What is principled negotiating? Why are principled negotiations and benchmarking so well suited to bank compensation negotiations?

In the simplest of terms, principled negotiating is a process that decides negotiating issues on the basis of merit rather than bargaining strength. It’s more efficient than haggling and it produces fairer outcomes for both parties. By referencing a standard that’s independent of the bargaining strength of either party, it gives the negotiating process transparency. How much should a bank charge a company for a particular service? No more and no less than it charges that company’s strategic peers. With benchmarking, both parties know what is equitable.

Who benefits from principled negotiations and benchmarking? Initially, corporations. Historically, they have been disadvantaged in banking negotiations. CBI benchmarking data will let them see, for the first time, the deal they are due. To the extent that the banks have leveraged a strong negotiating position into premium pricing, the savings that result from levelling the playing field will accrue to their customers.

But the banks will be winners too. Benchmarking data will enable banks to publicly justify their pricing policies – an important consideration in a regulated industry that is reporting record profits. It will also remove much of the suspicion and grumbling that’s part of conventional fee negotiations. This can only strengthen banking relationships. In time, it will drive both productivity and market share gains. When banks are pitching new customers, benchmarking data will provide a more believable and compelling rationale for switching. When banks are looking at internal costs, benchmarking will highlight where they’re competitive and where they’re not. The long term benefits that accrue to the banks from principled negotiating and benchmarking far outweigh the cost of any short term pricing adjustments.

Who benefits from principled negotiations and benchmarking? In the case of borrowing costs and bank fees there are no losers.