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Do we need a Chief Negotiation Officer?

August 5, 2021

According to a recent article from McKinsey & Company, 93% of business leaders of companies with more than $1 billion in revenue reported “great interest” in introducing a new role to improve negotiating results: that of chief negotiation officer. 

In a webinar conducted today, members of World Commerce & Contracting do not appear to agree. “A trouble-maker”, observed one. “They’d need to be super-human”, commented another.

Where executives and today’s commercial negotiators agree is that negotiation is a critical competence and it is often frustratingly difficult, especially when it involves large organizations. Authorities are frequently unclear, stakeholders are narrow-minded or rigid in their thinking, gaining attention to develop plans or make decisions can be tortuous. In fact, negotiation is symptomatic of organizational complexity – and it is hard to see how a Chief Negotiation Officer would fix the multiple challenges that stand in the way of speed and value.

That’s not to say we should simply shrug our shoulders and accept the status-quo. It is clear that improvements can and should be made. Digitization of business processes and consequent integration of data flows will surely help, but that is not enough. Simplification of contracts (to make them easier to understand and discuss) is certainly one step. Moving away from rigid agreement templates to more dynamic clause libraries, with pre-determined fall-backs, will facilitate many simpler negotiations, freeing resources to focus on the more important transactions and relationships. Developing and implementing standard planning methods and techniques brings immediate benefits and supports capture of results, allowing future analysis of what works and what doesn’t.

It can certainly be argued that someone needs to have accountability for developing an organization’s negotiating competence, though this could equally (and perhaps more amicably) be achieved through an executive council of key stakeholders. There is also some attraction in creating a Center of Excellence, though again its role and remit must be carefully defined.

Negotiation is important – and probably too important to be thrust onto the shoulders of one person. What do you think?

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  1. Eugene Grace permalink

    I successfully implemented a centralized negotiation effort for multiple employers and clients. The results were consistently superior. The problem for many business executives is that think that everyone is a negotiator. They also fear giving up control to a centralized negotiating group. However, the centralized negotiating team builds experience while the utilization of line executives results in much poorer results. And most executives just want to get past the negotiation over as it may be emotionally difficult for them. In my centralized negotiating unit, the business executive is deeply involved. The team includes a lawyer (me), a tax person, someone from accounting, a risk manager and any technical competence such as telecommunications or other IT person. The traveling team included only those who are absolutely essential with other necessary capabilities on telephonic standby. A core negotiating unit will be a profit center, mine was.

  2. Thanks for sharing your experience, Eugene. How did you measure the unit’s performance to determine its contribution to profitability?

    • Eugene Grace permalink

      Mostly, through revenue directly to the bottom line. We were able to generate more than $16 million of extraordinary income with almost zero expense through negotiation. Other benefits included increased warranties, reduced maintenance expenses, reduced liability profile. But the executive suite focused on the extraordinary income.

      When you have a negotiating team, it means that they are more experienced in that business skill. The failure to recognize negotiating as a separate skill results in the loss of substantial amounts. The more you do of anything, the better you become. Practice, practice, practice. My negotiating team focused on the three “Vs”: value, velocity and volume. By the way, the sales people loved me; they were able to earn more commissions faster.

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