negotiate with vendors

Negotiation is a necessary skill for all Assistants. Patrick S. Woods shares 10 key ways that Assistants can shine in their vendor negotiations

Unlike highly technical subjects (such as calculus – which I found to be so complex, I changed my college major), negotiation is a topic and skill with which we can all identify. Whether your teenager is asking to stay out after their curfew, you and your spouse/significant other are trying to decide on which bistro to dine at or you just bought a new car and you want the dealer to throw in some extra warranty, these all involve negotiation.

Although these scenarios involve daily life issues, one type of negotiation that I always discuss in my university masterclasses is the one on steroids – negotiating for the release of hostages. If you have 33 minutes of time to invest, take a look at the video on YouTube by Chris Voss called “An FBI Negotiator’s Secret to Winning Any Exchange | Inc.”

This is about a former FBI agent’s secret to winning negotiations, including those for human life. You will find that the take-away from his presentation for any type of negotiation, including you as the Assistant negotiating with vendors, is that they all involve two elements: facts and personalities. If this FBI agent only understood the facts of the kidnapping and not the personality of the kidnapper, then he would probably have had a very low success rate, and you can imagine the outcome. So please keep these two words in mind as we take our exciting ride.

To bring our 10 ways to life, I am going to share with you a fictional scenario, but I believe it is one that many of you can identify with in principle. (By the way, the names have been changed to protect the guilty!)

The Scenario

Background

Diligent Delia (DD) is an Executive Assistant reporting directly to their CEO – Ima Laddur Climur (ILC) – and DD’s Fortune 100 corporation is Spendmoneylikeit’swaterindustries,which provides consulting solutions in ethics and social responsibility to major global firms. ILC has been the CEO for 10 years and, to reward the staff of 400 for their hard work and performance, always authorizes their annual Fall Fest Celebration (held every October), which is a one-evening event including a buffet dinner, top-name entertainment and an expensive parting gift – all paid for by the company.

The 2021 event

DD’s predecessor, Shirley Uwill Fell, was the coordinator of last year’s Fall Fest, and although the reason was not made public, they resigned from the company immediately after. This was due to so-called personal reasons, but the rampant rumor was that they were asked to leave by ILC due to the overwhelming failure of the event. DD, as the replacement, has been on the job for less than a month and must start planning next year’s Fall Fest with the intense pressure that it must be a resounding success like events from the past.

Reasons for the failure

There were three main reasons for the failure of the 2021 event.

  • Cost: The event was way over budget.
  • Quantity/Quality: Due to the pandemic, the buffet had to be served by the hotel staff with no repeat visits allowed, so it was not “all you can eat” and was served with very small portions; you had to use a magnifying glass to see the steak or non-meat option. Also, most participants claimed that the food tasted like it was pre-heated frozen and some could see TV dinner boxes discarded in the trash.
  • Venue: Although the event was supposed to conclude at 9:00 p.m., the hotel management not only cut the sound of the live band at 7:30 p.m., but also herded everyone out at this time, not even allowing the guests to finish their dessert. The expensive gifts, normally presented by ILC, had to be sent to their homes, days later.

DD’s research results

DD has a big challenge in that their employer is located in a very small town and as such, there is only one hotel in this community: the Bates Hotel (note: the owner’s cousin owns the famous motel of the same name that the classic movie was based on). The nearest town/city with more than one hotel is 60 miles (97 kilometers) away, and this can present a problem due to not mixing drinking and driving. DD found that their predecessor had not signed any type of contract with the venue (it was all based on a handshake agreement), and this resulted in the hotel both cutting the time short by over one hour and presenting a final bill which was 50% higher than agreed to.

So the million-dollar (736,000 pound sterling) question is: What does DD do now?

Here is where they can apply the top 10 ways to negotiate.

1. Change the Landscape of the Competition

Based on the above, it may initially appear that only one option exists: the Bates Hotel. But is that really the case? Perhaps DD can look at the cost of chartering buses to pick up the guests at the employer, transport them to a venue in the nearest town/city and return them to the employer. That will minimize the effect of drinking and driving and allow for more venues.

Note: Most normal buses have a capacity of 46 seats, so approximately 9 buses will be required to accommodate the 400 guests. Those who don’t prefer the bus can travel on their own.

Another option would be to host the event in the employer’s facility if they have an open area, or outdoors with the use of tents – similar to the receptions associated with outdoor weddings.

Note: They are now expanding their vendor base from one hotel to bus companies, tent providers and/or catering companies. Even though they may still return to the original hotel, DD can use this as negotiation leverage – in that they are not dependent on one (sole) source and have some options.

2. Dangle a Much Larger Carrot

The assumption is that the Fall Fest will continue to take place every October, just as it has in the past. So now DD presents much more than a one-shot deal: the opportunity for the venue and/or the other providers to have secure business every year. This can be used in the negotiation. Perhaps DD will want to put in place an agreement for the next five years. The key word here is “agreement.” Unlike their predecessor, who only used the handshake, DD will now have a signed contract in place.

3. Negotiate Contract(s) with Teeth

In support of the point above, DD must keep in mind that all contracts are designed to benefit the author, so it is preferred that they work with their legal staff to present a version authored by the company as opposed to the other way around. In effect, they will start with four types of contracts: one each for the hotels (local or in the nearby locale), the caterer(s), transportation and tent companies. The majority of all contracts only include boilerplate language, including clauses addressing cancellation and force majeure, meaning the venue is not held responsible for events beyond their control (such as the pandemic). However, DD can put in “teeth” language such as rebates as business volumes are met/exceeded over the five years, and performance factors which address the deficiencies noted in the 2021 event.

4. Open the Books

The Japanese were first to recognize that the benefit of adopting an “open book” policy with suppliers was crucial to successful negotiation and long-term relationships. Imagine that Toyota in Japan is engaging in a major negotiation with their battery supplier. Instead of the supplier (vendor) submitting a quote for the next year (with perhaps a proposed price increase), the pricing would not be determined until the end of the meeting. Going into the meeting, both parties would have a good idea of the market pricing and the fair profit percentage and then negotiate the cost with the end in mind: to lower the overall price but still give the supplier a fair profit – which is why they are in business.

5. Use the Negotiation Matrix

This is a great tool that we use in our ACEA® program.

DD can put this project in one of the four quadrants above. As the buyer (in blue), which one do you think they should select? My recommendation is the top right – “partner.” Why? Because if DD can negotiate a five-year or more relationship as suggested above, then the annual spend (horizontal line at the bottom) would be high and the strategic importance (vertical line at the right) would also be high. From the standpoint of their vendor(s), depending on which direction they chose, particularly in this time of the pandemic, the vendor(s) would probably view DD’s business as must keep.

In fact, in reference to the Japanese being master negotiators, Toyota advocated that similar to a marriage, you select the right supplier (vendor) and the term of commitment is for life (known as “evergreen” in contracting length). I speak from experience in negotiating large deals with strategic suppliers; if they understand that this relationship is truly worth their while (WIIFM – “what’s in it for me”), then they are more willing to be creative in pricing and incentives.

6. Utilize a Key Negotiation Tactic: The Bogey

No, the Bogey is not based on the famous actor Humphrey Bogart, but is basically an “appeal to emotion.” Remember from our introduction that negotiation is not only about facts, but also personalities. In DD’s initial and follow-up communication with the vendors, they can indicate that this project is extremely important to their career growth and, perhaps, keeping their job.

Key phrases recommended:

  • Would you work with me so that both I and my company will be successful?
  • My job/career really depends on this project. If this is extremely successful, we will both promote your company and grow with you.

Remember, you get a lot more with sugar than vinegar!

7. Utilize a Key Negotiation Tactic: The Missing Person

Several years ago, P&G planned to outsource over $3B in It services, and HP was a vendor on the short list. After key meetings at HP headquarters, the negotiation teams had dinner in a local restaurant. Just by pure coincidence (NOT), the HP CEO was sitting in the bar, and when the teams entered the restaurant – the CEO introduced themself, indicated how important P&G was as their future customer, and then left. It worked; HP scored the deal! Similarly, DD can plan for ILC to pop into their meeting if it’s at their location, or if they are visiting a vendor, ILC can strategically call them and then talk to the vendor to emphasize the importance.

8. Don’t Hesitate – Aggregate

Once DD has engaged in the 7 ways above, they should then begin to total up all the costs to see how they compare with the budget.

Of course, before they begin any of these steps, they would have met with ILC to get the budget number. Then they can determine from their various vendor proposals how they compare with this number and the areas of negotiation to focus on to meet or come below that number.

9. It’s All in the Plan!

The negotiation plan is key to DD’s success. Keep in mind that this plan will be communicated twice – before their vendor meetings and after, to let ILC know the numbers and end results. This plan must include the key sections of an introductory summary (what they are planning to do), the details, and then a concluding summary (what actually took place).

10. An Expensive Parting Gift – Are You Kidding Me?

This falls into the category of internal negotiation. Perhaps with the sensitivity of ethics, DD can negotiate with ILC to drop the expensive gift and then use the savings here to enhance the budget numbers. Particularly if ILC communicates to the 400-member staff that since their firm’s main business is ethics and social responsibility, this is in keeping with “walking the talk.”

Conclusion

To all you DDs out there – I wish you negotiation SUCCESS. Perhaps you can add Master Negotiator to your title!

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Patrick S. Woods is an international trainer and highly experienced senior executive who specializes in procurement, supply chain management and executive leadership training. Patrick has had the phenomenal opportunity to work with over 300 companies in ... (Read More)

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