It’s an art form that most consultancies don’t even think about. Yet negotiation, with clients or suppliers, is vital to the health of any consultancy.
It wasn’t many years ago that most large consultancies charged on the basis of the value to the client of what they were commissioned to design. Stories of £350 000 fees for a Cognac bottle are now the stuff that dreams are made of.
Today, most clients believe, rightly or wrongly, that they understand what they are buying when it comes to design and other creative services. Many will tell you they have demystified the creative process. This is partly due to their desire to reduce costs, and a few will tell you that it’s also due to some dubious past practices in certain quarters.
The fact is that the creative industry has given the crown jewels away. We have given away the real value that comes from an outstanding creative idea that can transform a company or brand. These have been sold short, while seeking to make up the additional income from production markups.
Clients, not surprisingly, have wised up to this and the result is that they have become better negotiators. Most now insist on paying for time rather than value.
As an indication of this we are seeing a phenomenal growth in a new breed of client: the purchasing director. Their mission? To give their company greater value and to get more out of a marketing and design budget. Companies that have signed up to this include the likes of BT, Boots the Chemists, Halifax, Jacobs and Royal Bank of Scotland.
Indeed, the vast majority of leading UK companies have a purchasing director. But the key change in recent years is that their remit has been stretched from raw materials and property to consultancy services.
They are highly trained specialists who put consultancies’ cost structure under the microscope. They are more than a match for most designers, account managers or, indeed, chief executive officers.
Most consultancies are not well prepared for such close scrutiny, because:
some still don’t really know how much a job costs and have no accurate job-costing system. This often prompts the ‘finger in the wind and how much do think they’ll go for?’ technique
a trained negotiator will usually have to report back to an ultimate decision-maker within their organisation. Consultancies, on the other hand, put their ultimate decision-maker in to bat
some larger consultancies use their financial director to handle negotiations. Yet, while they clearly know their numbers, few have been trained in the art of professional negotiation
most consultancies fail to prepare for the cut and thrust of a negotiation meeting in the way that they would do for an important creative presentation. Having a game plan, a list of options and answers to likely questions would be commonplace for a major pitch, but seem to be sadly lacking for many consultancies when it comes to negotiating the fee
Clearly, consultancies need to push negotiation up their training agenda. Indeed, it should be near the top of the list for every clientfacing member of staff.
Many consultancy heads fight shy of training too many staff in this skill, because they think the first stop after training will be the chief executive officer’s office, to try to negotiate a better salary. However, the fact is that negotiating even a small increase in any budget should create a dramatic improvement on the consultancy’s bottom line.
Any negotiation is not just about giving things away. It should be about a win-win situation. The trouble is that the results of client negotiations are not always communicated to everybody who needs to know them.
Carey Evans, who runs client/ consultancy relationship auditing company Relationship Audits and Management, says, ‘A surprisingly high number of client/ supplier relationships hit the rocks, as the details of contracts are not communicated to the staff who work on the business day-to-day and are going to be responsible for making things work. If either side has committed to doing less than would generally be expected, it is vital everybody should know that.’
So what to the future? It is now inevitable that in the next few years we will see the growth of consultancy-based negotiators. In large communications groups they will not only negotiate with their suppliers, but also play a pivotal role with finance and managing directors in the negotiation of client contracts. Equally inevitable will be a new breed of consultants offering this as a specialist skill to medium-sized and smaller groups.
One of the biggest challenges facing the design industry in the next few years will be to convince clients to pay for the value of what design can do. One of the first steps on this road will be the ability to negotiate in the most professional manner.