When the negotiation team gets mediocre deal results, their bosses blame the economy, or the other company, or the weather for bad results. The real problem is that the negotiation team did not take the negotiation process seriously enough to systematically plan for it.
Some people take a stab at planning. In fact, one client showed me her three-ring binder with some planning tools in it. That’s a great start, but no substitute for actually planning for a contract negotiation. In my experience, there are seven common mistakes that businesspeople routinely make when they are planning a negotiation:
- React, rather than lead. This is the single biggest mistake all negotiators make at some point in their career. This reactive approach always costs companies money — usually a lot of money.
One client I worked with earned millions more than they had originally anticipated simply by taking control of the negotiations and leading instead of following. By leading, they planned how to use financial data. And, when during a protracted negotiation conversation, their counterpart balked, my client stayed calm—they did not react. In fact, they even planned on how to respond if they got push back.
- Underestimate their counterparts. This mistake is a corollary to the first mistake. Clients who have made this mistake often overrate their own abilities while simultaneously underestimating those of their opponents. When negotiating performance- and outcome-based agreements, rate your teams’ skills and your counterparts’ team realistically.
- Assume they know more than they really know. Mediocre negotiators make a lot of assumptions. Successful negotiators ask a lot of questions of their counterpart and their stakeholders. The single most important question I ask my clients’ internal stakeholders is this: “Is that true?” I’m questing any underlying assumptions I am hearing in order to prepare for negotiation conversations.
- Assume their counterpart has no choice but to work with them. This is a very dangerous assumption that cost one client a piece of business. A small manufacturing client hired me after they’d learned that their customer awarded the work to another supplier. After some postmortem discussions, the management team and I came to one conclusion: The negotiation team had assumed the customer had no choice but to work with them. They were wrong.
- Assume they have to make a lot of concessions. This is another dangerous assumption many clients make. Negotiation teams who make concessions give away the farm and justify their decisions. It takes some work and effort to find the right mix of tradeoffs, but it can be done.
- Thinking this time will be like the last time. While it’s helpful to remember what happened the last time you and your counterpart had to negotiate, the business environment continues to change rapidly. Changes in demand, changes in the supply base, and changes in personnel will impact the bargaining sessions. This time will be different!
- It’s a tough economy. Yes, it’s true: Some companies are experiencing a difficult business environment. That alone should motivate businesspeople to be more vigilant and prepared, not less so. Don’t blame external factors when the real reason your company is not getting the results it wants from contract negotiations is a failure to plan properly.
Don’t settle for mediocre results from bargaining sessions. One large manufacturing client was surprised to learn from a survey I sent out that middle and senior management alike recognized their failure to plan, and their employees overwhelmingly asked for more training.
Aim high. Plan for success by planning for your next negotiation. The rewards your company reaps will far exceed the time your negotiation team takes to plan properly.