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The Power Of Negotiation

September 1, 2010

‘You don’t get what you deserve, you get what you negotiate’ is the title of a blog by Jon Hansen, in which he challenges the ‘adversarial state of mind … that for so many years has hindered the buyer and supplier relationship …. negatively impacting an organization’s ability to sustain positive results”. 

Jon castigates much of the negotiation training delivered by Karrass and others who encourage the ‘win-lose’ mentality. I agree with his comments. There are still many who see the negotiation itself, rather than the outcome it inspires, as the objective. This transactional, commodity-based thinking certainly does not fit well with many of the relationships required by business today.

Within the article, Jon also addresses the question of ‘lying’ and the sense among many that this is not only acceptable, but normal. He suggests such attitudes destroy trust and maintain the cynicism associated with many negotiators, especially those in Procurement.

While broadly agreeing with the point that unprincipled negotiation will lead to disappointing results, I regret that I do not entirely share Jon’s perspectives on the question of lying. Sadly, this is not so much to do with the negotiators in sales or procurement – it comes from the top. For example, in its recent paper ‘A Conspiracy of Optimism’, the International Center For Complex Project Management identified the ‘conspiracy’ that leads executives on both sides of the table to ‘lie’ to their trading partners and to create a combined version of ‘the truth’ that leads to mutual delusion over what they can achieve, by when and for how much. Indeed, how truthful are any of us when we are seeking to impress someone with whom we want a deal or a relationship?  

These executives are also the ones who then set the measurements or oversee the organization that will negotiate and deliver on their stated goals and objectives. And they do not set measurements that reward truth; in fact, the ways they reward people clearly encourage the marginalization of truth – for example, sales commissions based on forecast revenue or volume of deals closed; Procurement bonuses based on estimated savings. How often do organizations even go back and track how close those forecasts were to the truth? It is actually too difficult within current systems – and there are too many factors that may have led to the alteration – so it is easier to keep things the way they are.

There is of course some difference between ‘omission’ (failing to divulge the complete picture) versus ‘commission’ (deliberately misstating the truth).  However, mature organizations understand that these challenges exist and it is therefore entirely legitimate – and necessary – to validate and verify what you are being told. We do that through a wide range of mechanisms, including market research, references, interviews, requiring certified records etc. We try to ‘hold feet to the fire’ through contractual warranties and respresentations. If we are smart, we also include review, change and governance procedures that enable verification and update.

In the end, it is the overall quality of contracting and contract management that creates effective ‘due diligence’. Negotiation is just one phase in this activity and any organization that relies solely on the effectiveness of its negotiators is indeed foolish – and will reap the consequences by performing poorly over time. After all, once the lying begins, it spreads – and we only have to look at the big corporate governance failures over the years to recognize that is true. Indeed, at one of my past employers, the internal audit function would monitor the company newspaper to see which Sales teams had won the biggest awards – and would investigate accordingly.

13 Comments
  1. Once again Tim, your cerebrally balanced commentary rightfully distinguishes between the actual origins of the problem as opposed to it’s manifestation on the front lines.

    Could it be that this “mutual delusion over what they (re executives) can achieve,” is at the heart of the high rate of initiative failures in the procurement world.

    I can recall one of the biggest challenges faced by the Government of Canada’s Way Forward initiative, was the universal belief that the projected billions of dollars in purported savings that were expected to be achieved through the initiative, was affectionately referred to as the DMs “foo foo dust,” or the “things that dreams are made of.”

    What is even more interesting is that when I had spoken with one of the senior officials from the Treasury Board indicating that no matter how many ways I had attempted to confirm that the projected savings were in fact achievable, each effort concluded with a figure that was a scant “fraction” of what was being presented publicly, I received the following response (in writing mind you); “you may very well be right Jon but, we followed procurement guidelines and policy in selecting the vendor to implement the solution, and that is what was important.”

    Hmmm . . . I wonder what impact this had on employee morale , and those on the front-line who were charged with making the dream a reality?!

    It is indeed a sad day when even those who have authorship in the lie cannot even muster enough energy to perpetuate its shelf life.

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