“If I had eight hours to chop down a tree, I’d spend six sharpening my axe.” Abraham Lincoln on being prepared in general, but it also applies to one of the biggest negotiation mistakes.
When negotiating a contract with a vendor, some negotiators feel there is “always another vendor—so don’t give an inch.” But this can generate long-term problems for you and higher costs to the company. The most effective approach is to partner with your potential vendor to achieve a win-win agreement (Your organization gets most, if not all, it wants while the vendor wins enough to satisfy themselves.) The best way to reach a win-win scenario is to avoid some common negotiation mistakes that even veteran supply chain managers make.
Here are 10 common negotiation mistakes to avoid:
Research their company and industry by checking their Web site and other business Web sites that can tell you where they’re strong and where they’re not (e.g., scottrade.com, vanguard.com, finance.yahoo.com, etc.)
2. Focus is too narrow
Consider a wide range of items and issues to negotiate, not just those specified in the RFQ/RFP, if they will help you achieve your contract objectives
3. Being overly aggressive
This is taking a win-lose approach, which inevitably results in losses to the company in the long term
4. Focusing only on price
Everyone wants the lowest price, but if that’s not possible or it jeopardizes your vendor’s business, look for alternative values in terms, conditions, etc.
5. Failure to “flinch”
Whatever the vendor’s offer is, show concern that it’s not enough, then counteroffer. Look for alternatives that are high on your priority list but low on your vendor’s.
Your words, voice tone and facial expressions should always be friendly and professional. Avoid condescension, gloating, power plays and other negative tactics.
7. Poorly defined terminology
Ensure all acronyms, abbreviations or internal jargon are either avoided or well defined. That leaves little to no room for misunderstanding now or later
8. Overlooking inconsistencies
Review and proofread the contract (and have others do so too) to ensure there are no inconsistencies that can be the basis for future disputes and problems in arbitration
9. Thinking that strengths offset weaknesses
If one part of the contract is weak and can cause future problems, the fact that other parts of the contract are advantageous isn’t relevant. All parts of the contract must stand solidly on their own.
10. Unnecessary language
The final word is … be prepared!
When high-value contracts and supplier relationships are at stake, the company that is best prepared is strongest. It’s the one that will sail through tough negotiations confidently—and with outcomes in its favor. That confidence will come because you have spent the time and effort to prepare, not in spite of it.
There is no more perilous negotiation scenario than being over-confident. Especially to the point where you believe that you don’t need to prepare thoroughly. It is equally dangerous to underestimate the capabilities of the supplier’s negotiating team.