Better Negotiations Lead to Better Outcomes

by John MacKenna

Family businesses can increase their potential for success and avoid missteps by learning the finer points of negotiation — an activity that permeates many essential business processes and personal relationships.

Kyle Glover, an attorney at the law firm Pierce Atwood and Lecturer on Law at Harvard Law School, was the featured speaker at a recent University of New Hampshire Center for Family Business event held at the Manchester Country Club, in Belmont, NH. He presented a framework, tools, and techniques for analyzing negotiation and negotiating more effectively in the context of a small business.

Negotiation is a skill that is highly applicable to all business situations and to life in general, Glover recently told Oil & Energy. “We all negotiate every day in our personal and professional lives. We have developed patterns of how to respond, and while these may work in certain circumstances, they may not work well in others. The problem is that many of us keep using those approaches and patterns without thinking about whether they are really effective. If you just rely on your automatic reaction, you may succeed six times out of 10, but four times in 10, you fail, and you don’t know why. To get to 10 out of 10, you need a way to understand what is working or not working and how to do it better. The self-awareness piece is critical, because negotiation is not just an instinct. It is a learned behavior embedded in every person. It can be learned and unlearned, and we can get better at it.”

The Benefits of Negotiating Well
When a company commits to negotiating more effectively, many improvements are possible, particularly where similar negotiations occur repeatedly, such as onboarding of new employees and dealing with suppliers. “Because negotiation is fundamental, you tend to see a lot of benefits when you do it well,” Glover said. “You get better working relationships. Transactions happen more effectively, and you see better deals that are more tailored to what the business really cares about. Your potential to succeed as a company goes up as a result.”

He encourages executives to take a close look at how they reward people who negotiate on the company’s behalf. The incentives must align properly with the company’s goals, or the employee is actually getting rewarded for making deals that don’t serve the company’s best interests. “One key example of this is commission,” Glover said. “If commission for a procurement person is based solely on the price of the contract, for example, you have to be prepared for other non-monetary aspects of the deal to get less attention. If those non-monetary aspects are important, you may have a misalignment of incentives.”

Attention to the negotiation process can also deliver powerful benefits in a family business, by helping to defuse personal issues between family members, according to Glover. “A lot goes into conversations between siblings and other family members that is not about business, such as emotion and childhood experience. You could still be playing out what happened with you and your sister when you were 10 years old. If you only talk about money or other substantive issues, it will be very difficult, because of those other important pieces happening under the surface. Your framework and skillset for negotiation needs to be broad enough that you can diagnose those sorts of problems and then engage with them in a constructive way.”

In addition, company leaders should pay special attention to the process of negotiation. “In some cases, a business makes a bad decision or takes too long to make a decision, because it hasn’t designed a decision-making process that makes sense,” Glover said. “For example, many family businesses have a ‘consensus’ style of decision-making – all of the owners have to agree to move forward. Although that can make sense in some cases, it can also lead to a ‘lowest common denominator’ approach or to the decision not being made at all, ultimately hurting or hamstringing the business.”

Improving the Culture
Where should companies that want to improve their negotiation effectiveness start? According to Glover, companies can begin by training their team. “Even without making any changes to the way companies make decisions, they can begin to see results simply by empowering their teams to negotiate more effectively and use effective skills. Employee training is definitely a relatively inexpensive thing that companies can do.”

In addition, Glover says, companies can also begin to think about more fundamental features of their operations, such as culture and processes. “For example, one thing that can really help your team to continually improve is building a culture of giving and receiving feedback effectively. Everyone needs feedback to improve, but getting feedback is frequently a challenge. For example, many people in senior positions in an organization can struggle to get honest feedback because folks below them in the hierarchy are nervous about being honest. If you are the CEO, you have to have feedback and get an honest sense of what is working and what isn’t. If you’re not getting good information, your decisions will not be as good as a result.”

There are some core steps businesspeople can take to become better negotiators, both within the company and outside — with customers, suppliers and vendors. One of the basics is understanding that negotiations are complex. The substance of a deal (such as pricing, term, etc.) can be a challenge, but other factors may also get in the way of a deal, including communication issues, emotions, lack of clarity about the goal, and differences in individual negotiating styles. By accounting for all these factors, a person can learn to troubleshoot and understand why a particular negotiation is not working well.

People in business may be comfortable with their negotiation skills, but they can always get better. “Michael Phelps is arguably the best swimmer ever to compete in the Olympics, and even he has a coach,” Glover noted.
“It is the same with us. We need a coach for negotiations.”

Glover works in Pierce Atwood’s Portland, Maine office. He can be reached at 207-791-1289 or kglover@pierceatwood.com. Pierce Atwood is a full-service law firm with a strong focus on family businesses.

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