At Scotwork, we champion the importance of understanding and knowing your objectives ahead of any negotiation. Your objectives then drive the main issues to be addressed with the other party when you sit down at the table.
Sounds simple right? Well simple on paper maybe, but not always as simple in real life. Or at least not, if you are negotiating within a multidisciplinary team or on behalf of multiple stakeholders.
The thing is, even when you are part of the same organisation, same division or same unit – different stakeholders can and often will have different, competing interests of their own.
This was the case recently for a client of mine who were looking to upgrade some key machinery. All the heavy hitters were in the room as we began to prep for their upcoming discussions with the vendor. Amongst them were the Chief Finance Officer, the Head of Production and Head of Legal. Some of the main issues on the agenda when looking at this equipment upgrade were price, risk and scope.
Let me ask you, which stakeholder do you think was most interested in:
Naturally, price was of greater importance to the CFO, whilst the Head of Production was much more interested in discussing the project scope. Effectively, the Head of Production was pushing very hard for the very expensive ‘Rolls Royce’ equivalent of machinery while the CFO advised that we could only go 5% over budget and no more! With two mis-aligned, competing positions... where is the walk away point?
In this kind of situation, defining the overall objective becomes difficult because we are dealing with different interests and competing micro-objectives. To walk into the actual negotiation with the vendor at this point would not be helpful to either party and result in much time wasting and frustration. As such, it is crucial to pressure test what is truly important and gain an understanding of where we can be flexible before we sit down at the table.
So how do we achieve this?
Our advice would be to bring all team members together and do the following:
- Understand and Agree on Strategic Business Objectives First: Before you even consider the tactical objectives, you must first define and achieve alignment around the strategic objectives of the business. It is very helpful here to use the guiding principle of the business to prioritise the variables and in turn, the order of concessions you would be willing to concede. Using our example above, the strategic business objective might be to ‘Be the number one most reliable provider of ABC service’.
- Agree on Tactical Objectives and Pressure Test Each Individual: With the strategic objective defined and agreed upon, this then provides a much clearer picture of what tactical objectives can and should be utilised to achieve this. Again, using the example above, the tactical objective might be to ‘Buy the equipment that will allow us to achieve our strategic objective.’ It is then key, that we educate and pressure test each team member around this and ensure they are prepared to remain accountable. For example, if there was pushback internally around the price we might ask “CFO are you prepared to sign off that you’re not prepared to pay more than XYZ? Are you comfortable with the fact that by buying the cheaper equipment, we will likely not achieve our objective of being the number one provider, nor the most reliable?”. We may also put to them that “In the event that a great deal in all other areas were to fall over because you couldn’t go to 6% over budget instead of 5%, not only do I want you to sign off, but it’s you that will be accountable to the Board for this decision.” At this point it’s also smart to reassure the stake holder that you’ll be focused on achieving your INTEND position and not going straight to your LIMIT… and any movement will be traded (value protected), not given away.
In summary, priorities and objectives may differ for different stakeholders and it may be necessary to introduce conflict in order to define the objectives for the negotiation. However, pressure testing what is truly important at the start can save later pain and provide a greater chance of achieving the strategic business objectives.