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Turning Negotiation into a Corporate Capability

Every company today exists in a complex web of relationships, and the shape of that web is formed, one thread at a time, through negotiations. Purchasing and outsourcing contracts are negotiated with suppliers. Marketing arrangements are negotiated with domestic and foreign distributors. The contents of product and service bundles are negotiated with customers. Product development packs are negotiated with joint venture partners. It’s difficult to think of any business initiative that does not require some form of negotiation.

In the article, "Turning Negotiation into a Corporate Capability," we explore the themes mentioned in the introduction above. Here's a snippet from one of the sections within the article (which you can download below):

Broadening the Measures of Success 

The way a company measures the success of a negotiation guides the way a negotiator approaches and conducts the negotiation. Although many companies have begun to stress the importance of forging partnerships with key suppliers and customers, in most cases, this goal remains a high-level aspiration that has not been translated into clear performance measures for negotiations. Most measures still center on gaining the best price or achieving the lowest cost. Dollars and cents, after all, are the easiest things to measure, and they form a concrete basis for setting budget goals and for linking negotiators’ pay to their performance.

Emphasizing financial measures naturally leads negotiators to focus on cost issues. Consider what happens in most procurement departments. Each year, budget goals are established that assume certain (usually fairly aggressive) price targets will be met for goods purchased.

Knowing that they’ll be judged according to how well they meet or beat these targets, department managers instruct the purchasing agents to get the best possible prices from suppliers, and they evaluate each deal according to some measure of price – the discount from the list or the prevailing market price, for instance. Knowing they’ll be judged on the price breaks they achieve, the purchasers view negotiation as a zero-sum game – for them to win, the other side has to lose. Even if the company espouses a win-win approach in dealing with vendors, the purchasers know that their managers will be amply satisfied if they can bring home a big discount.

Read the full article below. 

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For more on this topic, please visit our Negotiation page.