Craig Reed has spent his entire career in procurement. Having worked at major corporations including DuPont, Delta Air Lines, Honda, and John Deere, he’s now the Chief Procurement Officer for Corteva Agriscience. And, with all that experience, he knows a thing or two about procurement negotiations.
The importance of preparation
Preparation is one of the most important parts of any negotiations. While not a profound observation, Reed’s experience offers a more nuanced take than, simply, preparing.
For him, a key part of the preparation is fully understanding the business requirements from that negotiation. Procurement negotiators often assume they do the best for their business based on their own criteria. That might be something like getting the lowest cost, or the best terms, but these might not always match the business’s needs.
“Sometimes that might mean a higher quality product, or a shorter delivery time,” Reed explains. “And sometimes it does mean I need a lower cost, but it means making sure you’ve clearly aligned your strategy with what the business requirements are.”
It’s important for the procurement team to really understand the business because, ironically, the internal negotiations are often the hardest ones. A large corporation will have an internal structure that frequently creates silos. And each silo might have different opinions. The most obvious might be the tension between production teams looking for quality and finance teams that are striving to reduce costs. And even when every team or division is united on a company vision, they can still have diverse views on how to best realize that vision.
Procurement, therefore, can find themselves negotiating with suppliers and attempting to reconcile internal views, which may be irreconcilable, with the outcome. Reed recommends these discussions should take place before an external negotiation even starts, as part of the strategic planning process. “Let’s have discussions around the decision criteria, about what important for each team, about what they want to achieve,” Reed suggests, “then you can align on the set of data, and walk the path together.”
Listening and pausing
No matter how much preparation and work goes in before starting a negotiation, they will never go exactly to plan. That’s why it’s crucial to actively listen during a negotiation.
“You will pick up so much information that will be informative, that you can build into your overall strategy,” says Reed. “And it may confirm your assumptions and expectations of the direction in which you’re heading. Or it may tell you that you haven’t considered everything.”
Listening carefully allows you to pick up the signs and signals that will help you correct before it’s too late. Failing to do so may cost you credibility or even the whole negotiation if it has started to drift too far from your initial expectations.
And Reed also highlights how important a pause can be in negotiation. There is often a sense that stopping a negotiation is not possible. This is frequently because of the pressure that negotiators put on themselves. Sometimes this the result of a sense that there is an expectation of a result or outcome from negotiations which has to be met. Sometimes it’s down to wanting to save face, and a feeling that an adjournment weakens a position. However, these sentiments are almost always wrong. A purposeful pause, whether to gather information, advice, permission, or just to think things through, will almost always result in a better negotiation outcome.
Simply asking for a few more days freezes things, rather than ends them. “So, it’s a perfect way to not give up anything, and they're not giving up anything,” says Reed. “But it allows you to go back and adjust your strategy accordingly. Because in many cases things change quickly, and you want to get as smart as possible!”
The difference between good and great
For Reed, that willingness to pause and wait for a few days is part of what makes a great negotiator. Reed uses the analogy of fly-fishing. When the fish bites, it becomes a competition. Simply reeling the fish in can break the line, and even the rod. Instead, it’s a match, the fish needs to be reeled in, but given slack when it tries to swim away. Eventually, the fish tires and can be landed.
Negotiation requires the same healthy tension, gradually pulling the result towards an outcome, but retaining the freedom to pause and let things run a little if that’s needed.
“It’s about having a perfect balance between the art and science of negotiation,” says Reed. “We need to know what the data tells us, but know that it can’t tell us a company’s circumstances, goals, or challenges. So, you need to be artsy enough, nuanced enough, emotionally intelligent enough, to balance it.”
Click here to listen to Craig’s full episode.
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December 01, 2021 at 10:00AM
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