5 Ways CFOs Can Lead Through Expert Negotiation

By Nancy Hargreaves

No longer confined to the back office, today’s CFOs are strategic partners who play a critical role in shaping the future of their organizations.

As such, negotiation is one of the most crucial skills a CFO must master. CFOs negotiate high-stakes business objectives that can distinguish organizational success from failure. They leverage negotiation skills to effectively secure financing, manage vendor contracts, and drive mergers and acquisitions.

Here, we explore five key strategies CFOs can employ to excel in negotiations, along with some personal learnings and tips:

1. There’s no such thing as overpreparation.

   This may sound obvious, but research and preparation cannot be underestimated. Thorough preparation is the foundation of any successful negotiation. It involves gathering all relevant data, understanding the market landscape, and identifying the goals and interests of all parties. This also includes understanding your counterpart’s financial health, market conditions, and potential alternatives.

   In practice: I’ve seen arguments fail countless times in Board executive team meetings. These arguments could have been well made if the people involved had done their background reading and research. Objective research helps keep emotions at bay, so you can focus on the facts to get the desired results.

   Pro tip: Leverage data and visuals. Nothing backs up a well-constructed argument better than cold, hard numbers and an easily digestible visual to drive the point home.

2. Build meaningful relationships.

   Negotiation is not just about numbers; it’s also about building and maintaining relationships. Effective CFOs understand the importance of establishing trust and rapport with their counterparts. This can lead to more collaborative and mutually beneficial outcomes.

   When budget planning, for example, is top of mind, executive teams need to function for the greater good and pull together in terms of available resources (namely cash and headcount additions) to move forward with the company’s primary goals and objectives.

   The CFO sometimes plays the role of “bad cop” on behalf of the CEO to corral consensus between sometimes territorial players. In building trust and relationships with the executive team throughout the year, the CFO can demonstrate equity and fairness amongst all parties and achieve that final result, with everyone involved feeling they were heard.

   In practice: Most of my clients are in the Life Science sector and typically pre-revenue) when it’s often easy to forgo marketing dollars. When resources are limited, marketing is the first expense to be reduced, but this can be a mistake. Market positioning and a head start on investor relations will sometimes pay dividends. It piques strategic interest and initiates slow-burn exit options for the company.  

   Navigating the path between maintaining an engaged and enthusiastic marketing/investor relations team, prioritizing the longer-term goals and objectives of the entire company, and being transparent about it builds rapport, trust, and confidence that all departments will be prioritized at the appropriate time. Transparency and trust are essential.

3. Maintain clear and consistent communication.

   Clear and effective communication is essential in any negotiation. CFOs must be able to articulate their positions, listen actively, and respond thoughtfully to the other party’s concerns. This involves not only verbal communication but also non-verbal cues and written documentation. So often, nuances, subtleties, and debate are lost, particularly with remote working, so CFOs must work harder to communicate effectively.

   One aspect of clear communication that is often overlooked is consistency. CEOs and CFOs must deliver consistent messaging to all audiences. That is not to say priorities, initiatives, and mandates do not change occasionally in light of additional or better information and data. However, flip-flopping on messaging is exceptionally damaging and confusing for any organization.

   In practice: I recall one CEO at a company I worked with who was infamous for chasing the “shiny new thing.” Having objectives set at least annually and agreed to as part of a long-term strategic plan will keep the team aligned and in step with progress toward those objectives. 

   Pro tip: Continue revisiting annual objectives and adjusting only as frequently as necessary. Regularly share the work you and your team are doing to attain these objectives.

   [CFO communication can be even more challenging when leading global teams. Here are some tools for mastering multinational management.]

4. Be flexible and learn to adapt.

   Negotiations are rarely linear and often require flexibility and adaptability. CFOs must be prepared to adjust their strategies and approaches based on new information or changing circumstances. This ability to pivot can be a significant advantage in achieving favorable outcomes.

   In practice: One of my recent BioTech clients was looking to raise a Series C round, and despite good clinical data, there were no value inflection milestones in the short to medium term. Rather than continue down what may have been an arduous path to obtaining additional funding, management pivoted and focused instead on a cash-rich shell to back into. While this meant a lot of additional effort on behalf of the team, the dual-track approach resulted in a successful outcome.

5. Practice analytical and strategic thinking.

   CFOs are inherently analytical and strategic thinkers. These skills are invaluable in negotiations, where they must analyze complex financial data, assess risks, and develop strategic solutions. Effective CFOs leverage their analytical capabilities to identify leverage points and create win-win scenarios.

   Stereotypically, the CFO is the logical, rational, and level-headed executive team member, often best positioned to uncover potential pitfalls and manage risk mitigation strategies. It is imperative to remain dispassionate and present the truth as we see it, which often contradicts the desired outcome. It is one thing to present data; however, it is an entirely different skill to present interpretations and suggested actions based on that.

   In practice: One of the most valuable tools I encourage my clients to invest in is a long-term (minimum 5-year) financial plan. While this may sound basic, so many plans I see do not have critical components such as a linked P&L, balance sheet, and, critically, the cash flow.

   Pro tip:  Cash has to be the primary focus, and nuances can be lost with annual (rather than monthly and quarterly) plans. The ability to scenario-plan and tailor to the audience are key components of a financial plan that can assist in decision-making. Assessing business drivers and underlying assumptions also focuses the team’s attention on the KPIs that need tracking and monitoring.

 

The evolving business landscape demands that CFOs manage financial operations and act as strategic negotiators who can navigate complex deals and partnerships.

Incorporating these strategies into their negotiation toolkit will enable CFOs to achieve their immediate objectives, build lasting relationships, and create sustainable value for their organizations.