"Now more than ever, organizations that successfully instill a strategic approach to negotiations across all levels are well-prepared for difficult negotiations in the future." – Matthias Schranner
"Now more than ever, organizations that successfully instill a strategic approach to negotiations across all levels are well-prepared for difficult negotiations in the future." – Matthias Schranner
Anna Cajot, Negotiation Conference Director, is in conversation with Matthias Schranner, Global Negotiation Expert & Advisor for Businesses and Governments.
Anna: Reflecting on your experience, what are some of the indicators that an organization’s negotiation approach is ineffective? And how does C-level involvement contribute to this inefficiency?
Matthias: A critical indicator of an ineffective negotiation approach is when organizations deviate from their negotiation strategy under pressure. This includes failing to adhere to the predefined targets of the negotiation, and moving the walk-away position under pressure. These changes are often driven by intuitive rather than strategic decisions.
C-level executives are pivotal in negotiations, as they hold ultimate responsibility for the organization's strategic direction and outcomes. However, their involvement can also lead to inefficiencies. For instance, executives may not always have a clear view of the negotiation progress due to an inconsistent internal reporting system. This often leads to an uncontrolled escalation in the negotiation, especially in complex global environments where matrix structures are prevalent.
Additionally, emotional reactions from executives might prompt them to intervene intuitively, potentially undermining the negotiation team's game plan. This can severely disrupt the negotiation process and jeopardize the outcome of the negotiation.
Anna: How do you balance overseeing the negotiation process as a whole while avoiding getting bogged down in details?
Matthias: Balancing oversight and not getting involved in details is essential for any CXO. While responsible for setting clear strategic targets and boundaries, a CXO must refrain from micro-managing the negotiation process. Instead, the focus should be on orchestrating the negotiation strategically, ensuring that the team adheres to the predefined targets.
To do so, CXOs should establish an internal reporting system that provides regular updates on the progress of the negotiation. This ensures being up to date without disrupting the dynamics at the negotiation table. By maintaining a distance, CXOs can avoid emotional biases that could arise from being directly involved. It also enables the negotiation team to focus on the negotiation process.
Anna: How do you select the right people for the negotiation teams? What qualities should a CXO look for in these team members?
Matthias: Selecting the right individuals for negotiation teams is critical to achieving successful outcomes in high-stakes negotiations. A key role in the negotiation team is the ‘Commander’, who oversees the negotiation process strategically while the ‘Lead Negotiator’ is directly engaged with the opposing party at the negotiation table.
CXOs should look for team members who are strong strategic thinkers, highly adaptable and resilient under pressure as well as being very conflict-oriented. The Commander, often a more senior executive from relevant departments, needs to observe the negotiations strategically and support the Lead Negotiator when needed. This team setup ensures that the negotiation team operates cohesively and strategically, even in challenging negotiation environments.
Anna: As a CXO, how do you manage and mitigate risks in high-stakes negotiations?
Matthias: Managing risks in high-stakes negotiations requires CXOs to strike a balance between overestimating and underestimating them. CXOs who underestimate risks may overlook potential pitfalls, leading to unprepared deadlocks or unfavorable agreements. Conversely, those who overestimate risks may shy away from negotiations altogether, missing valuable opportunities for growth or conflict resolution.
To manage risks effectively, CXOs should implement comprehensive risk management strategies that include crisis preparedness. It also involves anticipating potential stumbling blocks such as supply chain disruptions or economic downturns and developing contingency plans accordingly.
Furthermore, CXOs should encourage a culture of proactively assessing risks in negotiations, where diverse perspectives and expert opinions are sought to avoid confirmation biases. This ensures that the organization is well-equipped to navigate uncertainties and challenges during negotiations, maximizing the likelihood of achieving favorable outcomes.
Anna: When a CEO realizes the need for a change in their organization's negotiation culture, what are the initial steps they should take?
Matthias: The first step for a CEO seeking to transform their organization's negotiation culture is acknowledging the impact of uncertainty on traditional negotiation practices. Events like the COVID-19 pandemic and geopolitical crises have underscored the limitations of long-term contracts and highlighted the need for flexible frameworks. Moving forward, CEOs should shift their focus from detailed contract negotiations to establishing broad, adaptable frameworks that promote creativity and flexibility. This approach allows organizations to anticipate and respond effectively to unforeseen challenges and opportunities, thereby enhancing negotiation outcomes over time.
Anna: Can you provide an example of how such a framework would function in practice?
Matthias: A practical example of this framework involves setting strategic partnership goals over a defined period, such as expanding business operations in a new market over the next five years. Rather than negotiating every detail upfront, organizations establish a framework that outlines overarching objectives and risk management strategies.
For instance, the framework might include contingency plans for potential disruptions like supply chain issues or economic fluctuations. By preemptively addressing these challenges and defining roles and responsibilities within a crisis management plan, organizations can mitigate risks and maintain operational continuity during negotiations.
Anna: What strategies and steps should CEOs follow to instill a robust negotiation culture within their organizations?
Matthias: Instilling a negotiation culture begins with embracing diversity in the preparation phase. CEOs should encourage input from managers of diverse backgrounds, including different genders, ages, and cultural perspectives. This diversity fosters creativity, innovation, and flexibility in negotiation strategies, moving away from rigid, one-size-fits-all approaches.
Additionally, CEOs should advocate for small, focused negotiation teams composed of a Decision Maker, a Lead Negotiator, and a Commander. This streamlines decision-making and ensures clarity in communication.
Furthermore, CEOs can prepare their organizations by implementing effective reporting systems that monitor the progress of the negotiation and identify potential risks on the horizon. This enables timely interventions and adjustments in the negotiation strategy, thereby minimizing the likelihood of uncontrolled deadlock situations.
Another crucial step for CEOs is to develop a comprehensive crisis scenario and risk management plan tailored to their organization's specific needs. This involves anticipating potential challenges, such as economic downturns or geopolitical instability, and preparing actionable strategies to mitigate risks.
CEOs are encouraged to seek expert guidance and leverage external resources, such as negotiation consultants, to refine their negotiation strategies and crisis management capabilities. By proactively addressing potential risks and embracing a culture of continuous improvement, CEOs can position their organizations for success in future negotiations.
Meet Matthias in person at the Negotiation Conference 2024. Book your ticket: https://www.n-conference.com/conference/zurich