Making money during a boom is easy. It’s when the good times come to an end that boards and CEOs learn whether their business has what it takes to maintain growth and margins. One of the key indicators of long-term success is the way a business engages with its external and internal stakeholders.
Winning a new major client, making a strategic acquisition, managing teams for performance, or spending less while managing risk: negotiation is everywhere. The Midas touch is the ability to turn leads and opportunities into gold without wasting time or harming relationships. That makes effective negotiation essential at all levels of business.
A 2012 study estimated that UK private-sector businesses lose around £17 billion every year as a result of poor negotiation practices. For the average company, that equated to a 7-per-cent loss of profits. There is no reason to suspect that the findings would have been much different in Australia.
In business and in life, you don’t get what you deserve; you get what you negotiate.
One reason why many companies struggle in this area is because negotiation skills are largely taken for granted. It’s a skill that CEOs and senior executives are presumed to possess, but there is no objective standard to measure if they do. Recent research has shown that most executives are poor judges of their own negotiating performance.
The obvious solution is to invest some money on negotiation training—except it doesn’t seem to make a substantial difference to corporate performance. In their book Built to Win: Creating a World-Class Negotiating Organization, Movius and Susskind explain why most of the millions of dollars spent annually on off-the-shelf negotiation training is wasted. They demonstrated that negotiation performance starts at the top. To build businesses with the Midas touch, CEOs need to lead by example and make negotiating a core organisational competence. That will reinforce good negotiating discipline and make skills training worthwhile. Building a negotiation culture involves all areas of the business from procurement to sales, from the boardroom to the shop floor.
CEOs who think that basic negotiation training is the answer are asking the wrong question.
Effective negotiation training must focus on practical skills development that is then reinforced in the business and by the real-world negotiation challenges the teams are facing. Here are some of the key principles that will help to create the right environment for success.
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