ROI and ROE on Negotiation Skills Training and Process Application

In this world of not having enough time and resource to get things done, we can’t afford not to hone our skills in the areas that make the most impact. One of those is Negotiation Skills and Behaviors.   In fact it is not just enough to hone your skills, but you must put a plan into place to apply them to your supply and demand chain processes when sourcing, selling or operating your company.  Then you need to communicate the results to the organization including your employees, your shareholders, your customers and your vendors. 

Why ROI and What is ROE?  As you know when we are scrutinized or when we scrutinize any investment in our people, we need to justify this investment back to our stakeholders.  As we turn away from recession, this will help us make better decisions and create long lasting impact.  
We all know ROI – Return on Investment.  Very simply put, take the dollars you invest in the training and any fully loaded costs (TCO) and measure the delta from deals your teams close with vendors or customers or internally; what your benchmark was that you were expecting versus what you actually got.  Divide this into your investment and you have a simple ROI.  This should not take a lot of time and resource, but should be a good measurement to show back to your business.

ROE is a bit different.  I listened to a very prominent speaker in this filed, Jim (5 levels of measurement and I can’t remember his name) and he shared with us a measurement that impacts the business in a qualitative way.  If we have expectations of how people will behave after they are trained, we need to measure this too.  For example, if we set process into place on preparation of negotiation, we should be reporting the return on expectations that in the major deals with vendors, we need to produce a preparation document to identify certain outcomes.  This ROE will drive behaviors that will impact the way we get to our ROI.  Sometimes we forget we are human and must measure behavior, not just $$ outcomes.

Here are a few areas to consider when you are delivering Investment and Expectation impact to the business through training in Negotiations:

  • Start with the highest point of impact to your business
  • Highest level in the Supply Chain Organization including the executives
  • Greatest impact to the top or bottom line 
  • Largest influence on your organization

When we work with corporations across the globe on negotiation, we find the best place to start the impact on negotiation is at the top.  If you can begin with your executives and change the behaviors and applications of negotiation from there, you will have the best chance for sustainable change and largest ROI and ROE on your Supply and Demand chain organization.  
In one case, we began with the C levels of an organization running a major IT company.  They brought their top executives into a single course over 2.5 days.  We worked them like we intended to work their teams.  Their issues were not with single vendors, they were across categories, business units, parts of the country and the world.  It included all of their business service offerings.  

They went into the course thinking they were too seasoned to be “taught.”  Because it is a behavioral experience they got to practice process and engagement the whole time.  They weren’t taught, they practiced and learned.  By the end of the 2.5 days, they were designing the deals the would take on, the message they wanted to get out to their organization, the impact they wanted to make and who would be involved and how they would sustain it in their business; this from the CEO, COO, CPO, CIO, CFO, 5 presidents of divisions and numerous VP’s and Senior Directors.  They were all major influencers on their organization.  

They decided in order to make the biggest impact on the business, over a 2 year period they would bring their top 380 people across the supply and demand chain through a series of courses and live deal applications and build a sustainable process in negotiation to carry this on for many years.  3 years later we are still engaged on live deals with this company as an advisor and have planned the next level of strategic negotiations.  They are running their negotiations much more smoothly with incredible results they set out to do.  Without involving the top of the organization, this would not have been possible.

  • Identify what outcomes you are looking to attain and let the business and the participants know
  • Have the measurable areas of impact identified before you begin
  • Outcomes in Business Results
  • Outcomes in Behaviors

One of the outcomes of the senior level Negotiation training and process we did with them was identifying business and behavioral implications of this undertaking.  We sat down with the COO of the organization and his senior director and laid out an implementation plan and a measurement plan.  They figured they would invest around $830,000 in this initiative and wanted to set out a plan to measure what impact they would make on the organization because of this.  This measurement was their TCO so they took into effect the investment in the training and all associated costs.

They set out two measurements ROI and ROE.  What business results they would attain directly related to the change in approach and application of the skills.  They identified the largest of the deals to follow and took a measurement across the organization for all of the deals.  They also wanted to measure the effective use of the negotiation planning tool we worked with teams on during the courses.  They embedded these planning tools in their risk review process around all major deals and expected each category or team to present them in order to get the necessary funding and authorizations.  
Then we set the plan in motion together.

  • Create a plan to sustain these changes in behaviors and process and assign an executive champion to communicate the importance and a business partner to implement
  • Communicate the results

Over the next year, the company sent their deal teams into courses together.  They chose to bring the deal teams together so they could create a single language and behavioral process across the teams in their negotiations.  The Executives who came through the course first opened each of the courses, supported the initiatives through constant communication and worked to support the behaviors as these deal teams began to engage with their customers, their vendors and each other.  

In a great example of ROI and ROE and in closing to this installment, I have a final story of success from this case.  This was shared with us as the deal was happening and once the deal was completed.  One of the division presidents working with is deal team engaged with their customer.  The total targeted deal size was approximately $72 Million.  They were being pressured to deliver the same services for $60 Million.  They used the tools from the courses and their expected outcomes to shape and guide their behaviors.

Because of their process evaluation, their preparation and application of the skills to this engagement, they were able to close the deal at $72 million, attain the profit targets they planned out and deliver the services in a much earlier timeline than anticipated.  This was used as a benchmark for further deals.  They attributed the additional $12 million on this individual deal back to the planning they did and the application of the skills they taught across the organization.  This was communicated back to the employees, the board and is still used as an example in the organization of what could happen.

If you set out a plan for ROI and ROE when you teach negotiation, follow that plan and build it into your organizational process and behaviors, you will make a great impact on your negotiation outcomes.