The following article was prepared by Mike Taylor, C.P.M.


Creative Negotiation (part 3)
January 2004

Effective negotiation isn't always a planed process or major production, it's a habit. By considering all aspects of contract issues before saying anything, effective buyers turn each communication into a negotiation. Lawyers also practice this principle; "What you say, can and will be used against you". In the same way, what you say can make a big difference in the outcome of a discussion.

That is, how you identify a problem or contract issue can and will make all the difference in the ensuing discussions

Here is one example: Remember the shocking stories of the $999 Airforce pliers? [I have this article on the wall as a reminder] The Airforce bought a special tool for maintaining jets and someone called the tool pliers. Newspapers discovered the purchase and compared the tool to the $5 pliers you and I buy at the hardware store. It made terrible headlines. In reality, these were specially designed and manufactured, spark-resistant crimping tools for a hard-to-reach spot in a jet engine. But because someone took a shortcut in a document and called them pliers, the door was open to a major public relations problem.

In a negotiation, the same thing happens many times. The words used to describe the situation; problem, issue or concern can have a big impact on the progress made in resolving it. A major issue can grow out of a minor misunderstanding. The opposite is also true. A major issue can be diffused by better (or different) descriptions and phrasing.

The company CEO first exposed me to this principle years ago, when I had only been in purchasing for a few years. I was amazed at how he easily negotiated a potential problem with one of our customers by simply thinking before he said anything. Here is what happened:

We were chrome plating a very long tube for a customer in Chicago. The process leaves a few inches raw at each end (without any plating). About the time we were ready to ship the finished tube, our shop superintendent realized that the specification appeared to require the entire tube to be plated, including the ends. The next reaction was panic and argument among the shop people, the estimator, salesman, etc. When the panic reached the corner office, the CEO took charge.

In this case the CEO didn't react to the obvious specification interpretation problem. He focused on a different issue. The fact that the raw ends of the tube needed protecting when they were shipped was a much more basic question. That's the way he characterized the issue when he called the customer.

The CEO made the assumption the customer knew the process, had allowed extra material for the raw ends and expected the result. He calmly called the customer, gave him the good news "we are ready to ship" and asked how the customer wanted the raw ends protected. When talking to the customer, the CEO changed the nature of the problem and negotiated the issue just by the way he asked the question.

Score one for the effective negotiator.

More recently, I had another manager who was great at doing this. In his words, major issues became a series of minor problems, significant disagreements became simple misunderstandings and contract disputes were distilled into a number of minor questions. He negotiated every time he spoke and still is a very effective negotiator.

We can do this by looking at each contract problem with a critical eye. What is the real problem that needs to be resolved? Whose problem is it, really? Can we describe it differently? Notice, we are NOT focusing on who is responsible. It's the problem, not the responsible person, which needs to be resolved to move the contract forward

So how do we get there? Practice. Start now by looking at common problems differently. Develop a better way to characterize issues and use language to diffuse the situation and steer the discussion. This might be a good exercise at staff meetings or ISM events. Pick a common contract problem and have everyone at the table take a shot at a better way to characterize the issue. MAKE NOTES and keep them close at hand.

Try these examples:

We receive an invoice that doesn't match contract terms. Does the invoice need fixing? Is that where the contractor should focus his attention? Is this really an invoice if it doesn't match the contract, or just a wasted piece of paper? Is this going to result in a "payment delay" or is it more properly an "invoicing delay"? Whose problem is it? Wouldn't you rather have an invoice that complies with contract terms? Can we avoid this confusion in the future by setting up an automatic payment?

When the wrong product shows up, does the specification need fixing? Did the contractor make a shipping mistake? Whose problem is it to get the wrong product back to the contractor? Who owns the wrong product? Isn't the real problem that the contractor hasn't yet performed by supplying the correct product?

When the contract schedule slips, does the promise date need correcting or does the contractor need to explain how he plans to recover? Is the real problem to determine how the delay occurred or is it rather to determine what can be done to get material? Then later, for the long-term relationship; was it a mistake in the quoted delivery date? Was it a problem in communicating production progress? Was it an unrealistic expectation that should have been resolved before contract award? Is it a contractor's normal business practice that should be considered before the next award?

In contract negotiation, the same things happen many times. We have the chance to practice and learn a better way to address issues. The phrasing used to describe the situation can have a big impact on the outcome. Get in the habit of Asking the right Questions and using communication to your advantage.

You'll be a more effective negotiator without really trying.

Mike

P.S. Ever have a used car salesman ask, "Can you afford this car"? Heck no! They ask; "Will this car suit your needs" or "Do you like this one". Once the salesman finds a car you love, figuring out how to pay for it is a different problem that you have a lot of incentive to work on. Do you think car salesmen are taught how to change the outcome by phrasing the problem differently? Hmmmmmmm.

Read more articles about negotiation and creative contract solutions in the Purchasing Toolbox at http://www.mltweb.com/prof/tools.htm and in the BuyTrain news article archive at http://www.mltweb.com/tools/buytrain/index.htm


 

MLTWEB is assembled and maintained by Michael L. Taylor, C.P.M. 
Materials and articles prepared by Mike may be shared for purchasing education provided that this source is cited and no fee is charged. The rights for any other use are withheld.
Copyright;  Michael L. Taylor, C.P.M.
Last Updated: 11/26/2016