Beneficial partnerships don't just happen. They are cultivated and nurtured and negotiation plays a key part.
By Frank Mobus and Brad Young
The call came in late on a Friday afternoon. It was the kind of call you never want to receive as suppliers’ production is ramping up for your company’s peak-selling season. A major mechanical failure caused a complete process shutdown that won’t be fixed for several months. The supplier is cancelling all your pending orders; they are sorry, but there’s nothing they can do.
Fortunately, the product was multi-sourced. The “How do I deal with this problem?” call went out at 5 p.m. eastern on Friday to a factory owner in a time zone 7 hours ahead. He picked up his mobile phone around midnight his time, listened to the situation, and said, “Don’t worry. I will start my machines tomorrow morning and will take care of this problem for you. I’ll hold my prices as is. You can get me a formal PO next week. I trust you. Enjoy your weekend.”
Without valuable partnerships, it could have been a major crisis for the company. One partner had the courage to immediately call and report the problem. The other acted to solve the customer’s problem, not to seek additional opportunistic margin but to apply positive leverage to the customer relationship.
Beneficial partnerships, like the ones above, don’t just happen. They are cultivated and nurtured and negotiation plays a key part. The partnership in this real-life story existed because the customer spent years applying positive leverage with the supplier through honest, purposeful supplier-development activities. The customer challenged the supplier to improve while providing how-to help along the way. They gave the supplier opportunities to manufacture new product lines and as a result the supplier experienced exceptional growth, not only with this customer but with many others. A negotiation approach based on positive leverage built a strong partnership.
Creating and using leverage is always important in negotiations. For many negotiators leverage boils down to the old choice between “the carrot” or “the stick.” In simple competitive bargaining situations, that’s okay. But all negotiations are not the same: there is a range or continuum spanning simple bargaining on one end to relationship-building, partnering negotiations at the other. The characteristic feature of relationship negotiations is that they are not one-off deals; they are repeated occurrences that happen over a long time frame. In mutually-beneficial, long-term relationships, the relationship itself becomes more important than any one deal or agreement.
Positive leverage is the long-term strategy of offering help and new opportunity to your counterparty, over-time, with the hope or expectation of reciprocation along the way. Positive leverage is a long-term investment requiring not just effort on your part but belief and trust in your partner to “do the right thing.” When it works, great efficiency follows: things run smoother, get done faster and with greater success.
But, it’s not always the pot of gold at the end of the rainbow. Positive leverage comes with a warning label. The strategy doesn’t work if one side proves untrustworthy, or is opportunistic, taking advantage of unexpected situations rather than “looking out” for the relationship and their partner.
Oftentimes in business relationships we hope for the best, but hope is not enough: relationships require vigilant monitoring to assess the health and even-handedness of both parties. This is especially true over time as personnel, company objectives, and needs change. Even so, entered into judiciously and with proper care, positive leverage can lead to the kind of relationship demonstrated in the story above, that of the superstar supplier who goes the extra mile when you need it most.
Frank Mobus is the CEO of Mobus Creative Negotiating and Brad Young is the Vice President of Global Manufacturing & Sourcing for the Staples Brands Group.
December 16, 2016
Source: Supply Chain Management Review
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