Why negotiation is the number one skill for effective procurement and SRM

Having coached Procurement professionals in over 30 countries to prepare them for upcoming negotiations, we believe negotiation skills are the top skill for effective category management because negotiation is all about effective communication.

  • Promoting ideas and influencing internal stakeholders
  • Supporting and being supported by colleagues to benefit everyone’s skills and wellbeing
  • Enabling hard and soft power where appropriate with third parties
  • Using good communication habits daily to expand the impact of your work

When people hear ‘negotiation skills’, they tend to interpret that as meaning ‘leveraging suppliers to reduce price’.

However, we know in Procurement that we reduce operating costs in so many other ways where negotiation is a core element of effective implementation.

Internally focused examples include:

  • Showing the impact of commissioning services externally compared to internal provision
  • Strengthening policy awareness and cultural attitudes to cost management
  • Presenting data that highlights demand and consumption management
  • Highlighting the business benefits of specification reengineering

Externally focused examples are:

  • Sponsoring risk and business reputation management
  • Championing sustainability issues through category choices
  • Exploring new contract, relationship and payment models with suppliers
  • Tenaciously driving continuous improvement initiatives in supplier cost and performance

Where negotiation is a core skill for Procurement, it becomes the sine qua non of post-contract supplier management.  While day-to-day supplier management is focused on the important issues of performance management and contract delivery, there are inevitably additional negotiation demands that occur in the field of:

  • Contract breach and dispute management
  • Conflict resolution and relationship expectation concerns
  • Payment and reward management
  • Risk and dependency management

Negotiation skills therefore become not only about application but also about coaching.  In this space we need to enable our internal colleagues, who may be the daily post-contract supplier managers, to be just as effective as commercial negotiators as our Procurement colleagues.