Features

How (and Where) You Negotiate Matters

Author(s):

Mark Trowbridge, CPSM, C.P.M., MCIPS

May/June 2012, eSide Supply Management Vol. 5, No. 3

Different techniques work best for different modes of negotiation — in person, by phone and via email. Familiarize yourself with them, and you'll be ahead of the game.

Today's procurement professionals often find themselves conducting negotiations in a variety of mediums. Some complex negotiations take place in the same room as the supplier's representation, in teams or as individuals. Others happen remotely, via telephone or email.

Each mode of negotiating has unique variables which procurement practitioners must consider; otherwise, they may hand over an advantage to a skilled opponent.

Negotiating Face-to-Face

Negotiations are generally most productive when conducted in person, either as a team or solo. In this mode, participants have the advantage of both verbal and nonverbal indicators from the other party. And, they don't suffer from the technical limitations (which I'll discuss later) inherent in telephone or email communications.

Several factors make in-person negotiations most beneficial. For team negotiations, these include:

Group synergy — The benefit of team negotiations is based on the well-known principle that the whole is greater than the sum of its parts. In other words, a group usually makes better decisions than can the individuals who comprise the group, working alone.

Strength in numbers — My colleagues and I often train corporate groups and conference audiences around the world in negotiation practices. As the participants in our company's on-site negotiation role-playing workshops learn quickly, a team nearly always has an advantage over a single opponent. Different members of a negotiation team can play key roles that make their approach highly effective.

In-person team negotiations are the optimal format for multi-element, high-value and sole-/single-source negotiations. These negotiations are more effective when conducted face-to-face by a group of people.

Team negotiations are particularly important when decisions must be made during the actual negotiation process. A team composed of empowered stakeholders can use quick caucus or breakout discussions to make decisions which can immediately be reintroduced into the negotiation dynamic with the other party.

In-person individual negotiations — Face-to-face, individual negotiation environments provide greater benefits than arms-length telephone or email negotiations. Many of a typical procurement group's negotiations are one-on-one — especially for standard procurement transactions; it's impractical to pull our internal customers out of their business operations for standard negotiations.

Having a skilled procurement professional represent stakeholders in standard transactions optimizes the staff's time and resources. However, consider the following factors before deciding that standalone negotiations are the best mode for interacting with an important supplier:

• The downside to one-on-one negotiations is that this approach increases the sole negotiator's responsibility in the areas of preparation, success and failure.
  
  
• This format also may require greater communication time in advance (with stakeholders, internal customers and so on) to gain consensus on key negotiation elements. As such, single-person negotiations are less efficient for multiple, changing negotiation issues; it may take too long to communicate concessions with decision-makers.
  
  
• Being the sole negotiator may put the buyer at a disadvantage if the supplier brings multiple negotiators. Peer pressure doesn't lose its effectiveness just because we become adults!

Negotiating by Phone

Many of today's business-to-business negotiations occur over the telephone. It's important for procurement professionals to remember that things happen more quickly on the phone than in person. Small talk is minimized, and participants are more willing to take extreme positions; people are less inclined to take extreme positions in person. So, be prepared.

Other important factors regarding phone negotiations include:

• Behavioral researchers say we lose 75 percent of the communication content (nonverbal) when speaking on the phone.
  
  
• Telephone negotiations necessitate focusing on everything that's said. A poor cellphone connection can further complicate the clarity of communication. So, be ready to ask the other party to repeat themselves when he or she has said something critical. It's also a good idea to take notes and confirm key discussion points with the other party via email.
  
  
• Be prepared; have quality questions ready. Good interrogatives/questions draw information out from the other party during the discovery phase of the negotiation process. Proper interrogatives use phrases such as "how," "why," "why not" and "please explain" in an effort to get the other party to share information which can then be leveraged.
  
  
• Conference calls allow the other party to have advisers in the room, albeit muted. You may never even know other people are involved — until it's too late.
  
  
• Conference call services also allow the host to record the conversation, sometimes without your knowledge. If that's a concern, use your own conference service, and be the host.

Additionally, heed these key pieces of advice before conducting a negotiation by phone.

Don't get caught by surprise. An unplanned, unscheduled phone call from a supplier means you may not be prepared to negotiate. Instead, ask if a later time would be acceptable — one that lets you properly prepare.

On the other hand, a surprise phone call by you can be advantageous. Usually, the person who initiates the call is at a distinct advantage. He or she has had time to prepare, isn't taken off guard, can prepare a checklist and can organize support data and materials. You can also use the surprise phone call to set the agenda, thus controlling the issues being discussed.

Negotiating by Email

Today, email is frequently used to negotiate pricing and key points. Complicating this is the increased use of texting; in these scenarios, communications are often significantly truncated.

A client once told me, "If email had been around before the telephone was invented, someone would probably have said, 'Hey, forget email; with this new 'telephone' invention, I can actually talk to people!" And it's true: Whenever we use email to negotiate, we're really holding the relationship at arm's length.

If you do negotiate by email, remember:

• Email negotiations may progress even faster than phone negotiations because there's less give-and-take. Using email also makes interaction more positional because the parties are putting everything in writing. This means there's less ability to change your position once the other party has seen your posture.
  
  
• On the other hand, email allows exact details to be proposed — and received — with a high degree of certainty. It can also enable you, as the negotiator, to bypass gatekeepers. Whereas you may have difficulty getting past lower-level salespeople or administrative personnel using the phone, email can allow you to interact directly with a decision-maker.
  
  
• Email encourages prompt, direct response. Also, it can be accessed and used 24 hours a day, seven days a week. Be careful, however, not to respond to an email or text too quickly.
  
  
• If the other negotiating party chooses to use email, pay attention. This may be a clue that he or she isn't comfortable negotiating in person. Additionally, he or she may be enlisting the expertise of a senior decision-maker before replying to you.
  
  
• Even more so than telephone negotiations, using email puts you at a nonverbal advantage. With this medium, you can't take advantage of body language and auditory clues.

Another point to consider is that you may, technically, put a legally binding contract in place by agreeing to something the other party offers in an email. In a court of law, a contract can be formed by a written offer and acceptance of that offer. Certain bodies of law (including the most recent changes to Article 2 of the Uniform Commercial Code) now explicitly regard electronic correspondence as being "in writing."

It's a much better idea to handle contentious subjects and/or complex elements in person than by email or text. If an email exchange isn't progressing as you'd like it to, quickly pick up the phone and speak directly with the other party. Or, better yet, schedule a time to meet in person.

Last but not least, always be aware that there's no way to ensure email communications are kept confidential. At any time, the other party can forward or blind-copy your communications without your knowledge.

Plan Early, Plan Smart

Whenever you're developing a strategy for an upcoming negotiation, a key element in your success — or failure — will be selecting the ideal communication "mode" for your objectives. Then, once the mode is selected, you'll need to employ the techniques covered in this article to ensure the best possible interaction.

Mark Trowbridge, CPSM, C.P.M., MCIPS is a principal with Strategic Procurement Solutions LLC (www.StrategicProcurementSolutions.com), where he directs consulting and training operations. The firm has worked with clients like Apple, LG Electronics, Delphi, WSCA, Kraft Foods, Nationwide and BP. Trowbridge regularly trains supply chain groups throughout North America, Europe, Asia, Malaysia and the Middle East. To contact this author, please send an email to author@ism.ws.

For more negotiation strategies, visit the ISM articles database.

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