B2B Street Fighting Blog

2 differing views on managing business negotiations

Posted by Marie Dudek on Tue, Dec 04, 2012 @ 09:11 AM

Some of our recent research shows some interesting and significantly differing responses from C-suite executives and street-level sales professionals.

2 differing views of managing business negotiations

  • Executives were 46% more likely than salespeople to believe their firms were extremely proactive in managing negotiations, while salespeople were 43% more likely to believe their firms were extremely reactive.
  • Executives were 36% more likely to believe their negotiation and sales processes were integrated.
  • Executives were 77% more likely to view their decision-making authority as highly centralilzed, while salespeople were 71% more likely to view it as somewhat or highly decentralized.
The implication is there is a disconnect between street-level and executive management caused by the absence of negotiation strategy and process.  This is exacerbated by the absence of internal, cross-functional alignment.  This disconnect can not only cause marketplace confusion, it can create internal strife.
  • Negotiation decision-making is becoming more centralized, reported 71%
Here are the benefits of centralized decision-making:  it provides more control over brand equity; prevents sales professionals from sending mixed messages about the value proposition; and decreases variance in pricing.  Here are the dangers:  Waiting for a centralized authority to approve a deal often grinds negotiation to a halt, and, what's more, centralized negotiation is very customer unfriendly, leaves no room for creativity and puts salespeople and account managers in the unenviable position of not being empowered to make decisions.

The other school of negotiation strategy is one of decentralization - that is, to let those closest to the deals make real-time negotiation decisions because "they know best."  The benefits of this approach are faster, more customer-friendly and creative deals.  The dangers are that sometimes those deals are a little too creative, hurting margins and brand with too much variance and zero-based decisions.

There is a new school of thought, however, that accentuates the benefits of centralized negotiation authority while diminishing the drawbacks.  It's called radically centralized strategy with radically decentralized execution, and it's structured around the concept of guardrails.  Recently, we met with 26 cross-functional managers who somehow touched internal and external negotiation.  This group approved high and low ranges on nearly 70 aspects of its organization's value proposition.  These 70 potential trades were put directly in the hands of salespeople.  The net effect has been better, faster decisions at the market level, tightened variance on negotiation exceptions and an empowered sales force.

Tags: business negotiations, negotiation strategies in business

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