Supplier negotiations for strategic projects can be complex and long-drawn-out affairs. If you don’t get the balance right, they can be costly and even fail outright to achieve your desired business outcomes.
Contract negotiations need detailed preparation if you want to minimise commercial, operational and reputational risk, assure successful delivery of your complex project and secure positive outcomes from the relationship. If you lack the capacity or internal expertise to navigate supplier negotiations, what should you do: Hire a specialist negotiation consultant? Invest in negotiation training for your team? Both?
The answer will depend on your organisation’s circumstances and why you currently lack the capacity or internal expertise. For example, staff turnover may have created skills or capacity gaps, or you may not undertake complex projects very often so supplier negotiations are uncommon meaning there is little call for internal capability. This article considers the options, the pros and cons of each and how to assess if your investment is value for money.
What are the benefits of hiring a negotiation consultant?
Hiring a negotiation consultant can provide several advantages when contracting with a supplier.
- Expertise and Experience: Negotiation consultants specialise in the art and science of negotiation. They possess extensive knowledge and experience in various negotiation techniques, strategies and best practices. They can offer valuable insights into the supplier’s perspective, industry norms and potential pitfalls to help you secure the most favourable terms and conditions.
- Maximising Value: Negotiation consultants are skilled in identifying and maximising value in negotiations. They can help you uncover hidden opportunities, leverage your strengths and mitigate potential risks. Their expertise can assist you in structuring the contract in a way that aligns with your business objectives and secures your required outcomes.
- Objective Third-Party Perspective: Acting as a neutral intermediary and facilitator, a negotiation consultant can help to bridge gaps and resolve conflicts between you and the supplier, (sometimes, also between you and your internal team). Their unbiased viewpoint can foster constructive dialogue and enable more productive negotiations.
- Strategic Planning and Preparation: They can help you define clear negotiation objectives, develop a comprehensive negotiation strategy and anticipate potential challenges. By thoroughly analysing the supplier’s position, interests and alternatives, they can assist you in formulating effective counteroffers and trade-offs.
- Enhanced Communication and Relationship Building: Negotiation consultants can provide guidance on effective communication techniques and help you navigate challenging conversations. They can also assist in building rapport and fostering a positive relationship with the supplier, which can contribute to long-term success and future collaborations.
- Time and Resource Savings: Negotiating contracts can be time consuming and resource intensive. By engaging a negotiation consultant, you can offload some of the negotiation responsibilities, allowing you to focus on core business activities. Consultants can often bring efficiency to the process, leveraging their expertise to achieve better outcomes in a shorter timeframe.
- Cost Savings and Risk Mitigation: A skilled negotiation consultant can identify cost-saving opportunities and assist in optimising pricing and contract terms. They can help you negotiate favourable pricing, payment terms, warranties and other contractual provisions that align with your budget and risk tolerance. This can result in long-term cost savings and risk mitigation.
It’s important to note that while hiring a negotiation consultant can provide numerous benefits, it’s essential to choose a reputable and experienced professional or consulting firm. Their expertise and compatibility with your organisation’s goals will play a significant role in the success of the negotiation process.
Ideally you should also explore the different negotiation styles and agree which is right for your organisation and then ensure you understand what style of negotiation approach the consultant intends to use and whether that fits with your organisation’s preferred style.
Hiring a negotiation consultant doesn’t mean handing over all negotiation work and responsibilities to the external specialist. It is important to remain involved but establish clear roles for both your team and for the consultant.
What are the potential challenges when hiring a negotiation specialist?
While hiring negotiation expertise can offer numerous benefits, there are potential challenges that you should be aware of:
- Cost: You’ll need to evaluate whether the potential benefits and cost savings outweigh the fees charged by the consultant. It’s crucial to have a clear understanding of the consultant’s pricing structure and ensure that it aligns with your budget and expected return on investment.
- Lack of Alignment: If the negotiation consultant doesn’t fully understand your business objectives, industry dynamics, or specific requirements, their advice may not be aligned with your needs. It’s essential to thoroughly communicate your expectations, provide relevant information and ensure that the consultant has the necessary expertise in your industry or domain.
- Lack of Industry-Specific Knowledge: If the consultant does lack in-depth understanding/experience of your specific industry or domain, this could potentially limit their ability to provide context-specific advice and recommendations.
- Conflict of Interest: There may be instances where a negotiation consultant has relationships or affiliations that could compromise their impartiality. While most reputable consultants prioritise client interests, it’s crucial to clarify any potential conflicts of interest and ensure that the consultant is acting in your best interest throughout the negotiations.
- Over-reliance on the Consultant: While negotiation consultants can provide valuable insights and guidance, there is a risk of over-reliance on their expertise. It’s important to maintain an active role in the negotiation process and not solely rely on the consultant to make all decisions. You should remain informed, engaged and provide your input to ensure that the negotiated terms align with your specific requirements.
- Limited Knowledge Transfer: While consultants can deliver immediate results, their engagement may not lead to the long-term development of negotiation skills within your organisation. There’s a possibility that their expertise and strategies may not be effectively transferred to your team, thereby missing an opportunity to build internal capabilities and empower your team members to handle future negotiations independently. This can result in a dependency on the consultant for future negotiations. To mitigate this risk, consider collaborating closely with the consultant, encouraging knowledge sharing and implementing internal training or processes to develop your team’s negotiation skills.
- Cultural or Personal Compatibility: The negotiation consultant should be able to work well with your team and establish rapport with the supplier. If there are significant differences in communication styles, cultural norms, or personalities, it may hinder effective collaboration and potentially impact the negotiation outcome. It’s important to assess the consultant’s interpersonal skills and their ability to adapt to different environments.
To minimise these potential dangers, conduct thorough due diligence when selecting a negotiation consultant. Check their credentials, testimonials and past client experiences. Have a clear and detailed agreement outlining the scope of work, deliverables, fees and any potential conflicts of interest. Open and transparent communication throughout the engagement will help address concerns and ensure a successful collaboration.
What attributes should I look for in a negotiation consultant?
When selecting a negotiation consultant, several key attributes are worth considering:
- Expertise and Experience: Look for someone with deep experience who has kept their knowledge up to date and understands the day-to-day practical application of negotiation theory, strategies and best practices, preferably with a successful track record of negotiating in your industry or a related field. Assess their experience, certifications, academic background and any specialised expertise relevant to your specific negotiation challenges.
- Strong Communication Skills: The consultant should possess excellent communication skills, (listening, speaking and writing) with an ability to articulate complex ideas clearly, ask insightful questions and facilitate productive discussions. Look for someone who can communicate confidently, persuasively and adapt their style to different audiences.
- Analytical and Strategic Thinking: They should be able to analyse complex situations, assess risks, identify opportunities and develop creative solutions. Look for someone who can think critically, evaluate multiple perspectives and tailor negotiation strategies based on the specific context.
- Problem-Solving and Conflict Resolution Skills: Negotiations often involve resolving conflicts and finding mutually beneficial solutions. The consultant should have strong problem-solving and conflict resolution skills. They should be adept at identifying underlying interests, managing emotions and facilitating win-win outcomes. You need someone who can navigate challenging situations and help parties find common ground.
- Adaptability and Flexibility: Each negotiation in complex projects is unique; therefore, the consultant should be able to adjust their strategies and techniques to suit different circumstances. Look for someone who can adapt to different negotiation styles, cultures and personalities while maintaining professionalism and integrity.
- Impartiality and Ethical Conduct: Integrity, honesty and impartiality are key. They should prioritise the best interests of their clients, maintain confidentiality and adhere to professional and ethical standards.
- Strong Interpersonal Skills: Building relationships and rapport with stakeholders is crucial in negotiations. The consultant should possess skills such as empathy and active listening, be able to establish trust, effectively manage relationships and navigate challenging dynamics between parties.
- Client-Centric Approach: A good negotiation consultant will have a client-centric focus. They should prioritise your specific needs and goals, actively seek to understand your organisation’s unique challenges and constraints, tailoring their approach accordingly and consistently delivering value to your business.
- Continuous Learning and Improvement: As we indicated earlier, negotiation is an ever-evolving field. Look for someone who stays updated with the latest research, industry trends and emerging negotiation techniques. They should have a growth mindset and demonstrate a willingness to adapt their approach based on new insights and developments.
Remember to evaluate these attributes based on your specific needs and objectives. Seek references and testimonials from previous clients and check their reputation, online presence and reviews. Seek feedback from others who have worked with the consultant to gauge their professionalism, effectiveness and overall satisfaction. A negotiation consultant with a strong combination of these attributes can significantly enhance your negotiation outcomes and contribute to your organisation’s success.
Should I invest in negotiation skills training to build internal capability?
If you are concerned that simply hiring a negotiation consultant will deliver limited return on investment, requiring repeated hiring each time you need negotiation expertise, you may be considering investing in negotiation skills training to build capability across your team instead. This can be a cost-effective option for organisations who have a regular need for supplier negotiations in complex projects. Below are a few points to help you make your case for the investment required and some things to be aware of when considering this option.
- Long-term Skill Development: By training, coaching and mentoring your team in negotiation skills, you invest in their professional growth and enhance their capabilities. These skills will benefit your organisation in the long run, as team members become more confident and adept at handling negotiations independently.
- Tailored to Your Business: Training and capability building programmes can be customised to address the specific needs, challenges and goals of your organisation. The focus can be aligned with your industry, customer base and unique negotiation requirements.
- Team Cohesion: Training your team fosters collaboration, shared understanding and a common language around negotiation. This often leads to improved teamwork, coordinated negotiation strategies and better overall results.
- Cost-Effective: Training and capability building programmes can be a cost-effective option, especially when compared to the fees associated with hiring a negotiation consultant.
- Time and Resource Investment: Building your team’s capability in negotiation skills requires allocating time and resources for the training, coaching and mentoring programme. It can impact day-to-day operations or require participants to take time away from their regular responsibilities.
- Learning Curve: Developing effective negotiation skills is a gradual process. It can take time for your team members to apply the newly acquired knowledge and skills effectively in real-world negotiation scenarios. (Unless you combine the training with the preparations for a forthcoming negotiation.)
- Internal Limitations: Depending on the expertise available within your organisation, the depth of knowledge and range of strategies taught during the training programme may be limited compared to what a specialised negotiation consultant can offer.
Ultimately, deciding whether to hire a negotiation consultant or invest in negotiation skills training for your team will depend on your organisation’s specific needs, budget and long-term objectives. In some cases, a combination of both approaches may be the most beneficial, leveraging the expertise of a consultant for specific negotiations while building internal skills through training.
Can I hire a negotiation consultant who will also train my team?
At BPG it is our preference for our negotiation consultants, where practical, to share their knowledge throughout their assignment, training the client’s team while preparing for and delivering a specific live negotiation project. Our training programme will prepare you in all areas of our negotiation methodology to ensure you have the necessary skills and understand the processes and techniques involved, to secure win-win outcomes.
Training is provided by a leading practitioner and is tailored to the specific requirements of the negotiation your organisation is facing. We provide the training in the lead up to your live negotiations so that you can put your learning into practice immediately, helping to embed your new skills, under the direction/supervision of the negotiation consultant. You get the benefit of capability building from a leading expert and specialist negotiation consultancy support for the preparation of and during the delivery of the negotiation itself.
How can I measure return on investment (ROI)?
Measuring ROI when hiring a negotiation consultant or investing in negotiation skills training can be challenging. The steps below can help you measure your ROI:
|Hiring a Negotiation Consultant||Training Your Team in Negotiation Skills|
|Define Measurable Objectives: Are you looking to reduce costs, improve contract terms, increase supplier performance, or mitigate risks? Establish specific, measurable, achievable, relevant and time-bound (SMART) objectives to track and evaluate.||Define Measurable Objectives: Are you aiming to improve specific negotiation skills, enhance team collaboration, increase deal closure rates, or achieve better contract terms? Establish SMART objectives to track and evaluate.|
|Establish Baseline Metrics: This could include factors such as average contract value, negotiation cycle time, costs, payment terms, or other relevant metrics. These baselines will serve as a point of comparison to measure the consultant's impact.||Pre-Training Assessment: Evaluate participants' current negotiation skills, knowledge and performance - through surveys, interviews, or simulated negotiation exercises. Establish baseline metrics related to negotiation effectiveness, success rates, or other relevant indicators.|
|Track Key Performance Indicators (KPIs): These could include metrics such as cost savings achieved, improved contract terms, reduced negotiation cycle time, increased supplier satisfaction, or any other indicators that align with your objectives. Regularly collect data to measure progress.||Track Performance Metrics: These could include factors such as deal closure rates, negotiation cycle time, customer satisfaction ratings, or other measurable outcomes. Regularly collect data on these metrics both before and after the training.|
|Conduct Post-Negotiation Evaluation: Compare the results achieved with the baseline metrics and assess the impact of the negotiation consultant's involvement. Evaluate whether the desired objectives were met and to what extent.||Post-Training/Application of Skills Evaluation: Evaluate the participants' performance and skills improvement. Compare the post-training metrics to the pre-training baseline to measure the training’s impact. Evaluate how well participants are applying their new skills in real-world negotiations and whether training has translated into tangible improvements in negotiation performance, outcomes, participant confidence, or other relevant indicators.|
|Quantify Tangible and Intangible Benefits: Tangible benefits are measurable and can be quantified in monetary terms, such as cost savings or revenue increases. Intangible benefits, such as improved relationships with suppliers or reduced business risks, may be more challenging to quantify but are still valuable to consider.||Participant Feedback: Gather feedback from the participants to understand their perception of the training's effectiveness. Surveys, interviews, or focus groups can provide valuable insights into participants' experiences, knowledge acquisition and application of skills, helping determine the perceived value and impact of the training.|
|Calculate Financial Impact: Calculate the financial impact of the negotiation consultant's involvement. Compare the actual results achieved with the baseline metrics and determine the monetary value of the improvements. Consider factors such as increased revenue, cost savings, avoided risks, or enhanced efficiency.||Feedback from Stakeholders: Seek feedback from stakeholders who interact with the trained negotiators, such as clients, suppliers, or internal colleagues. Their perceptions of the negotiators' improved skills, effectiveness, or communication can provide valuable insights into the impact of the training.|
|Compare Costs and Benefits: Compare the costs associated with hiring the negotiation consultant to the benefits realised. Calculate the consultant's fees, expenses and any additional costs incurred during the negotiation process. Compare these costs to the quantified financial impact and assess whether the benefits justify the investment.||Cost Analysis: Evaluate the costs associated with the negotiation training programme, including training fees, participant time investment and any additional expenses. Compare these costs to the benefits realised to assess the ROI. Consider factors such as improved negotiation outcomes, cost savings, increased deal values, or enhanced customer relationships.|
|Long-Term Effects: Evaluate the long-term effects of the negotiation consultant's involvement. Consider whether the improvements achieved have lasting value and will continue to benefit your organisation beyond the immediate negotiation. Assess the potential for ongoing cost savings, enhanced supplier relationships, or improved negotiation skills within your team.||Long-Term Effects: Consider the long-term effects of the negotiation training. Assess whether the skills learned are sustained and continue to benefit the organisation beyond the immediate training period. Evaluate whether the training has contributed to a culture of negotiation excellence, improved collaboration, or ongoing performance improvement.|
Remember that measuring ROI for negotiation consultants and/or negotiation skills training can be complex, as it involves both quantitative and qualitative factors. While some improvements, such as cost savings or increased deal closure rates, can be measured in monetary terms, other benefits, such as enhanced communication or improved relationships, may be more challenging to quantify. However, by establishing clear objectives, combining various assessment methods, tracking relevant metrics and comparing costs to benefits you can gain a comprehensive understanding of your return on investment.
Whether you are looking to fill a skills gap for an ongoing negotiation need or just need support on a one-off occasion, there’s lots to think about when engaging dedicated negotiation support.
If you would like to talk through the options available to you, please call BPG’s team on 0845 345 0130 for a no-obligation, confidential chat with a specialist in this area. Or learn more about our Negotiation Skills Training programme here.