DeltaBid welcomes the third article in this four-part series by expense management specialist Jack Quarles. He highlights one of top strategic skills of procurement professionals: providing internal stakeholders with options and guiding them through the decision-making process.
What’s the most important part of a negotiation? Take your pick:
- Wearing the right outfit
- Knowing when to bluff
- Divulging the right amount of information
- Keeping a poker face
Sadly, most negotiations training puts too much emphasis on these superficial tactics, when the right answer is: none of the above.
In practice, nearly all real power in negotiations comes from one source: having options. If you are the best face-to-face negotiator on the planet but you have no options, then you are ultimately at the mercy of the party across the table. On the other extreme, you can say the wrong thing, and do the wrong thing… but if you have several strong alternatives, you are still far more likely to get what you want on your terms.
The road to better buying, stronger negotiation, and capturing maximum value is paved with options. In most companies, it is the sourcing and procurement teams that are most skilled at identifying and developing potential options. Maybe it’s as simple as finding four suppliers that can provide a product or service. But when procurement is playing a strategic role, it may be much more than that.
Reframing: It’s about Results, not Resources
Let’s step back and look at the big picture again. The prior article in this series presented that procurement’s central question should not be “what do you need?” but “what are your goals?” The sourcing team is not just finding materials, but it is advising on how to achieve desired results.
Consider how a results-based approach redefines problems and thereby opens up new dimensions of options and potential solutions:
Some of you may be thinking: those results-based projects are a bit beyond procurement, aren’t they? Absolutely! They probably involve strategic considerations, deep operational expertise, and imply C-level input. At the same time, these results-based challenges absolutely depend on what procurement does best: getting the most value out of the marketplace. So they are perfect opportunities for sourcing professionals to add strategic value and raise their contribution.
Working through the Options
Globalization and technology have enabled a marketplace that offers more options than ever before. As procurement and sourcing professionals guide their companies through these potential options, they are now more critical to the organization than ever before.
Here are a few ways in which procurement can ask the questions that need to be asked.
- The Option of Not Doing Anything. The zero-baseline is always a choice, but when a project gets rolling, sometimes it is hard to stop. When functional owners lose sight of the big picture, procurement can remind others of the goals and balance the costs and benefits.
- The Option of Outsourcing or In-sourcing. Imagine that the procurement department is engaged to purchase an email marketing system. When you step back and look at the overall goals of the project, it may be wise to ask: could a vendor do this better than we could?
- The Option of Different Vendors. The classic procurement function that everyone expects is pre-qualifying candidates and presenting them for review. But it’s not as easy as comparing airline fares. Any purchase of moderate complexity will involve solutions and vendors that are not apples versus apples. Procurement can highlight the meaningful features and connect solution differences back to the project goals.
Any analyst can ping a search engine to find a vendor or two. But procurement is better qualified than any other group to plumb the marketplace, discover viable options, and present them in the context of company capabilities and goals. That is strategic work that leads to better decisions, and it’s a natural place for procurement to lead.
In the next article we’ll get to the final step: making the right decision.
About the author: Jack Quarles
Jack Quarles is a speaker, consultant, and author of #1 bestsellers How Smart Companies Save Money and Same Side Selling, as well as the upcoming Expensive Sentences. He has saved companies tens of millions of dollars over two decades in the field of expense management, and often advises on RFPs, vendor selection, and outsourcing decisions. Jack is a founder of Xigo and Buying Excellence and serves on the board of Peacemaker Ministries. Jack has received degrees from Yale University and Northwestern’s Kellogg School of Business.