Use of various forms of simulation can help to make training personalised to individual roles, and can recreate real working scenarios in a safe, virtual format. Walmart makes good use 360-degree video-based virtual reality to enhance store and management training, taking technology that was used for athletic programs and adapting it to involve human interactions.

Real-life face-to-face supplier meetings are not the place to “practise” the skill of influencing suppliers. Therefore, scenarios like supplier negotiation or a visit to a supplier factory work well in a simulated classroom environment.

The simulation involves pre-classroom eLearning to understand the tools and concepts, followed by a role-play based class event.

The training includes a mixture of visual prompts, role play and data analysis. Simulation is a safe test environment to try different behaviours and analysis activities and have a chance to reflect afterwards about which worked best.

Why does simulation work?

  • It is “safe” – a chance to experiment with behavioural change without disturbing supplier relationships.
  • It is challenging – using third parties to role play different scenarios takes learners out of their comfort zone.
  • It is familiar – the concepts are like the learners’ daily activity, so they can easily apply the ways of working and behaviors they would normally.
  • It uses “on the job” scenarios – the most effective learning is experimental. Using the 70:20:10 model, 70% of learning should be on the job and just 10% is formal. This style of learning brings real work examples that have been customised to fit a classroom event.
  • It is low cost – individual coaching and mentoring is an expensive solution to promote behavioural change. Simulation uses eLearning to prepare the leaner for a group event in the classroom environment. These all have a low cost per learners.

Simulation is a valuable addition to a Procurement Academy. A blend of self-directed learning and instructor-led learning is an efficient approach to achieve world class procurement practice.

80% of many Procurement teams will be either Millennial or Generation Z by 2025

The existing competency gap is at risk of widening. A diminishing group of experienced professionals may fail to pass on skills and knowledge to early-career colleagues, due to their high work burden. The new dynamic has implications for CPOs in terms of how they develop their teams to deliver greater value to the organization.

Past:

  • Expert Procurement professionals are considered “too experienced” for training
  • Many Procurement professionals are “too busy to learn”
  • 70:20:10 is a “training” formula. Training commitment is monitored through Learning Management Systems

Future:

  • 70:20:10 will be a workplace model for everyone. Learning is perpetual, not allocated to “training time”
  • The 70, the 20 and the 10 are integrated through:
  • Self directed formal learning (10%)
  • Planned and work specific informal learning through discussion and sharing (20%)
  • Evidenced application of learning with line manager support (70%)

Conclusion

Those organizations that make a commitment to learning are attractive to professionals that drive the most positive change.

Self-directed learning sticks. Procurement professionals need a wider range of options to choose from.

eLearning is 50% faster and 40% cheaper than classroom formal learning modes. Pfizer, Micron and adidas are a few of the organizations that have benefited from ADR’s eLearning.

Each commercial negotiator has a natural negotiating style.

Sometimes this is driven by the business environment and commercial factors that are relevant to the agreement being discussed. Many times, it reflects the preferences, beliefs and values of the individual. This can be harnessed to each person’s advantage because a natural style will result in negotiations that reflect authentic views and true passions. However, everyone benefits from reflecting upon whether their negotiation personality is serving the best interests of the organization they represent and the agreement they seek to make.

Negotiation personalities are typically:

Competitive – Seeking to conquer, thriving in combative circumstances, prescriptive and direct

Collaborative – Problem-solving, protective of the relationship, consultative and open

Neither style is right or wrong, it is simply which is more appropriate and more likely to be effective in the negotiation scenario presented. When the natural style is known, it is then essential to recognize the pitfalls associated with failing to apply the style.

The most common pitfall with the identification and application of the appropriate style is misinterpreting competitive style with being “tough” and a collaborative style as being “soft”. Neither is true as both styles have common characteristics. They are both rigorous, ethical, professional and solutions-driven.

To improve your negotiation personality, identify the most common mistakes with misinterpretation of competitive and collaborative styles.

Instead of being too soft (treating the other party like a friend to get agreement) or too tough (treating the other party like an adversary to get a victory), seek an efficient solution.

Instead of being too soft (insisting on achieving agreement at any cost) or too tough (insisting on achieving your position at any cost), determine success based on facts.

6 top tips for successful online meetings

 

1. Online meetings are like bad knitwear- they can quickly become shapeless

Implement a structure for your meeting. It may be an agenda, a methodology, a negotiation plan. It leads us to an outcome or decision. It the structure was originally intended for a face to face discussion; you may need to tailor the timings and approach somewhat. Discipline is imposed through a framework.

2. Don’t fear the void

In a face to face discussion, people are silent as they think, make notes, get refreshments. It goes unnoticed. Online it is fiercely apparent. Don’t interpret online silence as dissent, disgruntlement or discomfort. Be comfortable with silence.

3. Manage your inner web-bore

People fatigue much more quickly in online meetings than face to face meetings. Brief is better. Use multiple micro sessions in place of each face to face meeting, to achieve the same outcomes.

In a face to face discussion, humans find each other fascinating. Brains are constantly processing the voices, expressions, choice of words and reactions. These are in full technicolour face to face. The flatness of onscreen images or teleconference removes those nuances. The lack of sensory input allows the brain to drift and the speaker to drone. A change of facilitator can help here.

4. Pick some props

People need a focus online. Give them images, share a whiteboard to make notes or to make a note of points agreed. Keep changing your props to make sure everyone is still in attendance and listening.

Even better, ask your audience to move around during the call. Sitting for long periods stagnates body and mind.

Use voting buttons for generic topics but don’t make key decisions that way. The transparency can make people feel exposed.

Voting also seems to encourage negotiators to use those “no-no” phrases like “meet you half way” or “let’s split the difference”. These phrases mean there is no concession strategy, which is poor planning.

5. Avoid the looks that kill

When one doesn’t have an audience, the body relaxes. But online, such body language can appear negative or disengaged.

If we are faced with a video audience, a speaker can start to “perform” for the camera in a way that is very unnatural for them.

If this is a concern, simply don’t use video. Allow everyone feel comfortable to think in peace with their thinking face on.

Alternatively, agree 10 minutes video time at the start of an online meeting. This way, everyone saves face and avoids having to say “I don’t want to look at you – or me!”

6. Celebrate your choices

You needed to have complex or difficult conversations which might have benefited from a face to face discussion. As this was not possible, you have chosen to use online communication tools. Don’t apologise for that, enjoy the benefits that this offers you such as collaboration tools and short discussions slots in your busy day.

Keep emphasising the positives at each stage of the discussion:

We are working, despite the challenges.

We are moving forward with our plans.

We are making a success of online meetings.

For organizations who are buying from non-competitive supply markets (for example, the supplier solution is the only viable option for reasons of specification, location or confidentiality), the most suitable negotiation route is a collaborative negotiation.

Given the fact that there is no credible alternative to this supplier, many such negotiations still fail to achieve any agreement. Or the agreement made is sub-optimal to one or both parties. Buyers cite the reasons for this, which often include: Lack of flexibility of the supplier Personality clash Inadequate or inappropriate concessions made on either side

It is essential to review such negotiations and to assess whether the necessary prerequisites for collaborative negotiation were in place. For example:

1 Mutual trust

The correct negotiation atmosphere must exist to negotiate in collaborative negotiations. Many commercial buyers and contract managers allow their ego to cloud their negotiation planning, often thinking “I will start off collaborative and see what the other party does – I may switch styles if I don’t like how things are going”. If collaboration is perceived as a bargaining technique then it will not work. The commercial manager must have the courage to select the appropriate style and the associated behaviors and commit to them, regardless of their ego or personal preferences.

2. A positive relationship

Where there is dependency, it is essential to treat the commercial relationship as if it has value in its own right and must be nurtured appropriately. It is not a matter of being “friendly”, which is often a misinterpretation of collaborative negotiation. The relationship must be underpinned by respect, with practices such as sharing of goals, continuous improvement activity and joint effort to identify and deliver mutual benefits.

3. Shared interests

In collaborative negotiation, all parties acknowledge that a negotiated settlement will always be superior to no agreement. Where it is accepted that agreement is in all parties’ interests, the focus of negotiation becomes how everyone can contribute to meeting the goals of all parties and not just maximizing their own spoils.

4. A zone of possible agreement (ZOPA)

A ZOPA is the negotiating area where agreement is feasible, regardless of which party appears to be achieving a greater “win” from negotiation. All negotiation parties must establish whether a ZOPA even exists early on to avoid wasted effort. This can be achieved through sharing organizational interests accurately and adequately.

Collaborative negotiations typically fail because one or more of these conditions was not in place, either because the negotiating parties were not aware of their importance, or due to a lack of skill on the negotiating parties’ part. Unfortunately, many commercial negotiators would rather treat negotiation like a game or a gamble than apply a tried and trusted effective negotiation framework to their efforts.

It is increasingly common for organizations to separate Sourcing from Supplier Management tasks, if not the entire function – it is clear why.

With effective cross-functional working and joint business objectives these concerns can be overcome to make a stronger supplier-facing unit, with a single voice and common message to the external parties that contribute to a high-performing team.

Buying organizations that are highly vulnerable to issues such as reputational damage, business continuity failure and security breaches often have dedicated Supplier Management functions.

Supplier Management encompasses a wide range of risk management, performance improvement and contract ownership activity. Most businesses find it is normal now to have fewer vendor relationships that house massive cost and risk.

Meanwhile, the Sourcing team has a huge responsibility to continually observe the supply market and look for emerging sources of capability and advantage. They run large, complex competitive bids, manage challenging contractual negotiations and enhance value through methods such as cost improvement and improving sustainability in their supply chains.

The advantages

Dedicated supplier performance managers, able to judiciously apply incentive programs. •Full time resource focused on supplier capability development, cost improvement and innovation.

Separation of roles protects the partnership from the relationship battering that competitive bidding can involve.

The disadvantages

Supplier Managers are sometimes inadequately involved in the process of business needs analysis and contracting, which hampers performance management later on.

Future visioning of the supply base can be a low priority when operational imperatives are the focus.

The needs of Supplier Management can overshadow commercial wisdom. Risk management, new product development or new projects mean that the Supplier Managers are not always monitoring whether the current relationship style suits the competitive landscape of the supply market.

With effective cross-functional working and joint business objectives these concerns can be overcome to make a stronger supplier-facing unit, with a single voice and common message to the external parties that contribute to a high-performing team.

One of the best things about being part of a small, global business is the frequent opportunity to learn how Procurement is evolving in other countries and cultures.

Here are some insights I gathered when speaking to my colleague Abed Sinan from ADR’s Middle East business. The team’s client base is typically in the Gulf Cooperation Council (GCC),a political and economic alliance of six Middle Eastern countries (Saudi Arabia, Kuwait, the United Arab Emirates, Bahrain, and Oman). The GCC has a population of around 45 million and GDP in excess of 1.4 Trillion USD.

A profile of procurement skills in the Middle East

Current state:

  • Many procurement decisions are still largely stakeholder-led and procurement people are often perceived as an “after-the-fact” team to implement the plan.
  • Many individuals have skills strengths in specific sourcing and supplier management activities, but often need training in the full category and supplier management process to make connections between the competencies and to leverage their combined knowledge. As Abed commented, “there is no one-stop shop buyer”.
  • Procurement competence development is a low priority for too many organizations.

Opportunities:

  • There is a high appetite for learning, and procurement competence is increasing rapidly in all GCC states.
  • ADR coaches consistently report a “have a go” attitude from learners. They want to try all new tools and techniques.
  • Procurement professionals in the GCC feel strongly that their learning activity should have an immediate impact on their sourcing activities. Our ADR tutors note that the “return on training” is very high when training is followed with category coaching. There is a strong will to demonstrate benefit through concentrated use of sourcing and supplier management techniques.

The key themes of Generation Z according to a McKinsey&Company article include:

  • Fewer confrontations and more dialogue
  • Inclusivity and multiple definitions of self
  • Realistic and pragmatic perspective

The highly open and ethical mindset is conducive to effective collaborative negotiations.

These are typically difficult negotiation behaviours to master, with many Generation X and Y procurement negotiators falling back to competitive behaviour when pressured for savings or speed.

Most importantly, collaborative negotiations are increasingly the norm. Many procurement professionals are working on categories that involve strategic relationships with suppliers. This may be because the market is non-competitive, dependency or because there is a clear benefit from close long-term working.

It is often the case that strategic relationships are given to the more experienced or long-serving staff members. However, the portfolio matrix reminds us that resource allocation should be based on behavioural fit. Given this profile, Strategic categories fit Generation Z procurement professionals well.

Critical category: ideal buyer personalities

  • Tenacious
  • Problem-solving
  • Dynamic

Strategic category: ideal buyer personalities:

  • Creative
  • Inclusive
  • Discussion-leading

Acquisition category: ideal buyer personalities

  • Organised
  • Meticulous
  • Data-driven decision-makers

Leverage category: ideal buyer personalities:

  • Driven
  • Motivated and motivators
  • High expectation of self and others

At ADR International, we teach negotiation skills to Procurement professionals worldwide, both classroom and online. With a larger proportion of Generation Z buyers in our classes, the shift towards digital learning is apparent. In addition to providing more online learning, what should Procurement Leaders do to ensure their Generation Z procurement staff are developed to excel in collaborative negotiation?

  • Generation Zers need to experiment and explore. Allocate them to strategic category teams to contribute.
  • Empower Generation Zers. They will generate ideas and should be accountable for delivering them.
  • Encourage them in supplier management and supplier meetings. Being attuned to the importance of mutual gains will add authenticity to their discussions.

Source: McKinsey&Company. “True Gen: Generation Z and its implications for companies”. Tracy Francis and Fernanda Hoefel

There is a lot of advice about how to plan and execute supplier negotiations, but the key to success is understanding the objectives and tactics of the supplier.

Counter-tactics can improve negotiating outcomes for procurement professionals. For example:

Know where the supplier is in their sales cycle.

The supplier may be at the stage of prospecting, identifying needs or proposing a solution directly to budget holders or functional managers. The procurement person will be using different conditioning and influencing methods at each stage.

Remember, the supplier will sell first and negotiate second.

Avoiding negotiation is a smart way of deal-making for suppliers. Procurement can counter this by starting the negotiation process first, and early.

Recognise the supplier closing tactics.

There are many ways a supplier will try and close discussion and make agreement. The procurement professional needs to be in control of this. Taking charge of the progress of discussion blocks the suppliers attempts to close too soon.

There are 3 ways you can learn more about supplier negotiation tactics and how to tackle them:

  • ADR’s Online Procurement Academy for Negotiation: eLearning for people who negotiate with suppliers
  • ADR’s Online Supplier Influence Course: An instructor-led webinar for in-house teams
  • ADR’s Negotiation Tactics Training : A role-play based classroom course for procurement people

Negotiating with suppliers requires a blend of behavioural and analytical skills. Without thorough analysis, no mystical influencing techniques will help to secure agreement in a challenging discussion. A review of the buyers’ and sellers’ markets alongside an assessment of the position of the respective parties is essential.

Supplier economic analysis uses supplier financial statements to provide a view of the supplier’s financial performance and associated negotiation stance. The buyer can choose to take a quick view of the supplier’s position and how this may impact relative power. Or, the buyer can choose to take a more in-depth study of the supplier. This will depend on the level of risk involved in the purchase and the amount of time available to invest for what level of return.

A quick overview will tell the buyer some information that is useful prior to negotiation:

  • What gross and net profit does the supplier make as a business?

This may be compared to the industry benchmark, to the historical trend and to the account cost model that the buyer has obtained from the supplier for the purposes of should or could cost analysis.

  • How is the supplier organization structured?

Ownership is an important element of how the supplier makes decisions. If they are shareholder owned, they may have different priorities and perspectives to a private or family owned organization.  The organization will impact when the supplier’s financial year runs and when their accounts are published in what form. It is useful to be aware of financial quarters of the supplier when they may feel pressured to make a significant sale.

The form of the accounts may be an extensive annual report or a summary that meets government requirements, depending on the organization type. This may impact the type and quantity of information available to the buyer.

  • What level of financial risk does the supplier represent?

A brief calculation of the size of the buyer as an account relative to the supplier’s overall income gives a good indication of how the buyer sits compared to the suppliers’ other customers.

This also helps the buyer to determine if the level of planned spend with the supplier is appropriate, particularly given the overall mix of products and services that the supplier is selling.

The size, profitability and attractiveness of the sale are relevant to the supplier’s potential motivation to sell to and service the buyer’s account.

An analysis of supplier solvency and liquidity provides a snapshot of the supplier’s ability to meet both immediate and longer-term liabilities in the form of salaries, purchases and debts. This analysis can be supported by a credit report and should be viewed in the context of the overall business plans of the supplier and the market conditions.

Deeper analysis

Where there is a greater need to assess supplier financial performance to understand their business efficiency and effectiveness, ratio analysis is useful to support a deeper economic study. This will give indicators of performance through return on capital employed, speed of collection of income from customers and inventory turnover. Comparison of these elements with similar organizations and industry benchmarks will provide the buyer vital clues that indicate where there are areas of opportunity.

This opportunity could be immediate cost reduction or longer-term continuous improvement ideas. In either case, supplier economic analysis is a good starting point for a challenging or collaborative discussion with a supplier.