Deliver better outcomes, faster: How to negotiate effectively with key stakeholders
28 March 2018
By Edward Levy
“Give me six hours to chop down a tree and I will spend the first four sharpening the axe”
Often attributed to Abraham Lincoln over 150 years ago (though more likely from someone less impressive one hundred years later) this quote remains true today, and was the message with which we kicked off a recent training session focussing on negotiation skills.
Preparation is crucial
We had been asked to work with the trustee board of a Defined Benefit pension scheme which does not have an independent trustee. The Trustees were approaching their triennial valuation and expecting the results to show a significant deficit. In this context, they were looking for some guidance on how to approach a potentially tricky negotiation with the sponsoring employer.
The highlight of the training session was a role play of the discussions with the employer about the valuation result. However, in keeping with the tree chopping example, we spent the bulk of the session thinking about how to approach the negotiations. We emphasised some key points.
- First, it is essential to take some time to understand the context for the negotiations. This ranges from the balance of powers under the Trust Deed and Rules to the strength of the employer’s covenant. It is also important to be clear on the Trustees’ objectives, most fundamentally to ensure that all members receive their benefits as they fall due.
- At the same time, the company will also have its own concerns, with likely emphasis on the amount and volatility of future pension costs. We encouraged the Trustees to put themselves into the company’s shoes and to consider the position of the other side in the negotiations. In some cases, the company representatives may only have limited scope to make decisions. They may also feel under pressure from the powers that be, for example when part of a large group of companies.
- From the Trustees’ perspective, they should remember that there are several levers to pull. As well as the timing and quantum of any recovery plan, issues such as investment strategy, the underlying valuation assumptions and contingent guarantees could all be in the mix.
Our session gave the Trustees a chance to explore their options in a constructive and non-confrontational way. It was great to see the Trustees all playing their part, both in lively discussions and during the role play itself. The Chair said afterwards that he wished that the training had been six years’ earlier.
Negotiating can be a daunting task for those who don’t have to do it on a regular basis. As independent trustees we are well versed in how to handle potentially contentious situations and share our knowledge with our trustee board colleagues regularly.
If you think that a similar session could help you sharpen your axe for a difficult negotiation, contact us to discuss how we can support you.