Honing negotiation skills a competitive advantage
In 2008, a cargo ship owned by the Danish Clipper Group was hijacked by Somali pirates. As luck would have it, company CEO Per Gullestrup made two quick decisions that led to the safe return of his ship and crew. First, after discussing the situation with his insurer, Gullestrup decided to pay a ransom. Second, he agreed to use a professional negotiator rather than handle the situation himself.
After a few weeks of professional haggling, the company’s expert negotiator managed to significantly limit the Clipper Group’s financial pain by striking a deal that saw the pirates receive between US$1 million and US$2 million — much less than their initial US$7-million demand, not to mention the ship’s insured value, according to National Public Radio’s story “Behind The Business Plan of Pirates Inc.”
Everybody negotiates. In our personal lives, for example, we negotiate all the time (what to have for dinner, what to watch on TV, where to go on vacation). But negotiations are always done better by people who are trained to do them. And the ability to negotiate effectively is even more valuable in our professional lives, which is why business schools dedicate significant resources to helping executives hone these skills.
When people think about negotiation skills in the business world, they often associate them with the process of buying and selling, so it is not surprising to find individuals involved in procurement and sales most often proactively developing the skill. But managers and executives across an organization can significantly benefit from negotiation training.
This is especially true for HR professionals, who are involved in a wide range of key functions that can make or break a company’s bottom line, such as: procuring resources and building business cases for new HR initiatives; hiring, developing and retaining staff and executives; and managing critical organizational processes.
All of these functions involve some sort of negotiation and the skills required to do it as efficiently and effectively as possible, while also preserving high-quality relationships, are not typically developed on the job.
Negotiation is a collaborative process — it’s not about beating up the other side. Ideally, the focus should be on addressing the needs of all concerned in a way that fosters high-quality relationships. When this isn’t done, things can quickly go wrong.
Look at job offer negotiations. When I ask MBA students who holds the power in these interactions, they typically say it’s HR. But when I ask HR professionals, they typically think it’s the applicants. These perceptions can result in posturing and get in the way of a sincere assessment of strategic fit with the organization.
Even worse, they can result in an organization having a talented new hire who feels she did not get a fair deal and who will soon look elsewhere.
Keep in mind that negotiated deals often fall apart during implementation because negotiators are not sufficiently prepared to negotiate. High-quality preparation is key to making effective deals.
Before talks start, you must have a clear sense of what you want. You must know your limits and acceptable trade-offs, along with your strengths and the unique advantages of what you have to offer. And you must also anticipate what can go wrong and plan for it.
Furthermore, when preparing for a negotiation, it is important to understand that monetary issues shouldn’t be the sole focus of discussions, since it is usually non-monetary issues that provide the greatest opportunities for addressing needs.
All of the above require the ability to put yourself in the other side’s shoes, which takes listening skills, not to mention practice.
Human resource managers spend a significant amount of time negotiating with numerous stakeholders, and these negotiations can influence everything from employee morale and productivity to the health of the leadership pipeline.
That’s why smart companies seek competitive advantage by helping their HR folks hone the skills they use every day to keep the corporate ship out of rough waters — not to mention the hands of corporate raiders.
Fernando Olivera is an associate professor in organizational behavior at the Ivey Business School at the University of Western Ontario in London, Ont. He is also director of the Ivey Negotiations Program which is part of Ivey’s executive education program. For more information, visit www.ivey.uwo.ca/executive.