NDR 737

Creating a World-Class Negotiating Organization

Based on book Built to Win
John Turner 3/6/2011

This p aper challenges many o f t he assumpt ions and pract ices o f how o rganizat io ns co nduct business, specifically how organizat ions negot iat e. Nego t iat io n is not simply a qualit y endowed in and pract iced by individuals. It mu st be considered a syst emic qualit y t hat inher es in t he organizat io nal cult ure. It must be considered as a core co mpet ence of t he inst it ut ion.

Int ro duct ion There ar e few t hings more import ant to running a successfu l co mpany t han being able t o reach wise, st able and advant ageous agree ment s. Whet her you are seek ing t o close a billio n do llar co mmercial sale or purchase, st ruct ure a crit ical lo ng-t er m part ner ship, or fost er an efficient operat ing enviro nment , you and yo ur o rganizat io n are at r isk if you cant consist ent ly meet corporat e int erest s relat ively quickly while building and preserving relat ionships. So me o rganizat io ns have recognized t his need and have ident ified negot iat ion as a co re co mpet ence t hat t heir emplo yees are expect ed to mast er. (Movius, 2009) In my o rganizat ion we have a so mewhat well-organized process for prepar ing fo r and conduct ing negot iat ions, yet many opport unit ies exist to vast ly impro ve t he nego t iat ing skill level, int ro duce new concept s and int egrat e t he use of availab le t echno logy t ools int o t he process. Pro curement and supply chain p ersonnel and t heir managers are negot iat ing wit h supp lier s who have goods and ser vices vit al t o organizat io nal success. Oft en, t hey are t old t o get t he best deal for t he organizat io n, but t hey are measured so lely o n short -t erm cost reduct io n. They ma y have limit ed for mal aut hor it y wit hin t heir organizat ion but a long list o f requirement s and goals given t o t hem by t he var ious int er nal st ake-ho lder s of t he product s t hey are charged wit h pro cur ing. Once scoping and pr icing ar e negot iat ed, procurement will t urn t he pro cess o ver t o t he legal depart ment to iron out t erms and condit io ns. This will delay agreement and inject a highly posit ional set of demands int o what had been a reasonably co llaborat ive conversat io n. Meanwhile, int er nal st ake- ho lder s will wo nder why t he process is t aking so long, and why t hey havent gott en ever yt hing fro m t he deal t hat t hey had asked for, even as so meone fro m finance suggest s procurement has overpaid. (Mo vius, 2009, p. 4) A pro cess for mo ving quick ly and effect ively t o impro ve negot iat ion per fo r mance needs t o be creat ed. This process requires t hat organizat io nal leader s shift fro m t hinking about negot iat ion as so lely a mat t er of individual
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sk ill at t he t able t o t hinking about negot iat ion as an organizat io nal co mpet ence t hat requ ires building and adjust ing business processes t o encourage best pract ice and cont inuous impro vement . It requires t hat leadership pro vide suppo rt , guidance, and resources needed t o ensure t hat change effort s can succeed. It requires conduct ing a br ief yet careful audit o f how negot iat ions are being co nduct ed across t he organizat io n. It requires producing a set of reco mmendat ions t hat respond t o t he problems t hat are revealed by t he audit . And it requir es develop ing effect ive int er nal coaching, t raining, procedural realig nment and incent ives t hat will sur mount t he barr iers t o change. This requ ir es coordinat ed cont r ibut io ns o f mult iple leaders ins ide t he organizat io n. A leader ship sponsor wit h sufficient influence must be lieve t hat negot iat ion is a co re co mpet ence and co mmit t o build ing a cult ure of proble m so lving and relat io nship building. (Mo vius, 2009, pp. 9-10)

Descr ipt ion o f t he conflict environment I wo rk in a Procurement organizat ion wit h roughly 2,500 emp lo yees t hat has a $30 billio n annual purchasing responsibilit y for The Boeing Co mpanys Co mmercia l Airplanes Unit . Our Procurement depart ment is divided int o six majo r areas t hat are focused on cert ain commodit ies required t o build a co mmercia l air plane, such as Raw Mat er ial, Det ail P art s, Small and Large Assemb lies, S yst ems ( Avio nics), Int er ior Part s (seat s, lavat ories, over head st o rage compart ment s) and Aft er market Part s Support. Each area is co nst ant ly int er facing wit h an ext ensive glo bal supply chain on var ious cont ract ing act ivit ies, and at t he same t ime int er facing wit h numerous int er nal cust omer s o n t he st rat egies required t o br ing t he best value t o t he co mpany. The int eract io n engages t yp ical Online Disput e Reso lut ion (ODR) co mmunicat ion too ls such as t elepho ne, email, WebE x audio and video conference t echno log y and face t o face meet ings. The environme nt is oft en fast paced and highly

st ressfu l due t o t he int ense desire by all part ies t o do t heir best to ensure t heir ind iv idual, group or company needs and int erest s are met .

Descr ipt ion o f t he t ype and nat ure of conflict in the environment . Regard less if it s an int er nal or ext ernal int er face, t he int er act ion is so me t ype o f nego t iat ion. Wit h t he ext erna l suppliers, it s about price, qualit y and schedu le and t he int er nal negot iat io ns can be t hese t hree areas plus t he specific need s fo r any host of depart ment s out side of our Procurement organizat ion, su ch as E ng ineer ing, Manufact ur ing, Sales, Int ernal Audit and Legal. Many diverse cu lt ures fro m around wor ld t o across town are int ert wined wit hin t he daily co mmu nicat ions necessar y t o successfully manage such a co mp lex supply chain net wo rk. This leads t o a silo ment alit y, meaning each depart ment or supplier has it s o wn set of pr ior it ies, goals and t arget s to achieve. Conflict s of minor t o majo r sig nificance amo ngst t he part ies can and do occur on a daily basis.

The Pro blem Wit h in o ur Procurement organizat ion t her e is a t remendous amount of nego t iat io n expert ise. Yet t his wealt h of knowledge and exper ience is bar ely capt ured for t he benefit of fut ure negot iat io n set tings. It s akin t o a poorly insu lat ed building, where many closed rooms exist and t he cent ral heat ing fur nace is running const ant ly, yet much of t he valuable war mt h is escaping wit ho ut not ice. Our organizat io n needs t o find wa ys t o openly co mmunicat e bet ween organizat ions (clo sed rooms) and add so me ser ious insulat io n (ODR too ls) t o ret ain and reuse t he wealt h of negot iat ion/ conflict reso lut io n expert ise t hat is expounded co nst ant ly t hroughout the organizat ion.

Suggest ed So lut ions 1. Co mmit t o organizat ional lear ning. Creat e an eNewslet t er. It is necessar y t o keep clo se t rack of what was t ried, what t he result s ar e, what was lear ned and what furt her adjust ment s might be necessar y. ( Movius, 2009, p. 90) 2. Do cument Successes and Failures A relat ively lo w cost ODR approach t o begin build ing an improved negot iat io n in frast ruct ure would be t o develop a cent ralized dat abase t o capt ure negot iat io n resu lt s t hat have occurred wit hin t he organizat ion. Each t ime a negot iat io n o ccurs a br ief quest io nnaire would be co mplet ed by t he negot iat io n t eam capt ur ing t he approaches t aken, t he result s achieved and t he lessons learned. (Ert el, 2000). St art ing wit h a simple ODR reposit ory plat for m can be t he fu nd ament al building blo ck for an organizat io n t o use as a spr ing board int o var io us t ypes o f ODR t ools in development of more robust negot iat io n pro cesses. Tho se sit uat ions t hat did not t urn out as well as expect ed are just as valuable t o capt ure as t he successful out co mes. The difficult ies exper ienced by a nego t iat ing t eam might be ver y inst ruct ive to ot hers. Usua lly more can be lear ned fro m failures t han fro m successes. (Movius, 2009, p. 91). It ma y make sense t o present bot h successful and not so successful st ories ano nymously t o min imize concer ns of damaging reput at ions or t hat an individual or t eam has set t he bar to o high wit h regard t o t heir fut ure per for mance. (Mo vius, 2009, p. 92) 3. Creat e a Virt ual Cent er of E xcellence New t echno logies are now making possible new virt ual opport unit ies for co llabo rat ion, lear ning and support or coaching fro m expert s fro m wit hin and o ut sid e an organizat ion. Techno logies are now available t o creat e secure
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int eract ive t ools for co mmunicat io n and learning. Secure pages or rooms where cert ain groups or divis io ns can work t hrough int eract ive t ools t o leverag e d ist r ibut ed knowledge and enable valuable media cont ent lear ning exper iences. (Mo viu s, 2009, p. 93) Our procurement organizat io n is virt ually dispersed acro ss t he Unit ed St at es, part s of Canada and Aust ralia. Virt ual co mmunicat io n too ls will beco me essent ial t o set st andard procurement pract ices and leverag e t he expert ise across t he co mpany. A virt ual cent er of excellence has t wo main funct io nal plat for ms. Fir st , it is an o nline lear ning port al wher e all t ools, t emplat es, video lect ures, podcast s. FAQs, art icles, blogs and discussio n t ranscr ipt s can be capt ured, organized and archived. T his allows ever yo ne fro m first t ime emplo yees t o t he most exper ienced negot iat ors to guide t hemselves t oward t he resources t hey need. The co nt ent can also be rat ed by user s for qualit y and helpfulness, allowing for co nt inuo us improve ment to t he mat er ials. (Movius, 2009, p. 94) The seco nd plat for m lever ages social net working t echno logies. This allo ws peo p le t o work toget her more effect ively, especially across great dist ances and bo rders. In a secured user space mult iple part ies (wit hin t he co mpany or ext ernal supplier s) across t he wor ld can work toget her to run t hrough a preparat ion t oo l, brainst or m new value cr eat ing st rat egies and lear n what is co llect ively known about t he ot her part y and it s needs. This t ype o f co llabo rat ion can generat e a summar y document to be used in furt her nego t iat io ns. T his seco nd t ype o f plat for m allo ws bot h individuals and t eams t o po se quest io ns t o a designat ed co mmunit y of user s and t o get answers quickly fro m inside and out side t he organizat ion. E mbedded search engines can t rack inq u ir ies by pre- assigned keywords and show quickly which t opics are more act ive and which answers have been pro ven mo st usefu l. T his will allow an add it io nal set of mat er ials and conversat ion to occur and give t he procurement o rganizat io n a power ful new way t o ident ify fut ure needs and t o quickly address t hem. (Mo vius, 2009, p. 95)
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One Fo rt une 500 Co mpany has developed wit hin it s procurement divis io n a Nego t iat ors Garage as an online resour ce for any and all negot iat ors in t he co mpany. T he Garage is a dyna mic virt ual enviro nment t hat provides exper ienced negot iat ors real t ime access to t he resources t hey need t o be successfu l. This includes on-demand t raining resources, t ools and t emplat es fo r st rat eg y preparat io n and execut io n, a managers corner wit h a focus on dr iving nego t iat io n per for mance t hrough effect ive coaching and a reposit or y for shar ing and st o ring negot iat io n hist ories. T he Gar age also provides co mpany leaders wit h a u nified vis io n and working definit ion of what it will t ake for t heir co mpany t o be a world-class negot iat ing organizat io n. (Movius, 2009, p. 97) This aut hor is scheduled t o discuss t his online p lat for m in gr eat er det ail wit h t he Pro curement Vice President of t his co mpany in t he near fut ure. Fu nd ing mechanis m and review of t he cost of imp lement ing So me o rganizat ions have ident ified negot iat io n as a core co mpet ence and co llect ively spent millio ns o f do llar s each year on off-t he- shelf negot iat ing t raining workshops. According t o t he aut hors of t he book Built t o Win, t hese o rganizat io ns ar e for t he most part wast ing t heir mo ney. Treat ing negot iat ion co mpet ence so lely as a mat t er of individual skill building is a cost ly mist ake. (Mo viu s, 2009, p. 1) Invest ment s in lear ning and co mmunicat ion plat for ms which include ODR t echno logies will promot e reflect ion, assessment , co nt inuo us improve ment and add profit s direct ly t o a companys bott om line. It is far less cost ly t han resort ing t o t raining-and- more-t raining year aft er year o r hig h pr iced consult ant s at t he last minut e. (Movius, 2009, p. 9) Organizat io ns can invest in organizat ional change in ways t hat help obt ain consist ent ly bet t er resu lt s more quickly, while leaving good relat ionships in place. They provid e ODR p lat for ms as well as t radit io nal face to face co mmunicat io n t hat allow fo r shar ing o f infor mat ion and lear ning about best pract ices. Wor ld-class nego t iat ing organizat ions creat e feedback mechanis ms t hat encourage carefu l evaluat io n o f successes and failures.
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Est imat e o f init ial imple ment at ion cost s of ODR plat for ms and in house t raining fo r t he size o f my procurement organizat ion is less t han $200,000. This est imat e was der ived fro m research wit h anot her large manufact ur ing co mpanys exper ience wit h act ual st art -up cost s. This is a relat ively minor invest ment co mpared t o t he pot ent ial savings due t o improved negot iat ion skills across a co mpany. I n t he case o f my organizat ion where we purchase roughly $30 billio n annually for airplane part s, assemblies and ser vices, enhancing negot iat io n effect iveness by 1 percent would yie ld an addit io nal $300 millio n annually in pro fit . This could repr esent t he difference of being ext remely successful or failur e to meet company goals and expect at io ns. Barr iers and challenges relat ed t o imp lement at ion Many challenges exist in t he imp lement at ion of a mut ual gains approach t o o rganizat io nal negot iat io n skill improvement t hat includes use o f ODR p lat fo r ms. So me o f t hese barr iers ar e t he follo wing, yet not limit ed t o t his list : (Mo viu s, 2009, p. 124) 1. Turnover and reduct io ns in an organizat io n lead t o lost knowledge and sk ills. 2. Lear ning opport unit ies go missed because emplo yees are reluct ant to share failur es. 3. New business processes, roles, or t eams emerge t hat conflict or compet e at a t act ical level wit h t he st eps necessar y for negot iat io n success. 4. So me groups in t he organizat io n may refuse t o work wit hin a new framework because of lack o f confidence in t echno logy skills needed t o incorporat e ODR plat for ms. 5. Leaders t rump t heir own endorsement by r evert ing t o short -t er m met r ics t hat t hwart t he creat ion o f lo ng-t er m valu e and preser vat ion o f relat ionships.

Assessment of met r ics Creat ing a wor ld-class negot iat ing organizat ion can be summar ized in t he fo llo wing model o f act io ns. (Mo vius, 2009, p. 134) 1. Assess current challenges and opport unit ies. a. St art wit h a sound t heor y Mut ual Gains Approach b. Assess negot iat io n per for mance c. Make diagnosis and provide reco mmendat io ns t hat include ODR plat for ms 2. Creat e a cult ure o f lear ning a. Provide a co mmo n model and language wit h ODR t raining b. Adjust and align operat ing procedures c. Co mmit t o organizat ional lear ning 3. Sust ain new co mpet it ive advant age a. Const ant ly evaluat e impact b. Address per sist ent barr ier s c. Fost er candid feedback d. Work to preserve t rust The ke y t o sust aining t he co mpet it ive advant age t hat comes fro m enhancing an o rganizat ions negot iat ing capabilit ies is t o t hink syst emat ically about chang e. (Movius, 2009, p. 133) The abo ve act io ns and met r ics, if implement ed will lead t o successful organizat ional negot iat ion skill impro vement . Co nclu sio n The pro cess descr ibed in t his paper is mor e t han just t heor y, t hese act ions and resu lt s have been proven in real business ent it ies. The applicat io n o f ODR pract ices is in it s infancy. As I pursue implement at ion o f t he reco mmendat io ns o ut lined abo ve I will be looking t o inc lude even more ODR t echno logies t han descr ibed by t he aut hors of Built t o Win.

Even t ho ugh I work for an airplane manufact ur ing co mpany where connect ing peo p le face t o face is our really our core reaso n for exist ence, I see great valu e in st reamlining met hods t o communicat e and negot iate t hrough ODR t echno lo g ies. As wit h mo st t hings in life, balance is t he key. I n t he case of creat ing a wor ld- class negot iat ing organizat io n, blending face t o face co mmu nicat ion and ODR int er act ion when appropriat e will ult imat ely make o ur co mpany st ronger, more flexible and be a desirable co mpany wher e fut ure generat io ns o f t alent ed individuals will want to be emplo yed.

Works Cited
Bennis, W. (2009). Foreword. In H. a. Movius, Built to Win (p. 1). Univer sit y o f So ut her n Califor nia, Los Angles. Ert el, D. (2000). Turning Negot iat ion int o a Corporat e Capabilit y. I n Negotiation and Conf lict Resolution (pp. 101-127). Har vard Business Review. Mo viu s, H. a. (2009). Int roduct ion. In Bui lt to Win (p. 1). Boston: Har vard Business Press.