Before jumping into a global agreement, take some time to get rid of the hurdles that could lower your ROI and make you less competitive in the long run.
The growing availability of the Internet in all parts of our world, which has seemingly erased national borders and shrunk the enormity of our planet, has precipitated an increase in global agreements between companies and countries. Regardless of client size, sophistication or location, most companies pursue global agreements because of the belief that global agreements automatically leverage a company's size, spend and geographic location into a quantifiable, competitive advantage.
Unfortunately, global agreements guarantee nothing; they merely reflect the desire of two or more partners to conduct business, usually in a new way. An agreement's strength is directly proportional to the contracting parties' level of preparation and planning and their commitment to support change management and contract maintenance. Without such a commitment, contracting parties find themselves quickly overwhelmed and disappointed.
Often, we are our own worst enemies. As negotiators, we can unintentionally sub-optimize our own global agreements as we rush forward to evaluate global agreements, pressured in part to avoid "falling behind" our competition. Rushing in blinds us from identifying the eight most common hurdles blocking global agreement optimization, which, ironically, exist within our own company's four walls.
These eight hurdles can be eliminated prior to entering a global agreement, and, by doing so, can improve a company's present supply/buy situation. Resulting agreements result in higher return on investment and return on effort, and they can be designed to remain flexible to changing market signals over optimal time periods.
The eight most common barriers blocking global agreement optimization are:
- Lack of clarity
- Over-reliance on a traditional toolbox
- Standard approach to new and unique opportunities
- Inflexible savings definition
- Miscalibrated timing and speed
- Lack of funding
Lack of Clarity
Test your negotiation team. Ask each member to write down on paper the goal of an agreement without consulting one another. Responses from an efficient negotiating team will be concise, simple and closely clustered around the same goal; responses from an unorganized team will vary greatly and may even be contradictory.
Potential agreement partners are not mind readers. Vague, ill-defined and inconsistent contract goals prevent partners from correctly interpreting a company's intentions, leading them down irrelevant avenues.
Lack of clarity automatically reduces potential contract return, and "business-eze" is usually the culprit. "Business-eze" is an operational language based on a specific company's culture and geographic location, which is best understood by the company's own employees, but not by those outside the company. To increase the agreement's value, clarify communications by eliminating all "business-eze." Use simple language to make clear statements. Further define the goal in terms of expected outcomes and measurement methods. This enables potential partners to propose better solutions.
Over Reliance on a Traditional Toolbox
Global opportunities are everywhere, filled with unique benefits and hard-to-quantify deliverables. A buyer's over-reliance on traditional evaluation methods can misrepresent a global agreement's potential risk and value.
Traditional Tool Box: Negotiate price and terms; Specialty Tools: Cost contribution to the finished product
Traditional Tool Box: Market Surveys; Specialty Tools: Cost-plus or should-cost analysis
Traditional Tool Box: Single-faceted negotiations; Specialty Tools: Multi-faceted negotiations
Traditional Tool Box: Flat price comparisons; Specialty Tools: Risk management
Traditional Tool Box: Single component negotiations; Specialty Tools: Category management
Traditional Tool Box: Annual contracts; Specialty Tools: Optimal market timing