5 Tips to Help CFOs Become Better Negotiators
Here’s how to get better at negotiating both inside and outside the company.
Sandra Beckwith, CFO.com, September 29, 2022
Ravi Narula (CFO of FinancialForce) recalls a particularly frustrating situation several years ago when closing a deal with a company in another country. The two parties had negotiated all terms. With no remaining questions or open items, they submitted the contract for legal review.
During that two-week period, Narula’s counterpart continued to request changes. “We had all agreed in good faith upon these various terms. Why was this happening?” wondered the now CFO of FinancialForce, a business process automation software provider. He got his answer when discussing the situation with friends who lived in that country. “They said that it didn’t mean there were problems with the deal. This approach is just part of their culture,” Narula said.
It reminded him of how important it is to know who you’re negotiating with, but especially so in cross-cultural situations.
Whether you’re negotiating with someone around the world or down the hall, Narula and others offer the following tips for becoming skilled negotiators.
- Set Goals
Start with an over-arching goal, advises James Reiman, principal at Reiman Negotiations, and author of Negotiation Simplified: A Framework and Process for Understanding and Improving Negotiating Results. “Your goal is almost never to win. It’s to reach a conclusion that’s beneficial to both parties,” he said.
Using vendor negotiation as an example, Reiman asks, “Is your goal to get the very best price? Or is your goal to secure a long-term supplier relationship?”
“Your goal is to get the best price from your vendor so that your vendor can supply you consistently at the quality level you need,” Reiman continued. “It’s almost always to get the best value, but the value is not necessarily the price. And how you define value goes back to your goal.”
- Prepare, Prepare, Prepare
CFOs and experts universally agree that in-depth preparation is essential. Reiman views negotiating as a three-act play with preparation as the first act. “Think about it as planning and rehearsal,” he said. “Dig into the details, but also plan what you’ll say and make sure it conveys what you need it to.”
While many companies do a post-mortem evaluation after a negotiation, Narula suggests adding a pre-mortem to the process. “What would success look like at the end? What are the challenges?” he tries to ask himself.
Reiman spoke about setting realistic goals to get familiar with the feeling of achievement. “Establishing goals and success criteria along with ideas for achieving them leads to better alignment and less stress,” he said.
When Holly Grey, CFO of cybersecurity company Exabeam, is brought into a negotiation with a prospect, it’s often because the discussion stalled. Before joining the conversation, she meets with her legal or account negotiating team.
Grey broke down the process of her preparation prior to even meeting with the prospect. “We’ll spend half an hour just going through the prospect’s issue and concerns. Do we have any insight on why these are their concerns? If it’s a list of say, five things, I’ll consider which ones I’m willing to give on versus which that I’m not, or which I can flex a little bit on even though it’s not as much as they’re asking for.”
- Earn and Build Trust
“Trust-building starts with viewing the negotiation not as a transaction, but as a partnership,” said Narula when asked about the value of trust. “Once you have trust, you respect the other side more. You’re willing to listen to them, you’re willing to get their feedback.”
Narula builds trust internally during the budgeting process by turning what could be a tense negotiation over numbers into a collaborative discussion about goals and how to fund them. “I have learned to involve [the team] earlier on as part of the decision-making around key corporate goals. Once they are fully aligned, we can work together as partners and as a team to find a mutual solution. This approach works for the company and for them,” he said.
Michele Williams, professor of management and entrepreneurship at the University of Iowa’s Tippie College of Business, recommends building trust with internal colleagues long before there’s a negotiation situation. “Take time to get to know the people you’re working with and the people who you’re going to be making decisions for because part of trust is them believing that you’re making a decision that’s in their best interest given what’s in the company’s interest,” she said. “Building trust also helps to move people away from an adversarial mindset.”
- Regulate Your Emotions
Some neuroscience research shows that when adrenaline triggers your brain’s fight or flight response during high-stress situations, you lose access to your brain’s frontal lobe, where creativity and problem-solving occur. Considering how important both are to finding a mutually beneficial outcome in a negotiation, learning to regulate emotions before and during the discussion is critical.
Rachel Kanarowski, a workplace consultant and founder of Year of Living Better, offered these tips:
- “Sleep well before the negotiation. It seems simplistic, but when you’re not getting enough sleep, you’re having a lot more stress response happening in your body.”
- “Become aware of how you feel when you’re emotional or stressed so you can recognize and address it quickly.”
- “Calm down with breathwork when you begin to feel emotional. Take two short breaths, then a long exhale. Repeat.”
- “When you begin to lose focus because you’re thinking ahead to alternatives or solutions, notice your feet connecting with the floor. That should tune in your sense of listening and bring your attention back to the moment.”
Build trust and uncover essential information by listening. “As negotiators, we take the other person’s perspective and try to make deals that we think will work for them. Asking questions and listening allows you to get to know them better while getting more information about what would really make a win-win deal,” Williams said.
Grey has found that skill to be particularly important when she’s brought in to de-escalate a tense negotiation. She describes a situation where she joined a Zoom call and listened while a potential customer vented. She showed she was listening by nodding her head and taking notes.
“I think defusing the situation, especially if there’s a little bit of an edge to the conversation, is step number one,” said Grey. “When they finished, I said, ‘I understand your position. I see where you’re coming from. Let me help alleviate some of your concerns.’ Then I went through it from a business perspective, addressing their issues.”
“Listen to what’s not being said, too,” cautioned Reiman, using a vehicle purchase negotiation as an example. He said if the salesperson doesn’t bring up delivery timing, that’s a clue it’s going to be a problem. While we don’t know what we don’t know, preparing for the negotiation with “enormous energy and detail, will help you learn more about what to listen for.
Grey believes that the range of internal and external situations CFOs are required to negotiate can give them an advantage. Sometimes you’re the customer, other times you’re the vendor. “The fact that you can have that Jekyll and Hyde view can be a little bit of a whirlwind where you’re seeing both sides,” she said, “but it helps you bring both understanding and empathy to the process.”
Source: CPA Letter, Sept 30, 2022, AICPA & CIMA and CFO.com, Sept 29, 2022