Negotiating in an Uncertain Market: Why Preparation Beats Improvisation

The uncomfortable truth about today’s economic climate is that uncertainty is the constant. Some businesses will prosper through recession and through recovery. The ones that do are usually those who spot opportunity in adversity, or adapt fast enough to make the most of it when conditions shift. There may be room for creativity in an uncertain market. There is no room for impulsiveness. Pro-activity and planning have become the central commercial discipline.

After a long stretch of relative economic stability, the credit crunch forced a more creative look at how agreements are constructed. Creativity tends to unlock value for both parties at the table and tends to produce contracts that hold up in difficult conditions. But creativity without discipline is theatre. When compliance and performance come under strain, the bar for structured negotiation training and preparation rises sharply.

Make time to scope and prepare

Planning and constant re-appraisal are the price of operating in an unstable market. Risk, investment, scale, performance, compliance and results all interact. Each is shaped by how a negotiator reads their own position and that of the other party. A simple checklist (impact, dependency, leverage and urgency) should be answered before a single conversation begins. If you cannot articulate an answer to each, you are negotiating with a blind spot.

Effective negotiators are pro-active. People in general are reactive to change because there is always something more urgent on the desk. That single trait does more to sub-optimise commercial outcomes than any other, through complacency or denial. Investing time to reappraise agreements is like checking the fitness of your team before kick-off. You cannot wait until half-time to decide who you want on the bench. When the market shifts, third-party pressures often create the real impetus for a new conversation.

Take the case: Simply Tiles and Sebeline

Spanish terracotta wholesaler Sebeline supplied a UK retailer (let us call them Simply Tiles) with floor tiles across multiple sizes and finishes. The relationship was strong, with a long performance history on both sides. Simply Tiles had grown to represent 30% of Sebeline’s business.

During 2008/9 Sebeline’s performance in France and Spain weakened, leaving them increasingly dependent on a struggling UK economy. Cost-cutting only made supply less reliable. Simply Tiles realised that while they were under pressure themselves, the opportunity to provide their supplier with greater security at a moment of vulnerability was worth a different kind of conversation.

The Simply Tiles board took two full weeks out to scope a strategy. The UK bank was reluctant to lend, so the agreement had to remain paper-based in the short term. Within three months of opening discussions in June 2009, Simply Tiles had secured a 49% stake in Sebeline at a 70% discount. Circumstance played its part. The time invested in scoping the opportunity turned a difficult market into a strategic position.

Curiosity is a commercial asset

Questioning and listening are the obvious negotiation skills. What drives them is curiosity. Curiosity is what helps you read the personalities involved and identify which pressures, priorities and motivations can be influenced in the room.

The motives of people and businesses move with personality, timing and circumstance. Most experienced negotiators handle a competitive counterpart who needs to be seen to win very differently from one whose natural instinct is to find a fair outcome. Three elements should sit under continuous review: the market, the business performance and the personalities involved.

The best negotiation consulting work tends to start by re-igniting the habit of inquiry that day-to-day commercial life slowly trains out of people. For wider context on the human side of these conversations, this analysis of emotional intelligence and business negotiation is worth a read.

In the Simply Tiles case, MD James Sadler travelled to Spain to spend time with his counterpart at Sebeline. He found a passionate management team whose real constraint was finance for new technology, not a lack of commercial ambition. That single piece of intelligence reframed every subsequent decision back in the UK.

Discipline and motivation across the team

Time is one of the most powerful levers in any negotiation when it is attached to terms. On a strategic level it sets the balance of power and shapes the chance to discuss issues on a level footing rather than reactively. Within most agreements there are two points worth recognising. Point A marks the moment market or performance change begins to show in contract performance. Point B marks the moment those changes become established as the way it is now, precedents form and conversations turn retrospective. Entering the territory between or beyond those points compromises both power and opportunity. That alone is reason enough to plan early.

This matters even more in renegotiation. It is easy to walk back into the room assuming the relationship is what it used to be. Uncertain economies tend to expose that habit quickly. The objective of preparation is to develop a current view of both parties’ positions. That view usually requires a baseline of trust or collaboration to surface.

Strong negotiators treat preparation as part of the negotiation itself. They set objectives for the prep work, not just for the outcome. The right starting question is: what do I need to qualify before the first meeting? Plan multi-level scenarios rather than single-track ones. Stay alert to the shifts that happen mid-process. Most businesses operate through relationships across many functions, so prep should also cover who else needs briefing before talks begin. It should also map how the negotiation will be escalated if it has to be. This is where structured negotiation courses tend to deliver their highest return, by making that habit instinctive across a team.

Take the case: Boeing and the Chinook order

On 10 November 2009, under political pressure to respond to calls for reinforcements in Afghanistan, Gordon Brown announced plans to fast-track an order of Chinook transport helicopters. Cuts to lower-priority defence projects were under review to fund the £1bn purchase of 30 aircraft, many to enter service within the year. The potential agreement with Boeing represented a major departure from the usual tendering process.

Circumstance had created urgency. Short-term dependency in the relationship shifted, the balance of power tilted, normal protocol was bypassed. The question for any negotiator on Boeing’s side: how would those lead-time implications now be priced? More importantly, had this kind of scenario been factored into earlier planning sessions? A related view on holding the line when commercial pressure mounts can be found in this piece on negotiating with a customer you can’t afford to lose.

“It is not the most intelligent species that survive, it is the most responsive to change.” Charles Darwin

The Sat-Nav already exists

Saying preparation matters is about as illuminating as suggesting you should plan a route before driving across the country. The useful question is whether there is a system that helps anticipate the toll roads, the closures and the recent accidents along the way. The Gap Partnership built one called ESP (Electronic Strategic Planner). It provides a common method for planning negotiations around power, process and people. It also pre-empts the obstacles a chosen strategy will encounter.

ESP defines a route, identifies the likely friction points and builds in contingencies. Like any Sat-Nav, it gives every internal stakeholder a clear view of how the negotiation should unfold, down to conditional proposals, anticipated objections, counter-moves and the Potential Problem Analysis required to handle them. In an uncertain market it earns its keep more than ever.

The pattern across every example is the same. Disciplined preparation, paired with curiosity about the other side, is what turns volatile conditions into commercial advantage. That is the perspective consistently brought by The Gap Partnership, a global negotiation consultancy specialising in commercial negotiation training, with more thinking on the subject collected on the firm’s insights hub.

The market will keep moving. The businesses that prepare for change rather than react to it will, as Rockefeller and Darwin understood in different ways, still be standing when the cycle turns.

Author Profile

Adam Regan: Deputy Editor

Features and account management. 7 years media experience. Previously covered features for online and print editions.

Email Adam@MarkMeets.com