Tag Archives: negotiation skills

Five Key Mistakes that Hurt Negotiations

After a career working with sourcing managers, I’ve had a chance to observe great practices and others that should be avoided. These 5 tips keep coming up when I work with teams in procurement.

  1. Too Much information – Suppliers are constantly collecting information about you, your organization and your interests, all for the sake of building strategies to motivate decisions in their favor. Beware of Facebook, Instagram and other personal social media outlets that provide details about your hobbies, family and interests. I often see posts by sourcing managers, sales reps and marketing reps on Facebook and Instagram that discuss travel and negotiation activity – I do suggest that you search Facebook for your company name and representatives’ names to see what they’re thinking; just don’t post that type of information yourself! In my case, I use LinkedIn for business, avoid friending business contacts on my personal Facebook account and am mindful of what I post.
  2. Failure to truly understand supplier motivation – Most sourcing managers understand the profit motivation of suppliers, but they fail to account for cash flow, capacity, business information, global footprint, your company’s reputation, being associated with an industry leader, capacity utilization, impact on fixed cost, ease of doing business and many more reasons that your business is desirable. These factors are the keys to unlocking the supplier’s true interests in doing business with your firm. In my case referrals are a motivating factor since 80% of my business is the result of a referral.
  3. Emphasis on supplier’s gain in negotiation – We’ve all done this in our lives–trying to negotiate with a supplier on why it is to his/her advantage to meet our targets. We seek win-win and list myriad positive what-you-have-to-gain reasons for coming to agreement. My wife says “If I were only one-tenth as motivated by the benefits of healthy habits as I am by the consequences of not saving my work on the PC every 5 minutes, I’d weigh 120 pounds and run marathons.” We tend to approach suppliers with what we all gain rather than what we have to lose by not meeting the targets. We certainly want mutual benefit, but sometimes we fail to talk about what we could lose. Are you more motivated to do things meet your “win” goals than you are to do things to avoid a loss?
  4. Using power, threat and coercion when you are unprepared to take action – If you are going to use this method of persuasion, you need to follow through with your threat. If you say that the supplier is likely to lose business by failure to comply with your request, be prepared to take action. Never make a threat you can’t back up. If suppliers are truly strategic to your business, they will call you out and you could lose all credibility with the supplier. Of course, power, threat and coercion are tactics you should only use in very specific applications under very specific circumstances, right?
  5. Managing suppliers via text messaging –Text messaging works great if you need quick answers or have a simple question. If overused or abused, you become a nuisance. Nothing can replace a quick call to gain alignment on a complex issue. Unfortunately in today’s fast-pace environment we look for quick solutions. It’s easy to decline a request on an email or text message; it is a lot more difficult if you are making the request in person or on the telephone. Remember that negotiation begins long before you sit across the table.

Think about all communication and actions when working with suppliers and avoid the pitfalls and mistakes that can cost your organization dearly.

Have you ever screwed up a negotiation?

How are you perceived?

Ten rules to keep you off the asshole list

Today I read Anthony Bourdain’s ‘No Asshole’ Rule: Life’s Too Short To Work With Them by Darius Foroux. The article speaks to those of us who have turned down money to work with difficult people. Bourdain recalls a story of working in a family business when his farther turned down a large assignment with a high return. The team and family were astonished and, when asked why he turned the business down, he replied because they are assholes. The reality is that Bourdain’s father classified the customer as a supplier hopper.

I, too, have chosen to not work with assholes. Sometimes it took me a while and a lot of money to learn the person was a jerk, and sometimes it was after the first meeting. Here are a few examples of my experiences.

In my corporate career, a fire extinguisher sales person visited me to extol the benefits of Halon fire protection. He pulled lighter fluid from his pocket and then lit my desk on fire–in a paper mill. Good thing for me, the Halon worked. I wanted to yell at him, but politely explained that he violated our safety protocols and would be barred from visiting again.

Early in my consulting career, I was invited to a global bank to present how our firm would build a global transformation program. We were asked for a detailed proposal so our global team spent about 100 hours getting the details right. After receiving our proposal, the bank’s VP of Procurement and Administration told us that we were the supplier of choice asked us to present our proposal to the team. We brought in 4 people from the regions where the transformation would take place to do the presentation of the roll out plan. There was limited feedback during the presentation and this episode was repeated at least three more times. At a conference, it was interesting to see that VP, who had been promoted to CPO, give a presentation on how to turn your employees into consultants. The cost of the proposals, presentations and visits to the prospective customer was over $75,000 to my company with $0 of resulting revenue. This person became notorious in the consulting world for gleaning free consulting on how to roll out programs; we were not the only suckers.

Another potential customer in the pharmaceutical industry send me a request for proposal. The choice was narrowed and I was lucky to be selected to make a presentation. The cost for the trip was about $2,000 and I was told that we were the leading contender, but the firm would do an auction, during which the auction software malfunctioned causing the auction to last about 4 hours. I was told that my firm won the auction, but a week later, the pharmaceutical firm explained that they were more comfortable with the incumbent, who had thought about it and now was willing to meet the auction price. Two months into the assignment, the supplier failed and the company asked me to help recover the program. I was not anxious to rebid the program.

After reading my book, the famous owner of several the major casinos in Las Vegas asked me to meet with his CPO. I went to the front office for the meeting and learned that the CPO’s office was in the basement of the casino. He came out and told me he was a busy man, directed me to wait, so I sat in his office for 50 minutes waiting for him to meet with me. His opening statement on his return was that he was the king of the casino business and while I had extensive experience with companies like GE, Microsoft, Birdseye and ConAgra, I was at the bottom of the food chain and would have to go to the small casinos then work my way up before I was worthy of his time. He then pulled out a drawing of a cow and asked me to break it into its parts. Having worked in the food business and consulting for two large food companies in the meat business, I could have told him what area of the cow each cut comes from, but I chose to leave that meeting and never return.

Whether you’re the seller or the buyer, being perceived as an asshole doesn’t make you a tough negotiator and certainly doesn’t deliver value for you or your company. Here are 10 rules to keep you off the asshole list.

  1. Always operate with integrity
  2. Never mislead suppliers
  3. Always outline events, timetables and your true motives
  4. Always give straight, timely feedback: good or bad
  5. Be respectful of other’s feelings and time
  6. Always be fair and firm
  7. Never exploit suppliers; the situation can reverse
  8. Be prompt for meetings and use time wisely
  9. Keep in control
  10. If you’ve been an asshole, acknowledge it and move forward

Let’s face it, we all can be assholes. I certainly can, especially when someone cuts me off on the road. I’ve learned how small the world is, so I work hard at maintaining professional relationships. Years ago, I had just accepted a position to lead procurement in a food company. Imagine how shocked I was when my new boss called one of the suppliers to gauge my relationship skills. Unfortunately, he chose a supplier that was uncompetitive in a major bid and had lost about $5,000,000 in business. I was surprised when the account manager gave me a great recommendation, explaining that he had lost a major contract, but couldn’t compete with the new offer. My new boss was happy that I could change a supplier out and still maintain the relationship. That was a big lesson: you never know who will show up and how relationships impact your career.

Do customers or suppliers think you’re an asshole?

Negotiating with Consultants – the insider perspective


In the indirect category one of the tricky negotiations is consultants. In many cases, they are brought in at high levels of the organization for their specific expertise. Often they have already been awarded the job and are ready to start the assignment with the contract being the cleanup details. Has this ever happened to you? In this blog I’ll give you hints to improve negotiations with consultants.

The types of consultants will vary by specialty and market. It’s important to understand that all consultants are not strategic. Let’s look at a way to determine types of consultants.


In Pillars 1 & 2, the power rests with the hiring company and can be tactical in nature. For Pillars 3 & 4 the consultants often have the power and the negotiations must be more strategic, outlining the principles around the engagement and the relationship. The larger firms relate fees to the value perception of the customer rather than a cost-based formula. The consulting firm typically deals with the prospective customer’s senior management and provides several options for solving business issues. Many of these options will be conceptual, leaving the project details open to be negotiated. The key cost drivers for the consulting firm are margin goals, staff utilization and opportunity cost, which are presented to the prospective customer as staffing for the project and timeline.

Pricing methods
The decision on pricing methods depends on the nature of the agreement and whether a performance element is involved. This can also be tackled on an assignment-by-assignment basis. The options for pricing are to develop a structure not linked to performance or link consultant performance to milestones and deliverables.

Options include:

-Pricing not linked to performance. Approaches include:

  • Hourly rates, daily rates, weekly rates, monthly rates
  • Differential rates: partners, seniors, juniors
  • Fixed fees: annual, monthly, weekly, project [turnkey contract]
  • Retainer fees

-Pricing linked to performance. Approaches include:

  1. Performance lump sum pricing—the parties agree a charge for work that will achieve a specified target. The service provider works whatever hours are necessary to meet the target.
  2. Target pricing—the parties agree a price for performing a task or for meeting a target based upon estimated days at a nominal daily rate. A sliding scale may be applied if the actual days are more or less than estimated days:
    1. Fewer days warrant higher per diem rate
    2. More days warrant a lower per diem rate
  3. Performance fee—the partners agree a mix of charges between daily/project rates, retainer fees and a performance fee based on an agreed quantum, linked to specified deliverables.
  4. Milestone based fee‒A fixed fee based on a retained with milestone payments and performance payments based on deliverables is achievable, although the consulting firm may resist this option.

The consultant may offer a performance only fee since some managers like for the consultant to have skin in the game, but there is usually a dispute at the end of the assignments about who had the idea, when was the idea generated, the ideas the company does not want to implement and who ultimately has accountability for either product or supplier failure. One of my assignments generated over $400,000,000 in savings; if there had been a 30-40% gain share (the typical rate), the client would have been unhappy with the payment even though the value was achieved.

Key negotiation tactics
Staffing the project:

The first consideration is to understand who is staffing the project. The negotiator must dig into the background of each consultant and understand their capabilities roles, accountability and responsibilities. It’s essential at the start of the project to define what work will be assigned to each level of consultant. It’s also important to negotiate the role of the managing consultant and the time that will be spent on the project.

Caution–Bait and Switch: One thing that some larger consultants do is start the project with a top-class team then remove the team and replace it with lower level people once the project has started. It is essential that the negotiator insists and documents that the players that start the project will remain through to the completion of the project.

Pay for Performance:

The key part of the program revolves around the project scope, milestones, deliverables and time line. All of these must be detailed in the scope of work (SOW). The negotiator should develop a series of progress payments and incentives for meeting the project deliverable rather than a time and materials contract. The goal of any successful consulting assignment is one where the deliverables are met and the company succeeds based on the work done. The negotiation is all about achieving value for money and performance.

Caution–Resistance to performance payments: Many consultants are not held accountable for meeting all of the project deliverables and will extend timelines with scope creep as a way of increasing revenue and finding other areas to extend their longevity in the business. Milestone and performance payments keep the consultants efficient and focused one the task and deliverables at hand.

While we focus on fees, it is much more important to quantify the objectives and deliverables at the front-end of any assignment. Unfortunately, the stakeholders are trying to quickly address a business issue and are unlikely to want to dig into the detail. As procurement professionals, it’s our job to educate and influence stakeholders to ensure that the service being provided meets the expectations of the company at the agreed fee rates. Performance payments and a team that remains with the assignment from the start will take you far.

How do you negotiate with consultants?

5 Ways to Deal with Emotion in Negotiation


Many times we enter negotiation with detailed plans, strategies, positions and a BATNA, but, sometimes, we forget that people on the other side have goals, objectives, needs, wants and strategies, too. When both sides are passionate about meeting their objectives, emotions, planned and unplanned, become part of the interaction. When dealing with emotion in negotiation, the one thing that that works for me is to be tough on the problem and soft on the people.

I have participated and observed several thousand negotiators across the globe and have found there are four skills separating the effective negotiators from poor negotiators:

  • Listening. Effective negotiators do more listening than talking.
  • Questioning. Question effectively and use questions to your advantage.
  • Communicating. Be clear, unambiguous and to the point.
  • Relationship. Separate the problem from the people

Effective negotiators learn how to recognize and deal with emotional people, challenging tactics and maintaining focus on the key issues.

Dealing with emotional opponents can be challenging, but here are 5 tips for managing emotional players in negotiations.

  1. Anger – find out why they are angry
  2. Insulted – address the feeling and move on to key issues
  3. Guilt – move away from the guilt and focus on the key issues
  4. Exasperation – empathize and understand
  5. False flattery – refocus the discussion

It’s important that you do not make substantive concessions in hope of deescalating the tension or sustaining the relationship. Always focus your points on the fact that you want an agreement that is fair to all parties. Avoid assigning blame or pointing out deficiencies and help them save face, it’s essential that you build and sustain trust by always separating people from the problem.

How do you diffuse emotion in negotiation?