How to achieve a successful negotiation

A high-stakes negotiation with implications for the entire global economy is a timely reminder that negotiation is a skill that management accountants must develop and practise carefully to optimise their business results.

Negotiations between the UK and the EU on their post-Brexit relationship are due to start at the beginning of March, with both sides having already set out their seemingly divergent positions.

Michel Barnier, the EU’s chief negotiator, said in a tweet on 11 February that “it is logical that we want to maintain close security and economic ties. But UK interest in diverging from us means this will be challenging.”

For Paul Fisher, associate fellow at Saïd Business School at the University of Oxford in the UK and who runs the twice-yearly Oxford Programme on Negotiation, a focus on interests rather than positions is relevant to both business deal-making and large-scale political negotiations such as Brexit.

He said: “[In] a lot of negotiations [people] start off by claiming, ‘My position is this. This is what I want to achieve. This is my red line.’ We encourage people to look beyond the position [to] the interests that make up the position.”

Many negotiations, he said, are about gains and concessions — giving away things that are of low value to you in return for gaining things that are of high value to you. “If you have rigid, inflexible red lines, it makes it that much harder to come to an agreement.”

Counterintuitively, a large number of areas of difference between the parties can sometimes be helpful, Fisher said. “Sometimes the more differences you have the more value you can generate in the negotiation.”

A fallback position

A BATNA — best alternative to a negotiated agreement — is useful, he said. “The stronger your alternative is and the stronger your willingness to walk away, the stronger your negotiating position.”

“It’s like selling your house. If you are trying to sell a house and have already been given an offer … below what you want to sell it for, you have got that alternative to move towards if you don’t get a negotiated agreement.”

Don’t be afraid to make the first offer, Fisher advised. “If you do your research and put down your first offer, you actually anchor the negotiation around that offer. … If it is based on good evidence, you actually to a certain extent control the negotiation.”

He added: “It is a very human psychological instinct that once you anchor something, people adjust rather than create when reacting to the offer.”

Stakeholders “away from the table” but who will be affected by the result of the negotiation also need to be considered, Fisher said. “The more you can bring them on board and utilise them in the negotiation, the more successful and durable your agreement is likely to be.”

He also advised to try not to make the negotiation personal — separate the issues and the people.

Negotiation, he said, “is not a competitive sport”, and it is important to understand your negotiating counterpart, the pressures they are under, and what they want to achieve from the negotiation.

He suggested that many negotiations fail before they start, because of a lack of preparation. Being prepared should include working out your objectives and goals as well as ensuring you have a firm mandate on your negotiating position internally within your organisation.

Process is also important, including establishing where you are going to meet, the agenda, and timelines. If you are negotiating cross-culturally, you need to consider which language to use.

When negotiating internally with colleagues, you need to be aware of relationship dynamics and the danger of complacency and failing to do the necessary preparation, Fisher said. “[As with larger negotiations], the same principles apply — prepare, put yourself in the other side’s shoes, try and look at their fundamental interests.”

SME market

Fiona Bevan, ACMA, CGMA, is director of Bevan Financial Management Ltd., based in the southwest of England, and works closely with small and midsize enterprises (SMEs).

She said that one challenge for management accountant sole practitioners is that a low-price offer by a new client for their services can be taken personally — in the way that negotiating on behalf of a team or bigger business would not be.

Bevan said selecting the venue for negotiations should be a practical choice rather than “playing power games”. However, she suggested that visiting clients’ businesses to negotiate has some advantages. “It allows you to get a much better feel for the business you are dealing with,” she explained. “And it also means that you can meet other people who might be part of the decision-making process [which] you wouldn’t do if you were just going to be meeting the managing director or … other member of the business.”

Bevan works with clients for a fixed price, paid on a retainer basis at the end of each month. Once a year the price and service level will be discussed. If there has been some “scope creep” on services provided, Bevan said annual renegotiation would aim to find a fair price. She said: “If you use the phrase, ‘What do you think is fair?’, it puts it back [to] them.” The result, she said, is nearly always a higher price for the accounting services provided.

In the SME marketplace, the management accountant role and the value it can bring to a business is not well understood, Bevan said. In that situation, management accountants would need to lead the negotiation.

Negotiating tips

Fisher’s and Bevan’s advice for management accountants when negotiating includes:

• Do your homework. Understand what’s important to the other negotiating party and the things you can offer that they will really value. Bevan said: “It’s much easier to negotiate from a position of knowledge than … from a position of guesswork.” In a sales negotiation the danger of using guesswork is that you will nearly always undervalue yourself or your product because it is easier to sell cheaper.
• Practise before the negotiation. When you go into a negotiation, plan and prepare in advance for likely objections that will arise. Practise in front of a mirror so that you’re not hearing your own words on the topic for the first time in the meeting.
• Spend time listening and questioning. Understand fully what you can offer in the negotiation and the stresses that could be influencing your negotiating counterpart.
• Get the right balance between sharing and withholding information. Sharing information can create extra value in the negotiation, but oversharing can damage your bargaining position.
• Be self-aware. Recognise that people from different cultures may have a different approach to negotiating. “Some cultures take a process-focused linear approach with little small talk, while other cultures will be warmer and more emotional, and others focus on building up trust over a longer period,” Fisher said.
• Develop your persuasion skills. This can be done through building your authority, storytelling, use of metaphors, and humour in some cultures.
• Build trust and respect. This is important for developing long-term business relationships and includes overcoming cognitive biases. These include holding other parties to blame for factors outside their control (accuser bias) and focusing on factors beyond your control to explain away your behaviour, while ignoring factors within your own control (excuser bias).

— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.