What are the most common barriers to successful business negotiation?

Even when you are aware that negotiation is a skill, it does not mean you will be successful at it, often despite and in spite of your presumed knowledge and negotiating experience. Competently participating in the negotiation process and making rational decisions in that process can be hindered by various barriers and mistakes, both objective and subjective and psychological in nature. In this text, I will address only one barrier, as most other barriers stem from that one; if you overcome that barrier, many others will resolve themselves.

You probably do not expect me to say this, but from my own negotiating experience as a trainer, participant, advisor, or observer in negotiations, the greatest barrier is of a subjective nature. The greatest barrier to successful business negotiation is unpreparedness for negotiations, or at least inadequate preparation, although most participants in negotiations swear by their preparedness (no, it is not the lack of a smile that is often seen in superficially written texts).

To support my claim, I will refer to the conclusions of Mr. Bazerman.

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“Over the course of training and consulting with tens of thousands of negotiators and dealmakers, we have become aware that, by far, the most common and costly mistakes in negotiation take place before talks even begin.

Interestingly, the problem is usually not faulty preparation, but lack of preparation altogether!

Under the false assumption that negotiation is ‘all art and no science,’ most people fail to prepare adequately for negotiation. When coupled with the belief that the ‘real action’ begins at the bargaining table, even smart, thoughtful, and motivated people walk into substantive negotiations ill-prepared.”

Max H. Bazerman

In addition to being the Straus Professor of Business Administration at the Harvard Business School, Max is formally affiliated with the Kennedy School of Government, the Psychology Department, and the Program on Negotiation at Harvard Law School.

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What is the reason for this unpreparedness? 

First, it is necessary to know all aspects/elements of the negotiating situation (I have written about most of them in previous texts), just as in chess we have pieces, in negotiation we have ‘certain negotiating elements.’ Second, we need to know how to set up the negotiating situation just as we place pieces on specific squares in chess. For chess pieces, we must know their movement and combine the game with all pieces in all phases of the game. In negotiations, we must know how to set up the negotiating situation with all elements and combine the game with all elements in all phases of negotiation.

We do not have countless pieces in chess, but we have countless combinations in the game, and similarly in negotiation, we do not have countless elements, but we can have from a few to many combinations (not exactly countless). However, even if you know all of the aforementioned about chess, it does not mean you will be a good chess player, because to become a chess grandmaster, you must play numerous games and invest a lot of time and effort in analysis, both of your own and others’ games. To become an excellent negotiator, when you know all of the aforementioned, you must play numerous negotiating games and invest a lot of time and effort in analysis, both of your own and others’ negotiating games, to become a negotiating grandmaster.

I have already mentioned in previous texts that every negotiating situation is somewhat specific and therefore requires the development of an appropriate strategy and tactics, and to develop a strategy and tactics, you must know all the elements of that strategy and tactics. A major problem is that most negotiators frequently apply a ‘one size fits all’ approach, i.e., they approach each negotiating situation in the same way they became accustomed to negotiating once, in the early stages of their careers.

That factor, ‘one size fits all,’ along with insufficient knowledge of all aspects/elements of negotiation and inadequate setup of negotiations (of those aspects/elements) and the lack of viewing negotiation systematically at the corporate level, as a corporate competence, in my opinion, are the main reasons for inadequate preparedness, or ‘lack of preparation altogether’ as Mr. Bazerman states.

There is a significant difference between self-taught chess players (hobby chess players) and those who build their skill on a studious approach to all aspects of the game, from openings to endgames. Although self-taught players often consider themselves good chess players. I personally was a good (experienced) hobby chess player who once thought he could compete with professionals until it proved otherwise.

Another difference between chess and negotiation is that in chess you strive to win, and if you are better, you will achieve that, while in negotiations you strive to achieve your goals (not to win) because the other party also needs to achieve its goals to agree to a deal. However, in negotiations, it is interesting that if an agreement is not reached (i.e., you do not achieve your goals), the other party is usually blamed for its incompetence/uncooperativeness, while in chess there is none of that, as the situation is clear and everything is visible to the naked eye.

Example: A different view on the procurement process and consequently negotiation

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“Cluster Management at ThyssenKrupp means that we are taking the next step beyond classic pooling concepts. We are not only seeking to leverage economies of scale effects when awarding purchasing volumes to fewer, carefully selected suppliers. Procurement at ThyssenKrupp is increasingly focused on the strategic, forward-looking steering of our Group’s demands. Strong levers are applied to tap into the opportunities that international supply markets have to offer.

For this purpose, ThyssenKrupp has started to build up a cluster management organization. To us, clusters are supplies and services which we have grouped together based on identified similarities and potentials from collaboration across companies, regions, and/or functions, allowing us to take a joint strategic approach. The strategic work of our Cluster Managers and their teams is based on a Groupwide matrix organization and supported by professional tools and methods.

We are bringing together our purchasing volumes and procurement know-how effectively. We act as one ThyssenKrupp in the global supply markets and are in a better position to develop innovative solutions and new win-win scenarios together with strategically selected suppliers.”

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Of course, this example can also be considered in the context of ‘Cluster Management’ and improving the ‘value chain’ to achieve a competitive advantage through innovations; however, here we will consider this example in the context of negotiation to make things clearer in that context.

Most companies still apply only the traditional method of negotiation in procurement, the ‘classic pooling concept,’ although sometimes things, when considering the entire ‘value chain’ of the company, need to be viewed in a different context. Thus, in negotiations, entirely new negotiating aspects/elements and goals can be taken into account beyond the classical ones (higher margins, rebates, longer terms, etc.). Strategically and operationally looking at this example and comparing it with the traditional method of negotiation in procurement, you will see that these are two quite different concepts that then require different approaches to negotiations, which must be understood and be able to implement, i.e., have the knowledge and skills for it. Therefore, fundamentally, in your preparation for negotiations, you must take this into account to prepare adequately.

Of course, this does not mean that with certain suppliers you will not maintain the traditional method of negotiation, the ‘classic pooling concept,’ with usual goals, strategies, and tactics, which again must be effectively implemented so that the other party is satisfied with its share of the pie.

All in all, companies cannot and must not allow a superficial approach to negotiations; they cannot allow their negotiators not to distinguish the need for a different approach to certain negotiating situations, depending on the context, and not to prepare adequately for negotiations. Therefore, there is a great need for negotiation to become an important competence at the corporate level and not to be viewed only as an individual skill dependent on individuals.

A systematic approach at the company level is needed, and in this context, there is a great responsibility on human resources and education departments in companies (and top management) to understand the things written here and recognize the advantages that a systematic approach provides and to find the best partners and programs/training for education in the market. Partners who can convey a systematic approach to negotiation to their companies and the necessary knowledge and skills to their employees at all levels. This is necessary for negotiation to become a corporate competence in the true sense of the word, a competence that brings a competitive advantage in creating the ‘value chain’ of companies. Competitiveness that is so needed by Croatian companies.

S.M.A.R.T. – WIN Concept of Business Negotiation
Copyright Ivica Katanić, www.pregovaranje.com