In Tough Economic Times You Should Avoid Making These 3 Critical Mistakes

Uncertainty is dominating most people's thinking

. Staying positive in the current environment does not mean that you will have to stop listening to the daily news. Staying positive means that you will have to embrace the new reality and transform both your own as well as your company's approach to doing business in the toughest period since the Great Depression.

If you study recent history, you will find that many companies not only survived the Great Depression but actually thrived during this period. You will also learn that a key part of the success of companies that survived and thrived was found in the way that they communicated with all their stakeholders - employees, clients, shareholders, bankers, regulators, partners etc.

During tough times, the importance of accurate, targeted communication is amplified. Keeping in mind that negotiation is nothing more than a specialised form of communication, the realisation that negotiation is an ongoing process rather than an event that takes place when you formally sit across the table to discuss contractual terms opens up profound opportunities for you to not only protect value but indeed to create additional value within the enterprise.

You and your company should avoid making any of the following 3 big negotiation mistakes in these trying economic times.

1. Lowering your aspirations

Businesses and people that thrived during past recessions focused on forward movement regardless of market conditions. Don't make the mistake of lowering your aspirations as a consequence of what is happening all around you. Success demands your full attention and requires ambitious targets - even more so during tough economic times.

Remember not to negotiate with yourself. Do not make the mistake of lowering your aspirations because you think that your counterparts will not entertain the level of your opening offer. Give your counterpart the opportunity to say no. Of course, you should be ready to make concessions if they do say no to your opening offer and this means that you will have to prepare a concession strategy where you have a clear picture of all items that you are prepared to trade.

2. Using only a competitive strategy to negotiate or renegotiate supply agreements

Don't make the mistake of thinking that a competitive approach to negotiating where you are only interested in achieving your own objectives will result in the best deal for you. In tough times, suppliers expect you drive a harder bargain and they will prepare a defense against your highly assertive approach. Very often their defense will be to underperform or only perform to rule during contract stage to ensure that they maximise profit from the transaction. And during the contract management stage the professional buyers are most often not involved in the supplier relationship management leaving open opportunities for arbitrage.

During tough times it becomes much more important to pursue a more collaborative approach where you also try to serve or meet some of the key medium and long term interests of your suppliers rather than only focusing on your own objectives. You will be surprised how creative suppliers can be if they sense that there is trust in place and they are able to openly explore creative options with you.

Remember that you are far more likely to make concessions to people whom you like and trust than to those who treat you with contempt. The universal principle of reciprocity is alive and well during tough times - which means we return to others the form of behaviour that they demonstrate towards us.

So, go ahead, set a collaborative tone for the relationships that you wish to have with your key/strategic suppliers.

3. Neglecting to create an organisational negotiation capability

Tough trading conditions provide the ideal impetus and opportunity to rethink the way that you and your company deal with suppliers, clients and other key stakeholders. Don't make the mistake of thinking that negotiating well is a skill only to be found in individuals.

There are things that you can do with relatively little effort to ensure that the results of your department, division or company's negotiation efforts are uniformly improved through ensuring the application of business negotiation best practices in line with the sales, purchasing or other business processes in your business environment.

To help you create an organisational negotiation capability, I have created a survey made up of 11 questions. Once you answer the 11 questions, you will immediately receive a report contrasting your responses against the hundreds of responses in our database. What's more, you will receive detailed recommendations based on your responses to help you create an organisational negotiation capability that will steady the ship in trying times.

by: Jan Potgieter

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