The Unexplored Cost of Negotiation Avoidance

Assume a food manufacturer purchases metal lids for glass jars. The price is €0.12 per lid, and the company buys around 10 million lids a yearly. The supplier sends over a renewal contract with the exact same terms as last year. The procurement employee notices that competitors seem to be paying less, €0.115 per lid, but decides not to raise this with their current supplier. The relationship with the supplier is good, timelines are tight, and reopening the discussion would feel like unnecessary friction. Instead of negotiating, the manager chooses the easier path: sign and move on.

To smoothen out the process even more, the supplier offers an extra option: for a small “administration fee” of 2%, the contract can be renewed immediately without any review or renegotiation. On the surface, this looks efficient. In reality, it is costly. That 2% fee adds €24,000 to the annual bill. More importantly, by avoiding a simple pricing conversation, the company gives up the chance to some serious savings a change that would have been worth €50,000 a year.

 The real cost of avoiding this negotiation is not just the €24.000 fee. It is the complete €74,000 of value that is lost without anyone ever labeling it a loss. This is negotiation avoidance in its purest form: not a failed deal, not a tense negotiation, but a decision to pay more, simply to avoid the discomfort of working together. 

Below are three possible reasons why negotiation avoidance happens so consistently:

1. Fear of conflict: people associate negotiation with tension and  negativity. A buyer might worry about ruining the relationship with a supplier or an excellent employee fears being labeled “high-maintenance" by their supervisors. People do not avoid negotiation because they think it’s irrational but because they imagine tension, awkward silence, or being seen as greedy. 

2. Underestimating value: people are not aware of the scale on which they, in reality, could be saving money or creating value. A procurement manager may accept an initial proposal assuming that the expected savings are not worthwhile for discussion without realizing the incremental savings over longer time periods. 

3. Lack of skill: people do not know how to properly conduct a negotiation in an effective and comfortable manner.  Suppliers might accept unfavorable terms for a sale not because they lack leverage, but because they are unsure how to create mutual value.

The solution starts with setting negotiation as the social norm rather than the exception. For example, leaders can ask teams to explain why a contract renewal or scope change was not negotiated and reframe negotiation internally as a “value review” instead of hard-bargaining. When negotiation is the standard it becomes harder to justify negotiation avoidance.  

More importantly, negotiation it self is not confined at the management level: The founder of a start-up negotiating a new round of funding from investors, a team leader that is discussing with there team members about workload and deadlines, and vice versa. The mechanic in need of new tools negotiating with their local tool supplier. Negotiation is not something that is only conduced by negotiation experts.

Addressing the fundamental problems of underestimation and the skills require intentional interactions on and individual and institutional level. Employees are not always aware of the things they could do to be better negotiators and create value. Not because they do not want to, but because they do not have the necessary tools available For instance: how to start an conversations with curiosity instead of demands and how to create mutual value and, in the process foster trust without escalating tension. Practicing negotiation in a safe environment helps employees with creating more confidence in negotiations.

 In the end, avoiding negotiation is costly, so lets normalize negotiation and give people the tools they would need to create up more value in the double digits.