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There are many books on the art of negotiations and getting to ‘yes’. But few of those address what happens after the parties sign the contract. Have you ever found yourself in change order hell – or worse – going back to the negotiating table because the situation has changed?
What should procurement professionals do?
Don’t just negotiate the deal to get to yes. Instead, begin by negotiating the essence of the relationship with your partner and create a flexible contract that can withstand the ups and downs of today’s business environment.
Turn the negotiating mindset on its head. Both parties need to agree they will adopt a “what’s-in-it-for-we” (WIIFWE) mindset.
The WIIFWE mindset represents a shift away from the old-school ‘what’s-in-it-for-me (WIIFME)’ approach. With a WIIFWE mindset, the negotiation alters the focus from the deal to the relationship. Simply put, the relationship itself becomes the focus of the deal. This idea says that once parties have arrived at yes in a negotiation, some real work and resources are needed to forge a lasting, collaborative, shared-value partnership that enables both parties to prosper.
Changing the nature of the relationship and embracing the WIIFWE mindset is done through an approach grounded in trust and six core principles:
These principles guide each party’s actions in the relationship. It flows from a decision to trust each other, as well as the necessary steps needed to build and maintain that trust. The core principles also establish a behavioural foundation for a productive relationship — provided they also act under the parties’ expressed intentions. The principles are ‘cultural norms’ or values the parties can use to guide behaviours while building a relationship.
They can be summarised as follows:
The parties to a collaborative relationship are obliged to make fair and balanced exchanges. If one party accepts a business risk, the other must be prepared to do the same. If one party commits to invest time and money in an important project, the other party should reciprocate.
Committing to the principle of autonomy means parties will abstain from using power to promote one side’s self-interest at the expense of the other. At the individual level, autonomy refers to the ability of individuals to act based on reasons and motives reflecting their own values and convictions. The same applies to business relationships. People want to make their own decisions, free from the power of another; they want to work as equals, and they want to be part of a process that allows them to make decisions as a group.
A ’getting to we’ relationship cannot function without honesty obliges the parties to tell the truth about facts, their intentions and their experiences. Individuals and organisations should call out dishonest activity immediately. If dishonesty — rather than honesty — becomes a social norm in day-to-day business practice, the partnership will not survive.
Businesses and business people view relationships in balance sheet terms: each side should be equal. The principle of equity, however, obliges parties to look more critically at distributing resources. It might be easy to split things 50/50, but it might not be the best or fairest approach to the relationship as it moves forward. Equity has two critical components: proportionality and remedies. Proportionality means one party may get a larger distribution of rewards than the other as compensation for taking greater risks or making investments. Equity is essential in maintaining harmony and trust in a relationship because equitable decisions prove a party is both trustworthy and trusting.
Each of the previous guiding principles is essential – but alone they are not enough. Parties in a collaborative relationship must also be loyal to the relationship as a single entity and ensure ‘relationship-first’ thinking becomes an operating norm, whereby the parties’ interests are treated as equally important. This can be a difficult concept to accept in many companies.
Integrity is the final ingredient of a robust relationship. It refers to the parties’ actions in similar situations and requires leaders to act consistently in their decision-making. Integrity is essential to get to the WIIFWE mentality and to remain there; it preserves the relationship because it promotes trust. To act with integrity is to show trustworthiness, which strengthens the foundation of the relationship. Integrity fosters predictability since what has happened in the past says something about what will occur in the future. Integrity is the reputational glue for high-performing, collaborative relationships.
Negotiating the true nature of the relationship under the WIIFWE mindset means that parties move out of the usual tit-for-tat cycle of tradeoffs and concessions. Instead, parties consciously establish an atmosphere that depends on collaboration and cooperation through the aforementioned principles.
The WIIFWE process follows five steps that can help lay the foundation for your next negotiation.
GETTING READY FOR WIIFWE
Look at three foundational elements for a successful collaborative relationship: trust; transparency; and compatibility. Step one begins with the parties sitting side-by-side and having an open and candid discussion about what each concept means to them. This will enable everyone to quickly learn the key tenets of how they can work together. When the parties complete this step, they will have a good idea of whether they have a solid foundation to build upon. If they don’t, you can work on solidifying the relationship and continue from there.
AGREE ON A SHARED VISION FOR THE PARTNERSHIP
If the parties agree that they have the basic foundational tenets for a highly collaborative relationship, the second step is to cocreate a vision for the partnership. The best way to do this is for each partner to create their own vision – but then transform that into a shared vision. This will give the partnership its purpose beyond a series of transactions.
COLLABORATIVELY NEGOTIATE THE GUIDING PRINCIPLES FOR THE PARTNERSHIP
Partners both work to improve the relationship and abide by the guiding principles to drive highly collaborative behaviour. Agreeing on the guiding principles is the critical step that distinguishes highly collaborative relationships. These principles will provide the mindset to support everyone on the journey. A key purpose of the guiding principles is to help prevent opportunism and competitive tit-for-tat moves.
NEGOTIATE AS ’WE’
Once the first three steps are complete, the parties should be ready to establish the mechanisms they will use as they negotiate details such as the scope of work, price, payment terms, and so on. This includes agreeing on negotiation rules – the strategies, tactics and methods both parties use to ensure the deal is fair and balanced. For example, the parties may make a negotiation rule that neither party will use a ’good cop, bad cop’ negotiating tactic and they will give the negotiators the authority to negotiate unique deal points. Once the partners have agreed to these mechanisms, they will then use them to achieve a consensus on specific details of the deal.
LIVING AS ’WE’
Many business relationships operate in a highly dynamic environment. This is why step five of the WIIFWE process has parties create the governance mechanisms that will help them live as ‘we’ throughout the relationship. This includes how to get both sides to work together at both a tactical and strategic level.
How you approach negotiations can make all the difference to your bottom line. WIIFWE is not merely about getting the deal done and moving on to the next one. Rather, it is a systematic five-step process to help you lay the foundation for strong and healthy business relationships.
Kate Vitasek is a faculty member at the University of Tennessee’s College of Business Administration. She is the author of six books, including Getting to we: Negotiating agreements for highly collaborative relationships, from which this article was adapted.
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.