The Critical Role of CXOs in business negotiations
Leadership Talk Series with Matthias Schranner
Leadership Talk Series with Matthias Schranner
"Now more than ever, organizations that successfully instil a strategic approach to negotiations across all levels are well-prepared for difficult negotiations in the future." - Matthias Schranner
Zurich, August 19th, 2024 -
The Pitfalls of Direct C-Level Involvement in Negotiations
CEO and other C-level executives can accidentally contribute to negotiation inefficiencies showed that direct C-level involvement resulted in missed opportunities and escalated conflicts, especially in global when overly involved. The majority of cases I worked on showed that direct C-level involvement resulted in missed opportunities and escalated conflicts, especially in global, matrix organizations.
Leaders view negotiations often as mere technical transactions, thereby overlooking critical warning signals and mistakenly believing they can always save the day by intervening later if things go wrong.
From my experience, there are three major disruptors in a difficult negotiation:
Ignoring Warning Signals: Executives might miss signs that negotiations are off track due to poor internal reporting systems.
Emotional Overreaction: When leaders take over negotiations without proper preparation, it disrupts the strategy and causes confusion.
Not negotiating in a team setup : Organizations often continue using their standard negotiation framework during crises, failing to recognize the need for a specialized negotiation team. This leads to ineffective issue resolution, missed beneficial opportunities, and escalated conflicts.
In conclusion, ineffective negotiation strategies often stem from a lack of strategic adherence and over-reliance on intuition. If the role of C-Level executives is not clearly defined, it leads to inefficiencies, especially in complex organizations, missed opportunities and escalated conflicts.
Responsibilities as a C-level executive in business negotiations
The key here is balancing oversight with non-involvement in negotiations, which entails several vital steps.
First, the CXO must provide the negotiation team with so-called "License to Negotiate," which includes a clearly defined range of authority and walk-away positions. This structure ensures that the team understands its boundaries and objectives. By handing over the mandate to negotiate to the negotiation team, the CEO can observe the negotiation from a distance, avoiding emotional attachment and enabling strategic oversight. This detachment from direct involvement helps to prevent crucial errors and facilitates much better decision-making.
Second, the CXO must carefully select the right people for the negotiation team. This is a critical task that requires identifying a ‘Lead Negotiator’ and a ‘Commander.’ The former handles direct interactions with the opposing party, while the latter oversees and monitors the negotiation process strategically, without actively stepping in. The Commander, for example, could be a Director from procurement, finance, or any other relevant department, depending on the context of the negotiation. The key quality for team members is the ability to manage the negotiation strategically without uncontrolled interference. This selection process is a testament to the CEO's trust in the team's capabilities and belief in their potential to deliver successful negotiations.
Third, the CXO must establish an internal reporting system to monitor progress. It should clearly outline the information the leader needs, ensuring timely and accurate updates. Establishing a robust reporting system before negotiations helps keep major stakeholders informed and prevent unwanted interferences.
Lastly, it is of utmost importance to manage and mitigate risks in high-stakes negotiations. This starts with understanding the balance between underestimating and overestimating risks. CXOs who underestimate risks tend to be overly optimistic, often leading to unprepared deadlock situations. Conversely, those who overestimate risks may avoid negotiations altogether, fearing their complexity and the potential for failure. To find a balance, a CXO should try to identify potential stumbling blocks as well as seek different opinions from different managers to ensure a realistic approach to negotiations. In summary, this strategic approach to risk management is a key factor in the success of difficult business negotiations.
Strategic Preparation for Future Negotiations & Instilling a New Negotiation Culture
In our experience, many CXOs underestimate the risks of not being strategically prepared for difficult negotiations. Consequently, they often neglect the importance of cultivating a strong negotiation culture within their organization.
I believe there are a few ways to facilitate it:
Negotiation-Focused Teams: Set up a small, focused team for the initial negotiation phase. Typically, this team should include only the lead negotiator and the commander to streamline decision-making and maintain clarity. Diversity is the key to difficult negotiations.
Effective Reporting Systems: Install an effective reporting system to identify and address warning signals early in the negotiation process.
Crisis Readiness: When necessary, a transition from a daily business matrix organization to a specialized crisis team. A predefined crisis plan allows the organization to respond swiftly and effectively to emerging issues.
Develop a Crisis Plan: Create a crisis management plan with predefined actions and designated teams to address potential disruptions. For instance, have a plan for supply chain issues, with specific roles and locations already determined.
For CXOs seeking to adopt this new approach, engaging with experienced negotiation consultants can be invaluable. Organizations like ours offer extensive expertise in setting up effective negotiation and crisis management teams. It is crucial to consult early, rather than at the last minute, to maximize the range of available options and achieve the best outcomes.
Negotiation expert Matthias Schranner was originally trained by the police and the FBI as a lead negotiator for high-stakes situations. For the past 15 years, he and his team at the Schranner Negotiation Institute have been advising clients, including global corporations and political parties, in high-stake negotiations. Matthias is the Founder of the Negotiation Conference in Zurich, where you can meet him in person in October: www.n-conference.com
Contact Details:
Anna Cajot
Negotiation Conference | Conference Director
anna.cajot@schranner.com
+41 44 515 46 31
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Event website: www.n-conference.com
About N-Conference:
The annual Negotiation Conference is the only event globally that brings together the world’s top negotiation experts. We provide a robust support system to enable executives to successfully lead high-stakes negotiations through access to an exclusive network of the world's top negotiation experts.
