By Jonathan Hughes, Partner, Vantage Partners; Ben Siddall, Partner, Vantage Partners; and David Chapnick, Principal, Vantage Partners
In November 2010, Jonathan Hughes, Aram Donigian, and Jeff Weiss published an article in the Harvard Business Review titled “Extreme Negotiations” that highlighted lessons in effective negotiation under extreme pressure from the U.S. military that also apply in the business world. Today we revisit those lessons in a very different world. The COVID-19 pandemic has shaken world markets, created significant political and financial instability, and reduced business predictability. Many companies have experienced a slowdown in business activity, with resulting revenue losses over the past several months.
As the news changes every day, timeframes for recovery are uncertain and will vary significantly by industry sector. As we saw in the 2009 financial crisis and subsequent recession, challenging contract renegotiations are a predictable result of this new reality. As companies in many industries confront shrinking demand, higher levels of unused inventory and increased uncertainty, they will undoubtedly turn to suppliers for cost savings while simultaneously looking for guarantees of supply assurance.
Sales teams will need to respond to heightened pressure from customers to reduce pricing, while negotiating to protect revenue and margins — even as they work collaboratively with customers to meet their needs and address their constraints. The current environment thus raises the stakes in customer negotiations and also increases the risk that negotiations become adversarial.
A key insight underlying the ideas in the 2010 HBR article is that negotiation behaviors tend to be deeply ingrained and are often reactive rather than deliberate, especially in high-stakes and stressful situations. Today’s environment can be viewed through the same lens. These strategies are not only useful at the bargaining table but can (and should) also serve to reshape planning and positioning far in advance of formal negotiations that we know are coming. A strong (collaborative) offense is the best defense.
Editor’s note: This article has been edited for length. The full piece, featuring multiple customer examples, will appear in the Fall issue of Velocity magazine.
Strategy 1: Broaden your field of vision, question assumptions, and rethink objectives
Start by identifying key assumptions and subject them to scrutiny; use negotiation planning and execution to continually gather new information and revise strategies accordingly.
One hallmark of the “extreme” negotiation is a feeling of danger creating pressure to act fast to reduce the level of perceived threat. In the face of this pressure, negotiators often begin acting before they fully assess the situation. They act and react based on gut feel and initial perceptions. Given the added pressure to look strong and gain (or remain in) control, they tend not to test or revisit their initial assumptions even as the negotiation progresses. As a result, they often negotiate based on incomplete or incorrect information. This often leads to conflict, impasse, or, at best, a resolution that addresses only a part of the problem or opportunity at hand.Continue reading ““Extreme” Negotiations with Customers”