Explore how you and your business can negotiate more effectively.
As 2025 gets underway, it appears the business and economic environment will continue to be uncertain and highly volatile. For many executives and businesspeople, these circumstances will result in the need to develop more nuanced negotiation strategies in their organisations.
1. Develop a deeper understanding of (perceived) risk
Agreeing on deals in corporate settings marked by uncertainty and heightened sensitivities requires a deeper understanding of your counterpart’s risk perception. For instance, when supplying goods or delivering financial services, your counterpart may be very sensitive to the ‘unknown unknowns’. As a result, they might take a more conservative approach to new initiatives and agree on additional warranties, leading to escalating costs and hindering mutually agreeable deals.
In these circumstances, you may want to consider, contingent agreements. These contractual arrangements or provisions that depend on the occurrence or non-occurrence of specific future events can be contingent liabilities, performance-based compensation, or insurance agreements. For example, if you were negotiating on behalf of an electricity company, you could agree with a supplier of wind turbines on specific commercial terms and conditions based on the performance of the installed turbines.
2. Seek value creation beyond the obvious or expected sources
Business negotiation is fundamentally about value creation and then value capture. Skilled negotiators excel at balancing value creation and value claiming. They understand the importance of maximising the deal's value for themselves while ensuring that the final agreement is acceptable to the other party.
This needs an understanding of value from the other party’s perspective. Knowing how value manifests, whether from meeting technical specifications or achieving higher levels of productivity through to providing peace of mind, is a precondition for effective commercial negotiation. Thus, in situations of high uncertainty, your counterparts may find it challenging to establish what they value and prioritise, resulting in an undefined willingness to pay and erratic negotiation strategies.
To better create and distribute value based on the other party’s needs, constraints, and perspectives requires the ability to ask meaningful questions. These are open, carefully crafted queries designed to obtain valuable information, provoke critical thinking, and help your counterpart focus on what matters. Meaningful questions will help identify authentic sources of value, and conversations focused on these sources of value help move deals forward. Don’t be afraid to engage in robust discussions, explore different options, and challenge assumptions.
Often, the negotiation process can lead to the discovery of creative solutions that enhance the value of the final agreement. Working through issues, understanding perspectives, and crafting compromises can make the outcome more valuable than any party initially envisioned.
3. Embed data analytics in your planning and preparation
Over the last couple of years, we have witnessed the explosion of artificial intelligence (AI) and massive growth in its applications. AI will play an increasingly prominent role in negotiation, with some large retailers like Walmart already adopting AI-based platforms to negotiate with some of their smaller suppliers. Negotiators can leverage data-driven insights to better scope negotiation scenarios, evaluate alternatives, and anticipate other behaviour. AI-powered tools will even assist in real-time analysis and support decision-making during negotiations.
Whether you believe that AI can help you as a negotiator or not, the fact is that AI-enabled or AI-augmented interactions are on the rise. Negotiation is both an art and a science; it’s a social process that blends strategy with human psychology. Whilst AI is unlikely replace humans negotiating multi-issue, complex deals, it will become part of the toolkit effective negotiators use.
4. Structure the negotiation processes
Uncertainty prompts organisations to seek assurances, warranties, and checks when entering negotiation processes. In most cases, this will result in protracted negotiation timeframes. Negotiators will benefit from having a ‘roadmap’ or a ‘game plan’ to better structure and execute negotiation processes. Most negotiations follow a similar staged approach:
- Planning and Preparation - thorough preparation forms the foundation for successful negotiation. Define clear goals, evaluate your Best Alternative to a Negotiated Agreement (BATNA), research the other party’s interests and constraints, and develop a negotiation strategy.
- Connection and Exploration - focus on building rapport, fostering trust, and gathering information. Active listening, empathy, and effective communication are crucial skills for this stage. By understanding the other party’s perspective, you can identify common ground and potential areas for creative problem-solving.
- Making Proposals - present your initial offers, frame your position persuasively and provide supporting arguments. Striking a balance between assertiveness and flexibility is critical. Well-crafted proposals lay the groundwork for constructive bargaining.
- Exchanging and Bargaining – characterised by the back and forth of offers and counteroffers. Skilled negotiators offer calculated concessions to move toward an agreement. In this phase, you will leverage psychological insights gathered earlier and your understanding of the subtle currents that influence decision-making to achieve your objectives and, if relevant, those of the other party.
- Seeking Agreement - this final phase focuses on solidifying the terms of the agreement and ensuring the parties are satisfied with the agreement. You will want to address any remaining concerns, confirm your understanding, and establish a clear path for implementation.
5. Embed flexibility by design
There is no such thing as the ‘right’ negotiation strategy. Every negotiation strategy and its associated behaviours must be adapted to the circumstances. The determining factors for how you define your negotiation approach are the requirement for trust between the parties, the level of dependency, the importance of the relationship, the complexity of the negotiation, and the significance of the deal.
Unlike a fixed formula, negotiation exists in a continuum from competitive to collaborative, demanding adaptability to specific circumstances. Ensure that you adopt an open mind and embrace flexibility by design. Negotiation is not a static skill but a dynamic capability that requires continuous learning and adaptation.
6. Give “silence” its voice in negotiation
In a world of increasing uncertainty, your counterparts may not have all the answers to questions raised during negotiation. Thus, silence may be the ‘best answer’. Silence creates essential ‘breathing space’ that allows negotiators to process information, think through options, and formulate thoughtful responses rather than reacting impulsively. When discussing emotional or complex issues, silence becomes even more critical to enable proper consideration and reflection.
Silence is also a powerful tool to encourage the other party to continue sharing information or reconsider their position. When met with silence instead of immediate pushback, people often feel compelled to fill the void by elaborating on their points or softening their stance. This can reveal valuable insights about their interests and priorities.
Using silence deliberately and appropriately is essential - not as a punishment or power play. The goal is to create a productive space for reflection and response, not to generate discomfort or hostility. Mastering strategic silence requires practice recognising when to stay quiet versus engage.
7. Reverse engineer your analysis and your preparation
Most literature provides advice on planning and preparing negotiation processes for your party. However, instead of asking, “What do we want from this deal? What are our interests and constraints?” ask the reverse questions: “What do they want from this deal? What are their interests, and what are their constraints”?
Formulating and analysing the process from the other party’s perspective enables you to anticipate their needs, predict potential roadblocks, and strategise effectively to achieve a mutually beneficial outcome. By viewing the negotiation through their lens, you can tailor your arguments, offers, and concessions in a way that makes sense to them, increasing the likelihood of a successful outcome. By putting yourself in their shoes, you can identify potential areas of mutual gain and develop proposals that address their key concerns while still meeting your objectives.
8. Balance winning with creating satisfaction
One common misconception is that negotiation is about “winning”. Most negotiations, especially in business contexts, involve ongoing relationships and future interactions. Thus, successful negotiation is about creating satisfaction for both parties whenever possible. When negotiations are focused on mutual satisfaction, they tend to produce more stable and durable agreements, opportunities for future collaboration, and greater total value creation by exploring win-win solutions.
An accurate measure of success lies in creating value and satisfaction for your counterpart rather than “winning” at their expense. By prioritising the other party’s satisfaction, negotiators can build trust, strengthen relationships, and often achieve better outcomes for themselves. This approach recognises that a satisfied counterpart is more likely to follow through on agreements, engage in future dealings, and recommend you to others.
However, this doesn’t mean giving away value. Instead, it means understanding the other party’s interests deeply enough to craft solutions that genuinely meet their needs while protecting your interests. Skilled negotiators know that when the other party feels heard, respected, and satisfied with the outcome, it creates sustainable agreements and long-term business.
9. Re-examine fairness
Commercial negotiation is not about fairness; instead, it’s about finding mutually acceptable resolutions that address the parties’ interests. This principle underpins the difference between positional bargaining - focused on power and individual gain - and a more strategic, collaborative approach that seeks to maximise joint outcomes and build relationships through problem-solving.
To ease the complexities of making deals in business negotiation, focus on mutual acceptability rather than on what is fair. Fairness can be subjective, and parties often disagree on what constitutes a ‘fair’ outcome. A negotiation succeeds when both sides feel they can accept the final terms, even if they view the deal differently.
This pragmatic approach recognises that negotiators typically have different interests, priorities, and perspectives that shape what they consider fair. Rather than getting stuck debating whose view of fairness should prevail, find solutions that address each party’s interests enough to make the deal acceptable, even if not ideal. Remember, focusing on fairness can lead to deadlocked positions and moral arguments. Core interests (profitability, market access, risk management) are more tangible and measurable.
10. Connect behaviour, cognition and emotion
Negotiating is underpinned by a complex interplay of behaviour, cognition, and emotion that shapes how parties interact and reach agreements. Behaviourally, negotiators engage in patterns of communication, information exchange, and influence attempts. These observable actions are driven by cognitive processes - how negotiators perceive the situation, process information, make decisions, and strategise.
Emotions like fear, anger, excitement, or trust significantly impact cognition and behaviour. For example, anxiety might lead to cognitive biases in how we interpret the other party’s behaviour, which then influences our strategic choices and communication style. Similarly, building rapport can create positive emotions that enhance cognitive flexibility and cooperative behaviour.
Skilled negotiators recognise these interconnections and manage them effectively. By regulating their emotions to stay cognitively sharp, adjusting their behaviour to influence the other party’s emotional state positively, and maintaining awareness of how their emotional reactions might affect their judgment and conduct at the table, they are able to achieve successful negotiated outcomes.
Conclusion
As the business landscape evolves, executives and businesspeople will need to embrace new approaches to negotiating. Recognising the multifaceted nature of negotiation in business and organisations, Cranfield School of Management has created the Strategic Negotiation Programme executive development course to address the themes outlined in this article. This integrated and holistic programme combines methods and approaches to develop both your negotiation skills and your team and organisational capabilities, enabling the design and execution of effective negotiation processes. Holistically it addresses the cognitive, behavioural, and emotional aspects of negotiation.
Download the brochure to discover more:
Authors
Javier Marcos - Professor of Strategic Sales and Negotiation, Cranfield School of Management
Alistair White - Former Partner at The Gap Partnership
