Executive Briefings

Zero-Sum Supplier Negotiation Eventually Leads to Everyone Losing

Applying leverage in negotiations results in a zero-sum outcome where one side wins and the other side loses. This typically means that the winner ends up with somewhat more than 50 percent of their hoped-for result and the loser gets somewhat less than 50 percent since, just as in sports competitions where the potential results are win-lose, lose-win and tie, the use of leverage doesn't allow for combined outcomes above 100 percent. Zero-sum outcomes not only create a relational imbalance, they create hard feelings. People who lose in one negotiation often do their best to turn the tables the next time such that they win - and you lose.

Creating Middle Ground increases the size of the pie, thereby allowing both sides to realize more than 50 percent of their hoped-for result and yielding a combined total result greater than 100 percent. Sure, in the end it's likely that one side will end up with a higher percentage of what they hoped-for. But, for instance, one side getting 80 percent and the other 70 percent - totaling more than 100 percent - rarely creates the type of friction that results from zero-sum negotiating.

Middle Ground is difficult to find when all you are talking about is piece price, which is often the case with commodities. On the other hand, an effective way to create Middle Ground is to consider Total Cost. In using this approach, piece price is just one factor to be considered in the overall negotiations.

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Creating Middle Ground increases the size of the pie, thereby allowing both sides to realize more than 50 percent of their hoped-for result and yielding a combined total result greater than 100 percent. Sure, in the end it's likely that one side will end up with a higher percentage of what they hoped-for. But, for instance, one side getting 80 percent and the other 70 percent - totaling more than 100 percent - rarely creates the type of friction that results from zero-sum negotiating.

Middle Ground is difficult to find when all you are talking about is piece price, which is often the case with commodities. On the other hand, an effective way to create Middle Ground is to consider Total Cost. In using this approach, piece price is just one factor to be considered in the overall negotiations.

Read Full Article