High Impact Negotiations How do deal with suppliers, colleagues and customers

1. High Impact NegotiationsHow do deal with suppliers, colleagues and customers Rich Weissman Endicott College

2. Session Objectives • Recognize the elements and process of negotiation • Concentrateon negotiation tools and techniques • Negotiatewith internal and external clients • Focus on process improvement • Highlightcommunication and the human approach to negotiation • Understand the benefits of successful negotiations

4. Negotiation • An exploratory and a bargaining process (planning, reviewing, analyzing, compromising) involving a buyer and seller, each with their own viewpoints and objectives, seeking to reach a mutually satisfactory agreement on all phases of a procurement transaction including price, service, specifications, technical and quality requirements, payment terms, and elements. ISM Glossary of Key Purchasing Terms

5. WHEN DO YOU NEGOTIATE?

6. Brainstorming Exercise • What are the traits of a good negotiator? 1. 2. 3. ….

7. Key Point! • Most negotiations occur over and over again. We tend to deal with the same customers, co-workers, suppliers, clients, directors, and managers for a long time. It is important to recognize and give proper weight to the context in which a negotiation is taking place. If it is within an on-going relationship, the significance of that relationship must be considered.

8. Negotiation Guidelines • Understand your mission and business drivers • Understand their mission and business drivers • Be authentic to build credibility and trust • Works towards a positive outcome for all parties • Create a plan for evaluation and assessment • Determine needs and wants from both parties

9. Reasons for Negotiation • Lack of competition • Price, quality, delivery, and service needs • High buyer or seller uncertainty • Single source strategies • Urgency • Long lead times • Need for flexible contracts • Lack of firm product specification • Reduce risk

10. The 5 Ps of Negotiating • Preparation • Poise • Persuasiveness • Persistence • Patience

11. Negotiate to Reduce Risk • Category 1: Preventable Risks • Category 2: Strategy Risks • Category 3: External Risks Kaplan and Mikes; HBR;

12. Preventable Risks • Internal risks, arising from within the organization, that are controllable and ought to be eliminated or avoided • Unethical, unauthorized or inappropriate actions from employees and managers • Breakdowns in routine operational processes

13. Strategy Risks • A company voluntarily accepts some risk in order to generate superior returns from its strategy • Strategy risks are not inherently undesirable • Companies need a risk management system designed to reduce the probability that the assumed risks actually materialize and to improve the change to manage the risks if they occur

14. External Risks • Some risks arise from events outside the company and are beyond its influence or control • Sources of these risks include natural and political disasters and major macroeconomic shifts • A risk management focus is on identification and mitigation

15. Major Modes of Negotiation • Cooperative (win--win) • Competitive (win--lose) • Counterproductive (lose--lose)

16. Getting to Yes • Fisher, Vry & Patton of the Harvard Negotiation Project • Separate the people from the problem • Focus on interests, not positions • Invent options for mutual gain • Insist on using objective criteria

17. Problems in Negotiation • Lack of formal negotiation training • Lack of preparation • Failure to establish realistic objectives • Unsound tactics • Cultural misunderstanding • Others…...? Focus on your organization

18. Assessment of Trustworthiness • Competence • Reliability • Professionalism • Consistency • Open communication • Transparency • Caring • Fairness • Integrity

19. Negotiator Temperaments • Distrustful • Self-protective • Calculating • Aggressive • Demanding • Dominating • Open • Indulgent • Conforming • Accepting • Supportive • Endearing • Engaging • Honest

20. Problems of Long-Term Relationships • Loss of objectivity • Complacency • Loss of secrecy • Growing dependency • Cooperative forces lessen • Person factors influence decision making • Organizations “locked-in” • Trendy • Easy!

21. Planning the Negotiation Process • Basic research and groundwork…an information quilt • Develop objectives aligned with the business • Gain support from senior management • Assemble the negotiation team • Action! • Verbal agreement • Written agreement (confirms the verbal agreement) • Making it work throughout its life

22. Elements of a Written Negotiation Plan • Brief overview statement • Business objectives • Positions of strength for both parties • Internal support requirements • Development of negotiating team • Negotiation plan & tactics

23. Documentation of Negotiation • Subject • Introductory summary • Particulars • Procurement situation • Negotiation summary

24. Negotiating Styles • The Competing Style • The Accommodating Style • The Collaborating Style • The Avoiding Style • The Compromising Style

25. The Competing Style • Focus on self-interest or substantive out…generally at the expense of the other party or relationship. • Persisting until you get what you want • Competing to ensure that your needs are met • Trying to outsmart and out talk the other party • Using your power to influence the outcome • Exploiting the other party’s weakness

26. The Accommodating Style • The accommodating style is concerned with preserving the relationship, even if it means giving up substantive outcome. • Focusing on the other party’s concerns more than your own • Going along with the other party’s suggestions • Trying to preserve the relationship at all costs • Focus on agreement not disagreement

27. The Collaborative Style • Collaboration involves exploring individual and mutual interests in an effort to satisfy everyone’s needs. • Bringing issues or concerns into the open • Dealing with issues important to both parties • Looking for creative solutions that make both parties winners • Seeking to build trust • Seeking to satisfy the needs of both parties

28. The Avoiding Style • Avoiding not only the issues but the other party or parties and negotiation itself. • Avoiding conflict with difficult negotiations • Avoiding controversy • Avoiding situations that might create tension • Avoiding open discussion of issues and concerns • Withdrawing from negotiation, even when you might win • Postponing facing difficult negotiations

29. The Compromising Style • Compromising is a partial-win, partial-lose proposition, where you get some of what you want but not everything, and likewise for the other party. • Splitting the difference • Backing off on demands • Giving up something for something in return • Taking an intermediate position • Engaging in give and take

30. Competition Legitimacy Commitment Knowledge Risk-taking Time Effort or work Money Negotiation skills Friendly associations Sources of Power

31. Types of Authority • Escalating authority • Limited authority • No authority • Full authority • Escape from authority

32. Anchor • An initial offer in a negotiation, often set from external experiences. • The sticker price of an automobile is an example of an anchor. • When anchors are used, creativity in a negotiation suffers.

33. Concessions • Small concessions give the impression that the bottom line is not far off. • Large concessions indicate that a lot more can still be conceded before the bottom line is reached. • Rapid or large concessions undermine the credibility of the initial offer. • All concessions teach the lesson that more concessions will be made. batna.com

34. Signals • True signals.People send signals instead of saying things outright in order to convey information while preserving some degree of deniability. • False signals.These signals are designed to mislead you. • Unintentional signals.Signals made in error that may be valuable. Schatzki, Negotiation: The Art of Getting What you Want

35. Framing • How an object, event, or situation is depicted or presented • Emphasize the value of their concessions • Provide a justification for the other party to make concessions • Offer a standard of fairness for dividing the value created by negotiating

36. Limits • Dollar limits • Term limits • Policy limits • Legal limits • Engineering limits • Customer limits • Committee limits • Miscellaneous limits

37. Agreement in Principle • May be part of the final agreement. • May be a way-station toward reaching an agreement. • May be used as a tactical approach to the negotiation. • May be a combination

38. BATNA • Best Alternative to a Negotiated Agreement • No agreement may be better than a poor agreement • The better your BATNA, the higher your leverage • Successful negotiations may not result in agreements

39. International Negotiations • Barriers and obstacles • Miscommunication because of language • Time zones • Cultural differences • Limited authority of foreign negotiators • Industry and business concepts

40. Ethics • Individual Ethics: A personal code of conduct when dealing with others • Professional Ethics: Standards that outline appropriate conduct in a given profession • Organizational Ethics: The values and principles that an organization has chosen to guide the behavior of people in the organization and /or what stakeholders expect of the organization • Societal Ethics: Principles and standards that guide members of society in day-to-day behavior with one another

41. Ethical Issues • Misrepresentation of position • Bluffing • Deception • Selective disclosure • Bribes • Spying • Theft • Humiliation • Sharp practice

42. Some Negotiation Tactics • Agenda • Deadline • Concessions • Missing person • Bogey • Take it or leave it • Good guy / bad guy • Best and final offer

43. Nibbles…or Key Tactics? • Cash terms • Extended warranty • Service / support • Spare parts • Training • Freight • Testing

44. Negotiable Aspects of a Purchase & Sale Agreement • Quality • Support • Supply • Transportation • Price

45. Quality • Specification compliance • Performance compliance • Test criteria • Rejection procedures • Liability • Reliability • Design changes

46. Support • Technical assistance • Product enhancements • Research & development • Warranty • Spare parts • Training • Tooling • Packaging • End user support

47. Supply • Lead times • Delivery schedule • Inventory programs • Consigned inventory • Stocking programs • Cancellation / reschedule options

48. Transportation • FOB terms • Carrier • Commodity classification • Freight allowance / costs • Multiple delivery points • Timing

49. Price • Purchase order price • Discounts • Foreign exchange • Escalation / de-escalation • Duties / taxes • Cost analysis / material / labor / overhead / profit

50. A Negotiation Checklist • Identify the primary supplier • Identify a second supplier based option • Determine the format and location for negotiation • Insist on a negotiator with decision making capabilities • Assess your leverage over the supplier • Determine your negotiation strategy