How a good negotiation strategy can transform your business

@IE University

It would be pretty surprising if an entrepreneur or business owner didn’t have a well-thought-out, long-term business plan. Having a clearly defined vision, mission, and story behind your business is also usually at the top of the list. But what about a negotiation strategy?

A good negotiation strategy is more than something individual professionals should develop to get what they want, or a skill to list on their resumes. It is something companies can and should define in order to increase profitability and business outcomes across the board.

Poor negotiating techniques or undefined negotiation strategies can lead to lost opportunities, relationships, and profitability. Internal negotiations between employer and employee, and external negotiations between an organization and potential customers, partners, suppliers, or stakeholders, can lead to win-win situations when a thorough negotiation strategy is established. This should happen before two parties sit down at the table together. 

Having a cross-company negotiation strategy that clearly outlines the best negotiation tactics to use allows the most forward-thinking business leaders to avoid letting emotional behavior and irrationality get in the way of adding value to their organizations.

Negotiation code of conduct to set standards

Negotiations from small and seemingly innocuous dealings like defining an employee’s responsibilities, to large, complex negotiations, such as business acquisitions, can get heated. Even the most level-headed professionals can lose their cool and start entering deals with their “gut,” even if they don’t have a clearly defined strategy in place. This can lead to combative behavior, distrust, and lose-lose outcomes for everyone.

Using a tool—such as a negotiation code of conduct—allows all parties to understand which behaviors are acceptable and which are not. In turn, this helps them to stay faithful to the document they have agreed on, before sitting down together or jumping into tense topics. This code of conduct defines what you will do as negotiators, what you won’t do, and what you believe.

It may look something like this:

  • What we will not do:
    • We will not lie.
    • We will not put pressure on the counterparty.
    • We will not intentionally manipulate the counterparty.
  • What we will do:
    • We will try to foster trust.
    • We will share information about our values and variables involved in negotiations.
    • We will live up to any agreement we come to in negotiations.
  • What we believe:
    • We believe in compromise.
    • We believe in ethical and moral negotiations.

By having these values set in writing and agreed upon before opening the negotiating can of worms, you can set moral and ethical guidelines that make sure your teammates are all on the same page. Defining these elements of your negotiation strategy also assures the opposition that you and your team play fairly, and increases the opportunity for cooperation, win-win outcomes, and long-lasting mutually beneficial relationships.

successful-negotiations

A solid negotiation strategy requires skill building

Ensuring each member of your team is prepared to sit down at the negotiating table with an up-to-date set of negotiation skills will make your business stand out as professional and prepared. The ability to effectively and assertively negotiate deals will bolster your reputation as a company, and let potential partners, suppliers, stakeholders, or investors know you are a serious company worth watching, and worth working with.

Understanding how to employ the following negotiation tactics can be key for positive outcomes at each negotiation:

Negotiation Tactics
  • Ranking priorities:
    • By ranking priorities in order of importance, and making this information known, both parties can understand the other’s position from the get-go, improving transparency and the potential to reach an agreement.
  • Knowing your limits and walk-away terms:
    • Coming to the table prepared with specific numbers allows you to confidently set the boundaries. Without having prepared this data, team members might over—or under—shoot in the heat of the moment. This could lead to disastrous and potentially embarrassing results.
  • Understanding key negotiation variables such as time, money, and performance:
    • Understanding the different cards you have to play allows you to more reasonably respond to counterparties’ requests. Coming to the table having prepared these numbers allows negotiation to flow more smoothly.
  • Effectively sharing information to garner trust:
    • Of course, it is not necessary (or beneficial) to put all your cards on the table up front. But by sharing some of your core values, your concerns, or even something personal, you can set the stage for more “human” talks based on trust.
  • Making an offer and effective counter offer:
    • If you are able to make the first offer, do it. You will set the stage and anchor the negotiations on your terms. If not, you can still reset or redirect the initial offer or conversation if the initial offer is far from where you would have liked it. Once the first offer is on the table, don’t rush in. Even if it is satisfactory, make a counter offer that will let the counterparty know you’re both getting the best deal.
Playing Jenga

Building these types of skills across the company, in order to fulfill a company-wide negotiation strategy, means you ensure everyone, from low-level employees to the highest-level executives, will enter each negotiation feeling confident and in control.

Being a confident negotiator not only leads to better outcomes in the moment of negotiations, but it also leaves a strong impression on the counterparty. This can help to strengthen relationships both inside and outside of your company in the long run. Employees will feel they are more in control of their roles within the company and clients, suppliers, and stakeholders will know they are working with a company that comes prepared.

Everyone wants to get the best deal. Having a clearly defined negotiation strategy that is implemented by all players at your company can have a transformative effect. It will allow you to take the emotional charge out of decision-making while strategically becoming a more human and trustworthy company able to form long-lasting, profitable partnerships.