Art of negotiation

Most boards include directors who are experienced at negotiating commercial deals. Individual negotiation skills are a critical skill set, especially when a fluid commercial environment demands agility. However, directors should look more broadly at how negotiation can add greater value to their organisations. Three questions to ask are:

1.How are negotiations conducted across the organisation?

Negotiation tends to be treated as an individual skill set with legal, financial or technical expertise called in as needed. However, a small number of companies approach negotiation as a corporate competence and are reaping the benefits.

“In some ways it didn’t feel like a negotiation – you bought into the programme. They had it well mapped- out and brought people into the process seamlessly to communicate the non-negotiables, manage the relationship, and work on solutions. It just looked so professional. Our own organisation was never that smart,” says a multinational talking about their Australian rail provider.

It illustrates the carefully planned and coordinated approach that some companies are taking to negotiation. Companies harnessing the benefits of coordinated team negotiations set up their frontline negotiators for success by providing a support team for one-off major deals. For more frequent lower- value deals, efficiency of the process is key.

Negotiation skills tend to be learnt on the job but can allow dangerous shortcuts or counterproductive behaviour to develop. The idea of ‘meeting in the middle’ may work when haggling to buy a car, but can waste opportunities to ‘grow the pie’ (Chris Voss’ book Never Split the Difference says it in the title). 

Consistently aggressive approaches to negotiation damage long-term business relationships and the use of ‘tricks’ such as ‘good cop/bad cop’ or one final ‘nibble’ at the end become predictable and damage reputation. The challenge is to harness existing talent while providing a framework across the organisation for creating and capturing value in internal and external negotiations. Structured preparation using a checklist is a good start.

Negotiation of deals tends to be delegated to individuals from one function. Not involving others may save time but sacrifices the potential benefits of a deal that is best for the organisation. One executive describes the coordination challenge as ‘making sure everyone stays in their swim lane’ and avoid ad hoc involvement that disrupts the negotiation plan.

2.How can directors support their CEO?

CEOs are constantly negotiating to reach agreements that strengthen support from partners and allies, ensure support from shareholder groups, secure sales and supply, or with regulators to ensure the right to operate. Negotiation goes well beyond formal meetings. From early contact to supporting a long-term relationship, agreements underwrite cooperation that allows the company to continue to create value. Boards can support their CEO in negotiations by providing authority, challenging strategy and providing access to networks of influence or intelligence.

Limited authority is a valuable tool and is often used in negotiations even where it doesn’t exist. It buys time to decide whether to agree to a proposal and if the response is negative then it demonstrates it has been thoroughly considered and preserves the relationship. Ego should not prevent the use of, ‘I understand what you’re proposing but I’ll have to consult the board’. Alternatively, ‘how can I expect the board to agree to those terms’ puts the pressure back on the other side to defend their proposal.

Crafting a comprehensive negotiation strategy will benefit from the breadth of experience within a board and being challenged on assumptions behind the strategy. For larger deals involving multiple parties, sequencing and judicious timing are key. Kissinger the Negotiator is an excellent read on crafting negotiation strategy, and how the best negotiators zoom out to the strategy and zoom in to their counterpart.

Directors can expand the CEO’s network for gathering critical information, understanding context and reality checking ahead of key negotiations. As Mark Twain put it, “it’s not what you don’t know that kills you; it’s what you know for sure that ain’t true”.

3. How does the board reach internal agreement?

Some of the toughest negotiations take place within a group. Negotiating with another organisation involves clear and acknowledged differences in interests. While directors have a duty to act in the best interests of the shareholders, organisation and stakeholders, how they translate those interests into decisions will differ. Even with strong board alignment there are likely to be differing opinions on how to meet defined interests.

Conflict of ideas is healthy and productive, but benefits from negotiation principles of separating the person from the problem, focusing on underlying interests rather than defending positions, creating options and using objective criteria. Given directors are ‘on the same team’ they may not recognise they are effectively negotiating.

Diversity of thought is important for high-performing boards, but to harness the benefits it is important that board members develop effective rules for negotiating to achieve high-quality decisions.

Negotiation courses at Harvard frequently include union reps with the company paying their course fee; companies want their union reps to be skilled negotiators. Good agreements are more likely when everyone has a strong negotiation skill set.

How to improve your negotiation performance:

1. Choose the time, venue and room set-up to positively affect negotiation dynamics.
2. Consider other parties that may be involved and their potential influence.
3. The first three minutes sets the direction of a negotiation; invest time preparing.
4. Ask ‘why’ questions; then listen for that vital piece of information or hidden interest.
5. Negotiations require patience; there is a right time to push for agreement. 

About the author

David Ferguson is an accredited mediator/ negotiator at TableTalk, which helps organisations create and capture greater value from agreements. He has 30 years international negotiation experience, completed Harvard’s Advanced Negotiation course and has a doctorate in negotiation.