Many years ago, I was negotiating a contract renewal with a large software supplier. Towards the end of the process, there were a number of ‘deal breakers’ that had to be resolved before the deal was acceptable from the client perspective (mine). This is not unusual as it is rare a deal is perfect for either customer or supplier “out of the box”.
We did all the things that you’d expect – wheeled in the Board Execs and traded blows in tough conversations, slowly edging towards some sort of compromise commercials that we could agree upon. Eventually we ended up at a point where the deal was about 90% there but there were elements of the compromise required to close it that were unpalatable for both parties.
We toughed it out and both parties got some of what they wanted and had to compromise on the rest. At this point my opposite number on the supplier side decided to share some wisdom with me during an informal chat. Richard (I’ll use his first name) said that in all his years of doing business he felt that a deal both sides could live with was a good deal, and that neither had to love it… This was not a ploy, as we’d concluded the negotiation.
At the time this seemed to be good insight, and I have had cause many times in the subsequent years to recall his wise words.
There is much written about negotiation and there are numerous different methods and processes that people follow.
What is clear to me is that all too often, parties don’t consider what they can live with. The approach is all or nothing, death or glory and relentless pursuit of one-sided deals. Sometimes this works, sometimes it doesn’t. All too often one side or the other ends up with a poor deal, or a deal that does not incentivise either party towards the right outcomes. In my experience, you’ll pay for it somewhere in ways you can’t even begin to imagine. After all, suppliers have to make a profit and there are myriad ways delivery organisations can adjust their resources, logistics and even materials to meet their internal profit hurdles. Many times I have heard the intention that the ‘contract’ will sit in a bottom draw, never to be referred to, only to see it as a permanent fixture on the suppliers desk ready for them to point out the various loopholes that they have discovered when they have been sweating how they were going to make their numbers.
That doesn’t mean to say you should be soft in negotiation. Ask for what you need. Have your deal breakers, but above all have a sensible view of what is a good deal for you. After all, suppliers will come back with offers that you’ll not have though of that will cause you to stop and think. If you don’t know where you are going… any road will get you there.