How many times in the course of a day do you find yourself negotiating a situation? I would be willing to guess that you encounter both planned and unplanned opportunities for negotiation several times a day, yet more often than not, you may find the act of negotiation difficult. If you push too hard, the deal goes astray. If you’re too soft, you become known as a pushover.
The key to sound negotiation is ensuring the appropriate approach to the kind of negotiation to hand. Within the IT environment, there are many kinds of negotiations that take place on an ongoing basis; we are continually involved in negotiations with users, partners, executive management, staff and, of course, suppliers. As a matter of fact, the environment within which we negotiate has become so specialised that a generic approach to all different kinds of negotiations no longer delivers optimal results.
There are similarities between the approach to best practices in negotiations and that of implementing best practices in the workplace supported by the deployment of IT solutions. To facilitate the achievement of corporate objectives through negotiations, IT departments should consider the creation of an organisational negotiation capability. As in the IT environment, strategy drives process which, in turn, drives implementation and support.
This means that a negotiation strategy should be defined, a supporting negotiation process designed and implemented, and a negotiation supporting infrastructure established to continuously drive the improvement of negotiated outcomes whilst minimising the losses associated with sub-optimal supplier and end user agreements.
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WHAT IS BEST PRACTICE NEGOTIATION?
To avoid the losses associated with sub-optimal agreements, it is necessary to pursue a ‘Whole Brain’ approach to all negotiations. In addition to negotiating in a ‘Whole Brain’ manner, IT negotiation practitioners dealing with suppliers should also empower themselves with a basic understanding of purchasing strategy, and the application of different negotiation styles to suit the negotiation to hand. Let’s explore these two concepts in a little more detail.
Whole Brain Negotiations
It has been proven that all humans have preferences for certain categories of activities within the context of understanding, interpreting and engaging in communication and negotiations. The Herrmann Whole Brain Model provides a useful metaphor for understanding ourselves and our negotiation preferences.
Figure 1: The Herrmann Whole Brain Model
We all have preferences for activities contained within each of the 4 quadrants. Interestingly, less than 3% of us have an equal preference for all 4 quadrants. Since more than 1 million people have completed the HBDI (Herrmann Brain Dominance Instrument) profile, we are in a position to monitor the trends that are of particular interest to negotiators in the IT environment. For instance, we know that professional buyers who represent organisations in their negotiations with IT suppliers typically have strong preferences for the A & B quadrants, but less of a focus on the C & D quadrants. This approach often leads to opportunities being missed to extract additional value. It also frequently results in too little focus being expended on understanding the relationship dynamics resulting from different types of negotiated agreements.
On the other hand, we know that sales resources representing IT suppliers typically have a stronger preference for the C & D quadrants. This leads to them often overlooking key risks, and hampers their identification of the real business impact offered by their solutions.
The best advice for any IT negotiator is to pursue a ‘Whole Brain’ negotiation model where due attention and focus is given to activities in all four quadrants.
- Quadrant A – Value
IT negotiators must have an understanding of the facts that underpin any negotiation. Failure to gather and understand the relevant facts that support optimal deal making results in failed negotiations, or negotiations where value is left on the table.
- Quadrant B – Process
Any negotiation without a robustly defined negotiation process and management infrastructure runs the risk of a less-than-ideal outcome. A framework is required to provide an environment in which risks can be proactively managed. A robust negotiation process ensures positive momentum and provides a reference for avoiding unforeseen complications and risks.
- Quadrant C – Relationship
Agreements can only be concluded between organisations represented by people. The way we interact with other people is critical in negotiation success. The importance of relationships in negotiation is amplified in an environment where continued partnerships and long-standing relationships result from business interactions.
- Quadrant D – Vision
Parties to an agreement need a shared vision of the losses and benefits. It is only by having an understanding of all parties’ respective vision that driving motivators or interests can be determined. A key part of negotiation competency is the ability to generate options that will serve the needs and interests of all involved. Purchasing Strategy and Fit for Purpose Negotiation Models
As IT executives acting as custodians of valuable company resources, it is incumbent upon us to ensure the appropriate application of negotiation strategies and tactics to achieve key company objectives. In this context, it is key to understand that there is a number of different negotiation engagement models available to us, depending on the objectives to hand.
Figure 2: Basic IT Purchasing Considerations
It would be unwise for us to engage in collaborative negotiations with a supplier that is providing products or services at a commodity level. Similarly, it would be equally unwise to engage in highly competitive negotiations with suppliers that are providing us with solutions that will have a significant strategic impact on our organisation.
We know that in negotiations, as in life, victims have a tendency to become aggressors. It therefore follows that if we are too competitive in our approach to negotiation, we can often leave suppliers feeling that they need to reclaim what they believe is rightfully theirs. We can recognise the symptoms of a deal that was negotiated too competitively by the issues that we pick up subsequent to closing the deal – issues with service level agreements, escalations and so forth. If deals are not profitable for our suppliers, they will go to great lengths to cut corners so they can meet their profit objectives – often to the detriment of their clients who drove too hard a bargain.
When we enter into negotiations with suppliers providing strategic solutions that have a high value to our organisation, it is important that we create a collaborative frame for the negotiations to ensure that we are able to extract maximum value from the proposed partnership.
Figure 3: ‘Fit for Purpose’ Negotiation Engagement Models
In conclusion, when negotiating in the IT environment, it is critical for practitioners to approach the entire negotiation process (preparation, engagement and debriefing) from a whole brain perspective and to apply the appropriate negotiation strategy in support of our organisational objectives.
Define a negotiation strategy
Answer the following questions:
- What group or groups of people should be capable to negotiate effectively in their vocational environments?
- What are the key negotiation characteristics of successful negotiators in your department?
- Should you be providing any free products or services to your clients or user community?
- Should you be providing any concessions to your negotiation counterparts without receiving a counter concession of equal or greater value in return?
- What are the drivers in your organisation for the implementation of leading practice negotiation skills?
- How will you measure success in the negotiation environment? – (consider both leading and lagging indicators)
- What are the specific actions that you will need to take to implement an organisational negotiation strategy?
Implement a supporting negotiation process:
The negotiation process must be robust and have a high utility value to its users. The single most important consideration in implementing a negotiation process is ensuring a consistent application of leading negotiation practice across the department or organisation. Additionally, this will result in a shared vocabulary and a common platform for the evaluation, refinement and improvement of negotiated outcomes. Build your negotiation process around the following key areas:
- Deal qualification
- Deal objectives identification (for all parties to the negotiation)
- Aspiration base
- Real base
- Contracting zone
- BATNA analysis (Best Alternative To a Negotiated Agreement)
- Negotiation role definition and team composition
- Deal specific negotiation strategy & tactics
- Negotiating climate
- Negotiation debriefing
Implement a negotiation training programme
Once an organisational negotiation process has been defined, all participants in the negotiation process should be trained in its use and application.
Create a negotiation support environment
It is important for executives to create an environment that supports the development and application of an organisational negotiation capability. Some of the key enablers are:
- Creating an environment for negotiators to simulate negotiations on a regular basis (on a quarterly or bi-annual basis)
- Creating a negotiation reference database – in its simplest form a log of resources with specific reference to the types of negotiation and relevant experience of organisational negotiators
- Automating the use of tools to support the negotiation process implementation
- Providing an individual coaching environment where resources can be coached in leading negotiation practice by managers
- The establishment of a corporate negotiation capability is no easy task and will require dedication and commitment at an organisational level. If approached circumspectly and applied wisely, the investment associated with the establishment of an organisational negotiation capability will deliver spectacular returns that will entrench competitive differentiation and superior stakeholder returns.
Successful Example Box
A large Global IT organisation with a focus on the Telecommunication Sector found the size of the deals that they were negotiating increasing substantially due to the underlying technology infrastructure moving from an analogue format to a digital format. Suddenly, the deals being done by the sales teams escalated from a value of around £1 – 10 million to £300 million plus, because the solutions now had relevance on a regional and national basis as opposed to only a local level.
This necessitated a change in the way that negotiations were conducted on all levels including with suppliers, partners, manufacturing, clients and other internal and external stakeholders. All of a sudden, there was a lot more complexity and risk involved in deal making on both the buy & sell side of the organisation.
Early diagnosis of the problem led to the engagement of expert help to facilitate the definition of an organisational level negotiation strategy and the design and deployment of a supporting negotiation process. The negotiation process was designed in such a way as to support both the relevant purchasing and sales strategies and training is currently being rolled out across the enterprise to instill a corporate negotiation capability with a specific focus on two things:
- maximising margins and savings on purchasing budgets
- identifying and mitigating risks
A key requirement of the negotiation process was the ability to integrate with the company standard purchasing and sales processes to ensure the most effective deployment of resources.
Early results are pointing to enhanced returns resulting from agreements as a result of:
- An improvement in the skills level of all negotiators due to best practice based negotiation skills training
- The application of a uniform negotiation process which allows for the dissemination of relevant information on a uniform basis
- A common negotiation vocabulary and a best practice cross cultural negotiation approach across territories
- Individual negotiation competency, preference & style analysis
- Optimal negotiation team composition & role definition
- Best practice based negotiation debriefing & refinement
Having reduced losses associated with an ad hoc approach to negotiation, the organisation is now gearing up to roll out the negotiation programme on a global basis.