I’ve had the privilege of working with hundreds of salespeople throughout my career developing them into more effective negotiators. The overwhelming majority of them have one thing in common when I meet them: they are neither motivated nor empowered to negotiate.
It’s easy for management to blame salespeople when negotiations conclude with value left on the table. But what they often fail to realize is that selling and negotiating are fundamentally different skill sets requiring fundamentally different behaviors. Selling is the process of creating the demand for the product or service, and negotiation is the process the parties engage in to come to terms on an agreement for that product or service. Once the specific terms of the potential agreement begin to be discussed, selling behaviors, tactics and strategies need to be replaced with negotiation behaviors, tactics and strategies. But here’s the problem. Management always motivates and empowers their salespeople to sell. They rarely motivate and empower their salespeople to negotiate.
Let’s examine the question of motivation first. How are salespeople incentivized? The goals they are measured and bonused on are typically based on the topline revenue they bring into the business and not the profitability of that revenue. This means they will do everything in their power to avoid losing that revenue. When the customer pushes back on price or any of the other negotiation variables, the salesperson will rush back internally to try and get approval for whatever the customer is asking for because they are terrified of losing the deal. They have no reason to care about the profitability of that deal because they’re not incentivized to care about it. In their mind, the more profitable their company tries to make the business, the higher the likelihood they might lose the business to a competitor. Then management wonders why it feels like their sales team works for their customers and not for their company?
Now let’s look at empowerment. The way management protects themselves from the sales team that they don’t trust is they will force salespeople to get approvals from finance or management or both before making any concessions. This essentially turns salespeople into the “middleman” going back and forth between the customer and management until the customer has found the lowest price possible because finance and management refuse to approve any further concessions.
Why doesn’t management trust their salespeople to negotiate? It’s usually because they don’t have a track record of being strong negotiators. Historically they have given too much away too easily and deteriorated the profitability of the company’s agreements. Why has this happened? Because the sales team is not incentivized or motivated to negotiate. And the vicious circle continues.
What if there was a better way? What if salespeople were incentivized to negotiate and therefore were motivated to negotiate? What if management empowered their salespeople to negotiate because they trusted them to negotiate? It might sound like a massive undertaking to address these issues. But it doesn’t have to be.
The world’s most successful organizations work to build and cultivate a negotiation culture within their business. This starts with how the different departments within their organization interact with each other. Naturally, departments like finance and sales or operations and customer service are going to have competing priorities. But if a business-critical skill like negotiation is viewed as a core competency by senior leadership, incentives plans can be designed for all departments that have a negotiation element built in. For the sales and finance example, maybe the sales team has a profit element built into their bonus instead of just revenue and the finance team has a revenue element built into theirs instead of just profit?
Once the right incentives are in place, the motivation will follow naturally. Once the motivation is there, the team needs to have all of the skills and tools at their disposal to be successful. Most organizations invest in sales training, but many have never even considered negotiation training. At Flex Negotiation, we have over a 50x ROI with our clients building custom programs that address their specific organizational challenges. Equipping your team with a behavioral framework and a planning process is the first step in transforming their performance from profit destroyers to profit creators.
Once the team is motivated to negotiate and equipped to do so effectively, leadership will start to be pleasantly surprised with the quality of agreements they start to see. This will of course naturally lead to leadership further empowering their team to negotiate.
Creating a negotiation culture within your organization sounds complicated, but it doesn’t have to be. If you focus on the path from motivation to empowerment, everything in between will flow naturally. If negotiation isn’t a core part of your organization’s culture, how long can you afford to wait before you decide it should be?
Tamer Halaweh is the Founder of Flex Negotiation, the leader in custom negotiation programs that transform your people’s performance. If you are interested in hearing about how the world’s most successful companies are utilizing Flex Negotiation’s framework to build a negotiation culture and enhance their profitability, you can reach Tamer directly at Tamer.Halaweh@flexnegotiation.com or (310) 595-0244.