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LeanLinking Team
May 8, 2023

The Importance of Setting Good Negotiation Targets

negotiation targets

Negotiation is a critical aspect of procurement and supplier management, and setting targets is an essential element in ensuring a successful outcome. Without targets and goals, negotiations can become aimless, leading to missed opportunities, unsatisfactory agreements, and lost value.

In this article, we will explore why it is important to set targets for a negotiation and how to do it effectively.

How setting targets in negotiations help you achieve your goals?

Focuses the Negotiation

Targets provide a clear focus for the negotiation. Setting targets helps to establish clear expectations and boundaries, ensuring that both parties are aware of what is achievable and what is not. It also helps with internally aligning with stakeholders and to manage aspirations and expectations. This helps to prevent any misunderstandings that can occur during the negotiation process, and it ensures that the parties involved stay on track.

Increases Preparation

Setting targets presents a perfect opportunity to conduct research and gather information about the negotiation. This information gathering process is crucial in enabling you to identify the key issues that are likely to arise during the supplier negotiation. This preparation not only increases the knowledge and understanding of the issues involved, but it also enables you to anticipate the counterparty’s positions and interests. This knowledge will ultimately enable you to make more informed decisions during the negotiation.

Provides a Benchmark

Targets also provide a yardstick to measure your negotiation success. By establishing a clear target, you can measure the progress of the negotiation and determine whether you are on track to achieve your negotiation goals. This benchmarking process is essential, as it provides a basis for making adjustments during the negotiation, ensuring you remain on track to achieve your objectives.

Maximizes Value

Setting targets is also critical in maximizing value. By setting clear targets, you can identify the most important issues to address during the negotiation and prioritize your discussion around the elements that drive most value for you and for your counterparty. By maximizing the value of the agreement, both parties can come away from the negotiation feeling satisfied with the outcome.

Reduces Risk

Finally, setting targets in negotiations helps to reduce risk. By establishing clear targets, both parties can identify potential risks and develop contingency plans to mitigate them. This risk assessment process is critical, as it enables both parties to identify potential issues before they arise. By having a clear understanding of the risks involved, both parties can take steps to reduce the likelihood of these risks occurring and prepare for them if they do.

Setting targets is critical in ensuring a successful negotiation. By setting clear targets, both parties can establish a clear path forward, ensuring that the negotiation is productive and that both parties achieve their negotiation goals. As such, setting targets should be an essential component of any negotiation strategy.

Here are some key considerations when setting negotiation targets:

Understand Your Objectives

Before setting targets, it is essential to have a clear understanding of your objectives. Ask yourself what you want to achieve from the negotiation, and ensure that your targets align with these objectives. It is also important to consider your stakeholder’s priorities, as this will help you determine which issues are most important to address during the negotiation. Try the frameworks such as RACQSI model to understand how your business partner thinks about the value your supplier is delivering; this will help you understand objectives, priorities, and targeted negotiation outcomes.

Conduct Research

Conducting research is critical in ensuring that your targets are realistic and achievable. Gather information about the other party's interests, needs, and priorities, as well as any relevant market or industry data. This research will enable you to identify potential areas of agreement, as well as any potential obstacles to reaching an agreement. In particular, look for data on your counterparty concerning their financial health, business success, risk exposure, and others.  

Set Realistic Targets

Setting realistic targets is essential to the success of any negotiation. Ensure that your targets are achievable, based on the information and research you have conducted. It is also important to consider any external factors that may impact the negotiation, such as market conditions or regulatory issues. Key analyses to perform are looking into “Share of Wallet,” i.e. your spend with the supplier as a ratio of the supplier’s total revenue, to understand your importance for the vendor; profitability development of the supplier over the last three years; and key competitors of your supplier to understand relative positioning. You may also want to read the supplier’s earnings briefings and annual reports to better understand their priorities and risk exposure.  

Be Flexible

Finally, it is important to be flexible when setting targets. Negotiations are dynamic, and unexpected issues can arise. As such, it is important to be prepared to adjust your targets if necessary. This flexibility will enable you to adapt to changing circumstances and find mutually beneficial solutions. As Mike Tyson said, „Any plan is good until you are punched in the mouth.” Adjust your target sets and your priorities flexibly when you learn new information during your negotiation process.

Setting good targets is critical to the success of any negotiation. By understanding your objectives, conducting research, setting realistic targets, and being flexible, you can ensure that your negotiation is productive and that you achieve your negotiation goals. By following these key considerations, you can set targets that are effective, achievable, and aligned with your overall objectives.

We also recommend checking out our blog about 5 Key Steps Of Supplier Negotiation Excellence to consolidate your negoitation process.

LeanLinking Team
LeanLinking provides both Supplier Relations & Negotiation Management solutions that enables large organizations to harness the power of insight with these solutions.
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