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Negotiating with Rainmakers

There’s an existential crisis in procurement.  One we never talk about. The crisis is this: companies invest probably 10,000 times more in the sales function than they do in the procurement function. And procurement is negotiating with sales.

If you pay really close attention, your sales negotiation counterparts, when coming from a company of similar size, will have more resources, better systems, better data, more insightful market research, more budget, more training, and all of this…. is because they are positioned as rain makers inside their respective companies. 

Anytime you are negotiating with a large supplier, their resources are more than yours. Period. They might even know more about your company and your demand requirements than you do. The main thing we have in our bag of tricks, at the end of the day, is money. How good of a negotiator would you be without it?

I’ve read an excessive number of “woe is us” articles on procurement in LinkedIn and elsewhere. Too many, in fact. This is not one of those. 

This is a reality check. Up to 82% of every dollar that comes into companies in the form of revenue goes straight back to procurement. Sales makes revenue, not profit. Procurement delivers savings straight to EBIT.  

So why are we viewed differently, and more importantly, funded differently? Why is sales a rainmaker function while we are not? 

There are so many answers to this question. Get us in the C-Suite, with a seat at the table. Force policies that require procurement involvement. CPO leadership. Involvement in corporate planning cycles.  Etc. All valuable, but I don’t think any of them are the right answer. 

I actually think the problem, and the opportunity, is much simpler than any of us recognize. 

Right now, procurement reports Monopoly savings to the C-Suite. “We saved you $226.5 million dollars last year”, we proudly tell our executive management chain.   So where’s the money? The CXO is excited and wants that money, now. The sad truth is it doesn’t exist. It’s all Monopoly money. 

Why doesn’t it exist? Because we gave it back to the business units in the form of residual budget, and they used all that money to buy more stuff. And so all those “savings” don’t actually exist. We just bought more goods and services than we thought we could have. 

So the problem, and the answer, is how to deliver cost savings to the CFO instead of back to the business unit. That’s the only way to get procurement out of the back office. 

That’s the only way to show our value. That’s the only way to get our resources, budget, systems, training, capabilities, and much more beefed up to where it should be. 

That’s the only way to make procurement viewed AND funded as rainmakers inside of our companies. As we should be. 

Solve this problem, and we will be sitting at the table with the C-Suite, instead of being on the menu for lunch.

Now go off and do something wonderful. Be your best!  

Omid G. 

“THE Godfather of Negotiation Planning” ~ Intel Corp

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