Is procurement gradually losing the art of the deal? Are the negotiation capabilities of procurement professionals being eroded? Are sales teams gaining an upper hand in negotiations?
These are counterintuitive and somewhat controversial questions given that procurement teams are meant to spend a considerable amount of their time negotiating – whether with internal stakeholders and business units to define the requirements, the scope, and the objectives of any initiatives, or the extensive range of negotiations undertaken with external suppliers.
Driving commercial outcomes for the organisation through negotiation is meant to be hardwired into the DNA of procurement. This could be in terms of securing price reductions, obtaining innovation, defining unique commercial arrangements, securing supply, changing service requirements, and agreeing contract terms. Often all of these take place within the same negotiation. However, for a range of reasons, a gap may be opening up in the approach, preparation, processes, knowledge, and capabilities of procurement teams when it comes to negotiation.
You might disagree with this assertion. However, it is not being made in isolation. This is not a casual observation being extrapolated and blown out of proportion. According to The Deloitte Global Chief Procurement Officer Survey 2019, negotiation capabilities were considered the second most important training area for procurement staff. However, 54% of the 481 procurement leaders that responded to the survey did not have confidence in the current capabilities of their teams to deliver their procurement strategies.1 This represented a 3% increase on the 2018 survey results.
This is not the only recent research to suggest that there is a problem. According to new research from Barclaycard Payments, of the over 500 senior procurement decision-makers who participated in their study, almost half (46 percent) of decision-makers admit to a lack of confidence when it comes to negotiating face-to-face effectively: 53 percent for women and 43 percent for men.2 This is cause for concern. How is this possible given the purpose of procurement?
If you are interested in learning more about this topic, please download our report, Procurement: Is there a negotiation gap?, below.?