The Fine Art of Negotiation
Skinny Dipping-Transparency: Transparency is the most important principle in Getting to We. In a world where information is power, most people tend to hide, horde and misrepresent information, and use it as a battering ram to get their way. But such classic negotiation tactics act as a trust barrier. Solving tough business problems requires companies to share more information with each other than ever before. Businesses also have to recognize that sharing information can change the conversation.
After years of contentious conversations, one $3.5 billion company knew it needed to make a bold move to prove that it was going to treat its service provider as a partner. At the outset of conversations to renew the service provider’s agreement, the buying company agreed to give the service provider its master agreement with its customer. The buying company felt they had nothing to hide and everything to gain by allowing their service provider to generate value-creating ideas. And it worked. Conversations shifted away from how to penalize for performance errors to measures designed to catch and rectify problems before the customer was ever aware of them, thus creating a win for all.
Another example of transparency is sharing your Best Alternative to No Agreement (BATNA). In traditional negotiations, it is sacrilege to share your BATNA, which is, in essence, your walk-away alternative. Negotiation training experts warn never to share your walk-away strategy as the person on the other side of the table can take advantage of you by knowing your breaking point. In a pure commodity purchase, this approach may work well but when your aim is to create value, it is counter-productive.
Let’s Get Real-Authenticity: Authenticity is more than a buzz word. It means that both partners’ employees are devoted to honoring commitments. In most cases, everyone from the bottom up does what is needed to perform at all times. This means everyone will tell the truth. Companies simply will not achieve extraordinary financial benefits from partnering if one or both companies fail to perform as promised and if their employees tell each other white lies because that is what the other party wants to hear. It all boils down to trust. Do you trust your partner? Many executives trust certain individuals at their partner’s company but not others. Mistrust leads to justification, blame, telling white lies and ultimately, communication and performance breakdowns.
In one such scenario, a sales executive for a service provider agreed to service level agreements (SLA) with a penalty clause for non-performance, but then mandated his team to not perform after the buyer ignored remarks that they were being unreasonable. Instead of trying to reach an agreeable negotiation by both parties, the service provider agreed to the buyers terms, and ignored the mandate because the cost of non-performing was far less than the cost to jump through hoops to meet their required service level. This type of insincerity is rampant on the buy side as well. Many service providers have grown averse to “gainsharing” provisions because some customers don’t make the gainshare payment to the service provider. Some companies may even quit signing up for gain-sharing provisions because their internal investment requires more than the fair share gained in return—or any share gained at all.
Practitioners on both the buy and sell sides share reasonable justifications about their public agreement and their unwillingness to follow through. This behavior creates enormous mistrust that hurts profitability at both companies. So what works? It all starts from the top, with senior level leadership from each company. Engage in discussions that provide both parties with effective feedback. As leaders model authentic behavior, they need to insist that their middle managers adopt the same stance.
Wikidata-Common knowledge: Wikidata means both companies create one set of data to analyze for trends, performance issues and market opportunities. It is inevitable that markets change, end users’ demands change and commodities become more or less scarce. In a Getting to We environment, both partners generate data and analyze that data, much the way internal company wiki’s work. Most use some form of unilateral collection of data for performance measurement. In a traditional negotiation setting, parties use data about performance history as a weapon to extract value from the other party. For example, when companies unilaterally score their suppliers, some suppliers share their disagreement with how their client arrived at the performance rating.
