Purchasing and Negotiation Training

Jeanette Nyden, J.D.

Editor’s note: Jeanette Nyden is a frequent contributor to this blog

Have you ever wanted to say no to some unreasonable request, whether from a customer, vendor, boss, or co-worker, but said yes just to keep the peace? If you are like most of us, we are taught that saying no can be a bad thing. But what about those times when you have to say no, and for good reason

Negotiators say no all the time. Negotiators who are skilled at saying no are often the most respected and popular in their field because they are more likely to craft an agreement that meets their needs and their counterpart’s needs too.

Saying no is not as hard as you think. A simple, four-step process gets you there. The set-up for the no—in the form of a counter proposal—is essential.

Four Steps to No 

Step 1:  Repeat the request in a curious and pleasant tone. It is essential to make sure that you understand what the other person is asking of you. Many of us work off of assumptions causing unneeded stress and confusion.

Here is a simple and effective way to confirm what you are being asked.

• You would like our company to . . . . Am I correct? 

by Jeanette Nuden

Step 2:  Ask some clarifying questions.

Clarifying questions are open ended questions meant to get the speaker talking about the reasons behind the request. This is a critical step in the process of saying no. Rather than arguing about the request, learn more about the reasons for the request and use those reasons to make suggestions or to make requests of the other person.

Here are some sample questions that work in any situation. Memorize these so they roll off of your tongue at the right moment.

Ÿ      Tell me more about . . . .

Ÿ      How does that impact . . . .

Ÿ      What concerns you about . . . .

Ÿ      How do you see us accomplishing . . . .

A word of caution about asking questions: Banish the word why from your vocabulary. Why questions put people on the defensive and defensive people are less willing to listen to suggestions or agree to a counter offer. 

Step 3:  Acknowledge what they have told you with a quick paraphrase. After the other person tells you her reasons for the request, restate those reasons back to her. This step proves to the person making the request that you are really listening to her and understand her objectives. This step sets up the no you are about say, without sounding like you’re saying no.

Good acknowledging statements start with phrases such as:

Ÿ      I see, this change will…  

Ÿ      Now I understand. You hope to…

Ÿ      What is most important to you is… 

online training in purchasing, negotiation, and sales

Step 4:   Make your counter proposal.

The counter proposal is a soft way to say no. In effect, what you are saying is let’s try something else here. Counter proposals are most effective after you convey your understanding of the reasons behind the request in the first place.

An example of a counter proposal might look like this:

• What if we were to do . . . . .  instead?

The key to this step is the word we. You are inviting the other person to join you in creating an alternative that works for both of you.

This four step process invites people to consider alternatives and to work with you to meet their needs, rather than make demands of you. The key to success with this process is to be genuinely curious about the reasons behind the request. The more curious you are the more likely you are to solve their needs.

It is easy to fall into the trap of saying yes to repeated requests just keep the other person happy. But saying yes indiscriminately will cost you a lot of time and money. You can become a skilled negotiator by saying no while at the same time continuing the conversation until you both reach an agreement you can live with. 

The next time you are feeling pressured to say yes just to keep someone happy follow these simple steps: Repeat the request to be sure you are hearing them correctly, ask some questions, acknowledge the purpose of the request, and offer your counter proposal. These four steps will give you an agreement that you both can both live with.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Do you recall Kermit’s melancholy refrain, It Ain’t Easy Being Green?  It ain’t easy being green for business buyers either.  Are photovoltaics, electric cars, wind turbines, geothermal heating and, cooling, Energy Star, LEED, Corporate Social Responsibility, passive solar, alternative fuels just buzz words or the real green deal?  Frustratingly, the answers are yes, no, and it depends.  Even after we separate the truly green from the greenwashing, we then must learn how to go green. 

 Giants like Wal-Mart, Proctor & Gamble, GE, UPS, American Airlines, and hundreds of other leaders in industry and commerce have already adopted sustainability. The fact of business life is that sustainability is driven by cost savings which equals purchasing.  Organizations large and small share the leadership strategy of assigning the purchasing profession to harvest the cost savings that translate to sustainability.  Whether the green initiative is energy conservation, reducing/reusing/recycling, managing storm water runoff, re-lamping facilities, using alternative fuels, or any other sustainable initiative is all about saving money. 

Click here for a two minute video on bringing a green purchasing seminar to your organization.

 What is more, the sustainability goals of virtually every business cannot be met by the organization alone so they are being passed down throughout their supply chains.  Even if your company is not currently engaged in green purchasing, your customers may soon mandate it. 

 Employers are already seeking to hire green purchasing pros.  Make your self more valuable to existing and prospective employers by learning all you can about going green.  Lead the green revolution and reap cost savings with the new Green Purchasing and Sustainability online course.  It is all about hard how to advice authored by purchasing pros for purchasing pros on going green in all the major areas under purchasing’s control.  

 Indeed, Kermit had it right, but the Society is making it easier for purchasing pros to be green.

It is easy for Americans to believe that most of the business world vibrates in our within borders.  Given our record in technology, wealth creation, and per capital accomplishment since our inception, we have some justification.  One of the manifestations of this xenophobia is a provincialism that we might not see in ourselves. 

A recent survey of college kids found that almost 90% could not locate Iran, Iraq, Pakistan, Syria, Israel, Afghanistan, etc on a map.  We don’t have to go that far!  I dare say that barely 5% of American adults could identify the provinces in Canada, let alone name their capitals.  We won’t try that exercise, but if you are among that 95%, you know who you are…

This is certainly an issue for us, so what can we do?  We are confronted by the age old bugaboo of not knowing what we don’t know.  One thing we can do is to just be aware of culture, our own, which seems natural, and everyone else’s, which is normal for them.  Let me give you an example of what I mean by cultural awareness.

The reason we don’t want to approach negotiation from a linear viewpoint is that it has no defined start and stop points.  Plus, it is a mixture of arts and science.  Further, the progression is scattergun, not logical as from arithmetic to algebra, to trigonometry, to calculus.  Since negotiation comes at you from many different and unpredictable angles, pros need to be able to play the game from any position.  The training should prepare you for that if delivered in a fashion that simulates negotiation.

 Foreign lands and languages

 If you speak one or more foreign languages, you know to just accept what other cultures do.  I mimic their behavior because it helps me to acculturate, an effort that does not escape my counterparts’ notice.  In much of Europe and the Middle East, greetings are a bus on the cheek, an air kiss as it were, twice in Western Europe and three times in Eastern Europe and the Middle East.  I don’t know why, it’s just the way it is.  Don’t question it. 

In Romance languages the adjective usually comes after the noun, such as house red, or load heavy.  It is perfectly logical either way and neither is “backwards”. 

In Europe, salad is commonly the last course in dinner, not before as we do it. There might be a good dietary reason, but I do not know.  If you have spent much time abroad, you have observed differing “personal space” practices. The Japanese hire people to push and cram subway riders into cars at rush hours while bus riders queue up politely and quietly while keeping a respectable distance apart.  It is just the way it is. 

Some tips for acculturating and improving your negotiation success

No matter where you go, two piece of advice always apply; learn to speak even a few words of the language and study the culture and history.  Doing so will not only ingratiate you with your hosts but differentiate you as a concerned and polite guest. 

 Middle East is mostly Islamic and Arabic cultures.  Some no-nos are:

• Showing soles of feet
• Touching with left hand
• Friendliness to family members
• Discussing business before dinner

 Pacific Rim

• Business relationships are more important with foreigners than personal relationships
• Refrain from excessive shows of enthusiasm or effusive body language
• Do not John Wayne the business card into your pocket – study it
• Try to speak a few words of the language –your efforts will be appreciated

 China         Cultural appreciation is required to succeed with negotiations in China.  It is a huge country with an enormous population that has wrestled with starvation through the centuries.  It is not surprising to learn that food is a keystone in their culture. 

While traveling with friends, we ordered a duck dinner.  The servers took everyone’s leftovers, boiled them into a soup which was served as the last course.  I knew that not much food is wasted in China from the popular adage, “The only part of the pig not eaten is the oink”.  Had I studied more of the culture, I would have known of the dietary belief in China that consuming hot liquids such as soup and tea after a meal is done so that any fats consumed are kept warm as they travel the alimentary canal so as to be excreted rather than absorbed.  I am uncertain about the scientific sensibility but convinced of the cultural value.

Meals are an important part of relationship building.  It is impolite not to try some of every dish.  Watch what they do and mimic as best you can.  Put the rice bowl up to your mouth and eat with chop sticks.  At dinner, ask your hosts about their country, particularly the history.  The Chinese are proud of their country and want you to appreciate it.

 Taiwan      I invited a counterpart at a Taiwan steel mill to dinner the first day we met.  Well, I waited for an hour, had diner and went home.  The next day, I asked the fellow if something had happened, but he said that he did not think I meant that night.  He explained that a dinner invitation is the equivalent of the “How are you” question.  No one really expects a response, but the question is expected.  Dinner invitations amongst relative strangers are understood to be sometime in the future.

 Japan         Japanese are big believers in ceremony.  Their society is built on degrees of honorific differentiation, quite a difference form our Americans informality.  However, the cultural influences of the west have brought on the Karaoke bar phenomenon a distinct departure from ceremonial behavior.  The younger folks take this quite seriously.  Excessive drinking usually accompanies this singing.  Some over-indulgers rent little cots to sleep in Tokyo because they live far out of town and cannot afford in town hotels, so they sleep in these stacked bunks.  Bowing is the accepted form of greeting.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

An infamous concrete bridge was finally finished in 1992.  In project management, we speak of the Triple Constraints: Budget, Schedule, and Scope.  You already know about the whopping Budget overrun.  The Scope or Quality had numerous problems, and the 3 year Schedule took seven years and three sets of contractor teams and one CM advisor to complete.  Do you think this project wound up in court?  Yes, many times.

Every contractor team experienced major difficulty with the state DOT and each team won substantially in its claims for additional compensation.  The presiding judge at trial said that the state DOT had disrupted the project, caused its delay, and had breached the contract by behaving improperly. 

No attempt at Partnering was made throughout this project between DOT and contractors.  In fact, this project may be and poster-boy for the detrimental effects of adversarial negotiation.  No names are used because they are not important to our purposes.  The point is that the Partnering approach puts negotiating parties on the same side of the table as mutual goals are established and advanced.  The alternative, as in this case, can be disastrous.

The next table presents an approximate time line and dollar amounts (give or take a few months and millions) of the project and some associated remarks. 

The principal source is the Providence Journal archives 

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Please score your answers to this Purchasing Law Quiz. Each correct answer is worth 5 points.  If you don’t know whether your answer is correct, it probably isn’t.  For a list of the correct answers, email RobertMenard@RobertMenard.com.  If you do indeed have them all correct, send me your answers and I’ll send you a free copy of my book, You’re the Buyer – You Negotiate It.

Answer 1 through 5 with True or False

1          The Uniform Commercial Code (UCC) is a federal law.                

2          The UCC does not generally apply to the sale of services.             

3          Prescribed forms of contract must be used in transactions for the purchase and sale of goods.                

4          The Price term must appear for a Purchase & Sales contract to be valid.          

5          A sells good belonging to B to third party C.  B can recover the good from C        

6          B obtains a Writ of Replevin to confiscate his goods from C.  What is a Writ of Replevin?                                  

7          Assume that Supplier has breached the contract agreement where buyer has not accepted the goods or has justifiably revoked acceptance and vendor has not cured any breaches.  Which are legitimate remedies under the UCC?  Answer True or False

a. Cancellation                                                                                          

b. Recover payments                                                                                  

c. Sell vendor’s good in buyer’s possession                                    

d. Recover money from Supplier                                                    

8          What is/are liquidated damages?                                                                      

9          What is meant by warranty of title?                                                                   

Answer 10 through 13 with True or False

10        Sellers’ warranties under the UCC include the following.  

a.      A merchant provides an implied warranty of merchantability that goods are fit for the ordinary (not particular) purpose for which they are used                

b.     A buyer may not rely upon the implied warranty of merchantability if he has or should have examined the goods                             

11        Every contract within the UCC imposes the obligation of good faith (including honesty and ethical behavior) in its performance which may not be disclaimed.                 

12.       Remedies provided by the UCC generally are intended to put the aggrieved party in as good a position as if the other party had fully performed.           

13        Generally, the sales representative has the authority to negotiate the deal?                       

14        A contracts to sell certain goods to B, reserving a security interest until the entire purchase price is paid.  Third party C negligently destroys these goods.  Who has a right of action against C?                                      

A         B          Both                 Neither            

15    In general, whose T’s & C’s govern?                                               

Buyer                  Seller                   Offeror             Offeree

16    For contract negotiation purposes, define “Offeror” and Offeree”                

EXTRA CREDIT

17    Generally, a buyer has the authority to negotiate the purchase?      True or    False                     

18        How are a Take or Pay and a Cost Plus Fixed Fee contract different?  

19        What is or are the CISG?                                                                                

SCORING  If you do not know for sure, give no credit

Add the extra credit points to your score, unless you got them all correct!

                        00 to 40                       Wow, my bad

                        45 to 85                       Needs work

                        90 to 115                     Bravo!

If you do not know as much as you thought you should, you are not alone!  Education and training is not what it should be in the purchasing profession.   One convenient way to improve is online courses.  Here are some recomendations on Essential Law for Buyers and Sellers,  Contract Law, and Types of Contracts.

Credit is given to the Purchasing Manager’s Desk Book of Purchasing Law (Prentice Hall) for the source of this legal information.  The Desk Book is a must-have reference for everyone in the purchasing profession.

See more  information on the frame work and definitions of warranties under the UCC at this link.  For examples of warranties under the UCC, see this link.

Harry Hough, PhD, founder of the American Purchasing Society

Editor’s Note: Dr. Hough is a frequent contributor to this blog.

No important military action is likely to be successful without preset objectives. It may not be completely appropriate to compare negotiating a purchase with a military operation, but better purchasing results are obtained when objectives are established beforehand.

What Objectives

The first thing to consider when planning a negotiation is to decide on what the objectives are. Here are some of the more common things of concern about most purchasing transactions.

Price

Long Term Costs

Product or Service Specifications

Delivery Date

Payment Terms

Length of Warranty

Warranty Coverage

Legal Jurisdiction

Packaging Requirements and Charges

F.O.B. Terms

Freight Charges and Carrier Used

Order Quantity

Length of Agreement

Cancellation Terms

Patents and Copyrights

Maximum and Minimum

The best target objective for each subject well as the least acceptable target should be decided. Some items will only have one satisfactory objective. Other items may have a wide latitude. For example, 12 may be the only acceptable order quantity because each piece of the item costs thousands of dollars. On the other hand, acceptable payment terms may vary between 2% 10, Net 30 to Net 60 because that is not as important to you. During the negotiation, you will be willing to compromise or give up on your less important objectives in order to obtain your more important ones.

Long term costs should be your first priority because that objective includes many of the other objects. You will give in on the objectives that are less important to you but may actually be most important to the supplier. The supplier will give in on the objectives that are less important to her and be more hard-nosed about the objectives she must have to close a deal.

Use Data to Determine Probabilities for Success

Setting objectives should not be arbitrary. They should be based not only on what you would like to achieve, but on what seems possible. A realistic estimate of possibilities can be made by analyzing the marketplace. For example, it will be very difficult to obtain price decreases if business is booming and the supplier is fully booked with orders far in advance. It will be much easier if the economy is down and the supplier has plenty of unused capacity. If you know that other suppliers have lower prices or are just hungry for business you have a better chance of getting your supplier to cancel the increase.

Look at the Price History

The purchasing operation should keep price history records. Compare the changes shown in price history with changes in the Producer Price index or even the Consumer Price index for similar periods. It is best to look up the code for the Producer Price index product category rather than use the summary index for all products as price movements will be closer to actual for a particular product. Compare the index with the supplier’s price changes. Suppliers often fail to change prices in spite of cost changes for fear of losing business. They postpone increases until they are forced by the economy to make very large increases. However, any supplier who has gone for years without asking for an increase in spite of rising costs means he has probably been overcharging for years.

Be Ready to Compromise

Leave room to negotiate. Don’t expect to obtain every objective. Don’t negotiate so well that you leave the supplier with little or no profit. That may reduce your costs in the short term, but if the supplier decides the product is not profitable, he may stop selling it and you will be forced to go elsewhere, or he may simply lower his quality to save costs. You will be better off if you allow the supplier to believe he has done well.

Jeanette Nyden, J.D.

Editor’s note: Jeanette Nyden is a frequent contributor to this blog.

We have a love/hate relationship with email. We love instantaneously sharing information with a lot of people. But, we hate getting spammed or deluged with irrelevant “reply all” responses.

We have the same love/hate relationship when using email to negotiate deals. Sometimes we love how efficient email is. But, studies show that we lose more than 50% of our deals when we negotiate exclusively using email. Do you hate that? 

Email negotiations are here to stay. We cannot go back in time, but we can improve our skills by immediately applying these five tips.  

1)                  Engage the Reader in a Back-and-Forth Conversation.  Negotiation is all about the conversation. It requires a lot of back-and-forth conversations to get to the final deal. At the end of short paragraphs ask a question. Questions will help keep the conversation going. 

For example, one of my clients sent a confusing email. When she corrected the information, she closed with a question. Will this information cause any problems on your end? The other party responded that it would not. If the information had created a problem, my client would have wanted to know. Her question would have elicited that information. 

People are notorious for sending back one sentence responses. I get asked all the time about dealing with one sentence responses. One liner’s could kill your deal. Add a question or two with your response. 

2)                  Carefully Select Subject Lines.  Subject lines are the reader’s first impression, so use subject lines wisely. For example, my client wrote “Quote” as the subject line in her email to the vendor. I suggested that she use “Quote for 2011 ABC Part Including Warranty and Service Options”. Not only does this make a great first impression, it conveys important information to the receiver. 

Don’t be afraid to change the subject lines to fit the body of your email. If you started with “3 points of consideration” and have only one point left, change the subject line to “Last point for consideration.” 

3)                  Structure Your Email for Impact.  Layout your emails to make it easy for the receiver to follow the back and forth negotiation process. Long, rambling emails will confuse the reader. Additionally, most people skim and scan emails. That means they’ll miss important stuff in long emails. 

For example, be sure to break topics up into bit sized pieces. Then talk about only one topic per paragraph. You may even want to number your paragraphs. In the example above, if you have “3 points for consideration,” number the paragraphs so you can keep track of the agreements on each point. Numbering your points to match your subject line will help people skim and scan your email more effectively.

4)                  Choose Your Words Carefully. Words only make up 7% of our communication. 93% of communication is non-verbal, such as tone of voice and facial expressions. All of that non-verbal communication is missing in an email. 

Negotiators take two different paths when using email. Some negotiators choose words to convey an emotional context that non-verbal communication would usually convey. For example, they might use words like surprised, or pleased, or disappointed. Typically, in a phone call or face-to-face meeting, a person’s voice or face would express those emotions. 

Other negotiators strip all emotion words out of the email and stick to the facts. In those circumstances, the negotiator would convey emotional context only during in verbal communications. In both situations, you will have to consciously choose your words. 

5)                  Make Effective Tradeoffs.  A tradeoff is a mutual exchange of value. Times are tough; margins are tight and everyone wants a great deal. Before you can make a tradeoff though, you have to know what you are willing to offer (pay the price the service provider is asking) and what you need in return (what meaningful service additions) to make it a mutual exchange. If you don’t know, take a minute to think about it. 

While it’s more difficult to make tradeoffs in an email, it can be done. One of my clients—a supplier—got an email that one of their parts was defective. Rather than respond with the warranty information, my client asked a question in the email. She asked about how the part was malfunctioning. The customer was installing the part wrong; the part was not defective. The email tradeoff was to send a representative to install the part correctly and train the mechanics at the same time at no charge to the customer. That email satisfied both companies. 

Email is here to stay as the preferred business communication tool. The best uses for email are to send data to your counterpart, to summarize conversations and meetings, and to double check assumptions, like timelines. If you and your counterpart prefer to use email to communicate, make sure that it reads like a back and forth conversation you might have if you both were actually talking.

 You can also improve your odds of successfully closing a deal using email by making small, significant changes to what you include in your email message. Carefully craft your subject lines. Break long rambling emails into bit sized pieces. And, finally, ask questions. You want to have a conversation, not just a one way data dump.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Why bring education and training to your site?  Because it makes your Return pay off many multiples of the Investment. 

I have had the good fortune over the past two decades to write and deliver more than 2,000 seminars to tens of thousands of fellow supply chain pros spread out over airline trips of hundreds of thousands of miles.  What I have learned is that there is always a need for education and training in our profession.  Purchasing is the Rodney Dangerfield of business, “I tell you we get no respect” even though every dollar we save flows undiluted to the bottom line. 

 Contrast that to the sales efforts that nets 5% on every sales dollar, a mere nickel versus every dollar saved by us.  Purchasing has a twenty times greater impact.  

See this two minute video about how these seminars have workd for other clients.   Click here to see what clients have to say about these seminars.

Do your profitability a favor and call 214.513.8484or email RobertMenard@RobertMenard.com to learn how we can collaborate on two, three day in house seminars.  We’ll customize it to satisfy your needs, whether basic or, advanced, broad or specific. 

In-house corporate training

The exercise driven nature of these seminars will is what adult education and training is all about.  The interaction drives the learning.  There is nothing theoretical.  We build in work place challenges and can pivot to others that arise

 I’ll return your contact soon after receipt with lists of deliverables and a content menu.  For references, see  my site or Linkedin.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Many of us arrive at purchasing because we did well at something else; our reward for that success was a sentence to purchasing.  Many people outside our profession say silly things such as, “I worked in purchasing after college”, or, “It is no big deal, get three prices, do a little bump and grind, and off in a cloud of smoke.”  These are revealing comments borne of utter ignorance of the most powerful generator of profits in all of business, purchasing.  It is provable with simple economics.

Smart business people know that profit is earned when they buy, that profit is converted to cash when they sell.  Speaking of money, do you know that buyers with professional designations earn more money?  The American Purchasing Society does a salary survey every year and one result is always the same

Buyers with professional designations of CPP earn more money!  Click here for a video about earning the Certified Purchasing Professional designation.

Did you also know that the law makes it a condition of our employment that we have the necessary skills and abilities to discharge our duties that other employees do not need to have?

Prove your dedication to our purchasing profession by pursuing your CPP certification.  Go to this web site and apply.

Take the full version, and I will be the coach and instructor; if you run up on the rocks, we’ll get you back on the right course.