5 Steps to Negotiating Better Agreements

Contributor: Hal Movius

Negotiating better agreements involves treating negotiation as an organizational
capability, so that decisions about negotiations are not left largely to the last minute, or
to individual intuitions. In my role helping leaders negotiate better agreements, I’m struck
by the effort that leaders put into negotiation skills training, without focusing on other
(often less costly) moves that would enable their people to negotiate better.

Even experienced negotiators are prone to powerful tendencies that hinder

their ability to negotiate better deals. Much research suggests that negotiators: fail
to prepare adequately by thinking through how the other party sees the problem and
their alternatives; fail to create as much value as they could; believe they have claimed
most of the available value (when they haven’t); believe that others will choose and
interpret data in the same way they will; and fail to recognize ways in which the situation
powerfully shapes their behaviors and thought processes.

But these shortcomings affect other judgments and intuitions as well. For example,
people have undue confidence in their ethical invulnerability. In one study of medical
residents, only 1 percent felt that sales reps from drug companies had impacted their
prescription choices, but reported that 33 percent of their colleagues had been
influenced. Among physicians, 61 percent claimed they had not been influenced—but
only 16 percent felt that their colleagues had been similarly immune. We all imagine our
best intentions will guide our decisions, but the evidence suggests otherwise.

Do Five Things

Leaders must do five things to enable better decision-making in negotiations:

1. Recognize that negotiation is not just an individual skill, but an

organizational capability. When I am asked by leaders to design training programs
in negotiation, I first suggest that they conduct a negotiations audit. A systematic
evaluation and assessment based on confidential interviewing can do three things: 1)
analyze where current deal preparation and decision-making practices are falling short,
and why; 2) how training must be tailored to address those specific problems; 3) what
leaders must do alongside training to ensure that new skills and learning will be
deployed.

More leaders are recognizing that efforts to improve require key sponsorship;
mechanisms for knowledge capture and continuous learning; and realignment of
processes and incentives where needed. The results of thinking more holistically are not
trivial. In 2008—a year when the net income of the Global 2000 fell by 31 percent—
companies ranked in the top quartile of negotiation posted an average increase in net
income of 42.5 percent!

2. Specify the criteria that define a successful negotiation. It is not enough to

articulate company values. Too often people assume that negotiations fall into some
nether world where values-based behavior does not apply. In worst cases, trumpeting
values like trust and collaboration create cynicism in business partners when negotiation
behavior (driven by short term goals) is more dictatorial than collaborative. Creating a list
of criteria, and scorecard for measuring against them, ensures that in negotiations,
people will balance short term financial targets with other longer term interests (risk, deal
stability, trust, reputation, time spent negotiating).

3. Embrace negotiation as a core capability. Many leaders remain nervous about

helping their people to negotiate better. Leaders in one Fortune 200 company readily
admitted that conflicts were routine, and that resolving them was critical to success.
“Just don’t use the word negotiate,” they pleaded. “We’re very collaborative.” (Their
counterparts told me a different story.)

In spite of books like Getting to Yes—which argues that negotiations can take the form
of joint problem solving—the word negotiation still suggests to some deception,
exaggeration, manipulation, and even threats. No wonder leaders remain wary. But
leaders should not let the word negotiation deter them from focusing helping their people
get better at reaching agreements.

4. Create opportunities—through coaching, training, and leadership

development experiences—for your people to confront their own emotional
barriers to conflict. Most executives can tell stories about key team members
avoiding conflict because they don’t want to be seen as obstacles to success. But
conflict that goes underground can create much bigger problems later.

Leaders should seek to normalize conflict on their teams among people who are paid to
care about different things. Even normalizing conflict does not guarantee that people will
have the emotional intelligence or courage to confront different interests, perceptions,
beliefs, or priorities. It’s easy after the fact to condemn others for failing to have acted
courageously by “speaking up” or raising issues that might “cause problems.” It’s harder
to be the person in the room, actually facing the situation. Effective leaders recognize
how hard it is for people to voice disagreement.

5. Recognize that negotiations are a potent source of feedback regarding

strategy. Leaders often tell me, “We perform a high-value service, but in negotiation
we’re treated like a commodity.” When pushed, however, they can’t explain how their
services are different or better that what their competitors can provide. They can’t point
to examples of boosting their client’s top or bottom lines in ways that justify a higher
price.

If you can’t articulate convincing arguments about the value you add, you can expect to
be treated as a commodity at the negotiating table (and the rise of Procurement reflects
this reality). Yet this is principally a strategy problem, not a negotiation problem. Leaders
who use negotiations as feedback are more likely to address the fundamental problems
that lie at the heart of the negotiation, rather than sending their people to negotiate with
the hope that there is some “magical tactic” that will rescue a favorable deal.

Leaders who manage negotiations well are process designers, coaches, and role
models. By moving in these five ways, you can expect dramatically better results in your
organization.