05/01/2019

“Classical purchasing will cease to exist.”

Gerd Kerkhoff and Matthias Schranner discussing the implementation of strategic approach to negotiations.

 

Mr Kerkhoff, when we talk about procurement 4.0, request for proposal and online campaigns, where is the human element in the negotiation of the future?

Through digitalization, standard processes will be executed largely without human interference. The idea here is to eliminate human error, even with regard to purchasing. Alongside this digital domain, though, there will still be room for negotiations that cannot be managed digitally. These negotiations will be approached systematically, with clear guidelines, in order to remove situational and personal perspectives as much as possible.

When people negotiate in systems, experience and gut feeling is eliminated from the equation.

There will always be a combination of systems and human assessment, and social competence needs to be brought into the negotiating system as well. It requires an interplay of human experience, personality and a firm grasp of the situation at hand.

Does that mean running through checklists rather than freely managed negotiations?

It is about achieving an objective result. Every purchasing manager will ultimately represent their result as the best one possible. It is like a reflex – that judgement comes purely from the situation, so it only represents a subjective estimation. This is something we have to get away from. If I have defined a systematic approach before the negotiation, instead of coming up with something new in the situation.

Let’s say we were writing a job description for a future professional purchaser. Which skills and abilities will be important?

We need three different types of negotiators that work together as a team. One person alone wouldn’t be able to cover all the requirements. The first would present the business to the outside world, with a great deal of charisma and communication skills. Secondly, you need a strategic thinker, and third is a doer, who can be relied upon to get things done.

That mirrors our FBI model – the negotiator, who sits at the table and goes straight into the conflict situation and the commander who is observing from a vantage, thinking strategically.

Yes, that is the trick. While running the negotiation at the table, someone on the team needs to maintain a more meta-level perspective in order to lead the negotiation strategically. This person provides a safety net by maintaining an effective link to the other side.

It also requires a certain amount of empathy, in order to read between the lines. Is empathy something that can be learned or taught?

Empathy is hugely important, because it builds trust and crosses bridges. In my personal view, empathy or charisma is almost part of our DNA – you either have it or you don’t. I don’t know if it can be learned. I am certain that it requires an interest and pleasure in dealing with other people.

There is this moment during a negotiation that calls for cooperation. If you miss this moment, you will inevitably hit a dead end. In our experience, negotiators that have overly specific guidelines tend to stick to them to the point where they miss this key moment.

The most important thing is first to know that this moment even exists. After that, it is a matter of having a feel for anticipating that point. Someone who is familiar with this point needs to be able to let go of their rigid attitudes and dogmatism because pushing the conflict too far will destroy the negotiation.

Dogmatism is a typically German trait. You have locations in nine countries. What kind of experience have you globally had with regard to negotiating processes?

To me, the way in which negotiations should be run is totally independent of the location. The negotiating process is the same all over the world, and the steps are identical. Social structures are far more important than any cultural component. For example, it is important to know how hierarchical a society is – it is important to approach the negotiating partner in a respectful and culturally appropriate manner.

To finish up, please give us a look into the future.

The goal in the coming years will be to make purchase prices more objective and measurable with the aid of digitalisation. This means classical purchasing will cease to exist in the future. Digitalisation is built on gathered data that is then connected to algorithms. Those will be displayed through various indices, so that prices simply follow market rates. For everything that can be digitalised, there won’t be any more classical purchasing. For remaining cases – major investments, M&A or complex acquisitions – it will require professional experts of all kinds who can lead negotiations to a successful conclusion.

NEGOTIATE. The magazine for global decision makers
2019
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