Posted 24th Oct
Facing the other party in a negotiation always has one common theme running throughout it: do I trust what they say? Do I have legitimacy supporting my position?
When we prepare and deliver negotiations, we are faced with the core aspects of legitimacy and trust on a regular basis.
As an example, when working with a large pharmaceutical business, price based negotiations were a regular activity. However, they took place in the context of a meeting held in a spectacular building, pointing to dramatic overheads. The challenge of establishing a real level of legitimacy influences the tone and direction of the negotiation.
Worse than a current apparent level of riches is the consequence of historical positions. A large manufacturer of excavation equipment in the UK had, in the 1990’s, a reputation for chasing price down for supplier product as their main negotiation stance, with limited regard to the consequence for the supplier. Seeking to improve relationships with suppliers became a real challenge, especially when seeking innovation and future investment by the supplier.
Our starting position in building legitimacy must be to understand our own history, and that of our supplier: however, we also need to consider how we can develop trust and understanding moving forwards if that is something we need to do. This is never an instantaneous process; we may need to plan for the development of a sense of legitimacy over a period of time, particularly in long running relationships in which the history of previous events may haunt either side.
Where there have been previous issues, we may need to face them directly within the context of the negotiation. In these situations, a proposal to address previous approaches may be a good way forward, particularly if it is based on joint problem solving rather than an imposed activity. We do need to bear in mind that we need to deliver on the outcome of the activity. There is nothing worse than proposing a way forwards and then failing to deliver on that as well.
Equally, our counterparts may well need to deliver a starting point on legitimacy. Failures to deliver in service or product quality, or pricing, or innovation promises all leave a bad taste and as such may need to be fronted and addressed as a part of a negotiation.
Much of the literature on building trust and legitimacy explores the need for openness and developing an ability to deliver our commitments. This suggests that we need to maintain open communications throughout both the negotiation preparation and delivery phase, onwards into the delivered contractual relationship and beyond; this can be seen as a part of the preparation for any subsequent negotiations.
The challenges come when we are looking at areas where the negotiation preparation suggests we have a limited ability to deliver a particular desired outcome; simple examples are often estimates of volume, or achieved payment terms. When we know our likely performance is worse than the advertised numbers, we need to decide if we are prepared to deliver a negotiation position which we know to be unlikely in practice. This, of course, is the whole basis of establishing legitimacy and trust. There needs to be a clear view of the company position and what we are prepared to do; we should always bear in mind that a current supplier will have experience to fall back on and even a new supplier is likely to have expectations of what is likely to happen.
Establishing what we do at moments like these frames our overall approach as negotiators; knowing that we represent a business, and seeking to take a view that our legitimacy is something to be protected, can serve us well.
We’d be happy to talk to you about our procurement centred approaches to negotiation training. Visit us at http://www.futurepurchasing.com/training-development/negotiation-training to find out more.
Knowledge Hub: Performance Enablers vs. Limiting Factors
Tagged by topic: Negotiation
by Mark Hubbard