Why do we choose to compete when collaboration provides better results?
For the past few years I have participated in career development academies for a couple of industry associations by doing a short negotiation primer. The facilitator for the sessions always leads off with an exercise he likes. The exercise assigns the trainees into groups A, B and C and gives Group A the most negotiation power, Group B the next highest level of power and Group C the lowest. Then, a few rounds of negotiations are conducted between two groups at a time (A&B, then A&C, then B&C) to see if two of the groups can agree how to split a pool of real money. At the end of the exercise there can only be one deal between two groups to split the money and the 3rd group gets nothing.
Learn how to save money by developing, gaining supplier
acceptance of and negotiating using detailed cost breakdowns:
Click to learn about APD Trainings
Over the years it has become apparent that:
- Group A, the group with the most power, normally approaches the negotiations in a competitive manner.
- Groups B&C, the groups with the least amount of power, normally approach the negotiations in a collaborative way.
- Group A is the group most often left out of the final deal leaving them with nothing while Groups B&C share the monies.
Unfortunately, the tendency for the more powerful to choose a competitive approach to negotiations extends to the automotive industry. We have conducted 3 surveys of sales and marketing leaders to identify whether their customers practice competitive or collaborative negotiation approaches.
Customer/supplier collaboration has been shown to reduce the costs during the critical design phase, reduce the need for many suppliers and improve quality. It is unfortunate that our survey results show that many OEM’s and most of the major Tier 1’s are viewed by their supplier sales leaders as behaving like Group A trainees; employing a competitive approach and minimizing their returns.
It always leaves me wondering why.