I would like to share with you 3 ideas of how you can harness & leverage negotiation as a source of competitive differentiation:

1.     Start to think about negotiation strategically as a means to create competitive differentiation.

2.     Determine the most appropriate negotiation tactics before entering into negotiation.

3.     Create a negotiation knowledge base. 

1.     Start to think about negotiation strategically as a means to create competitive differentiation.

What is the difference between negotiation strategy & negotiation tactics within a business context?

This is not a question that most people would be able to answer. In fact, most people can not answer this question because it is not a question that gets asked very often…..with dire consequences to the bottom line. Whilst the roots of both strategy & tactics are decidedly military in character, today we have come to recognise that within a business environment, strategy will generally concern itself with defining the big picture whilst tactics will be deployed to realise this big picture.

It is important to recognise that the elements of strategy & tactics should be considered within the context of how we interact with all organisational stakeholders. Within the context of communication and negotiation, stakeholders will form their opinions based on their perception rather than on the intent of the communicator. Have you come across organisations that purport to embrace a collaborative engagement model only for you to experience them as being extremely competitive when in negotiation with you and your organisation? Have you ever been in a position where it is imperative for you to gain price increases?

Often contributing to the problem is that your sales force has been conditioned to be accommodating to your clients because relationships are critical to your organisation, leaving them ill equipped to realise these increases.

If it is important to you to:

·          reduce time spent on negotiation,

·          reduce expenditure on the buy side of your organisation, and

·          maintain or increase margins on the sell side of your organisation,

then you can no longer think of an organisational negotiation strategy as optional – it is critical.

The results that can be obtained from interacting with all stakeholders in line with organisational or divisional strategy far outweigh the relatively minimal investment in time & resource required to develop an organisational blue print for negotiation.For far too long organisations and individuals alike have thought of negotiation competency as a natural ‘gift’ rather than an acquired skill. Only recently have leading organisations realised that the opportunity exists to entrench an organisational negotiation capability, rather than to be solely reliant on the negotiation skills their staff members have been ‘gifted’.

Relying solely on the inherent negotiation skills of staff members is fraught with risk. Staff members move on and there is no way that you can obtain knowledge at an organisational level so as to improve negotiated outcomes across the organisation. Contrary to popular belief, there is a vast body of knowledge, supported by many years of research that exist to underpin best practices in business negotiations. Through engaging in some structured thinking at the strategic level, it is possible to deploy negotiation as a ‘weapon’ in the battle for achieving savings, increasing profits and saving time.

To see if you can realise any benefits from thinking about negotiations strategically, what are your answers to the following questions?

·          Have you identified all the resources in your business/division/department that interact with suppliers and/or clients?

·          Have you matched your sourcing process with a business negotiation best practice process?

·          Have you matched your sales process with a business negotiation best practice process?

·          Have you defined criteria for success in business negotiations? (i.e are your resources aware of what an ideal transaction should look like within a given environment?)

·          Do you have a streamlined & standardised negotiation preparation process in place?

·          Have your key negotiation resources received training in best practice negotiation skills?

·          Are all the resources that negotiate on behalf of your organisation given specific mandates for negotiation?

·          Do you have a way to consistently value concessions?

·          Are the agents that negotiate on behalf of your organisation empowered to walk away from sub optimal agreements?

·          Do you debrief relevant negotiations with a view to creating a knowledgebase that can be accessed as an organisational negotiation support resource?

If you answered no to any of the questions above, then there is undoubtedly an opportunity for your organisation to realise significant benefit from starting to think strategically about business negotiation.

2.     Determine the most appropriate negotiation tactics before entering into a negotiation

Before entering into any negotiation, I would recommend that you spend at least as much time preparing as you would expect to be in negotiation. In other words, if you expect to be negotiating for an hour, you should at minimum spend an hour preparing for your negotiation. Success in negotiation is largely dependent on the quality of your preparation.

The problem is that business negotiators seldom have a view of all the elements that they should be preparing on so as to optimise the outcomes of their negotiations. Individuals tend to approach most tasks in life in line with their preferences – their approach to negotiation is no different. In other words, we all favour a certain way of doing things. When we prepare for negotiations – some of us will have a preference to focus on the value elements such as price & payment terms that underpin the negotiation, some of us may have more of a preference to come up with new ideas and others might want to only focus on the practical dimensions of the transaction or the relationships aspects and so forth.

Rather than just approaching negotiations from the perspective of our own preferences, it is more effective to execute negotiations in line with the required outcomes for that particular negotiation as determined by our assessment of the importance of the relationship, the monetary value of the transaction and the strategic value of the transaction to name a few criteria. For instance, we may have a preference to be competitive in negotiations and to really focus on obtaining the best absolute price whilst ignoring our counterparties’ needs. A more compromising or collaborative approach that recognises the needs of our counterparties may in fact yield a better price. The point is that we should let the situation dictate our tactics rather than to have our preferences or reactions dictate the tactics that we deploy when we negotiate.

Before entering negotiations, ask yourself the following questions:

How important is it to have a long term relationship with your counterparty?

If it is important to have a long term relationship with your counterparty, then it will be difficult for you to only deploy competitive tactics as these will often result in the break down of relationships. If you are interested in a long term relationship, your counterparty’s perception will have to be managed in line with your interest. In other words, you will have to let them know through both your words & your actions that you are seeking a long term relationship.

How many alternatives are available to you?

If you have many alternatives available to you, then you can afford to be more competitive as you are not reliant on only one potential outcome. In pure play commodity type environments negotiations can be fiercely competitive – in fact, the term haggling is probably a better description of what happens in this environment. If you find yourself in this type of environment then obtaining a good grasp of the various negotiation tactics available is key to ensuring an optimal outcome. Not only will it be important for you to counter the tactics used by your counterparty, you will also have to resort to tactically optimising the likeliness of convincing your counterparty to move in your direction.

You should decide before you enter negotiations whether your preferred approach will be:

·         Competitive

You are only interested in achieving your own objectives. The interests & objectives of your counterparty are not important to you. This can be as a result of the fact that your counterparty is one of many providers of a commodity type product or service.

·         Compromising

You are prepared to ‘meet in the middle’. This is what is classically known as a win/win outcome. This can be as a result of the fact that there are a more limited number of alternatives available to satisfy your objectives and that you recognise some of your counterparties interests & objectives because you value the relationship with your counterparty.

·         Collaborative

You would like to meet all of your own objectives & goals whilst at the same time meeting all of the objectives & goals of your counterparty. This can be as a result of the fact that both you and your counterparty have a limited number of alternatives available to satisfy both your goals & objectives. All parties recognise that the relationship is key to the success of this transaction.

·         Accommodating

You will be more interested in satisfying the objectives & goals of your counterparty than your own. This can be as a result of the fact that you are a new entrant into the market and your relationship with your counterparty is critical.

·         Avoiding

Some negotiations are well worth avoiding. Some transactions can be concluded by electronic means (reverse auctions etc.). This can be as a result of the lack of interest in a relationship and the significant amount of alternative options available to you.

To ensure that your counterparties perception of your intent is in line with your intent, invest time in determining the most appropriate approach before entering negotiations and then selecting tactics that support this approach.

3.     Create a negotiation knowledgebase.

One of the easiest ways to establish an organisational platform for gains from negotiation is to create a negotiation knowledgebase. In practical terms, this means that you will create an electronic repository of information that can be accessed by your negotiators on both the buy & sell sides of the business. To create a negotiation knowledgebase you should think about creating a negotiation supporting process that captures relevant information when transactions are debriefed. You should debrief transactions when negotiations are concluded (by concluded I mean that you’ve decided to end negotiations as a result of reaching agreement or as a result of not reaching agreement) as well as at certain ‘check points’ during the negotiation process.

I would suggest that you debrief ongoing negotiations on a regular basis so as to maintain currency and access to the incisive insights of those participating in the negotiations. A simple way to add value to the broad organisation is to create a list of resources matched with the types of negotiations that they have been involved in. This will provide the organisation with insight into who can be accessed to provide guidance, counsel or anecdotal advice regarding negotiations.

Creating a negotiation capability at an organisational or divisional level need not be over intellectualised. It can be achieved with relative ease by keeping matters simple.

Remember that working smart brings more benefits than just working hard. If your negotiations seem very tough and deliver sub-optimal value even though you have tried really hard then it could be a sign that you should be rethinking your negotiation strategy – rather than continuously refining & changing your tactics!