The Four Key Elements of An Enterprise-Level Negotiation Capability

Originally published by Forbes Business Council.

Lots of people take pride in their individual negotiation style, but they may not consider how their company negotiates. Given the sheer number of negotiations going on across an organization at any given point in time — with customers, suppliers, bankers, business partners, and more — imagine the impact if your organization could do a little better in each one, across the board.

When I took my first negotiation class, many years ago now, I learned that a negotiator’s success doesn’t just come from experience nor from memorizing a long list of tactics. To be successful, a negotiator starts by recognizing that negotiation is mostly problem-solving with another person (who may or may not see the same problem they do), and applies a framework or structure to get prepared and then execute.

At Harvard, they teach a model called the “Seven Elements of Negotiation” (which is now taught at law schools and business schools around the world, as well as in diplomatic academies and war colleges, including the U.S. Military Academy West Point).

I love that model, and in fact co-authored with Roger Fisher a short book, Getting Ready to Negotiate: The Getting to Yes Workbook, on how to use that model to prepare for all kinds of negotiations, be they M&A deals, border disputes or with your landlord. But when it comes to improving the results of negotiations across a whole company, you need to think more broadly than how to train individuals to negotiate better. You have to tackle the entire negotiation system.

What do I mean by “negotiation system?" It’s a term that recognizes that the most effective negotiators don’t operate in a vacuum. They apply their skills on behalf of the organization, in support of an overall business strategy, while standing on the shoulders of other negotiators at the company and leveraging a wide range of existing relationships, prior precedents and future commitments. A negotiation system encompasses four critical elements:

1. A Company-Wide Definition Of Success

What does “winning” mean for your organization, and how are those behaviors recognized and rewarded? A negotiation system addresses how incentives affect behavior at the negotiation table and adjusts incentives to serve not only the individual’s, but the company’s best interest.

For example, in theory, paying a salesperson or an agent a percentage of the deals they close rewards them for doing higher-value deals. But it also causes many of them to make any deal, especially at quarter’s end, because 10% of even a deeply discounted price is better than 10% of nothing. Another flaw is that it rewards them for doing bigger deals, but not necessarily better deals that are more profitable, strategic or otherwise valuable over the longer term for the company.

2. A Clear Negotiation Process

If it’s more than just a very simple transaction, the negotiation doesn’t just happen “at the table.” It starts by clarifying what you’re setting out to do, and defining the negotiator’s mandate and who holds the right to make which decisions.

It requires careful preparation, including consultation with relevant stakeholders. And it’s imperative to use that preparation to formulate and align around a strategy that looks not just at this negotiation with this counterpart, but at the broad portfolio of all negotiations going on across the company over the short and medium term.

And most deals require a deliberate plan to move from the negotiation table and “getting to yes” to actually putting the deal into action so it can deliver value to the parties.

If you fail to do any of these things, you may fail to reach a deal worth doing; or you may well do a deal you come to regret.

3. Negotiation Knowledge

In the negotiation process, organizations often have a lot more information than they know what to do with. Selecting, leveraging and applying that information so it informs your strategy and enables more effective problem-solving is one of the lowest hanging fruits in any organization’s efforts to improve across-the-board results.

Some are quite easy to put in place: Simple deal databases, context-sensitive playbooks, and “communities of practice” that share intangible lessons about particular counterparts or types of situations. And as we all learn to make greater use of generative AI tools, accessing and processing information about existing contracts, past deals and market trends will become easier.

But it’s critical to set aside the assumption that because “every deal is different,” each negotiator operates in a vacuum.

4. Skills And Mindset

There’s no question that negotiators can be more skilled, and that training can improve enterprise results. But just as important as skill enhancement is considering how to influence the mindset they (and their managers) take into the negotiation.

In my experience, if a manager never engages direct reports in a conversation about strategy, never tests their readiness for the negotiation and never demonstrates that they understand and embrace whatever framework is being taught in the training, the individual negotiators will quickly learn that the company doesn’t really believe in the training. And they’ll simply “go rogue.” Or they’ll become mere messengers for a manager calling the shots. And messengers are rarely very persuasive.

Think about all the negotiations going on with your suppliers and partners. What if you could do just a little better, on average, across all of them? What if your teams could create just a bit more value in each negotiation with every customer? How much better could your company do if each of those deals was a bit more productive and valuable?

Doing better deals, smarter deals, consistently — all it requires is to see negotiation through a different lens, one that goes beyond putting a few skilled individuals on the front line. Improving your enterprise negotiation capability by implementing a negotiation system creates tangible and lasting value for the firm.

For more detail on our work with Professional Services firms, visit our Strategic Negotiations page.