Reviving Stalled Negotiations

Price negotiations emerge as a critical area of focus when there are significant fluctuations in commodity prices. Recently, sales teams have spearheaded these negotiations, attempting to offset the sharp increase in raw materials, labor, and indirect costs through price increases. However, as some commodity prices have started to decline from their peaks, buyers have now begun to lead these negotiation strategies.

Even with good intentions, negotiations can encounter obstacles, resulting in stagnation or deadlock. For those familiar with our knowledge-based negotiation and cost courses, you will know that APD advocates for the collaborative negotiation strategies outlined in the book, 'Getting to Yes'. However, when a negotiation hits a standstill, I turn to 'Getting Past No', a subsequent work by one of 'Getting to Yes' authors, William Ury.

It's not feasible to condense a 200-page book into a brief article, so I'll highlight some essential points from both books that can be beneficial when a negotiation gets stuck.

Firstly, understanding why the negotiation got stalled is crucial. Ury cites five common reasons:

• The counterparty's emotion. For instance, a salesperson who has successfully negotiated price increases due to rising material costs, but had failed to address the impact of rising labor and energy costs, might react strongly when asked to reduce prices due to a drop in raw materials costs.
• Your emotion. A buyer that responds with the hard line of threatening to take business elsewhere in response to the salesperson’s initial negative reaction could be a potential obstacle.
• The counterparty's position. The salesperson might believe that reducing pricing will lead to a loss-making scenario for the product.
• The counterparty's dissatisfaction. The salesperson’s displeasure with a previous agreement that didn't account for increases in labor and indirect costs could cause emotional reactions.
• The counterparty's power. An imbalance of power can lead to an acceptable stalemate only for one party. If the salesperson isn't contractually obligated to negotiate and the buyer has no other option, the salesperson might walk away.

To avoid negotiation standstills, a history of collaborative negotiations, as outlined in 'Getting to Yes', should be applied:

• Differentiate between people and problems – respond to emotional outbursts by using questioning strategies to understand the other party's perspective better.
• Focus on interests, not positions. Show the other party that it's in the best interest of both parties to have profitable partners.
• Invent options for mutual gain. Frame the negotiation as a joint problem-solving task and explore new ideas.
• Insist on using objective criteria to choose from the identified options. Multiple solutions may be required for complex problems to ensure mutual satisfaction.

Finally, the most valuable negotiation skill is the ability to stop talking and listen. When a negotiation seems to be at a standstill due to the other party's inflexibility, avoid threats and instead use questioning techniques to understand their positions and underlying interests better. Validate your understanding by summarizing what you've heard and asking for confirmation or further clarification. If they agree with your summary, they are likely more open to considering your viewpoints and interests.

Learn more about APD’s live, online skill development courses for manufacturing purchasing teams:

Cost Management Certification – Identify, analyze, and negotiate better pricing with suppliers

Commodity Leadership Certification – Building and implementing effective commodity strategies

Strategic Negotiations – Planning and conducting common negotiations in manufacturing companies

Advanced Negotiations – Skills to adapt communications for better negotiations

Strategic Sourcing Workshop – Quickly align your supply base and reduce costs