How CEOs & Leaders Can Prepare For A Negotiation
In business, deal making takes place at the highest level. As Walt Sutton writes in The Secret: Life as a Key Executive in an Entrepreneurial Organization, CEOs will "first, last, and always be the deal maker."
Every day, CEOs engage in any number of deals, regarding customer relations, business acquisition, internal company policy and so on. Leaders need fully developed negotiation skills to ensure that they make successful deals. Leaders entering into negotiation need to consider the following points:
What Is The "Walk-Away" Point?
The walk-away point is the threshold beyond which a deal is no longer appealing. Anything up to that point is acceptable, merits consideration and discussion. Anything beyond it is a waste of time.
The walk-away point is where the absence of a deal is better than a deal that doesn't meet minimal criteria for success. Leaders are negotiators who know when to walk away from a potentially harmful deal. The point in the process to determine this is not on the fly. Consult with key stakeholders to make this decision ahead of time, and then stick to it. Kenny Rogers said it best in his song, The Gambler: know when to hold 'em and know when to fold'em!
Keep Your Eye on the Prize
The ultimate goal is consensus. Negotiations that begin and end at each party's walk-away point are doomed from the outset. We recently witnessed the shutdown of the United States government, because both sides tried to negotiate exclusively from their walk-away points. Both sides lost sight of their governing objectives and, instead, approached negotiation as winning vs. losing. Negotiation is neither.
A deal by nature sits somewhere between each party's walk-away point, and the process of negotiation is to understand each other's thresholds to find a mutually acceptable strike point. Understanding the difference between a bad deal and a reasonable deal will create the conditions necessary for both parties to succeed.
Understand the Other Party
Being aware of your own business goals is critical, but it is also important to research the person with whom you'll be negotiating. What do you understand about their objectives? What is their financial capacity to deal? Where are their investments? What kind of reputation do they have? Anticipating the other party's goals and objectives will prepare you for the moment when you may have to counter certain points to advance your own interests.
Don't Expect Equality
Neither party should expect equality in the process. Each party will rarely walk away from the table having made equal amounts of compromise for equal amounts of gain. So long as a deal is created whereby both parties have met minimal conditions for success, the process will be worthwhile.
Do Expect a Deal
Ultimately, the important consideration is whether both negotiating parties are motivated to reach a deal in the first place. When two parties have the shared objective of actually creating something that each finds acceptable, one that involves giving up some things in order to get others, the process of negotiation will most likely produce the desired outcome.
When the time comes for you to engage in making your company's next deal, make sure your negotiation skills are what they need to be.