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Renegotiating With Integrity

Author(s):

Marc Freeman


September/October 2009, eSide Supply Management Vol. 2, No. 5

How to Harness the Power of Active Listening, Being Nice and Taking Control in a Struggling Economy

Times are tough. We're experiencing a worldwide economic downturn, and everyone is feeling it in one form or another. Focusing on what you can't control — in this case, the economy — is futile. Instead, we must figure out a way to work around this downturn, which is where renegotiation comes into play.

Right now, many of us have contracts and relationships in place that aren't working. We need to figure out how to get them back on track. But, if you're going to renegotiate, it's imperative that you maintain your integrity and good reputation in the process.

Renegotiation isn't personal; it's business. Even so, when you tell a supplier you can no longer fulfill your obligation, it will have personal and professional effects. How you treat the supplier in that moment is critical. The best approach is to always behave as if the issue is personal, but react as if it's business.

It's About Moving On

Renegotiating is the art of revising, altering or changing a previously negotiated contract or relationship. The concept of win-win does not apply here. You can't expect to tell the other party that it won't be getting what it expected and expect to turn it into a win-win outcome.

Instead, your focus should be on creating a scenario in which both parties are satisfied enough to move on. What really matters is avoiding getting stuck in contracts and relationships that are costing your company money, time and resources.

Renegotiating a lease. In this scenario, your approach to dealing with landlords is critical. Most leases are written to their benefit, so there's hardly ever incentive for landlords to settle for less than what they're entitled to. However, if they're approached with an air of respect (and without an attitude of entitlement), most landlords are willing to work with tenants when times are tough. This still isn't a win-win proposition, however. The landlord won't be happy to accept less money for the space. Even so, this might be acceptable if it means keeping a tenant. Then, once a new agreement is reached, both tenant and landlord can move on to focus on more profitable activities.

Renegotiating with suppliers. As supply management professionals, the pressure is on us to constantly do better, with new features, and better prices and terms. We are constantly looking for ways to change current contracts and relationships. As such, our approach to renegotiation is critical. Because we have a history with these companies, as well as those representing them, we understand who we're working with and what to expect.

Lease File Folder

When approaching a supplier with an eye toward renegotiation, preparation is critical. Understand your company's needs, and anticipate the supplier's needs in advance. Be aware of the history between your company and the supplier. If you go into the renegotiation feeling entitled or aiming to find fault with the supplier, you will no doubt encounter resistance. Even if a supplier hasn't performed to your company's standards, don't go in with all guns blazing. Instead, open up the discussion by politely explaining your company's situation and the reasons why you've been asked to make a change. Ask for the supplier's help in resolving your problem.

A few components are critical to a successful renegotiation.

1. Active Listening

Once you have presented your case and asked for the supplier's help, sit back and listen carefully. Remember that listening is a verb, not a noun. It's a learned skill which doesn't necessarily come naturally. It means remaining silent while someone else is speaking. It means not thinking about how you'll respond while someone else is talking. In that silence, you'll get all the answers you need. Proper listening gives you the skills to ask the right questions. A great question is worth 1,000 answers. The key is to find out what the supplier needs, not what it wants.

Supply management professionals who listen best will always get the best deals. Not only will they build better relationships with current suppliers, they'll be first to buy the newest technologies to get ahead of their competitors and move their strategies to new industries before others.

Case in point: Several years ago, I was called to renegotiate a product for a store with which I'd done business for many years. I was competing against several other suppliers. The buyer told me that the other companies came in with a less expensive price, but everyone liked our product's design and quality best. Most of the decision-makers were more interested in quality and design, but the main decision-maker was primarily concerned with price.

Realistically, I couldn't come down far enough in price to match the other offers and still deliver the level of quality our company provided. But, what I heard the buyer saying was that I didn't really have to meet the prices of the other company; I just needed to get closer. This is what the buyer needed. This was expressed so subtly that I had to read between the lines.

In the end, I came down on price by 8 percent and secured the order. This is an important lesson, because the people with whom you're dealing can't always be explicit about what will secure the contract.

2. Be Nice

Being "nice" doesn't mean insipid or insincere; actually, it means the opposite — being genuine and respectful.

For example, I was recently stuck at La Guardia Airport in New York. Every flight home was cancelled due to weather. As I stood in line to work out my next steps with a ticket agent, I noticed how frustrated everyone in line appeared. This, in turn, caused the agents to grow increasingly short with the waylaid travelers. In fact, the man in front of me was so rude that the agent told him she couldn't help him at all. He was instructed to go back through security to the ticket counter.

By the time it was my turn, I could tell the agent was prepared for yet another fight. I stepped up to the counter and smiled. I told her I wasn't in a rush. I explained that I knew she was doing her best and that the current problem wasn't her fault. Immediately, she relaxed and took a completely differently tone with me than she had with the gentleman in front of me. She not only rerouted me quickly, but upgraded my seat to first class.

3. Take Control of the Process

Practicing active listening and being nice will give you control of the process, which is vital to effective renegotiation. To be successful, you must understand one major principle of renegotiation: the secret of the orange ball. The orange ball represents who's in control. If the renegotiation isn't moving in a direction that you want or need it to, you must determine who has the orange ball and how to get it back.

Whether we like it or not, someone has to be in control for any change or renegotiation to move forward. Otherwise, it can be very difficult to see whose goals are being achieved.

Be Respectful

More than anything else, people want — and need — to be treated with respect. It seems simple, but it can be very difficult at times. Even if a supplier or business associate has treated you badly, responding with respect will, more often than not, result in a deal or conclusion that's better for you and your company.

I'm not suggesting that you "roll over." I am, however, suggesting that you can stay strong and stand your ground while also approaching the other party with respect and dignity.

Remember: Your reputation will stay with you no matter where you go or who you work for. Being nice and respectful, and controlling the orange ball, will lay the groundwork for a new contract, relationship or transaction that's better and more profitable for you and your company.



Marc Freeman


Marc Freeman is the author of the upcoming book, Renegotiating With Integrity: It's Not Business, It's Personal. He has worked with companies all over the world to renegotiate hundreds of millions of dollars in contracts using a unique, practical approach based on respect, honesty, creativity and clear communications. To contact this author, please send an e-mail to author@ism.ws.




For more articles and resources on negotiation, visit the ISM articles database.

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