Purchasing and Negotiation Training

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Editor’s note: this is Part I of a two part series.  Part I identifies the Golden Rule of Negotiation and Part II explains how to apply it.

People drawn to the purchasing profession do not generally come equipped with a bevy of interpersonal skills.  Most toiled in related technical and scientific (process oriented) pursuits such as accounting, engineering, and production where success depended more on individual resourcefulness and creativity.  Then the good fortune arose to be assigned to purchasing.  Put another way, the reward for previous success was a sentence to purchasing.  In purchasing, the manageable processes are replaced by unpredictable people. 

 Golden Rule of Negotiation 

To conquer the interpersonal beast, pruchasing pros must master the Golden Rule of Negotiation.  The more familiar biblical golden rule sets forth unassailably sound morality about personal interactions.  “Do unto other as you would have done unto you,” is timeless advice.  

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Personal interaction in negotiation settings however, is more intellectual than physical.  As such, we must modify the golden rule to suit.  Our modification on the theme sets a stage more conducive to negotiation; by recognizing that intellectual messages are a lot more subtle that physical messages.  The Golden Rule of Negotiation is “Do unto others as they would have done unto themselves.” 

Practical vs. Theoretical 

Negotiation is far more practical that theoretical.  As a practical matter most people prefer the company of those who are similar than of those who are different.  We are more comfortable with those who share our values, our beliefs and our general view of life.  In a fashion similar to our prejudice toward extremists, we doubt and fear the view of the world exhibited by those who have personality types different from ours.  By using an open mind, we can turn that inherent disadvantage into a strategic advantage in negotiation.  

Sales training instills the concept of buying motivations early in the process.  Sellers are taught that no one buys unless they judge the purchase to be in their best interest and that the buyer’s question they must answer is, “What’s In It For Me (WIIFM)?”  

We speak in negotiation of making an intelligence estimate of the other side.  Sellers do this by anticipating the buyers’ WIIFM questions.  This preparation helps in evaluating the do-ability of the deal, establishing High Initial Demands (HID’s), and concessions.  

We still must deal with the people and personality issues, overcome communication barriers, and observe the Golden Rule of Negotiation.  We concern ourselves here with a mastery of personality styles and how they relate to effective communication. 

There is much more information available on this topic in other posts on this blog.  Here are four closely related stories.

Knowledge of Personality Helps to Manage Conflict

The Power of Influence, Part II

Anticipating a Negotiator’s Style

The Four Cost Elements for Negotiating

Steve Hague, author, speaker, and Certified Purchasing Manager

Editor’s note: Steve Hague is a frequent contributor to this blog.

It’s time to make the dealer an offer that he won’t be able to refuse. To do so intelligently, you need some idea what the dealer paid for the car you want to buy. Dealer invoice cost is the place to start.

 The dealer invoice cost can be found at a number of websites including Edmunds.com and KBB.com which stands for Kelley Blue Book. Known for their used car valuation guides, they also offer new car pricing information and reviews.  These websites are easy to use and have a great deal of information and cost data. Just find the vehicle you want to purchase, add options and you’ll get a set of three different costs. The only one we need to pay attention to is the dealer invoice cost plus destination charge.

 The dealer invoice cost should be fairly close to the actual cost that the dealer paid the manufacturer for the vehicle. The manufacturer will also give 2 to 3% back to the dealer once the car is sold.  Use this number as a starting point for negotiation and making an offer. If the dealer cost totals $20,000, I usually start with that number as an offer to purchase. As stated, the dealer will get 2 or 3% of the cost listed on the sticker price (MSRP) back from the manufacturer. I look at this as the dealer’s profit, though they’ll argue that it helps finance the vehicle while it sits on the lot unsold.

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The dealer will also most likely charge a documentation fee that can range anywhere from $100 to $300 or more. While there may be some legitimate administrative fees being covered, I find these to be excessive charges and therefore fight to withhold any further profit.

Make sure that if you’re trading another vehicle in that the value of the trade is handled separately from the new car deal. If the dealer gives you a great price on the new car price, they are most likely not giving you close to full value on the trade. 

Always let the dealer know that you have other options and use them. The most important is that if they don’t honor your offer, you’ll buy from another dealer. 

It’s a good idea to check with at least three dealers for price and availability of the vehicle you’re looking to purchase.

Editor’s note: Steve writes, speaks, and consults on customer service.

Did you ever meet someone for the first time that you liked almost immediately? Not in a romantic way, but more in a business relationship situation. The chance meeting might be a networking event or a conference. Regardless of the venue, you can’t help but feel positive about the person.

Psychological evidence indicates that we experience our feelings toward something or someone a split second before we can intellectualize about it. That positive feeling we experience is called a Halo Effect.

A Halo Effect occurs when one positive characteristic about a person dominates the way that person is viewed by others. Therefore, non-verbal behaviors such as facial expressions, body language and hand gestures translate much about how we will be perceived by our customers.

The opposite of the Halo Effect is the Horn Effect. The Horn Effect occurs when we allow one weak point to influence everything else. Similar to any behavioral transgression, some are sins of commission and others are sins of omission. How can the omission of behavior get a person into trouble?

Steve’s C/S Flowchart

In today’s fast-paced world of almost constant interruptions, maintaining good eye contact is a challenge. Some people will make matters worse by placing their cell phone on vibrate mode prior to a business meeting. Have you ever noticed the lack of concentration as someone ponders their uncertainty about whether or not they should answer the vibrating device on their hip?

I see this occur often and it is disruptive, to say the least. The best discipline is to establish a practice of turning off your device prior to the meeting. In the absence of this discipline, service professionals render themselves as discourteous and thereby permit the other person to perceive a Horn Effect, regarding behavior.

When a service professional learns to maximize the Halo Effect to their advantage, then business relationships can flourish. A customer’s perception about us, whether it’s wrong or right, is the reality we will have to handle as service professionals. In this economic climate, a back to basics approach to all customer service behaviors, starting with the eye contact, should be enforced throughout your company.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Please score your answers to this Commercial Finance Quiz.  Each answer is worth 5 points. 

If you 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.

If you don’t know for sure if your answer is correct, it probably isn’t.  For the ANSWER list, email RobertMenard@RobertMenard.com.  

Commercial finance is a mystery to most purchasing and sales pros.  Buyers must understand supplier finance and sellers must know more than can be gained from a basic business course for each to succeed.

After you complete this Quiz, if you want to address another deficiency for purchasing and sales pros, take the Purchasing Law Quiz.

1    From the data table below, calculate                                                                  

• Current Ratio                   
• Working Capital               
• Debt/Equity Ratio        

2    Which data value was not used for any of these calculations?             

3    Which one of these is not a current asset?                                                   

• Cash
• Accounts Receivable
• Plant and Equipment
• Stock certificates for publicly traded companies

 4    When is inventory not a current asset?                                                     

 5    An audited financial statement by an independent firm carries what type of opinion on financial condition.                                                                                               

• Unqualified
• Qualified
• None

6     What is or are GAAP                                                                                         

7     For accounting purposes, what is a 10k?                                                  

• $10,000
• An annual road race fund raiser
• An annual statement of financial condition from a publicly traded company
• $1,000,000

8    For a publicly traded company, what is an analyst call?                            

9     What is meant by accrual method of accounting?                                          

10    Generally, is loan forgiveness taxable income?          Yes or No              

11    For Sarbanes Oxley purposes, why are open line items on a purchase order considered contingent liabilities?                                                                                                        

12    What is subordinate debt?                                                                                      

• Debt that exceeds prescribed maximums
• Debt that falls below prescribed maximums
• Debt for which a lender stands behind superior claims
• Debt for which a lender stands ahead of superior claims

13    Which one of these is not found on the Balance Sheet?                             

• Long Term Liabilities
• Cost of Goods Sold
• Current Assets
• Shareholders Equity

14    Which one is not found on a Profit and Loss (Income) statement?           

• Long Term Assets
• Sales
• Net Profit/Loss
• Taxes

15    What is an S corporation?                                                                                

16    Which of these is not a recognized method of Inventory valuation  

• LIFO         Last In First Out
• FISH         First In Still Here
• FIFO         First In First Out

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17    Which of these is an asset                                                                                

• Debenture indebtedness
• Billings in excess of costs
• Certificates of deposit
• Trade payables

18    Unsecured debt means                                                                                     

• The debtor is insecure
• The creditor is secure
• The debtor’s claim is subordinate to secured creditors
• The debtor’s claim is superior to secured creditors

19     Generally, lease payments are depreciable.     True or False                                     

20   Specify one major difference between a corporation and a partnership or proprietorship.                                                                                                    

21     What is meant by cash method of accounting?                                            

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

00 to 50         Wow, my bad

55 to 80         Needs work

85 to 115       Bravo!

If you do not know as much as you thought you should, you are in the majority!  Education and training is not what it should be in the purchasing and sales profession.

Linda Byars Swindling, negotiation authority, former employment attorney, and author

Editor’s note: Linda Swindling is a frequent contributor to this blog.  For companion stories on mistakes to avoid in negotiation behavior, see The Amateur Negotiator’s Top 20 Boners, Part I, Part II, and Part III.

1                     Not putting your agreement in writing

People’s memories fade. Disagreements occur regarding exact points of the negotiation. As soon as possible, preferably while all parties are still together, put the basics in writing. Clear up any misunderstandings before they can become deal breakers later.

2.                  Making assumptions about others’ motivators, wants or needs

Who knows why people do what they do or exactly what they want? The same things that motivate you do not motivate other people. Their needs, wants and desires will differ from yours. (Reflect on your personal relationships if you need proof.) Ask the people you are negotiating with what they want or need and ask about their motivation.

3.                  Accepting first offer

Rarely is the first offer the best. Accepting the first offer says two things about you. First, you are overeager to reach a conclusion; second, that you are not confident in your position. By not bargaining, you also send a message to the other side that they have made a bad offer at the very beginning which they may try to retract. If a first offer is better than you anticipated, one of two things has happened. Either you are missing something of value in your evaluation of your position or the other party has not evaluated their position accurately. There are exceptions to this but always pause and think before reacting.

4.                  Becoming emotionally involved

Emotions can register as excitement, anger or even frustration. The saying “never let them see you sweat” is appropriate. Once any negotiation becomes personal instead of a business deal, you are in danger of coming out on the poor end of the agreement. Instead, take a break. Get your emotions under control or send in someone else to negotiate for you.

5.                  Not questioning enough

The more the other side talks the better your deal can be. Ask for explanations. Question the way values were arrived at. You can only determine the other side’s motivations and true interests through questions. Ask, ask, ask.

6.                  Not asking for more or less

Shoot for the moon. Know what is reasonable and ask for a little bit more. No, it isn’t greedy to ask for more. You never know when you might get a little extra. Also, if you don’t, you have nothing left to bargain with to get you to what you consider is a reasonable position. 

Don’t be surprised when the other party asks for “a little something extra” at the end. Know what you have that you can barter with and that is not essential to your position. If you don’t have to play that card, you have a bonus. If you do, it is not unexpected.

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7.                Not holding something back for barter chip

Don’t be surprised when the other party asks for “a little something extra” at the end. Know what you have that you can barter with and that is not essential to your position. If you don’t have to play that card, you have a bonus. If you do, it is not unexpected. 

8.                  Believing everything you are told

Yes, it is true. Not everything you hear in this world is the truth and not everyone’s version of the truth is accurate. Just because information is written or produced in a graph, does not make it valid. If what you are told “smells funny”, is illogical or does not follow what you have been informed before, ask for independent support. Back to the basics: Ask, ask, ask.

9.                  Over-committing or over-attaching to process

This attachment to the process is why some people make bad deals when purchasing a car. It takes a lot of emotional energy to trade in an existing car, pick the color and model of a new car, and determine a price that they can afford. Many buyers find themselves so entrenched in the purchase process that they will agree to pay more or purchase undesired options rather than starting the buying hassle all over again.

10.              Not willing to walk away

This behavior relates to attachment and commitment. Once you lose your ability to walk away from a deal, you have greatly decreased your power in any negotiation. Always leave yourself an out and know what your options are if the current negotiation does not work out.

Editor’s note:  Stu Schlackman is a frequent contributor to this blog

What causes conflict? Interactions with other people,  differences in expectations, motives, or priorities are but a few.  And we know that people with Gold, Blue, Green, and Orange personality styles have very different values and motivations.  Each reacts differently to risk and approaches decisions at different paces.  But these differences need not derail your interactions with others.

Conflict

Conflict occurs when sales and dealing with purchasing.  It also occurs when you are part of a customer service team. For example, are you ever angry when your manager calls a team meeting, and perhaps you have a proposal due?  What if your client demands to see you right away; occupying time you promised to your family? Conflict and stress are natural occurrences in our daily interactions at home, our business, or at client visits.

There are three elements of our personality that cause interpersonal conflict. We all go into meetings or situations with our personal expectations, motives, and priorities.

Motives, Expectations, and Priorities

• Our ideas about outcomes and results might be different from those with whom we meet. Motive for selling your products and services is rarely the same as their reason for buying.
• Expectations: We can see benefits from our involvement which might not be appreciated by others. If you look at your proposed solution and its impact to the client, will you be able to meet their expectations? Perhaps your organization works with or supports another organization. What does your team expect to accomplish versus the other team’s needs?
• Priorities: From our perspective an issue is very important and deserves priority treatment, while others ignore the situation. For most sales professionals the number one priority is close the deal! But this deal might not be the top priority for the client. 

In each of these, our expectations, motives and priorities are different from the expectations, motives and priorities of those we are meeting. The result can cause stress and conflict.

What causes conflict? Interactions with other people,  differences in expectations, motives, or priorities are but a few.  And we know that people with Gold, Blue, Green, and Orange personality styles have very different values and motivations.  Each reacts differently to risk and approaches decisions at different paces.  But these differences need not derail your interactions with others. 

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Conflict is normal

Fear of conflict is one of the dysfunctions that Patrick Lencioni describes in “The Five Dysfunctions of a Team”. If we fear or avoid conflict it will stifle the growth of any organization or customer relationship; and we know that building strong relationships is critical to making sales and building winning teams.  How can our knowledge of personality types help us?

Conflict can occur whether you are dealing with someone of your same primary personality style or someone that has a different primary color. Golds can be in conflict with Golds as easily as with a Blue, Green or Orange. However, there are characteristics of each personality style that can be stressful to the other colors, and therefore contribute to or exacerbate conflict. For example:

• Blues can be too idealistic and lack a sense of urgency.
• Golds can be too inflexible and resistant to change.
• Greens can ask too many questions and rework things to perfection.
• Oranges can miss details and ignore policies and procedures.

If we understand our personality differences, it can help us understand what our different expectations are. It will help us appreciate the fact that others might have different motives and priorities as we work together.

Knowing that conflict will always exist, we need to understand the best approach to resolving it with each color. This can save a lot of time and energy in the sales cycle.  It can make team interaction more productive and successful. Conflict is resolved with communication that acknowledges the needs and values of others.  Let’s look at how to diffuse conflict with each personality type:

• Golds define the issues, be respectful and be responsible for your actions.
• Blues be pleasant and show empathy for their concerns. Focus on the people aspects for resolution.
• Greens        avoid emotion, focus on the facts and encourage debate and discussion.
• Oranges      expect a challenge to the issue at hand, but be flexible and realistic and offer alternatives.

If you are a Gold and they are a Blue, reach out and respond with the empathy Blue’s expect.  If you are a Gold and they are a Gold, show them the respect you expect of them.  Resolving conflict effectively can take any relationship to the next level.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Boeing’s decision to move the production capacity of the 787 Dreamliner family of aircraft from Washington state to South Carolina exemplifies the power of negotiation strategy.  The action stems in part from high labor costs at Boeing’s Renton and Everett WA plants and crippling strikes that have caused customers to cancel orders or defect to their Airbus competitor.  A ‘Dollars and Numbers’ justification for Boeing’s decision is presented below but let’s first examine the negotiation strategy that drove the decision.

 Negotiation Strategies 

The four strategies of Negotiation are Win-Win, Win-Lose, Lose-Win, and Lose-Lose.  The selection of appropriate strategy is determined by a four quadrant matrix that evaluates Issue and Relationship.

 Boeing and the International Association of Machinists and Aerospace Workers (union)  have been engaged in a long term partnership.   The highly valued Issue of competitiveness and the long term Relationship with its high quality unionized work force were crucial to Boeing making  Win-Win the overwhelmingly preferred negotiation strategy over many years.

Over the past 25 years, the globalization of the economy and surge in low cost manufacturing particularly in Asia, has thrust the Issue of competitiveness to the fore.  Add the truculence of the union foisting four damaging strikes in 20 years, including one in 2008 for 57 days that cost Boeing $2 Billion, and it is clear that the negotiation strategy appropriately migrated to Win-Lose as the Issue grew more important than the Relationship.

Negotiation Strategy Matrix

According to news reports filed by the Wall Street Journal, Bloomberg News, and Business Week, the 2008 strike motivated Boeing to seek an 8 year no-strike contract in recent negotiations with the union.  In return for the no-strike labor harmony, the union sought such to extract costly demands for which agreement by Boeing would put it in severe jeopardy of losing many orders and customers.  This would not only have hurt Boeing and its shareholders, but the union would have ultimately been the big loser as lost sales translates to lost jobs. 

On Nov 06, 2009, Business Week quoted Boeing CEO W. James McNerney who said that “about 3,800 jobs in South Carolina will loosen the unions’ choke hold on the company” 

The Wall Street Journal quoted Jim Albaugh, CEO of Boeing’s Commercial Airplanes Unit, commenting on the move to SC, “It improves our competitiveness.”  He added, “Coming here will help us to sell more airplanes.”  Clearly, competitiveness was the Issue for Boeing.  With the competitiveness Issue, perhaps even Boeing’s long term viability dominating the bruised and teetering Relationship with the union, Win-Lose was the appropriate strategy. 

Dollars and Numbers 

Good business decisions are decided by analyzing dollars and numbers.  Expressing a challenge’s dimensions in objective and measurable quantities of dollars and numbers produces far better results than emotional gambles or seat of the pants guesses.  Negotiation decisions such as Boeing’s is another opportunity to apply the thoughtful Total Cost of Ownership (TCO) analysis that is the hallmark of a business pro. 

According to Boeing’s web site, orders for 840 airplanes valued at $140 billion have made this 787 Dreamliner the most successful launch of a new commercial airplane in Boeing’s history.

Further, the 787 Dreamliners prices range from $150 Million for the low end 787-3 class to $205.5 Million for the high end 787-9 class.  Business Week states that the average hourly labor costs in WA are $26 versus $15 in the right to work strongly non-union SC or more than 40% less.  To analyze this Issue from a dollars and numbers perspective, assume a hypothetical example of a mid range plane with a price of $208 Million. 

Assuming for calculation’s sake that half of the price represents labor cost, an aircraft which sells for $208 Million has $104 Million in labor cost built into the price.  To obtain the number of labor hours, divide the $104 Million by $26/hr yielding 4 Million hours at the WA plants.  At the SC plant, the 4 Million hours at $15/hr total only $60 Million, a whopping $44 Million difference per plane!  Multiply this by 840 planes and the total savings approach $37 Billion.  

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Not so Fast on Pulling the Savings Trigger 

These hypothetical savings will be eroded by costs of relocation, construction, and plant & equipment expenses costs.  Boeing is required to invest $750 million and create 3,800 full time jobs over a 7 year period.  However, these costs are mitigated by as much as $400 million in incentives from the state of South Carolina, Gov. Mark Sanford said in an interview with Bloomberg. 

A compelling argument raised by the union must be addressed.  Were we to factor in the union’s creditable argument that the labor quality and productivity will suffer, we see the necessity for Dollars and Numbers analysis to justify the Win-Lose strategy selection. 

Boeing could offset some of this work force deficiency by moving some willing employees from WA to SC, importing highly skilled labor, and investing in an intensive worker training program.  Assume for the purpose of calculation that the SC work force is 10% less productive than the WA state force.  This would add 10% of the average $15 hourly cost of $1.50. If Boeing were to also invest another 10% per labor hour $1.50/hr per worker in a worker training program, then a total of $3/hour or about 20% of the $15/hr cost would represent the erosion in savings to Boeing.  Continuing the calculation, $3/hr @ 4 Million hours per plane would add a total $12 million per plane raising the unit cost to $72 Million in SC versus the $104 in WA. The total savings for all 840 planes still would approach $30 Billion. 

Whatever the actual percentages are (the hypothetical figures used for calculation are believed to be reasonable), it is clear that the 40%+ savings in labor per hour creates billions of dollars in justification for the Issue and the thus the choice of Win-Lose. 

Moral of the Story

What are the major take away lessons for the purchasing pro, indeed, any practicing business management pro? 

1. Win-Lose was the best choice given that the Issue clearly dominated the Relationship
2. The Dollars and Number analysis provided the rational and objective basis that justified by the decision

Steve Hague, author, speaker, and Certified Purchasing Manager

Editor’s note: Steve Hague is a frequent contributor to this blog.

When it comes to those things in life that many of us hate to do, buying a car is usually near the top of the list.  Sure, everybody likes getting a new car; but very few of us actually enjoy the process. Auto dealers and salespeople are infamous for having the worst reputation among service “professionals” in any industry.

Using a dependable auto buying service makes car buying easy and quite painless. Of course you’ll still be spending money, but you’ll save yourself time, aggravation, and with the right professional, a lot of money.  There are different types of auto buying services available and which kind to use depends on your particular situation and how you feel about each type. 

ProAutoBuying charges a low flat fee and works exclusively for the customer. It’s important to make this distinction because many auto broker’s and so called buyer’s agents get paid by their customer AND the auto dealer.  This practice, although widespread, constitutes a conflict of interest.. Working exclusively for each of customers and having no relationship with any of the dealerships, ProAutoBuying serves auto buying customers throughout the country. 

A skilled auto buying service practitioner will be a professional who understands the car buying process, is a great negotiator, and above all has the best interests of the customer in mind.  There are many auto buying agents and services that proclaim that they are former auto salespeople or worked in an auto dealership and therefore they are experts. That’s like saying, “I used to be a bank robber and now I’m a police officer.”  Would you put your trust in that person working for you? 

ProAutoBuying is proud of the fact that we are not current or former auto salespeople, but we are experts at car buying and understand all of the tricks and traps that many consumers can fall into when buying a car.  Our service is quite simple. We find the exact vehicle you are looking for in the color and with the options that you want. We then research the exact dealer cost of the vehicle (not invoice cost), negotiate the best deal possible and review any proposed fees and paperwork. 

We also spend as much time working with the customer to review financing options and any other auto related information that the customer wants at no extra charge. 

At that point, all ProAutoBuying customers need to do is sign and drive!

Harry Hough, PhD, founder of the American Purchasing Society

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

 Would you rather deal with a salesperson whose calling card is a smile, a willingness to listen and, helpful ideas to achieve your objectives or one who wants to do all the talking and keeps telling you why whatever you want can’t be done? Would you rather work for a boss who listens and offers suggestions or one who doesn’t want to hear what you have to say and tells you its your problem?

Instead of berating a supplier for failure to perform, try listening and finding out the reasons for the mistakes and then offer suggestions for improvement. If you are a purchasing manager, listen carefully to what your buyers tell you. Then, evaluate what they say based on an investigation of the facts. Give praise for a job well done.

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Listen to your supervisor or manager with an open mind. Try putting yourself in his or her position and understanding motivations and criticisms. Acknowledge when you are at fault and indicate that you will correct the situation and avoid a reoccurrence. It is very refreshing when someone admits his or her mistake. You often gain more by accepting blame then making feeble excuses.

Suppliers too are more willing to work with and help out a buyer who is polite, is respectful, and has a smile.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Win-Win ranks high on the list of overused buzzwords, but many of us have trouble understanding the counter intuitive notion that two sides can win when a product or service is bought and sold.  Win-Win is not only obtainable, it is the ideal result.  How then does it work?

Negotiation strategy always has a profound impact on business.  There are four strategies; they are: Win-Win, Win-Lose, Lose–Win, and Lose-Lose. 

Selecting the appropriate strategy depends upon how the parties value the Issue and the Relationship.  A visual aid works well to explain this concept.  The chart below is  taken from my book, You’re the Buyer – You Negotiate It to help to explain the four different strategies available, how they depend on Issue and Relationship, and when to use them.  

Let’s begin with Win-Lose in the lower left quadrant because this is the type most frequently practiced.  Many folks who profess Win-Win actually believe that all that matters is that they win.  Sports competition conditions us to this conclusion because most often, there must be a winner and a loser.  Can you hear the growl of the primitive instinct, “And I’m not going to be the loser!” 

Negotiation Strategy Matrix

Take Lose-Win next, in the upper right quadrant.  This one is tough to grasp for many buyers when role playing as sellers.  At purchasing seminars, I confront them with this situation. 

Assume that your relationship with a good customer has grown chilly.  Orders are down, communication is limited, yet you can not identify the problem.  At a face to face settlement meeting, the chair you are offered across the buyer’s desk is low and uncomfortable.  If you sit, the sun will all but blind you.  What should you do?

The most common responses from the buyers are “Remain standing”, “Move the chair”, and “Close the blinds”.  If the Relationship is valued more than the Issue, the graphic above suggests that you should select Lose-Win.  If you were to sit in the low, blinding chair, the customer can exercise control.  By planning to lose over the Issue, you may allow the buyer to be comfortable enough to express the problem.  Then, you can rectify it and preserve the Relationship.  You might even increase sales as a result of your ‘owning’ up to your problem.

Lose-Lose , in the lower right quadrant may not seem to make sense, but in rare situations, it could.  For example, suppose that you are assigned the duty of buying photography services for the company June outing.  Every bona fide photographer has been booked for months for weddings, reunions, and graduations.  The only photographers you can get are two college physics students, whose long-term career plans involve photographing gamma wave radiation!

This is a clear-cut demand for the Lose-Lose strategies.  Who cares about the Relationship?  It has no future.  And as for the Issue, do you really want high-resolution photography of employees who have overindulged all day, maybe kissing the wrong spouse?  To be sure, the conditions under which Lose-Lose is appropriate will be few, but it is the advisable choice in those rare instances when Issue and Relationship have little value.    

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Now we come to Win-Win, in the top right quadrant.  Here, we recognize that one shot deals do not apply.  Each party has a vested interest in the Issue and the Relationship. Think of this strategy as the basis for a marriage, a long term committed Relationship where Issue tend to have mutual importance.   When the Relationship and the Issue are both important, the only appropriate strategies of negotiation is Win-Win.  An example is the current trend in business to pare back the number of suppliers.  The motivating force is to reduce costs and raise profits for both buyer and seller.  The long-term business Relationship matters as much as the Issue of profitability.  Win-Win should be the ideal strategies, and in all cases involving major customers and suppliers, should be our only choice.