Why To Hate Fact-Based Negotiation, Part I
Do You Use Emotions In Negotiation Or Only Facts?
PurchTips Editions #347 Click here for the printer-friendly version
More and more procurement departments are becoming parts of the finance organization. Some procurement heads report directly to their Chief Financial Officers. While generally good, one of the downsides is that many procurement professionals are taking on the personality of bean-counting robots.
This has led to the proliferation of “fact-based negotiations.” This is where some procurement negotiators focus on one, and only one, approach to negotiating: proving to the supplier what their costs should be so that the supplier will charge a lower price. They focus 100% on the science of negotiating and 0% on the art of negotiating.
In my opinion, fact-based negotiation should be a tool in the procurement negotiator’s toolbox. Just not the only tool. There are four reasons why I hate fact-based negotiation as a one-size-fits-all approach to negotiating with suppliers.
- It fails to leverage the effective tactic of using emotion in negotiations. When you negotiate with a supplier CEO, you may be negotiating with the company’s founder. Company founders are often emotional people – entrepreneurs who started their companies out of a passion to overcome odds. They can be moved by an emotional approach to negotiation. Focusing only on facts fails to tap into their propensity to make emotion-driven decisions.
- It fails to recognize that suppliers think about revenue growth more than cost. In procurement, we are almost brainwashed to think solely about costs. When suppliers create proposals, their minds aren’t necessarily on getting the cost calculations just right. Their minds are on winning deals and growing their top lines. Getting a supplier to agree to your cost calculation may not get your supplier to the price it is willing to offer to achieve the growth it seeks.
We’ll cover two more reasons to hate fact-based negotiations in the next edition of PurchTips.
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