August 22, 2014 | Written by: THINK Leaders
Categorized: Data | New Thinking
Negotiation is an art. The ability to convince another party to meet your terms often employs emotion and psychology along the way, and can take decades to master. But competitive businesses can’t rely on a handful of seasoned negotiating stars to close key deals; they need a dependable, repeatable approach that can be learned and practiced across the organization. Adding data to the process helps to turn an elusive art to a more predictable science.
Some of the best procurement departments know the value of using data to make sourcing successful. They design Requests for Proposals (RFPs) that extract detailed information from bidders in a standardized and comparable format. They tap internal Enterprise Resource and Planning (ERP) systems to create a more complete picture of how much they spend with a given vendor. This adds value –coming to the negotiating table thinking your company spends $10M with a vendor versus knowing it actually spends more than $100M across all divisions gives you leverage that otherwise may have gone unused. Smart procurement professionals also use outside data to assess supplier risk; after all, it doesn’t pay to negotiate the best price possible only to have your supplier fold six months later.
It’s not just procurement departments that can benefit from data-driven negotiation practices. Think of all the deals a company strikes – leases, joint ventures, IP licenses, compensation packages, ad buys, acquisitions and divestitures, and customer complaint resolutions. Injecting relevant data into negotiations across the company brings insight to these conversations. This is not to put the other party on the defensive, but to add perspective and context. Sharing data with your negotiating partner can often lead to better deals for both.
Already familiar with key company data and analytics, CFOs are well positioned to infuse this method of negotiating through the organization. They can also advise on external data that could better inform the company’s negotiators, such as government contract terms that are publicly available. Helping to better inform negotiators across the company puts data to work to increase the odds of successful outcomes for the business.