Negotiation as a Corporate Skill
Today, in the age of networking, strategic alliances and joint-ventures, the ability of companies and other institutions to negotiate successful deals is becoming evermore important. Every company today exists in a complex network of relationships formed through negotiation. Whether negotiating with suppliers, customers or strategic business partners, taken together, the thousands of negotiations a typical company engages in have an enormous effect on both its strategy and its bottom line. But few companies think systematically about their negotiating activities as a whole. Ertel found that companies instead take a situational view, perceiving each negotiation to be a separate event with its own goals, tactics and measures of success (1999). Moreover, negotiation is still largely considered to be an individual rather than corporate skill. The concept of negotiation as a skill manifests itself in training programs directed at sales personnel rather than in a company’s corporate philosophies. Few companies seem to have tried to turn their negotiation skills into a core competency with the objective of building more rewarding customers relationships.
Creating a negotiation infrastructure
This predicament is probably due to the complexity of negotiation. It’s so hard to make wise trade-offs in any one negotiation that trying to think about coordinating all of the elements in a negotiation seems to be an overwhelming task. Moreover, strong negotiation capabilities cannot be built by simply setting-up guidelines and rules for all negotiations. Rather, it requires a more coordinated approach to organizing and managing negotiations.
A number of companies have succeeded in managing their negotiations on a corporate level by building coordinated negotiation capabilities. Danny Ertel identified four broad changes in the companies’ corporate practice and perspective. First, the businesses have established a companywide negotiation infrastructure to apply the knowledge gained from past negotiations to improve future ones. Second, they have broadened the measures they use to evaluate negotiator’s performance beyond matters of cost and price. Third, they draw a clear distinction between the elements of an individual deal and the nature of the ongoing relationship among the parties. Fourth, the companies make their negotiators feel comfortable walking away from a deal when the deal is not in the company’s best interest. I will outline these changes as well as other elements I consider conducive to constructive negotiation that help companies achieve satisfying business results.
Negotiation is one of the few functions in the modern corporation that has resisted the trend towards standardizing processes and streamlining work. While companies have reengineered customer service, manufacturing, and even research and development, negotiation remains to be an individual domain. Each negotiation is viewed as a separate event, and the outcome is thought to depend on the negotiator’s personal judgement, timing and experience. The notion that every negotiation is unique is, of course, in the interest of negotiators. This notion isolates them from inference and criticism (Ertel, 1999).
In order turn negotiation into a corporate skill, companies provide more and better information to their negotiators, draw lessons from past negotiations and set up categorization and prioritization schemes to guide negotiators in selecting their strategies. By following this procedure, the companies do not just improve the outcomes of individual negotiations, they break down the common assumption that every negotiation is unique and cannot be controlled. According to Ertel this change in attitude forms the basis for more collaboration, creativity and efficiency throughout a company’s negotiation activities (1999).
Broadening the measures of success
The way a company measures the success of a negotiation guides the way a negotiator approaches and conducts the negotiation. Although many companies have begun to realize the importance of creating partnerships with customers and key suppliers, negotiation outcomes are often not judged in terms of how the outcomes impact relationships. The short term goal of gaining the best price or achieving the lowest cost in most cases still prevails over the long-term goal of building more rewarding customer relationships.
Buyers keep focusing on cost issues, or so sellers think, causing them to give in on the buyers’ discount demands instead of focusing on value they can provide customers with. This behavior leads buyers to ignore opportunities to be innovative in working with suppliers to create new value by, for example, reducing inventories or developing higher- quality components or custom-made solutions. Ertel points out correctly, that this behavior can constrain a company’s attempts to make strategic changes that require new,more collaborative relationships with suppliers, such as moving to a build-to-order manufacturing system (1999).
- Quote paper
- Christina Kuttnig (Author), 1999, Negotiation as corporate skill, Munich, GRIN Verlag, https://www.grin.com/document/106416