An Organization-Wide Negotiation Strategy

(10306) Rob Kaplan and Brian Dietmeyer say:

Ideally, it’s helpful if everyone in the organization is familiar with the same process for structuring and conducting negotiations. If everyone is on the same page, a lot of time can be saved. Work hard to develop an  enterprise-wide consensus on how negotiations are to be conducted. This will get everyone focused on the key issues rather than struggling to understand what’s going on.

Obviously the more good negotiators you have in the organization, the better the results you’re likely to achieve. Doing this also positions your organization so it can respond to changes in the business environment quickly and efficiently. By utilizing a consistent negotiation stratetgy, the organization will also come across as more professional than if everyone adopts an ad-hoc approach to negotiation.

To design and implement an organization-wide negotiation strategy, there are five distinct steps involved:

1. Identify all your organization’s key stakeholders, not only the salespeople in the field but also all those who work in the legal department, the product department and the senior management. All of these groups will have specific needs and requirements and unless there is alignment in the approach to negotiating used, confusion can result.

2. Train all these stakeholders how to negotiate strategically so everyone is on the same page and that everyone understands what needs to happen and why. If you want people to work together as a group, everyone needs to be up to speed.

3. Write down your negotiation strategy so everyone knows why a negotiation strategy is needed, how the results will be measured and evaluated and what guidelines need to be followed. Once again this has the effect of ensuring one part of the organization isn’t doing something that will impact negatively elsewhere in the same organization. Your negotiation strategy will also set the thresholds at which varying levels of management input is required with clarity and simplicity.

A sample negotiation strategy would look something like this:

Why do we need a negotiation strategy?

• Some of our competitors price their offerings irrationally
• We have margin pressure
• Buyers are trying to commoditize our products/services
• We sell solutions but end up negotiating solely on price
• There is too mucyh internal wrangling going on

What guidelines are included in our negotiating strategy?

• A worksheet must be completed for each sale over $50,000
• We will review each worksheet before deal approval
• We will not decrease prices without trading for other items
• We will include our new services in every negotiation
• All stakeholders will be trained on strategic negotiation

How will we measure the results of our negotiation?

• We won’t match a competitor’s pricing without negotiating
• We will make value-creating trades, not concessions
• Less than 5% of our deals will offer discounts
• Free licenses will be eliminated
• Customer satisfaction will increase from 60% to 80%

4. Distribute and implement your negotiation strategy by expanding the number of people who are skliled in strategic negotiation techniques. You may start by using the strategic negotiation process on your most important deals. Once everyone sees the effectiveness of this approach, it can then be extended to a wider range of negotiations. You’ll also need to audit how people are doing and provide ongoing coaching.

5. Measure the results achieved and show whether or not your organizational goals are being achieved. Measuring results closes the loop and ensures that your negotiation strategy continues to be enhanced and improved over time. Some organizations have even found that by centralizing their negotiation outlines and other materials, a library can be created which will serve as a great resource when new negotiations are undertaken in the future. You may also be able to create a database of information for everyone to access. This database could list the most likely customer demands you’re likely to encounter and multiple, creative ways to address those demands.