Win-Win negotiation: becoming a reality

Business is at last awakening to the need for a more positive approach to contract negotiation. That is the encouraging news from IACCM’s review of market trends in 2013.

During the last year, the approach to negotiation has visibly started to change, with a growing number of executives pushing a more collaborative or partnering approach to their supply relationships.

This is beginning to edge out the tendency to practice negotiation as a Zero Sum game, with success for one party happening at the expense of the other.

A variety of factors are driving this shift, but the important point is that negotiators are focusing more on performance and governance criteria that drive positive results and outcomes.

This means that contracts and negotiations have the potential to become more effective at tackling risks at source and generating improved financial results, rather than dealing primarily with the consequences when things go wrong.

Behind this shift in attitude there is a steady awakening in some industries to the fact that many of today’s agreements must be more sustainable and also more flexible.

The influences of a ‘caveat emptor’ world are diminishing, as the balance of contracts swings away from the purchase of direct materials and products and moves towards a growing volume of services and solutions.

These service and solution contracts require far more cooperation between the parties because value can only be gauged over time. ‘Success’ is not defined at the point of signature, but is determined by the eventual output or outcome that is achieved.

In other sectors, the shift may be more pragmatic.

It reflects a change in the balance of power. After a decade in which buyer-power has dominated, industries such as oil and gas, automotive, mining and utilities are confronting suppliers whose relative strength has been increased by new technologies and shortages in skilled labour.

Customers in these industries are being forced to re-think their approach to negotiation as part of a wider need to become a ‘customer of choice’.

In this environment, negative incentives to perform must be balanced by more positive attributes that encourage shared responsibility and collaboration and which create opportunities for innovation, continuous improvement and shared benefits.

Defensive, risk-averse, compliance-based contracts undermine results.

Therefore the agreements now emerging are far more likely to establish principles for improved governance and to recognize the need for greater flexibility.

This also releases the potential to discover hidden values that the parties lost in previous negotiation approaches.

There have of course always been negotiators who appreciated the need for balance and achieved Win-Win agreements. But they have tended to be the exception rather than the norm and in many cases their success proved difficult to replicate.

Too often, these high value relationships occurred in spite of the underlying organization and culture, rather than because of it.

The changes we see emerging are more fundamental and offer the possibility of a substantive shift in attitudes and capability.

Developing a ‘What’s-in-it-for-WE’ mindset

The nature of the thinking behind this is well captured in ‘The Vested Way’ which is a free ebook available to download in PDF format from the Vested website.

‘Vested’ is based on award-winning research conducted by the University of Tennessee College of Business Administration and funded by the U.S. Air Force.

In the ebook they propose that we move from WIIFME (What’s-in-it-for-ME) to WIIFWE (what’s-in-it-for-WE).

Having read this article, how do you think that a ‘What’s-in-it-for-WE’ mindset can improve your supplier relationships?

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This article is from the free online course:

Contract Management: Building Relationships in Business

University of Southampton