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Collaborative Negotiation

November 16, 2010

On the Contracting Intelligence blog, Jon Hansen writes an interesting article regarding Procurement’s relationship with Finance and the trend towards what it terms ‘more collaborative negotiation’ styles.

I must take issue with the findings it reports regarding contract negotiation. I perceive the problem that the article highlights regarding Procurement’s relationship with Finance permeating many of its other relationships, including those with suppliers. This can sometimes lead to delusional perceptions …. For example, IACCM asked Procurement professionals whether one consequence of the recession had been closer cooperation with their suppliers. Well over 70% said yes. When we asked suppliers whether they perceived greater cooperation from their customers, less than 10% agreed.

The article cites academic research on Purchasing negotiation which appears to reflect this self-image, rather than being accompanied by any objective view of actual behavior. It falls into the trap of seeing ‘collaboration’ as a unilateral process. Most bullies view their behavior as reasonable; their victims would generally see things differently.

Also, the debate fails to consider the fact that the vast majority of negotiations today are virtual, often driven by electronic tools and systems. Once more, the academics’ article betrays its detachment from the real world when it talks about negotiating parties meeting ‘at the table’ etc. Remote negotiation creates real divides and stresses, irrespective of the generation conducting the negotiation. The evidence suggests that such remoteness (driven by cost cutting and travel restrictions) enables far more aggressive behavior and of course undermines the principles of trust and openness that are fundamental to ‘collaborative’ relationships.

I wrote a blog about these issues following a meeting last week with around 120 sales executives, where several Procurement leaders presented. One or two of those Procurement heads were brutally honest – for example, the head of procurement at Aer Lingus told them ‘you are all commodity suppliers’ and warned them that ‘collaboration’ is not part of the Procurement agenda. Those words certainly reflected the day-to-day experiences of those in the room.

I think we do a disservice to our colleagues in Procurement if we perpetuate the myth that currrent negotiating behaviors (internal and external) are seen by others as ‘collaborative’. One key reason for this is the continued focus on PPV as the basis for measuring ‘success’ and this is compounded by the fact that most Procurement groups do not have extensive authority to negotiate substantive terms. And who is it that most commonly prevents Procurement from escaping this narrow trap? Why, it is of course the CFO ….!

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One Comment
  1. To reiterate my response to your comments in the Contracting Intelligence Blog (http://contractiq.wordpress.com/) kudos . . . and for the benefit of your good readers see below:

    Once again Tim, you bring an enlightened perspective to the table that in many instances is still beyond the conceptual grasp of those in our profession.

    Sadly, and as reflected in the disconnected results where 70% of those asked on the buying side of the equation believe that they have fostered closer relationships with their suppliers, while a paltry 10% of suppliers actually agreed, means that the true lessons for collaborating still have to be learned within the buying enterprise itself.

    What I believe is that Rudzki laid the foundations for stimulating buyers to look beyond their own area of practice to realize that they are part of a bigger internal picture. This requires commitment and in its own unique way a change management mindset that can be more challenging for established buying professionals versus those who are emerging from the present day school ranks.

    Unfortunately, many organizations have and still do attempt to bridge (and bypass) this gap through technological implementation versus skill development. While we are in the midst of what one could call a new era in terms of intuitive technologies based on the non-consultancy SaaS model that can on a more cost efficient basis assist with the collaborative exercise, these absent skills sets still need to be acquired and incorporated into the procurement process first internally, and then extended to include external relationships with suppliers.

    Until this is acted upon, I fear that this disconnect between buyer and supplier (re the 70/10 perception split) will continue to persist.

    In short, you are right on the money with what you are saying, it is the existing mindsets that need to catch-up . . . hence the article hopefully serves as a needed starting point.

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