Global Leaders in Procurement & Negotiations (PSCMInstitute.com)

Tag: negotiations

  • The 3 Procurement Contract Deadly Sins – Part 3

    We are now down to the 3rd Procurement Contract Deadly Sin.  And it’s the deadliest of them all.  If you did not read the prior 2 deadly sins, these all feed upon each other. Here are links to the other 2:

    The 3 Procurement Contract Deadly Sins – Part 1 – Global Leaders in Procurement & Negotiations (PSCMInstitute.com)

    The 3 Procurement Contract Deadly Sins – Part 2 – Global Leaders in Procurement & Negotiations (PSCMInstitute.com)

    This 3rd Procurement Contract Deadly Sin is also the most commonplace.  Everyone is committing this sin, and everyone is suffering from it.  Worse yet, nobody is talking about it. 

    This deadly sin makes you spend 70-90% of every day in unproductive fire fighting activities.  In unplanned activities.   In activities that become the highest priority, but don’t contribute anything to your career, income, or job results. 

    The final Procurement Contract Deadly Sin is this: writing of contracts for goods and services, instead of for *PERFORMANCE RESULTS*.  

    Let’s follow this painful flow:

    • The end user asks for goods and services. 
    • You solicit or tender for goods and services.
    • You negotiate for goods and services.
    • You contract for goods and services.
    • You receive goods and services.
    • Your end user complains, not about goods and services, but about PERFORMANCE RESULTS.
    • Since the contract was written for goods and services, you have no recourse and no remedies, because you got exactly what you contracted for. It just wasn’t what the end user actually needed.
    • You now have to spend your time fire fighting solutions because your end user is unhappy, your suppliers are confused, and the contract you wrote is useless to help resolve.  And somehow it’s all procurement’s fault.

    Sound familiar?  What would you say if I told you the Fortune 100 is absolutely struggling with this?  How about if I said the Fortune 500?  The Fortune 1,000?   Keep going. 

    The procurement profession is struggling with this issue, from top to bottom, in every industry, in every country, at every level. 

    Is that bad enough for you?  

    And what is being done about it?  Answer: absolutely nothing.  The contract templates are for goods and services and the lawyers don’t have it as a part of their scope to address this. 

    The net result is frustrated end users, frustrated suppliers, and exasperated procurement professionals that are full time fire fighters, against their will. 

    The answer is to rearchitect the entire procurement process so that end user demand is articulated in the form of performance results, performance results are solicited and negotiated for, and performance results are contracted for.

    And guess what happens next?  You guessed right: Performance Results are received.  

    No more frustrated end users.  No more frustrated suppliers.   No more full time fire fighter roles for procurement.  Much more free time on your schedule. 

    This is not just a theoretical panacea – we’ve taken over a hundred companies down this path and helped them transform.  Not a single one has looked back.   It’s the only way to go. And with all those employees no longer spending 70-90% of every day in wasted activities, productivity levels have gone through the roof. And they actually have time to work on strategy.

    If you aren’t working on this transformation, then you are a slave to this profession. It needs to be your #1 focus as a procurement leader.

    Now go off and do something wonderful.

    Be your best!

    Omid G.

    “THE Godfather of Negotiation Planning” ~ Intel Corp

    P.S.  The CPSCM™ IS THE ONLY certification program on earth that does a deep dive on this contract transformation that we just covered. Omid G is your private instructor for 32 very dense and fast paced hours – see the materials and hear his voice throughout – online and on demand!   Learn these skills to put your career and departmental results on the fast track for success.   Contact my office at support@PurchasingAdvantage.com for a free demo for your department or to discuss in-house Procurement & Negotiation Capability Building efforts for your team. 

  • The Fallacy of At The Table Negotiations

    The Fallacy of At The Table Negotiations

    I saw an article just this last week in LinkedIn describing different scenarios for buyer and seller to go back and forth on negotiation terms for best outcomes – offer, response, counter offer, counter response, etc. 

    It was touted as a game changing system, and was even given a name and trademarked, indicating it was something new and innovative. 

    It’s something I’ve been familiar with since the early 90’s, and I regret that it’s still being taught.

    If you go back to the invention of currency, and probably much earlier, this is how we always negotiated.  Each party trying to get more of the pie in return for less of what they have to offer in return. 

    This was the earliest form of what I call “At the Table Negotiations”.

    Meaning, this trademarked system is hardly new.  Yet it’s highly glorified.  It’s what we picture when there are the greatest stakes of all – with parties intensely negotiating at the table. 

    But all of that is for people who learned how to negotiate by watching TV shows and movies.  Or perhaps as a child, watching your parents barter at the local market. You’re not going to win any negotiations this way.

    Read this twice: Negotiations are won and lost before they ever start.  They are won FAR before you ever engage in At the Table Negotiations.  Anyone who tries to teach you how to win negotiations at the table is at best still stuck in the 1950’s.

    There really needs to be a well rounded approach for achieving success in negotiations.  In fact, the very definition of negotiation success needs to be redefined.

    The 1950’s and prior definition of negotiation success is how much of the pie you can get.  It’s parasitic negotiations.   You gain at the other party’s expense.  Value is being transferred instead of created.

    Negotiation strategies need to involve value creation before going to the table.  This involves researching what keeps the other party awake at night, and creating strategies to help make them more successful out of the deal, while costing your side very little. 

    This is why you are paid the big bucks, and it’s not optional in high stakes negotiations. 

    The other piece that has to be done is bargaining power analysis.  If you find yourself in a negotiation where you lack bargaining power, then you’ve driven yourself to the middle of the desert knowing you have no gas or drinking water.  You can’t let it get to that stage.

    You need to do an in depth analysis of what the source of their bargaining power is.  What exactly and specifically is it that gives them their bargaining power?  You need to understand this FAR in advance of negotiations very, very well.

    What might it be?  Almost anything.  Here are just a few:

    • Perception of highest quality
    • Monopolistic supplier
    • Switching or startup costs associated with adding or switching to new supplier
    • End user or business unit allegiance
    • Production capability
    • Access to critical material(s)
    • Etc.

    Then you need to architect a strategy to change that bargaining power to your favor.  The shift may not happen right away – it may even take years – but you can conspicuously lay the seeds right under the supplier’s nose.  They’ll get the picture. 

    Then there’s internal negotiations.  Most external negotiations fail because of failed internal negotiations.  Being fully aligned on the SOW/Spec hardly qualifies as internal negotiations alignment. 

    There’s alignment regarding procurement and negotiation strategy, sourcing approach, business shifting, standardization, alternative materials, timing, external communications, internal communications, management influencing, deal positioning, cost modeling, vendor evaluation criteria, and so much more.

    This is just skimming the top of things that need to be done in advance of At the Table Negotiations.  If all you are doing is getting trained in and executing to At the Table Strategies, you are stuck in some very old quicksand. 

    The CPSCM™ Certification Program – already invested in by half of the Fortune 100 – will position you to fast track your career and be a Negotiation Godfather.  In exactly 32 days, a huge announcement is coming and all of you need to be paying attention.   CPSCM™ Certification is going to be attainable by everyone.  Don’t miss it.

    Now go off and do something wonderful.

    Be your best! 

    Omid G.

    “THE Godfather of Negotiation Planning” ~ Intel Corp

    www.CenterforPSCMexcellence.org