For many countries around the world negotiating is an integral part of the culture. In the Middle East for instance, one negotiates over almost everything, including the price of produce at the market, and it is an accepted and expected part of life. But that is not so in America, where the listed price usually sticks. And though Americans may negotiate over a few things like car prices, most aren’t comfortable doing so.
American businesses are becoming much more global and companies recognize that in order to succeed globally, one must be able to negotiate effectively. So, for the last 20 to 30 years companies have been teaching negotiation skills to their employees. In effect, business people are becoming better and better at their negotiating abilities. Never the less, any given business person may negotiate only one to three deals a year. So when it comes down to that person doing a negotiation, how well will she or he perform? The truth, according to negotiating expert Gary L. Beal, is that Americans are still not very good at it.
Gary L. Beal is in the business of negotiating and claims that his product, the selling of negotiating skills and knowledge, will give companies the upper hand when they slide into a chair and start dealing with a roundtable of suits. Rather than go the indirect route, which is to teach a class on negotiating, Beal will help a corporation’s negotiators on a specific negotiation. He will go over the plans and strategy with a company and teach them how they can get the optimum outcome from that negotiation. And then send them into battle to tackle the task.
“Professionals help people in many different walks of business, but no one was actually going out and working with organizations and coaching them in how to improve their actual hands-on negotiating,” Beal says.
A New Model
Beal says that his model is different than the outsourcing consultant’s model. Outsourcing consultants handle the entire transaction, which may take several months, and a company may spend 15 or 20 days of consulting time on the project. Beal’s approach is different. What he does is work with the negotiation team and helps them think through their strategies, leverage points, exposures, aspirations, choices and options. The idea is to help craft a corporation’s negotiation strategy, but his model doesn’t qualify the vendor and the time spent with the client is reduced to a half a day to two days total.
“There is a place for the outsourcing consultant model, but it tends to be quite expensive,” Beal says. “My model tends to be much more focused and pointed on helping the team do the actual negotiating with the vendor.”
The Importance of a Successful Negotiation
Though lacking in negotiation skills, Americans tend to be very competitive because they grow up in a competitive environment. So once Americans actually do start perfecting their negotiating skills, they tend to transfer that competitive spirit into negotiations. In a car deal that is fine, in an outsourcing setting that may or may not apply.
“If you are going to have to work intimately with the outsourcing vendor and you spoil the relationship because of heated negotiations, there is going to be some real difficulty with them servicing your needs over time,” Beal says. “On the other hand if you go in and roll over, and they strike a very good deal at your expense, they may be very service oriented and very happy to serve you, but you may be getting overcharged.”
So a company has to be very careful how the strategy is crafted. If a company is outsourcing to a security service then a very competitive negotiation might fit the bill because the basic concern is good service at the best price, Beal says. But if a company is outsourcing its information technology (IT) and has to work hand and glove with the vendor every day then a very competitive win-lose approach shouldn’t be used. IT is fundamental to the success of a business, so having the supplier as an ally is a good idea.
“You have to push towards creative options and solutions where both parties can feel like they have made the pie bigger, so that the customer feels like they are receiving the maximum value and the vendor doesn’t get beat up,” he says.
The Importance of a Successful Negotiation
Companies should consider paying more money if it multiplies the opportunities the business has to grow, flourish, or function better. A company may also negotiate over the future of their current employees.
During any major outsourcing arrangement there is a transition of a function from the customer to the vendor. And in many cases there will be employees that are either going to move from the customer to the vendor to fill holes, or be terminated. If a company feels a sense of loyalty to the employees they may need to negotiate them into the deal somehow to make sure that they are taken care of. “If you don’t think about what it is you are trying to accomplish as you shed employees, whether it is a concern or not, you will end up with some outcome different than the one you hoped for,” Beal says. “So a company may negotiate over what the transition looks like.”
Timing may be another thing that is negotiated. When a company is ready to outsource, some vendors may respond better to time constraints, he says. If a supplier can’t respond immediately to a company’s time needs it doesn’t mean they are a bad partner; it may mean that the company might need to look at the total value equation and if it takes longer it might be more cost effective in the long run. A supplier may be able to come in and do a turnkey, but it may cost more money.
And of course, terms and conditions are negotiated – specifications, quality levels, ease of use, and type of service, he continues. All of these things fit into the equation and frequently, while price is important, cost has to be looked at in terms of all the things that a company is trying to accomplish in an outsourcing deal.
“There are a lot of cases in outsourcing where relationships have not gone particularly well, or have not lived up to expectations. I believe in large measure that this is a function of not negotiating a deal that meets all of a company’s fundamental needs,” he says. “My belief is that over time we are going to see more outsourcing and that the push to really ‘stick to the knitting’ will be a very compelling argument. A good negotiator will look at all of the things that a company is trying to accomplish and determine how to make all of those things fit into a negotiation strategy.”
Lessons From the Outsourcing Primer:
- In order to succeed globally, a company must be able to negotiate effectively.
- A competitive negotiation may not be the best approach when outsourcing the IT function, or any other function where the vendor and the customer have to work as a team.
- Companies that only look at price when negotiating may overlook other values that an outsourcing arrangement can bring.