This week many procurement professionals are facing a need to renegotiate a substantial number of contracts – where demand has dropped suddenly; where critical goods or services need to be locked in; or where some second or third order effect from the current health crisis is hitting supply chains.
As we all know, successful negotiations rely on planning, aiming to understand the other side’s position and approach, making sure we know the full spread of what might happen in a negotiation, and ensuring that we are positioning against all the outcomes we are seeking to achieve. Research by a range of organisations suggest that well planned negotiations deliver 50% more value than those that are not. Our approach to negotiation planning is based on a structured template which guides individuals through a series of thoughts and outcomes. We use it ourselves, and within a range of training and coaching activities in our client work.
We’re making our template available to you to download for free and have provided a supporting 30 minute webinar run by Mark Hubbard, Director of Negotiation, to talk you through its use.
You can download the Negotiation template and watch the webinar here: [ https://futurepurchasing-2434470.hs-sites.com/download-negotiation-advantage-0 ] As ever with a template, there’s no need to use every element if you don’t need to. However, we’d recommend a real focus on the negotiables – if only to make sure we keep the balance of all the negotiation elements on both sides in view.
Detail checking the existing contract
If we’re re-negotiating, then there’s probably a contract in place. It is worth running through the contract in detail and looking at which clauses need to be pulled into the negotiation, and which you are assuming are outside of it. By doing this, you can build a better picture of the issues most likely to be in play. It will also let you know what was missed out of the contract when it was pulled together, if anything. The negotiation charter on pages 2 and 3 are excellent to pull together an overview of the negotiation quickly, whilst thinking about the broad approach, testing for issues and risks and thinking about an overall timescale to get to an end result.
Understanding the overall positioning of the negotiation
We also consider two of the main strategy tools – portfolio analysis and supplier perception analysis – to make sure we understand the overall positioning of the negotiation. It also prompts us to think about the underlying issues in an area of spend, and current supplier behaviours and what might be driving those. Even within the current challenges, it’s sensible to reflect on what else might be happening, and whether either side has the foundation of trust necessary to allow a negotiation to progress with any chance of success. The last page asks us to think clearly about the options we have to encourage agreement with a particular position, the influencing approaches we have available, and the value of particular options to ourselves and the supplier. Thinking about the value of options is a critical part of the preparation, as it is worth checking if the approach you might want to take sounds feasible from the supplier’s perspective. There are more elements available in the full negotiation template, which we’d be happy to talk to you about, but this is a good starting point.