commercial infrastructure
In discussing the process of negotiation and the way in which corporate objectives need to be defined we need to avoid seeing negotiations as one off events. In order for an organization to manage the negotiation process effectively it requires a working commercial infrastructure.
Danny Ertel ["Turning Negotiation into a Corporate Capability" - HBR May/June 1999, reprinted in Harvard Business Review on Negotiation and Conflict Resolution] stated that in order to build a negotiating capability an organization needs to deal with four main issues:-
- an organization-wide policy linking the negotiators' priorities to the organization's policies
- broadening the measures used to evaluate success in negotiation beyond simple measures of price and cost
- making a clear distinction between individuals deals and long-term relationships, and
- the organization is committed to walking away from bad deals - no sale at any price - and that there should always be a "Best Alternative To Negotiated agreement" or BATNA, see Getting to Yes, by Roger Fisher & William Ury.
The strategies to be following in determining issues such as the BATNA will be a key factor in corporate success.
In Inpractice there are two main issues, firstly establishing and communicating an effective corporate strategy for negotiating with other organizations, not merely producing spin which no one on the organization seriously believes [see every other Dilbert cartoon, such as The Dilbert Principle Scott Adams], and secondly creating effective processes for dealing with commercial matters. In practice these procedures will deal with many of the areas within the organization and are central to the operation of the organization. The areas covered include the following:-
- pricing and estimating
- bid management
- the sales process; costs of sales, commission structures, targeting potential clients
- product offerings - warranty issues and support
- legal and IPR issues
- financial planning: including foreign exchange, cash flow projections and interest rate related instruments
- external expertise: legal, accounting, banking and technical
- project management processes and responsibilities
- third party responsibilities: partnerships and joint ventures
- recording commercial issues and communicating information on negotiations to the rest of the organization
[Information on these processes and procedures will be added in due course.]
Use of tools such as the balanced scorecard can be helpful in comparing the performance of commercial processes in large or distributed organizations. It is also important to liaise with areas, such as IT and production departments which hold key knowledge about products, services and customer requirements, rather than rely on information distributed via third parties.
Effective use of information systems, and the creation of effective feed-back mechanisms, will increasingly be the key to the operation of effective commercial processes.
The negotiator also needs to be aware of the importance of other processes within the organization, as these will need to be taken account of in negotiations and a well-negotiated agreement will meet the requirements of a number of coporate policies. One of these processes that has attractd a lot of attention in recent years has been the question of supply chain management.
