If you search ‘negotiation skills’ online you can find thousands of websites, books, videos and companies offering to help you improve. For the professional treasurer, they’re a key part of the job – just looking at any job description of a role in treasury confirms that, with ‘negotiation skills’ almost always in the list of essential requirements.
For David Freedman, Director of Sales at training provider and behaviour change specialist, Huthwaite International, the classification of negotiation skills as belonging to the ‘soft’ skillset, is simply incorrect. Huthwaite is a training provider that has spent 40 years conducting extensive research and analysis and basing its training programmes around its findings. Huthwaite views and teaches negotiation as a ‘hard’ skill – comparable to the technical skillset that all treasurers must have in their professional life.
“There are categories of certain types of behaviour that we’ve researched and which we know work in a certain ratio when you’re negotiating. Learning how to use those behaviours in the right ratios is the key to success – if you don’t, you will fail,” Freedman states.
For treasurers, negotiation often has crucial financial impacts on the business, meaning successful negotiation is vital. Interacting with counterparties such as banks is imperative for securing the right funding, interest rates or cash management fees. A treasurer must be confident in these interactions to ensure their business gets the most out of it.
“Whether it’s times of difficulty, where the finances aren’t that brilliant, or where they’re trying to get the best possible value for money with interest earnings, or the terms on which they bank or can access assets, or choosing their banking partners, all of these at some level are going to involve an element of choice. You are going to be a buyer of a service. The bank is going to be your supplier,” explains Freedman.
Negotiating favourable terms is important for obvious reasons. “If you get locked into some kind of contractual arrangement which is disadvantageous to you, it will carry on being disadvantageous to you for the duration of the contract.”
This is equally important when it comes to internal business negotiations. “Department X wants sudden access to funds in order to increase the marketing budget and the role of the treasurer to some extent is to decide whether or not it’s in the best interest of the company to let them do that, and then to have the negotiation on the other side to get access to those funds,” says Freedman.
This leads to multi-layered negotiations, he explains. Negotiation with the department who want to make the funds available, people within the business elsewhere who have different concerns – for example, maintaining shareholder value and therefore not dipping into funds. Lastly, external negotiations with the places where those funds are lodged to make sure that there is no breaking of covenant or reducing the advantageous terms in which the company invested.
“You need negotiation skills for this. If you don’t have those skills and you say ‘yes’ to everybody, that damages your treasury business. If you say ‘no’ to everybody, that might damage your corporate position or at least the relationships you have within your organisation,” says Freedman.
Improving your skills
A key element of becoming a successful negotiator, according to Freedman, is understanding negotiation strategy. “You must know, what do you want to achieve from this? What are your aims?” he explains. Objectives should be set clearly and precisely. Instead of thinking “I just want to get more money more quickly”, a successful negotiator will set out more specifically “I want to get access to £3m and I don’t want that to affect the rate that I’m getting on the residual investment”.
After setting out clear and precise objectives, Freedman says a successful negotiator will then prepare and plan how they’re going to get them. Huthwaite identifies a significant difference between ‘preparation’ and ‘planning’ – and understanding that can make the difference between being a successful or an unsuccessful negotiator.
Preparation is the number-crunching, it’s identifying both parties’ objectives and essentially working out the best possible outcome and the worst possible outcome. “And in-between that, working out if there is a point that we would be happy to settle on and then calculating the costs of any concessions,” he adds.
In contrast, planning is working out what to do once in the room. “How am I going to create the right atmosphere? How am I going to optimise our power? How am I going to be persuasive?” are the questions a successful negotiator will be asking themselves, says Freedman. The key outcome of the planning phase is ensuring the negotiator has the flexibility to have a number of solutions in place for any issues identified in the preparation phase.
This flexibility is important, especially when it comes to sequence planning. “Unskilled negotiators assume that if they get A right then B follows, then C, and so on,” Freedman explains. “Skilled negotiators see things as intertwined. They can start on any issue and deal with them in any order, thinking about all the different issues they could trade against one another in a bargaining situation.” Most importantly, they will only agree on the whole thing once they’ve agreed on everything.
Treasurers may have a harder time in the planning phase, but preparation comes more naturally to financially-minded individuals. “Everything in preparation involves spreadsheets, finance strategies, number-crunching, in a way that comes easily to them,” he explains.
Ask questions and express your feelings
Another key finding from Huthwaite’s research is that skilled negotiators describe their feelings 12% of the time, whereas average negotiators only do so 7% of the time. Freedman elaborates: “That’s not an emotional outburst or tears, it’s just using words that say: ‘I’m delighted that we’ve been able to reach an agreement on the first three points,’ or ‘I’m disappointed that in the last three hours we haven’t been able to agree an acceptable rate to both parties’.”
Additionally, skilled negotiators ask questions. The accomplished negotiator spends more than twice as much time as an average negotiator in seeking information and asking questions about what the other side does. Instead of giving one-sided justifications for certain aspects of the negotiation, it’s more important to ask about the facts and opinions of the other person. This allows for identification of what they are thinking and feeling, thus putting the skilled negotiator in a better position.
There are up to 17 behaviours that Huthwaite has identified overall, and it’s these types of verbal behaviours and analyses that Freedman believes should classify negotiation skills as ‘hard’ skills. “You need to learn this approach, and having learnt it, you need to be conscious of it first of all, and then ideally unconscious of it,” he says.
Practice makes perfect
Once these skills are learned, reinforcing them is the only way to keep them, warns Freedman. Aside from actually entering negotiations, utilising coaches inside the organisation as well as external training is the main way of doing this. “That’s true of any training you do, whether it’s driving a car or skiing or using negotiation skills. You’ve got to practice it and have somebody helping you out if you’re starting to worry that you’re going back to your old habits.”