TABLE OF CONTENTS
3. General Analysis
Negotiation is the process whereby interested parties resolve disputes, agree upon courses of action, bargain for individual or collective advantage, and/or attempt to craft outcomes which serve their mutual interests. It is usually regarded as a form of alternative dispute resolution. The first step in negotiation is to determine whether the situation is in fact a negotiation.
The essential qualities of negotiation are: the existence of two parties who share an important objective but have some significant difference(s). The purpose of the negotiating conference to seek to compromise the difference(s). The outcome of the negotiating conference may be a compromise satisfactory to both sides, a standoff (failure to reach a satisfactory compromise) or a standoff with an agreement to try again at a later time. Negotiation differs from "influencing" and group decision making.
Penus Given the above definition, one can see negotiation occurring in business, non-profit organizations, government, branches, legal proceedings, among nations and in personal situations such as marriage, parenting and others.
Whether we realize it or not, we negotiate things every day. Many of these are "little things" (Who's going to pick up the dry cleaning? When can we get together for a discussion? How can I get you to return my voice mail message? Children negotiate for toys and sugar-filled treats. Spouses negotiate for more time, more attention and more control. Employees negotiate for better offices, bigger salaries, more responsibility, etc.
Much of the research on effective negotiation points toward high expectations as one of the fundamental keys to a successful outcome.
As much as we emphasize the importance of win/win negotiating and "putting yourself in the other person's shoes" it is also important that you feel comfortable expecting a very positive outcome for yourself.
Don't be afraid to have unreasonably high expectations, as long as you can back them up with some tangible logic and a process designed to move the other party in your direction.
You can agree or disagree with whatever the other party sees or believes, but you will do well to understand it. By understanding it, you will have the advantage in knowing how to present what you seek as a fair outcome in terms that the other party will be able to accept and understand, rather than fear.
Negotiation means developing an ability to resolve disputes and conflicts. Effective negotiation requires a willingness to work with other people to reach solutions that everyone can live with.
Practical Negotiation Skills
Here are a few quick tips to help you develop this important life skill:
Think through exactly what you want - be specific and have valid reasons for why you need it. Knowing what you want, and why, will help you to be clearer and more confident.
Before you start negotiating, it's important to have an idea of what the other party would like the outcome to be, too. So think it through - why do they need what you're offering/asking for? And do your research - how can you make them happy?
If what you're asking for is fair and justifiable (example: you'd like to earn as much as someone you work equally as hard as) then you're much more likely to get what you want. It's no good thinking - "I want to go to Ibiza, therefore I need a pay rise, so give me the money". Try and demonstrate how what you do is worth just as much as other person's work - and you're on the way.
You have to believe that you deserve your desired outcome. If you don't, the moment your client or boss questions you, your argument will fall apart because you don't have enough confidence in it. Believe it, trust yourself - and rehearse it.
When your boss/client is talking to you during negotiations, don't use that time to plan your next line of attack - it's more important that you listen to them and see their point of view. They'll take you more seriously if you do, even if you disagree with them.
Negotiating isn't about confrontation; it's about two parties reaching an amicable, mutually beneficial agreement. Keep that in mind when you're talking and, even if you don't get what you want this time, view it as good practice for the future.
When you're discussing specifically what you want, as well as what they want, work out what you'd be prepared to walk away with if you're not successful. Is there an acceptable alternative that will keep both parties happy in the short-term? Throw this into the negotiation if it doesn't go in your direction - everyone can compromise.
Expect to win
In addition to having high expectations, here are a few more tips for effective negotiation:
- Agree on the Terms and Scope of the Negotiation.
Lots of negotiations get off to the wrong start because the parties involved have not taken the time to define clearly the areas where they disagree. Very often, parties will rush toward gaining positional advantage over what they see the main issue to be, but before there is real agreement on which issues are at stake, no real agreement is possible.
- Define where all parties agree and disagree - the main sticking points become apparent and areas of possible agreement come to light.
- Discover possible areas of agreement - it sets a more balanced tone as all parties proceed further.
- Define the scope of the dispute - you have already begun to take subtle control of the following negotiating process.
2. See Yourself from the Other Party’s Point of View.
"Empathy" does not mean soft, emotional feelings of affection. It means the ability to put yourself in the other person's shoes, to see the world from his/her point of view. Empathy does not require "sympathy," it only requires understanding.
3. See the Other Party from Their Point of View.
You will be most successful if you can advance your position so the other party can still maintain the "ego" beliefs they hold most important.
“Tact is the ability to see others as they see themselves” - Abraham Lincoln
For example, if the other parties see themselves as "tough negotiators," find ways during the process to emphasize their "toughness" - directly or, (better yet) indirectly - especially when you are making progress in advancing your position.
Be Honest, and Get Your Facts Right.
You can't negotiate successfully if you lose or lack credibility. Never knowingly make a false statement or assertion, but even that is not enough. Very often, successful negotiation comes down to having more - and more accurate - information than the other party. For that reason, be sure to do your homework, so that you can speak of many facets of the issues at hand with confidence.
Use Silence To Your Advantage.
Loud displays, or "blowing off steam" will almost always work to your disadvantage. Experienced negotiators who use such styles know how to feign such emotions at strategic points in time, in a purposeful fashion. So stay cool. A corollary to this rule involves the use of silence. It is a natural human reaction, especially during conflict, to try to fill up silence, due to anxiety. But anxious people during negotiations tend to say things that erode their positions.
By being silent at the right moments, you can give the other party a chance to see your strength, give voice to the thoughts behind their stated positions - so if they are secretly giving in on the inside, you give them a chance to do it for real.
Find Some Objective, Fair Standards All Sides Can Agree Upon.
Take the initiative early on to stake out some fair standard against which any final solution can be judged.
For example, if you are selling your car, you may want to use the Kelly Blue Book - especially since Blue Book values tend to be slightly higher than those found in other such sources, so that this resource favors the seller, but is still a recognized, fair standard.
By setting the standards for final judgment of the solution, you frame the issues, take greater control of the process and frame up the standard to your advantage.
Long Term Relationships
When you know going into a negotiation that you want (or need) to maintain a productive relationship with the other party after the negotiation concludes, there are certain key principles you must adhere to.
Negotiating within the context of any long-term relationship requires trust, but building that trust doesn't exclude pursuing your interests. It means being forthright and listening carefully to the other side. For this type of negotiation - where gaining advantage has to be balanced with maintaining the viability of the relationship - listening is as important in negotiating as stating what you want.
Something More Than Zero-Sum
In some negotiations, a gain for one party means an equal loss for the other. Think of buying a car: You want the lowest price, the salesman wants the highest, and chances are you'll never see each other again.
Often you'll many issues embedded in what looked like just one. For example, in a salary negotiation, an employer wants to pay as little as possible and a would-be employee wants the opposite. But maybe the candidate values stock options more than salary because her financial needs are not immediate. Likewise, the employer may be cash poor and stock rich. Add in flextime, telecommuting, vacation, and other benefits, and what looked like a zero-sum negotiation at first has become a situation in which both sides can find room for agreement.
Divide, Unify, and Conquer
Define all of the distinct elements of challenging issues. Because typically the most challenging negotiations in long term relationships are comprised of multiple layers. The more layers you "peel off," the more nuanced your negotiation becomes. Once you've dissected the problematical point into its different parts, step back and look at the negotiation as a whole. Avoid treating each individual part as its own separate zero-sum negotiation. Build inclusive packages of agreement with give and take on the various issues.
Be Confident and Courteous, Stay Calm and Curious
Staying calm and non-confrontational keeps aggression at bay and the negotiation on track. Asking questions sets a positive tone -- for the other party, and for you. Cultivating curiosity allows you to unpack the situation, focus on the important issues, and rein in your emotions.
It's hard to be upset and curious at the same time.
Aspire to Greatness but Stick With the Possible
Define success before you come to the table. What do you really want? Generally, people lack confidence when entering a negotiation, and they set their aspirations too low. Think about what you believe is a "reasonable" goal for the negotiation, then push it a little.
Write down you objective - your "stretch goal" - but don't think of it as unreasonable. This should be your target. As long as it is within the realm of possibility. Don't create a stretch goal that's totally impossible, but you should push the envelope of possibility.
Those who set higher goals, who expect more, who plan for more, tend to get more.
What Are Your Alternatives?
In addition to a "stretch goal" - determine your best alternative. This is not your bottom line. This is your plan if negotiations fail completely -- taking another job, looking for another job, or just staying put. Your best alternative is in your control -- you can always work to create a better one.
Example: "The other day I went car shopping. I was considering two cars, one much nicer than the other. The nicer car cost much more; I'd resolved to buy it only if I could negotiate a good price. Otherwise, I'd buy the cheaper car. The expensive car was my aspiration; the cheaper one, my alternative."
Write down your best alternative with your "stretch" goal.
Map Your Range
Your stretch goal (highest possible aspiration) and your best alternative delineate the range of possible agreements for you. If the person across the table offers you something below your best alternative, don't take it. It helps to think through all the options that will work for you, and to write them down. Take your notes into the negotiation with you. They offer a touchstone to keep you focused.
Map Their Range
What do the people across the table want? What's their best alternative? Compare their range to yours. Where do the two overlap? That's where you will find agreement.
Dig for information so that you can map their range of possible agreements.
Example: When buying a car, you might obtain the consumer report that tells you the price of every option and establish a price range. You could dig deeper and discover that car dealerships like to sell cars at the end of each quarter because they're taxed on every vehicle in inventory. So that's when you decide to go and buy a car. So essentially, you have worked to map the range of the other party and enter the negotiation when that range is most advantageous to you.
The Digging is Never Done
Ask lots of questions...
Why do you want that? Why is that important to you? Why is THAT a priority for you? Which of these issues is a "want to have" rather than a "need to have?" Have you thought of any creative alternatives? What are your long-term goals with this? Are there others who will be affected by this?
You get the idea - Negotiators say that you have to dig down five levels of 'why' to get to the root of the issue. It's okay to go into a negotiation not knowing everything -- but you must ask questions to understand fully what they want and why.
Have you ever experienced any of the following?
- A father and teenager argue over use of the family car.
- Two brothers disagree about whose job it is to take out the trash and demand that a parent settle their argument.
- A couple strongly disagrees over how to balance a checking account.
- A wife and husband are increasingly at odds over how to share housework and child care.
- A parent's job is threatened because he or she regularly misses work due to a preschooler's frequent illnesses.
- Employees resent their employer, who has set an inflexible work schedule to follow.
To find solutions to these disagreements, negotiation skills are needed every day at home, at work and in the community. Negotiation means developing an ability to resolve disputes and conflicts. Effective negotiation requires a willingness to work with other people to reach solutions that everyone can live with.
Your personal relationships are often shaped by how well you are able to manage and settle conflicts. If conflict is managed effectively, then a relationship can be maintained. But if conflict is handled poorly, the outcomes may weaken your relations with family, friends and work acquaintances over time.
Ineffective approaches to conflict
The following examples illustrate some common situations that can lead to conflict. After a discussion of how to develop successful negotiating skills, this publication concludes with suggestions for resolving the conflicts in these examples.
Example 1: Parent-child conflict
It's Friday, and Jose' and his mother are arguing once again about the teenager's weekend curfew. Mrs. Santiago has grown increasingly distressed by her son's continuing resistance to the 11 p.m. curfew she has set. Jose' insists that this is unfair. Both become so angry and frustrated that they storm off to separate areas of the house to avoid each other and further conflict.
Example 2: Workplace conflict
Lamont has been late for work several times in recent weeks. He has failed to turn in several important project outlines on time without explanation or apology, annoying his employer. Until recently, Lamont's attendance and performance at work had been consistent, motivated, and highly productive. Lamont's recent behavior has been so uncharacteristic that his employer decides to confront him, demanding a meeting the next day.
Example 3: Marital conflict
Diana and James have the "perfect" marriage, two children and a lovely home. Both work in professions that provide personal satisfaction as well as a comfortably secure income. They have "made it." And they are miserable. Work and family roles have left them with little time to spend together and have increased their areas of disagreement. Diana and James have become focused on meeting their own needs with little regard for the needs of the other. Resentment, dissatisfaction and conflict are all they seem to share any longer.
The goal of negotiation: "everyone wins"
People resolve disagreements in many ways. Some tend to deal with potential conflict by denying it or trying to avoid it altogether. Instead of confronting and resolving problems, people may let their anger and resentment build while they remain silent. This approach can result in constant personal stress, which can lead to illness or poor general health. If disagreements are not resolved, the possibility for more intense conflicts at some later date is increased. Problems seldom improve on their own.
Conflict can involve issues of power and authority. Adults may resort to threats and punishments to solve problems with children. Labor unions may strike and management may respond by laying off workers. These are examples of using power to control, intimidate and force solutions on other people. These forced outcomes only add to the grounds for future conflict.
Conflict can also be motivated by ego. Solutions are selfishly sought with little regard for the other person. The conflict becomes a "win/lose" situation in which one person "wins" at someone else's expense. The one-sidedness of this "solution" increases the odds of more conflict. "Losers" will defy, test, resist and retaliate against the "winners."
How can everyone win?
The key to effective negotiation is clear communication. Communication involves three important skills: understanding. You can't have one skill work without the others — for example, you can't have good understanding without good listening and speaking. Negotiation is most effective when people are able to clearly identify and discuss their sources of disagreement and misunderstanding.
Negotiation begins with a clear, concise explanation of the problem as each person sees it. Facts and feelings are presented in a rational manner from the individual's perspective, using "I" statements. Communication between people will go more smoothly when statements such as "I become very upset when you " are used rather than more aggressive statements such as "You make me mad when you," which blames the other person and puts him or her in a defensive position. Shared concerns rather than individual issues remain the focus of discussion throughout negotiation.
The negotiation process will be most effective when people take time to think through what they will say. When possible, plan ahead to meet at a time and place convenient to everyone. A quiet, neutral spot where there are few distractions or interruptions is perfect for open discussion.
Listening is an active process of concentrating all of one's attention on the other person. Encouraging the other person to share thoughts and feelings, giving feedback on what has been heard, and maintaining eye contact are skills that show you are interested in understanding what he or she has to say. It is always helpful to simply ask, "I understood you to say Am I correct in this?" or "I hear you saying that you are, Is that how you feel?" Active listening assures the other person that he or she is heard, accepted and respected. The ability to listen actively supports open, ongoing negotiation.
Thinking ahead or anticipating the course of the discussion are distractions that interfere with listening. Poor attention and listening can lead to misunderstandings, inappropriate solutions and continuing conflict.
Understanding. Before two sides can look for solutions, a common understanding must be reached. If two people do not understand each other's problems and concerns, then the process of negotiation will either be broken off or will end with solutions that do not work.
Active listening encourages understanding. It is important to pay close attention to what someone says as well as to how he or she behaves. Body language, including facial expressions, hand gestures and degree of eye contact, can provide clues about the other person's thoughts and feelings.
Observations, however, are shaped as much by the observer as by the person being observed. It is good practice never to assume to understand the other person without first asking, "Did I hear you correctly?" or "I have noticed that you appear " or "I sense you are under strain. Do you want to talk about this?" and "I'd like to hear from you about how you are feeling" are all good examples of statements that encourage communication and better understanding between people.
Guidelines for successful negotiation
- Show respect. Success rests in accepting the other person despite differences in values, beliefs, educational experiences, ethnic backgrounds or perspectives. Negotiation permits you to examine a problem from all sides, and to promote understanding and interest in the other person without necessarily agreeing to her or his viewpoint. Taking time to listen and to ask questions makes it easier to learn more about someone's perspectives. Considering different perspectives will increase the range and variety of possible solutions. Genuine interest in other people and in their contribution to finding solutions builds trust. Trust provides a foundation for continuing a relationship. A foundation of trust also eases future efforts to solve problems.
- Recognize and define the problem. Each person begins with a clearly identified statement of what he or she wants and/or needs. Negotiation should identify not only individual concerns, but mutual concerns, perceptions and interests. From this process, a common ground for agreement between the individuals is sought. Selfish issues and goals are eliminated in favor of mutually acceptable goals. Problems are examined apart from the personalities involved. Blaming the other person is inappropriate and destroys the cooperative nature of negotiation.
- Seek a variety of solutions. More information about the problem may be needed before a solution can be decided upon. It may be helpful to examine other sources of information such as books, magazine articles and people who may be familiar with the issue. Outside assistance may help you to overcome your own biases. Mediators can provide impartial assistance with the negotiation process.
- Brainstorming is one way to gather many creative ideas rapidly. This process allows everyone to openly make suggestions without fear of criticism. At this stage, every suggestion has value and is accepted. After all suggestions have been shared, they are reviewed to determine whether they might coincide or overlap with each other. Negotiation then becomes a matter of choosing a solution to which no one has an objection. Remember, personal goals should not take priority over shared goals.
- Collaborate. Working together doesn't mean "giving up" or "giving in" to another person's demands or goals. Two or more individuals can agree that disagreement exists. However, they can also agree to put aside their anger, frustration, resentment and egos in favor of working together for a solution to a common problem. All negotiated work is completed by consensus. A negotiated solution is reached when everyone has given up something to gain common benefits.
- Be reliable. It is important to follow through with negotiated agreements. The very work of negotiation implies a commitment toward whatever outcome has been decided. Developing a "plan of action" that spells out who is going to do what, where, when and how is helpful. This plan is followed for a specified period of time, then evaluated at the end of that time period. It may be necessary to change plans and goals along the way, depending on how well the first draft met the shared needs of the individuals involved. However, the success of any negotiated outcome depends on everyone's fullest cooperation and participation. Individuals become reliable and trustworthy partners as a result.
- Preserve the relationship. In general, people will try to preserve valued relationships. Negotiation is a non-adversarial approach to resolving conflict in those relationships. There are no "good guys," "bad guys," or "winners/losers." Negotiation is based on equality. No one wields more power or control than another. The individual's ideas, attitudes, values and objectives are recognized and respected as legitimate. Solutions are mutually agreed upon.
Successful negotiation outcomes
This section provides suggestions for resolving the conflicts discussed in the three examples at the beginning of this article.
Example 1: Parent-child conflict
Effective approach: compromise. Mrs. Santiago has retreated to her room to calm down. It is time to discuss the issue of curfew with Jose' directly. She is careful to listen to Jose' and to give him time, attention and respect. He can express feelings without fear that his mother will ignore or reject them. Jose' admits that he had grown frustrated by his mother's seeming lack of respect for him, causing his anger. Mrs. Santiago and Jose' agree to an 11:30 p.m. curfew. Jose' had asked for a midnight curfew, but settles for the additional half hour. Mother and son have found a middle-ground solution that both can live with.
Example 2: Workplace conflict
Effective approach: consensus. At the meeting, Lamont explains that he has been caring for his elderly father, who suffers from Alzheimer's disease. Attempting to maintain a schedule at home and at work has proven difficult. Lamont is concerned that he will lose his job. Lamont's employer reassures him that his job is not in jeopardy. However, alternative and more flexible scheduling must be considered to resolve family-work conflicts. A consensus is sought. The employer values Lamont's training and experience, and Lamont values his job and his employer's understanding. Both are willing to discuss options and to try out alternatives that best serve mutual needs.
Example 3: Marital conflictEffective approach: mediation. Intimate relationships can become battlegrounds of unresolved issues, complaints and unrealistic expectations. Diana and James' marriage is one that is stuck and in serious trouble. They are unable to step back and view their problems rationally. Both have acknowledged their inability to resolve any of the multiple problems facing them. Diana and James decide to seek the assistance of a family mediator.
Licensed family mediators are trained to provide impartial help in defining the problems and to assist in the problem-solving process. Mediators and counselors both provide additional information and resources to individuals in difficult relationships.
Mediation has proven successful in relationships that have repeated difficult-to-solve problems. Diana and James' marital problems are not unusual. For that reason, family mediation services are being used more often as an alternative to counseling and/or legal services. For further information concerning family mediation, see "Resources."
Negotiation is most successful when both sides recognize the value of a relationship and have a mutual desire to continue it.
Participate actively in the process.
Show consideration and acceptance of each other's perspectives, values, beliefs and goals. Separate personality from the issue involved. Work together to develop a solution everyone can accept.
Successful negotiation tips:
- Communicate clearly.
- Respect the other person.
- Recognize and clearly define the problem.
- Seek solutions from a variety of sources.
- Collaborate to reach a mutual solution.
- Be reliable.
- Preserve the relationship.
Life is far easier when people have the sense to see things our way. In the real world, however, capital planning, corporate borrowing, annual budgeting, and priority setting all tend to require that people from different organizations - or even our own people with a different point of view - find satisfactory means to reach agreement.
For many decision-makers, annual obligations like business plan reviews and budget approvals tend to coincide with increased levels of stress and anxiety. We are well-prepared for the substance to be decided; it's the process that is so unsettling.
It can be troublesome if the short-term objective of minimizing conflict gets in the way of developing and achieving long-range goals. Interest-based negotiation techniques can help us focus our energy on the process and guide that process towards yielding a satisfactory result.
Most negotiations are repeat performances. We tend to deal with the same bankers, suppliers, clients, directors, managers, etc., for a long time. It is important to recognize and give proper weight to the context in which a negotiation is taking place; if it is within an on-going relationship, the significance of that relationship must be considered.
We can take positive steps to prepare for the decision-making process and we can monitor our own behavior - and that of other participants -- as the process goes forward. By following a few common sense rules we can reduce conflict and turn it into cooperation and reach solutions that really work for all the participants.
1. Separate the people from the problem. Religion teaches us to hate the sin not the sinner. If we view the problem as that which needs to be resolved rather than viewing someone holding a contrary viewpoint as a person to be defeated, the odds of a successful collaboration increase.
One specific technique that can work is to change the shape of the table rather than sitting opposite your 'opponents', arrange the seating so that all the parties are sitting together facing a flip chart or blackboard where the problem is presented. That makes it clear that all the participants are facing the problem together, that instead of it being 'us' against 'them', it is a case of 'all of us' against 'it'.
2. Distinguish between interests and positions. The classic story to illustrate this describes two sisters fighting over the only orange in the family larder. Each sister must have the entire orange for herself, any less is impossible. A wise parent asks each of the girls (in private) why she wants the orange. One explains she wants to drink the juice; the other wants to use the rind to cook a pudding. What each sister wants is her position, why she wants it is her interest. In this case, the simple solution is to give the cook the rind after the juice has been squeezed for the thirsty sister - thus meeting the interests of both.
When preparing for a negotiation, or after it has begun, don't just ask "What do they want?" It is also important to ask, "Why do they want it?" It is equally important - and often more difficult - to ask the same questions about your own views. Many successful negotiators find they will be more successful if they focus on understanding their interests as they enter discussions. If they haven't started out with a perfect package, the ideas of others may actually improve their final result.
Negotiators who arrive with a complete package can create real problems. Modifications to their ideas might be taken personally, they may be stubborn, and reaching a satisfactory resolution is made more difficult.
3. Consider your BATNA (Best Alternative To a Negotiated Agreement). If you do not reach an agreement with the other, does that really make things worse for you? When you're selling an antique Rolls Royce and have received an offer of $43,250, you know what another potential buyer has to do to get you interested. Of course, the first offerer may plan to use the car for chauffeuring wedding parties while a second offerer collects and restores antique cars and preserves them indoors. In determining you BATNA, a straightforward review of your interest will give you the clearest picture.
There's an old American country & western song about playing poker that summarizes the concept of BATNA: "You have to know when to hold and know when to fold." If you accept your BATNA, you know when you can simply turn your back on the negotiations. But it is important not to ignore the other party's BATNA. The relative strength of each party's BATNA will determine the balance of power each can exercise.
4. Silence is golden. This is true for two reasons: If one party is highly opinionated or emotional, if their approach is threatening or extremely demanding, keeping quiet after they finish speaking can be quite unsettling to them. It is like jujitsu; you allow them to be tripped up by their own forcefulness. Most people are troubled by silence in the midst of heated discussion. Sometimes silence is viewed as disapproval -- but since no specific disapproval has been voiced, it cannot be treated as an attack. It has happened on many occasions that, when met with silence, people have modified their previous statements to make them more palatable.
Silence is an important element in the crucial tool called Active Listening. The job of a good negotiator is to listen to and understand what others are saying. After all, you can't make an intelligent response to an opinion you do not understand. The discipline of Active Listening requires that you focus on what another person is saying; don't spend your time shaping a stinging response that will put them in their place.
Active Listening has some interesting consequences: The listener may actually be able to get a clearer picture of the other party's ideas. And when the listener's response shows just how good a job he or she has done listening, it can shock the other party: "Good grief, they actually paid attention to me!"
One other terrific result of Active Listening is that the discipline of focusing on other opinions can also give the listener the chance to reflect on the process and strategy. Stepping aside and taking a dispassionate view of the goings-on can make one a far more effective negotiator.
5. Pursue Fairness. If all the participants view the process as fair, they are more likely to take it seriously and 'buy into' its result. Moreover, the focus on fairness can have an important impact on the substantive result. If the parties to a negotiation can agree on standards against which elements of the agreement can be measured, it can give each a face-saving reason for agreeing. Referral to the Base Rate of the other major lending institutions, an industry standard of marketability, or other common measures, can validate the agreement the parties reach.
To be considered successful, an agreement must be durable. Parties who walk away from the table grumbling may regret their commitment and only honor it grudgingly. If they end up looking for excuses to get out from under an unwanted result, the gains achieved by the other side may prove to be short-term indeed.
6. Only one person can get angry at a time. This is yet another means to help individuals keep a cool head and pay attention to the process and the strategy, as well as the substance of the negotiation. If it's not your 'turn' to be angry, the exercise of restraint can be turned into a positive opportunity to observe what is going on with a clear eye. No less important, yelling at each other is not negotiation; it is confrontation. In those situations there may possibly be a 'winner'; but it is even more likely there will be a 'loser'.
In times past, when two property owners had a disagreement, they would hire knights and wage war to reach a conclusion. Then somebody invented lawyers, and the problem-solving process became one of waging law. Our society has reached a level of sophistication in which we recognize that the costs of waging war - or waging law - are terribly high. With the use of good negotiation skills, we have the capacity to reach conclusions in a more satisfactory manner: we can wage peace.
8 key Principles
According to the Rolling Stones, "You can't always get what you want." The question now becomes, "How many of the stakeholders can get what is in their interests?" If a business is to succeed in today's climate, everyone must be prepared to negotiate to arrive at favorable results.
Negotiating is an art practiced by virtually everyone; it is a craft practiced by few. There are many techniques to making negotiation work. If you pay careful attention to the following 8 key principles, you should find that negotiating, with all the stakeholders who are clamoring for your attention, will yield more efficiency, less stress, and greater long-term success.
- Be Conscious of the difference between positions and interests. If you can figure out why you want something - and why others want their outcome - then you are looking at interests. Interests are the building blocks of lasting agreements.
- Be Creative. Anyone can do things the same old way. Using brainstorming techniques, listening to outlandish proposals and opening up to unanticipated possibilities expand agreement opportunities. If you respond with new ideas and do the unexpected, you can open doors to far greater gains than when you behave predictably. Creativity can make everyone look good.
- Be fair. If people feel a process is fair, they are more likely to make real commitments and less likely to walk away planning ways to wriggle out of the agreement. Sometimes things are helped when a neutral, external authority is used to measure fairness - a dictionary, a lab test, or an academic article, for instance.
- Be prepared to commit. You shouldn't make a commitment unless you can fulfill it. Your commitment isn't worth much unless the parties to the negotiation are Drop-Dead Decision-Makers. Moreover, commitment is not likely to result unless all parties feel the process has been fair.
- Be an active listener. Communication takes place when information passes from a source to a receiver. If you spend all of your listening time planning how to zing the other party, then, when they finally stop talking, you haven't heard them. Focus on what others say, both on their words and their underlying meaning.
This will help you understand the interests upon which agreement can be based. When your response makes it clear that you've really been listening (and after the other party gets over the initial shock), they, too, may be more prepared to listen. Active listening can change the rules of the game and raise the level of civility in the negotiation.
- Be conscious of the importance of the relationship. Most of your negotiation is with repeaters (people you run across time after time such as your spouse and kids). The same is true for borrowers, directors, and representatives of affiliated institutions. If you understand the relative priority of the relationship, it can be easier to know when giving on a particular point may yield short term costs but long term gains.
- Be aware of BATNAs. BATNA stands for the Best Alternative To a Negotiated Agreement. Your BATNA is the situation you want to improve by negotiating with a given party or set of parties. If you can improve things on your own, you don't need to negotiate.
But BATNA is not your bottom line. It is a measure of the relative value of negotiating a particular issue with a particular party -- or whether you can fall back on better alternatives. Be Prepared. In order to negotiate effectively, efficiently, and wisely, it is crucial to prepare. Your job is not to outline a perfect, total solution; that would be a positional approach.
Preparation means studying the interests and BATNAs of every possible party. It means understanding the short and the long term consequences you use and the substantive results you pursue. Doing your homework can save a lot of time.
- Continually Enhance Your Negotiation Skills. Enhancing your negotiating skills is an important element of personal development. Helping your colleagues and staff to negotiate better will save time, reduce stress, and increase productivity. The changing cast of stakeholders means that successfully negotiating the minefields in the business world can be crucial to your own health and success.
Consumers sometimes think of negotiations as intimidating, formal proceedings that only happen in lawyers' offices, or under high pressure in venues like car dealerships. In reality, people are negotiating all the time.
In our daily lives, negotiating can be a means of making decisions with other people in a civilized, productive way. What you can negotiate ranges from what restaurant you'll have dinner at, to what movie you're going to see, the purchase of a house [or] negotiating a loan from a financial institution.
Negotiations with teen-agers have financial implications, too: when they want money, clothes or books. Deciding where to go on vacation is a major financial decision. Negotiation really covers every area of life. Virtually all people negotiate on a regular basis at work.
It often help to look at most of these day-to-day negotiations as episodes in ongoing relationships. You can start at the dinner table, or in other private social situations. You think about what you're doing and what you want to accomplish.
You need to understand why you want what you want, what your interests are and whether a given negotiator can be responsive to you. What good does it do to ask your father-in-law for a favor if his wife is going to make the actual decision?
Zone of Possible Agreement
In some cultures negotiation is highly choreographed. If in an Arab soukh you give a merchant his or her first asking price, you've ruined their day. You're supposed to be outraged by the price they are asking, and they are supposed to be outraged by the first price you're offering.
Try to figure out your zone of possible agreement. We can't always do that off the top of our heads, so asking questions helps us find out. You might ask, "What kind of price range sounds attractive?"
Big-ticket items are usually more open to negotiation; houses, cars, things like that. Hotel rooms and airplane fares are, too. Ask the representative: "Is this really the best price you can offer me?"
The Most Common Mistakes
Not being prepared is the most common negotiation error, along with not understanding why you're looking or something. You can say you want a blue dog, but WHY do you want it? Do you want to make a fashion statement, or do you want a dog that will scare everyone else? Understanding your core reasons for wanting something will give you added negotiation flexibility.
A very major mistake is getting emotional and taking the dealings personally. "An adversary is not necessarily an enemy," as Richard Nixon once said. That's why people negotiate better on someone else's behalf. They can be more cold-bloodedly analytical about somebody else's decision than their own.
Negotiations at Work
In the work environment, you need an understanding of how badly they need you. Otherwise you'll always feel at a disadvantage. You can only learn how badly they need you by asking questions and doing homework. That gives you a measure of the relative balance of power, and understanding the balance of power gives you a sense of the leeway in negotiations.
If you're being out-placed, or offered early retirement, you may still have some leverage. Let's say they have to downsize by 97 employees and 95 have agreed. Your leverage is probably better at number 96 than if you are the first employee to sign up. You have to understand the needs of the people making the offer.
Clearly, you have to look as best you can at your short- and long-term interests. If you're downsized out on the street, you may need enough money to pay the rent next month, but in the long-term maybe another job would be better. Perhaps you'll be able to quit the short-term job, but you may not have the choice. You've got to keep your eyes and ears open and know when to keep your mouth shut.
Every negotiation has long-term implications
Negotiation results don't just impact on the other side of the table. They can impact your reputation in the community, your reputation among friends. The question to ask is: How would you feel if the story was published on the Globe editorial page, read out in church or if your mother found out?
Ask for more than you expect to settle for
One of the cardinal rules of effective negotiation is that you should ask the other side for more than you expect to get.
You should feel comfortable asking for more than some people might consider reasonable.
Henry Kissinger went so far as to say, "Effectiveness at the conference table depends upon overstating one's demands."
Think of some reasons why you should do this:
- Why should you ask the store for a bigger discount than you think you have a chance of getting?
- Why should you ask your boss for an executive suite although you think you'll be lucky to get a private office?
- If you're applying for a job, why should you ask for more money and benefits than you think they'll give you?
- If you're dissatisfied with a meal in a restaurant, why should you ask the captain to cancel the entire bill, even though you think they will take off only the charge for the offending item?
If you're a salesperson:
- Why, if you are convinced that the buyer wants to spread the business around, should you still ask for it all?
- Why should you ask for full list price even if you know it's higher than the buyer is paying now?
- Why should you ask the other person to invest in the top of the line even when you're convinced they're so budget conscious that they'll never spend that much?
- Why should you assume that they'd want to buy your extended service warranty even though you know they've never done that in the past?
If you think about this, you'll probably came up with a few good reasons to ask for more than you expect to get.
You'll also probably come up with many more reasons why this makes you a bit uncomfortable. Most people have an innate desire to be fair and "reasonable" - but who determines what is truly fair? In a negotiation, the only thing that's fair is a final agreement that both parties perceive to be beneficial.
Win/win does not have to mean meeting the other party half way. In fact, win/win CAN mean getting everything you want. It can mean getting more than you thought possible. As long as the other party also receives adequate benefits from the final deal.
Asking for more than you can reasonably expect to gain gives you some negotiating room. If you're selling, you can always come down, but you can never go up on price. If you're buying, you can always go up, but you can never come down.
What you should be asking for is your MPP-your maximum plausible position.
This is the most that you can ask for and still have the other side see some plausibility in your position. There is a tendency among many people, when they know little about the other side's MPP, to discount or diminish their negotiation request from the very start. But the less you know about the other side, the higher your initial position should be, for two reasons:
- You may be off in your assumptions. If you don't know the other person or his needs well, he may be willing to pay more than you think. If he's selling, he may be willing to take far less than you think.
- If this is a new relationship, you will appear much more cooperative if you're able to make larger concessions. The better you know the other person and his needs, the more you can modify your position. Conversely, if the other side doesn't know you, their initial demands may be more outrageous.
If you're asking for far more than your maximum plausible position, imply some flexibility. If your initial position seems outrageous to the other person and your attitude is "take it or leave it," you may not even get the negotiations started. The other person's response may simply be, "Then we don't have anything to talk about." You can get away with an outrageous opening position if you imply some flexibility.
If you're buying real estate directly from the seller, you might say, "I realize that you're asking $200,000 for the property and based on everything you know that may seem like a fair price to you. So perhaps you know something that I don't know, but based on all the research that I've done, it seems to me that we should be talking something closer to $160,000." At that the seller may be thinking, "That's ridiculous. I'll never sell it for that, but he does seem to be sincere, so what do I have to lose if I spend some time negotiating with him, just to see how high I can get him to go?"
If you're a salesperson you might say to the buyer, "We may be able to modify this position once we know your needs more precisely, but based on what we know so far about the quantities you'd be ordering, the quality of the packaging and not needing just-in-time inventory, our best price would be in the region of $2.25 per widget." At that the other person will probably be thinking, "That's outrageous, but there does seem to be some flexibility there, so I think I'll invest some time negotiating with her and see how low I can get her to go."
Unless you're already an experienced negotiator, here's the problem you will have with this. Your real MPP is probably much higher than you think it is. We all fear being ridiculed by the other. So, we're all reluctant to take a position that will cause the other person to laugh at us or put us down. Because of this intimidation, you will probably feel like modifying your MPP to the point where you're asking for less than the maximum amount that the other person would think is plausible.
Another reason for asking for more than you expect to get will be obvious to you if you're a positive thinker: You might just get it. You don't know how the universe is aligned that day. Perhaps your patron saint is leaning over a cloud looking down at you and thinking, "Wow, look at that nice person. She's been working so hard for so long now, let's just give her a break." So you might just get what you ask for and the only way you'll find out is to ask for it.
In addition, asking for more than you expect to get increases the perceived value of what you are offering. If you're applying for a job and asking for more money than you expect to get, you implant in the personnel director's mind the thought that you are worth that much. If you're selling a car and asking for more than you expect to get, it positions the buyer into believing that the car is worth more.
Another advantage of asking for more than you expect to get is that it prevents the negotiation from deadlocking.
Sometimes (although rarely) it serves your purpose to drive a deadlock. But most negotiation deadlocks are created inadvertently. Often because one or both parties didn't have the courage initially to ask for more than they expected to get. So they both start the negotiation at their true, final, inflexible bottom line. And if there isn't a quick deal, neither party has left "wiggle room" to negotiate further.
A final reason reason you should ask for more than you expect to get - is that it's the only way you can create a climate where the other person feels that he or she won. If you go in with your best offer up front, there's no way that you can negotiate with the other side and leave them feeling that they won.
- These are the inexperienced negotiators always wanting to start with their best offer.
- This is the job applicant who is thinking, "This is a tight job market and if I ask for too much money, they won't even consider me."
- This is the person who's selling a house or a car and thinking, "If I ask too much, they'll just laugh at me."
- This is the salesperson who is saying to her sales manager, "I'm going out on this big proposal today, and I know that it's going to be competitive. I know that they're getting bids from people all over town. Let me cut the price up front or we won't stand a chance of getting the order."
Effective negotiators know the value of asking for more than you expect to get. It's the only way that you can create a climate in which the other side feels that he or she won.
Let's recap the five reasons for asking for more than you expect to get:
- You might just get it.
- It gives you some negotiating room.
- It raises the perceived value of what you're offering.
- It prevents the negotiation from deadlocking.
- It creates a climate in which the other side feels that he or she won.
If you don't feel you're getting enough out of a negotiation, nibble for more at the end.
Negotiators know that by using the Nibbling tactic, you can get a little bit more even after you have agreed on everything.
You can also get the other person to do things that he or she had refused to do earlier. Car salespeople understand this, don't they? They know that when they get you on the lot, a kind of psychological resistance has built up to the purchase. They know to first get you to the point where you're thinking, "Yes, I'm going to buy a car. Yes, I'm going to buy it here."
Even if it means closing you on any make and model of car, even a stripped down model that carries little profit for them. Then they can get you into the closing room and start adding all the other little extras that really build the profit into the car.
So, the principle of Nibbling tells you that you can accomplish some things more easily with a Nibble later in the negotiations.
Children are brilliant Nibblers, aren't they? If you have teenage children living at home, you know that they don't have to take any courses on negotiating. But just to stand a chance of surviving the whole process of bringing teenagers up you have to be a master negotiator, because they're naturally brilliant at it. Not because they learn it in school but because when they're little everything they get, they get with negotiating skills.
Think about it - children have virtually no leverage over adults except that which they create through negotiation tactics. So of course they get very good at it. They learn when to cry, when to smile, when to be especially cute and when to be terribly stubborn.
And they definitely know when and how to nibble:
"Dad, can I borrow the car for a couple of hours?"
"Thanks... could I get next week's allowance in advance?"
"No. You know the rules about that."
"How about just a few bucks for gas?"
"Uh, OK. But make sure you're back in time for supper."
"But I wanted to go to a movie. It won't be over until later."
"I thought you were only going to borrow the car for a couple of hours."
"Maybe five or six. Could I get half of my allowance in advance?"
You get the idea - What's happening here is that a person's mind always works to reinforce decisions that it has just made. Effective negotiators know how this works and use it to get the other side to agree to something that he or she wouldn't have agreed to earlier in the negotiation.
Why is Nibbling such an effective technique? To find out why this works so well, a couple of psychologists did a study at a racetrack in Canada. They studied the attitude of people immediately before they placed the bet and again immediately after they placed the bet. They found out that before the people placed the bet, they were uptight, unsure, and anxious about what they were about to do. Compare this to almost anyone with whom you negotiate: They may not know you, they may not know your company, and they certainly don't know what's going to come out of this relationship. Chances are they're uptight, unsure, and anxious.
At the race track, the researchers found out that once people had made the decision to go ahead and place the bet that suddenly they felt very good about what they had just done and even had a tendency to want to double the bet before the race started. In essence, their minds did a flip-flop once they had made the decision. Before they decided, they were fighting it; once they'd made the decision, they supported it.
If you're a gambler, you've had that sensation, haven't you? Watch them at the roulette tables in Atlantic City or Vegas. The gamblers place their bets. The croupier spins the ball. At the very last moment, people are pushing out additional bets. The mind always works to reinforce decisions that it has made earlier.
So one rule for effective negotiators is that you don't necessarily ask for everything up front. You wait for a moment of agreement in the negotiations, then go back, and Nibble for a little extra.
You might think of the negotiating process as pushing a ball uphill, a large rubber ball that's much bigger than you. You're straining to force it up to the top of the hill. The top of the hill is the moment of first agreement in the negotiations. Once you reach that point, then the ball moves easily down the other side of the hill. This is because people feel good after they have made the initial agreement.
They feel a sense of relief that the tension and stress is over. Their minds are working to reinforce the decision that they've just made, and they're more receptive to any additional suggestions you may have.
Always go back at the end to make a second effort on something that you couldn't get them to agree to earlier.
Look out for people nibbling on you.
There's a point in the negotiation when you are very vulnerable, and that point is when you think the negotiations are all over.
You've probably been the victim of a Nibble at one time or another. For example: You've been selling a car or a truck to someone. You're finally feeling good because you've found the buyer. The pressure and the tension of the negotiations have drained away. He's sitting in your office writing out the check. But just as he's about to sign his name he looks up and says, "That does include a full tank of gas, doesn't it?" You're at your most vulnerable point in the negotiations, for these two reasons:
- You've just made a sale, and you're feeling good. When you feel good, you tend to give things away that you otherwise wouldn't.
- You're thinking, "Oh, no. I thought we had resolved everything. I don't want to take a chance on going back to the beginning and re-negotiating the whole thing. If I do that, I might lose the entire sale. Perhaps I'm better off just giving in on this little point."
So, you're at your most vulnerable just after the other person has made the decision to go ahead.
Look out for people Nibbling on you.
Making a huge sale has excited you so much that you can't wait to call your sales manager and tell her what you've done. The buyer tells you that he needs to call purchasing and get a purchase order number for you. While he's on the telephone, he puts his hand over the mouthpiece and says, "By the way, you can give us 60 days on this, can't you? All of your competitors will."
Look out for people Nibbling on you. Because you've just made a big sale, and you're afraid to reopen the negotiations for fear of losing it, you'll have to fight to avoid the tendency to make the concession.
Countering the Nibble
The counter-tactic to the Nibble is to gently make the other person feel-cheap. You have to be very careful about the way you do this because obviously you're at a sensitive point in the negotiation.
You smile sweetly and say: "Oh, come on, you negotiated a fantastic price with me. Don't make us wait for our money, too. Fair enough?" So, that's the Counter Gambit to the Nibble when it's used against you. Be sure that you do it with a big grin on your face, so that they don't take it too seriously.
So, consider these points when you go into negotiations:
- Are there some elements that you are better off to bring up as a Nibble, after you have reached initial agreement?
- Do you have a plan to make a second effort on anything to which you can't get them to agree the first time around?
- Are you prepared for the possibility of them Nibbling on you at the last moment?
So, effective negotiators always take into account the possibility of being able to Nibble. Timing is very critical-catching the other parties when the tension is off and they're feeling good because they think the negotiations are all over.
On the other hand, looking out for the other side Nibbling on you at the last moment, when you're feeling good. At that point, you're the most vulnerable and liable to make a concession that half an hour later you'll be thinking-why on Earth did I do that? I didn't have to do that. We'd agreed on everything already.
Key points to remember:
- With a well-timed Nibble, you can get things at the end of a negotiation that you couldn't have gotten the other side to agree to earlier.
- It works because the other person's mind reverses itself after it has made a decision. He may have been fighting the thought of buying from you at the start of the negotiation. After he has made a decision to buy from you, however, you can Nibble for a bigger order, upgraded product, or additional services.
- Being willing to make that additional effort is what separates great salespeople from merely good salespeople.
- Stop the other person from Nibbling on you by showing her in writing the cost of any additional features, services, or extended terms, and by not revealing that you have the authority to make any concessions.
- When the other person Nibbles on you, respond by making him feel cheap, in a good-natured way.
- Avoid post-negotiation Nibbling by addressing and tying up all the details and using Gambits that cause them to feel that they won.
If you have to give in to a Nibble
Always get something in return if you have to give in to a nibble. Even if it is something that is relatively small and insignificant, it is important that the other party pays some sort of price for the Nibble.
Because at this point you are training the other party - if they Nibble on you and you give in, without getting something in return, they will tend to come back and Nibble some more. Again and again and again.
Example: A car salesman thought he had a deal closed until the prospective buyer said "We've got a deal, if you can throw in a set of new tires."
The car salesman didn't give in right away, but eventually said "With the deal we're giving you on the car, there's no way I can afford the cost of new tires, but I can go on the lot and see if we've got a similar vehicle with almost new tires we can switch out on your vehicle. Then he made the prospective buyer walk around the car lot with him to find a set of "almost new" tires he would swap out.
So the prospective buyer got most of his Nibble, but he paid the price in a) Time spent walking the lot and b) Feeling a little cheap to be going through so much trouble for a set of "almost new" tires.
If the salesperson had just gone ahead and given a new set of tires, the Nibbling would likely have continued. Because once a Nibbler gets a taste of getting "free stuff" just for asking, with no additional price to pay, then they'll never stop asking.
Reject the first offers
Negotiators know that you should never say "yes" to the first offer (or counter-offer) because it automatically triggers two thoughts in the other person's mind.
Let's say that you're thinking of buying a second car. The people down the street have one for sale, and they're asking $10,000. That is such a terrific price on the perfect car for you that you can't wait to get down there and snap it up before somebody else beats you to it.
On the way there you start thinking that it would be a mistake to offer them what they're asking, so you decide to make a super low offer of $8,000 just to see what their reaction is. You show up at their house, look the car over, take it for a short test drive, and then say to the owners, "It's not what I'm looking for, but I'll give you $8,000." You're waiting for them to explode with rage at such a low offer, but what actually happens is that the husband looks at the wife and says, "What do you think, dear?"
The wife says, "Let's go ahead and get rid of it."
Does this exchange make you jump for joy? Does it leave you thinking, "Wow, I can't believe what a deal I got. I couldn't have gotten it for a penny less"? I don't think so. I think you're probably thinking:
1. I could have done better, or
2. Something must be wrong.
First Reaction: I could have done better. The interesting thing about this is that it doesn't have a thing to do with the price. It has to do only with the way the other person reacts to the proposal. What if you'd offered $7,000 for the car, or $6,000, and they told you right away that they'd take it? Wouldn't you still think you could have done better? What if that bearing salesperson had agreed to $150 or $125?
Wouldn't you still think you could have done better?
It doesn't have anything to do with the price - it has to do only with the way the other person reacts to the proposal.
Second Reaction: Something must be wrong. Maybe there is something you don't know or understand. When the seller of that car said "yes" to your first offer, after thinking "I should have offered less" your net thought is probably "what if there is something wrong with it?"
These two reactions will go through any person's mind if you say "yes" to the first offer. Let's say your son came to you and said, "Could I borrow the car tonight?" and you said, "Sure son, take it. Have a wonderful time." Wouldn't he automatically think, "I could have done better. I could have gotten $10 for the movie out of this"? And wouldn't he automatically think, "What's going on here? Why do they want me out of the house? What's going on that I don't understand"?
This is a very easy negotiating principle to understand, but it's very hard to remember when you're in the thick of a negotiation. You may have formed a mental picture of how you expect the other side to respond and that's a dangerous thing to do. Napoleon Bonaparte once said, "The unforgivable sin of a commander is to "form a picture - to assume that the enemy will act a certain way in a given situation, when in fact his response may be altogether different."
So you're expecting them to counter at a ridiculously low figure and to your surprise the other person's proposal is much more reasonable than you expected it to be.
You've finally plucked up the courage to ask your boss for an increase in pay. You've asked for a 15 percent increase in pay, but you think you'll be lucky to get 10 percent. To your astonishment, your boss tells you that he or she thinks you're doing a terrific job, and they'd love to give you the increase in pay. Do you find yourself thinking what a wonderfully generous company this is that you work for? Probably not.
You're probably wishing you'd asked for a 25 percent increase.
Your son asks you for $100 to take a weekend hiking trip. You say, "No way. I'll give you $50 and not a penny more." In reality, expect to settle for $75. To your surprise your son says, "That would be tight, Dad, but okay, $50 would be great." Are you thinking how clever you were to get him down to $50? Probably not.
You're probably wondering how much less he would have settled for.
You're selling a piece of real estate that you own. You're asking $100,000. A buyer makes an offer at $80,000, and you counter at $90,000. You're thinking that you'll end up at $85,000, but to your surprise the buyer immediately accepts the $90,000 offer. Admit it - aren't you thinking that if they jumped at $90,000, you could have gotten them up more?
So, highly effective negotiators are careful that they don't fall into the trap of saying "yes" too quickly, which automatically triggers in the other person's mind:
- I could have done better. (And next time I will. A sophisticated person won't tell you that he felt that he lost in the negotiation; but he will tuck it away in the back of his mind, thinking "The next time I deal with this person I'll be a tougher negotiator. I won't leave any money on the table next time.")
- Something must be wrong. Turning down the first offer may be tough to do, particularly if you've been calling on the person for months and just as you're about to give up, she comes through with a proposal. It will tempt you to grab what you can. When this happens, be a Power Negotiator-remember not to say yes too quickly.
Key points to remember:
- Never say "yes" to the first offer or counter-offer from the other side. It automatically triggers two thoughts: I could have done better (and next time I will) and something must be wrong.
- The big danger is when you have formed a mental picture of how the other person will respond to your proposal and he comes back much higher than you expected. Prepare for this possibility so it you won't catch you off guard.
Cash isn’t always king
When You're Negotiating, Money Isn't As Important as You May Think. There are many things that are more important than money.
A reporter at a press conference once asked Astronaut Neil Armstrong to relate his thoughts as Apollo 11 approached the moon. He said, "All I could think of was that I was up there in a spaceship built by the lowest bidder." A cute line, but he was falling prey to a popular misconception that the government must do business with anybody who bids the lowest price. Of course, that's not true, but it's amazing how many people believe it.
Cost is far from the top of the list of what's important to most government procurement professionals. They are far more concerned with a company's experience, the experience of the workers and the management team assigned to the product, and their ability to get the job done on time.
The rules say that they should buy from the lowest bidder who they feel is capable of meeting their specifications. If they know that a particular supplier is the best one for them, they simply write the specifications to favor that supplier.
Of course, that is the key to selling to government agencies, whether it is the city, county, state, or federal government. If you want to do business with any level of government, you should become known as the most knowledgeable person in your industry, so that when the agency starts to prepare bid specifications, they welcome your advice on what they should specify. Fortunately, the trend is away from this type of direct bidding and toward the government agency hiring a private sector project manager to supervise the work. By inserting this middle person, they avoid the obligation to let bids and instead let the middle person negotiate the best deal.
So even with the federal government, price is far from the most important thing. When you're dealing with a company that doesn't have legal requirements to put out a request for bids, it's far from the top of the list. Just for the fun of it, review the following list of things that are probably more important than price to buyers:
- The conviction that they are getting the best deal you're willing to offer.
- The quality of the product or service. This is an interesting one because I frequently hear from salespeople that they sell an item that has become a commodity, and it doesn't matter which source the buyer uses and that the buyer wants only the lowest price. Baloney. If that were true 90 percent of companies supplying such products or services would be out of business. If that were true, the only company that could exist in the market place would be the one offering the lowest price, and that's a nonsensical proposition.
- The terms that you offer. Many large companies make more on the financing of their product than they do the sale of the product.
- The delivery schedule that you offer. Can you get it to them when they need it and be counted upon to keep on doing that? Do you offer a just-in-time delivery system? Are you willing to let them warehouse the product and bill them as they use it?
- The experience you have in delivering the product or service. Are you familiar with their type of company and the way they do business? Are you comfortable with that kind of relationship?
- The guarantees that you offer and, in general, how well you stand behind what you do.
- Return privileges. Will you take it back if it doesn't sell? Will you inventory their stock and do that automatically for them?
- Building a working partnership with you and your company. The old adversarial relationship between vendor and customers is disappearing as astute companies realize the value of developing a mutually beneficial partnership with their suppliers.
- Credit. A line of credit with your company may be more important than price, especially to a start-up company or in an industry where cash flow is cyclical, and you could take up the slack during the lean months.
- Your staff. When the contract calls for something to be made (aerospace, construction) or a service to be performed (legal, audit or accounting work, computer services) other factors may be more important than price:
a) The quality of the workers that you will assign to the job.
b) The level of management that you will assign to oversee the work.
c) The ability and willingness to tailor your product and packaging to their needs.
- The respect that you will give them. Many times a company will move from a large vendor to a smaller one because they want to be a substantial part of the vendor's business to have more leverage.
- Peace of mind.
- Reliability. Can they trust that the quality of your product and service will stay high?
Finding Out How Much a Seller Will Take
Now let's look at some techniques to find out the seller's lowest price. When you are buying, the negotiating range of the seller ranges from the wish price (what they're hoping you'll pay) all the way down to the walk-away price (at anything less that this they will not sell at all).
The same is true in reverse with the buyer. How do we uncover the seller's walk-away price? Let's say that your neighbor is asking $15,000 for his pick-up truck.
Here are some techniques you can use to uncover his lowest price:
- Ask. That may seem incredibly naive, but if he's not a good negotiator, he may just tell you what's on his mind. Of course, an effective negotiator won't fall for that, but many people will. If he's an effective negotiator, he will automatically turn the tables on you by saying, "I think $15,000 is a very fair price, but if you want to make me an offer somewhere close to that, I'll talk it over with my wife. What is the best price you would offer me?"
Of course, the way you ask for his lowest price makes a big difference.
Try these approaches:
"I'm really interested only in a pick up truck for occasional use, not one as fine as yours. I'm looking at one that the owner's asking only $5,000 for. However, I thought I'd be fair to you and ask you what the least you'd take would be."
Or be a “Reluctant Buyer” - After spending a lot of time looking it over and asking questions you say, "I really appreciate all the time you've taken with me on this, but unfortunately its not what I was looking for. But I wish you the best of luck with it." Then, when you're halfway into your car to leave you say, "Look, I really want to be fair to you because you spent so much time with me, so just to be fair to you, what is the very lowest price you would let it go for?"
Drop out of contention but tell him you have a friend who might be interested. You might say, "Thanks for showing it to me but it's really not what I'm looking for. However, I do have a friend who's looking for something like this, but he doesn't have much money. What's the very least you'd take?"
Nibble for a finder's fee. "If my friend did buy it from you, would you give me a $500 finder's fee?"
Offer something in return to see if it will cause them to lower the price. "Would you take less if I let you borrow it once in a while?"
- Have other people make super-low offers to lower the expectation of the seller. This is unethical of course, but we will tell you about it so that you will recognize it when it's used against you. If the seller has high hopes of getting $15,000 for his truck, your offer of $10,000 may sound like an insult. However if he's had only two offers so far, one for $7,000 and the other for $8,000, when you come along and offer him $10,000, he may jump at it.
- Make a low offer subject to the approval of a higher authority. "My buddy and I are going in on this so I'll have to run this by him, but would you take $10,000?"
Now let's look at some techniques that a seller could use to find out how much a buyer is willing to pay. Let's say that you sell switches to computer manufacturers.
Here are some techniques you could use:
- Raise their top offer by hypothesizing what your higher authority might be willing to do. Perhaps they buy similar switches now for $1.50 and you're asking $2.00. You might say, "We both agree we have a better quality product. If I could get my boss down to $1.75, would that work for you?" Protected by Higher Authority, it doesn't mean that you have to sell them to him for $1.75. However, if he acknowledges that $1.75 might be workable, you have raised his negotiating range to $1.75 so that you're only 25¢ apart instead of 50¢.o Determine their quality standards by offering a stripped down version. "We may be able to get down below $1.50 if you don't care about copper contacts. Would that work for you?" In this way you probably get them to acknowledge that price isn't their only concern. They do care about quality.
- Establish the most they can afford by offering a higher quality version. "We can add an exciting new feature to the switch, but it would put the cost in the $2.50 range." If the buyer shows some interest in the feature, you know that they could pay more. If he or she says, "I don't care if it's diamond plated. We can't go over $1.75," you know that fitting the product to a price bracket is a critical issue.
- Remove yourself as a possible vendor. This disarms the buyer and may cause him to reveal some information that he wouldn't if they thought you were still in the game. You say, "Joe, we love doing business with you, but this item is just not for us. Let's get together on something else later." Having disarmed Joe in this way, a little later, you can say, "I'm sorry we couldn't work with on the switches, but just between you and me what do you realistically think you can buy them for?" He may well say, "I realize that $1.50 is a lowball figure, but I think I'll get somebody to come down to around $1.80."As you can see from all we've talked about here, there's a lot to be said about the subject of price.
Good coop, bad coop
This is one of the best negotiation gambits to use if you need to put negotiating pressure on the other side.
Charles Dickens first wrote about it in his book Great Expectations. In the opening scene of the story, the young hero Pip is in the graveyard when out of the sinister mist comes a large, very frightening man. This man is a convict, and he has chains around his legs. He asks Pip to go into the village and bring back food and a file, so he can remove the chains. The convict has a dilemma, however. He wants to scare the child into doing as he's asked, yet he mustn't put so much pressure on Pip that he'll be frozen in place or bolt into town to tell the policeman.
The solution to the convict's problem is to use the Good Cop/Bad Cop Gambit. Taking some liberty with the original work, what the convict says in effect, is "You know, Pip, I like you, and I would never do anything to hurt you But I have to tell you that waiting out here in the mist is a friend of mine and he can be violent and I'm the only one who can control him. If I don't get these chains off-if you don't help me get them off-then my friend might come after you. So, you have to help me. Do you understand?" Good Cop/Bad Cop is a very effective way of putting pressure on people, without confrontation.
You've seen Good Cop/Bad Cop used in the old police movies. Officers bring a suspect into the police station for questioning, and the first detective to interrogate him is a rough, tough, mean-looking guy. He threatens the suspect with all kinds of things that they're going to do to him. Then he's mysteriously called away to take a phone call, and the second detective, who's brought in to look after the prisoner while the first detective is away, is the warmest, nicest guy in the entire world. He sits down and makes friends with the prisoner.
He gives him a cigarette and says, "Listen kid, it's really not as bad as all that. I've taken a liking to you. I know the ropes around here. Why don't you let me see what I can do for you?" It's a real temptation to think that the Good Guy's on your side when, of course, he really isn't. Then the Good Guy would go ahead and close on what salespeople would recognize as a minor point close. "All I think the detectives really need to know," he tells the prisoner, "is where did you buy the gun?" What he really wants to know is, "Where did you hide the body?" Starting out with a minor point like that and then working up from there, works very well, doesn't it?
The car salesperson says to you, "If you did invest in this car would you get the blue or the gray?" "Would you want the vinyl upholstery or the leather?" Little decisions lead to big ones. The real estate salesperson who says, "If you did invest in this home, how would you arrange the furniture in the living room?" Or, "Which of these bedrooms would be the nursery for your new baby?" Little decisions grow to big decisions.
People use Good Cop/Bad Cop on you much more than you might believe. Look out for it anytime you find yourself dealing with two people. Chances are you'll see it being used on you, in one form or another.
For example, you may sell corporate health insurance plans for an HMO and have made an appointment to meet with the Vice-President of Human Resources at a company that manufactures lawn mowers. When the secretary leads you in to meet with the vice president, you find to your surprise that the president of the company wants to sit in and listen in on your presentation.
That's negotiating two on one, which is not good, but you go ahead and everything appears to be going along fine. You feel that you have a good chance of closing the sale, until the president suddenly starts getting irritated. Eventually he says to his vice president, "Look, I don't think these people are interested in making a serious proposal to us. I'm sorry, but I've got things to do." Then he storms out of the room. This really shakes you up if you're not used to negotiating. Then the vice-president says, "Wow. Sometimes he gets that way, but I really like the plan that you presented, and I think we can still work this out. If you could be a little more flexible on your price, then I think we can still put it together. Tell you what-why don't you let me see what I can do for you with him?" If you don't realize what they're doing to you, you'll hear yourself say something like, "What do you think the president would agree to?" Then it won't be long before you'll have the vice-president negotiating for you-and he or she is not even on your side.
If you think this is an exaggeration, haven't you, at one time or another, said to a car salesperson, "What do you think you could get your sales manager to agree to?" As if the salesperson is on your side, not on theirs?
Haven't we all at one time been buying real estate and have found the property we want to buy, so we say to the agent that has been helping us find the property, "What do you think the sellers would take?" Let me ask you something. Who is your agent working for? Who is paying her? It's not you, is it? She is working for the seller and yet she has effectively played Good Cop/Bad Cop with us. So, look out for it, because you run into it a lot.
Counter-Tactics to Good Cop/Bad Cop
The first Counter-Tactic is simply to identify the fact that the tactic is being used. Although there are many other ways to handle the problem, this one is so effective that it's probably the only one you need to know.
Good Cop/Bad Cop is so well known that it embarrasses people when they get caught using it. When you notice the other person using it you should smile and say, "Oh, come on-you aren't going to play Good Cop/Bad Cop with me are you? Come on, sit down, let's work this thing out."
Usually their embarrassment will cause them to retreat from the position. o You could respond by creating a bad guy of your own. Tell them that you'd love to do what they want, but you have people back in the head office who are obsessed with sticking to the program. You can always make a fictitious bad guy appear more unyielding than a bad guy who is present at the negotiation.
You could go over their heads to their supervisor. For example, if you're dealing with a buyer and head buyer at a distributorship, you might call the owner of the distributorship and say, "Your people were playing Good Cop/Bad Cop with me. You don't approve of that kind of thing, do you?" (Always be cautious about going over someone's head. The strategy can easily backfire because of the bad feelings it can cause.
Sometimes just letting the bad guy talk resolves the problem, especially if he's being obnoxious. Eventually his own people will get tired of hearing it and tell him to knock it off.
You can counter Good Cop/Bad Cop by saying to the Good Guy, "Look, I understand what you two are doing to me. From now on anything that he says, I'm going to attribute to you also." Now you have two bad guys to deal with, so it diffuses the Gambit. Sometimes just identifying them both in your own mind as bad guys will handle it, without you having to come out and accuse them.
If the other side shows up with an attorney or controller who is clearly there to play bad guy, jump right in and forestall their role. Say to them, "I'm sure you're here to play bad guy, but let's not take that approach. I'm as eager to find a solution to this situation as you are, so why don't we all take a win-win approach. Fair enough?" This really takes the wind out of their sails.
Key points to remember:
People use Good Cop/Bad Cop on you much more than you might believe. Look out for it whenever you're negotiating with two or more people.
- It is a very effective way of putting pressure on the other person without creating confrontation.
- Counter it by identifying it. It's such a well-known tactic that when you catch them using it, they get embarrassed and back off.
- Don't be concerned that the other side knows what you're doing. Even if they do it can still be a powerful tactic. In fact, when you're negotiating with someone who understands all of these Tactics, it becomes more fun. It's like playing chess with a person of equal skill rather than someone whom you can easily outsmart.
Want to Get More at the Bargaining Table? Learn to Flinch at Proposals.
Highly effective negotiators know that you should always flinch - react with shock and surprise at the other side's proposals.
Let's say that you are in a resort area and stop to watch one of those charcoal sketch artists. He doesn't have the price posted, and he has the shill sitting on the stool. You ask him how much he charges, and he tells you $15. If that doesn't appear to shock you, his next words will be, "And $5 extra for color." If you still don't appear shocked, he will say, "And we have these shipping cartons here, you'll need one of these too."
Key point to remember - when people make a proposal to you, they are watching for your reaction. They may not think for a moment that you'll go along with their request. They've just thrown it out to see what your reaction will be.
- You sell computers and the buyer asks you to include an extended warranty.
- You're buying a car and the dealer offers you only a few hundred dollars for your trade-in.
- You sell contractor supplies and the buyer asks you to deliver it to the job site at no extra charge.
- You're selling your house and the buyer wants to move in two weeks before the transaction closes.
In each of these situations, the other side may not have thought for a moment that you would go along with the request, but if you don't flinch, he or she will automatically think, "Maybe I will get them to go along with that. I didn't think they would, but I think I'll be a tough negotiator and see how far I can get them to go.
A good flinch is both auditory and visual. In other words, in addition to SAYING something, the other party should ideally see you flinch. The reaction should be noticeable in your facial expression and body language.
Yes, there is a bit of acting involved here, but that's part of what makes negotiating fun! Don't dismiss flinching as childish or too theatrical until you'd had a chance to see how effective it can be. It's so effective that it usually surprises people when they first consciously use it.
When selecting a bottle of wine at a fine restaurant, say to the wine steward:
"I've heard wonderful things about the __________, but (flinch) I think its a little out of our comfort zone."
You'll be surprised how often the steward will drop the price by at least a few dollars. And even if he or she doesn't, its a great opportunity to practice flinching.
Or the next time you're making a major purchasing decision, say to the salesperson:
"I like this, but (flinch) wow, I just can't imagine spending that much."
Key points to remember:
- Flinch in reaction to a proposal from the other side. They may not expect to get what they're asking for, but if you don't show surprise you're communicating that it's a possibility.
- A concession often follows a flinch. If you don't flinch, it makes the other person a tougher negotiator.
- Assume that the other person is a visual unless you have something else on which to go.
- Even if you're not face to face with the other person you should still gasp in shock and surprise. Telephone and e-mail flinches can be very effective also.
Bracket your objective
Whether you're bargaining in your favorite antique store, negotiating for an increase in pay, or trying to get the rock-bottom price for a new car, you'll do better if you use a technique that negotiators call Bracketing. This means that your initial proposal should be an equal distance on the other side of your objective as their proposal. For example:
- The antique dealer is asking $1200 for that antique desk that would be perfect in the corner of your living room. You are willing to pay $1000. You should offer him $800.
- You hope that your boss will give you a 10 percent increase in pay. You should ask him for 20 percent.
- The car dealer is asking $25,000 for the car. You want to buy it for $22,000. You should make an opening offer of $19,000.
Of course it's not always true that you'll end up in the middle, but that is a good assumption to make if you don't have anything else on which to base your opening position.
Assume that you'll end up in the middle, mid-way between the two opening negotiating positions. If you track that, I think that how often it happens will amaze you. In little things and in big things.
In little things. Your son comes to you and says he needs $20 for a fishing trip he's going to take this weekend. You say, "No way. I'm not going to give you $20. Do you realize that when I was your age I got 50 cents a week allowance and I had to work for that? I'll give you $10 and not a penny more."
Your son says, "I can't do it for $10, dad."
Now you have established the negotiating range. He's asking for $20. You're willing to pay $10. See how often you end up at $15.
In big things. In 1982, the United States was negotiating the pay-off of a huge international loan with the government of Mexico. They were about to default on an $82 billion dollar loan. Their chief negotiator was Jesus Herzog, their finance minister. Treasury Secretary Donald Regan and Federal Reserve Board Chairman Paul Volcker represented the United States. In a creative solution, the US negotiators asked Mexico to contribute huge amounts of petroleum to our strategic petroleum reserve, which Herzog agreed to do.
That didn't settle it all, however. The U.S. proposed to the Mexicans that they pay a $100 million dollar negotiating fee, which was a politically acceptable way for them to pay the the U.S. accrued interest. When President Lopez Portillo heard what we were asking for, he went ballistic. He said the equivalent of: You tell Ronald Reagan to drop dead. We're not paying the United States a negotiating fee. Not one peso.
So now they had the negotiating range established. The U.S. asked for $100 million dollars. Mexico offered zero. Guess what they ended up paying the United States? That's right. $50 million dollars.
So often, in little things and in big things, we end up splitting the difference. With bracketing, effective negotiators are assured that if that happens, they still get what they want.
To bracket, you must get the other person to state his position first. If the other person can get you to state your position first, then he can bracket you so that, if you end up splitting the difference as so often happens, he ends up getting what he wanted.
That's an underlying principle of negotiating: Get the other person to state his position first. It may not be as bad as you fear, and it's the only way you can bracket his proposal.
Conversely, don't let the other person trick you into committing first. If the status quo is fine with you, and there is no pressure on you to make a move, be bold enough to say to the other person, "You're the one who approached me. The way things are satisfies me. If you want to do this, you'll have to make a proposal to me."
Another benefit of bracketing is that it tells you how big your concessions can be as the negotiation progresses. Let's take a look at how this would work with the three situations described earlier:
- The antique dealer who is asking $1200 for that antique. You are willing to pay $1000. You offer him $800. He comes down to $1150, which means that you can raise your offer to $850, and still have your objective mid-way between the two proposals that are on the table.
- You hope that your boss will give you a 10 percent increase in pay, so you asked him for 20 percent. He offers you 5 percent, so you can now lower your demand to 15 percent.
- The car dealer who is asking $25,000 for the car. You want to buy it for $22,000. You made an opening offer of $19,000. Then if the dealer comes down to $24,500, you can go up to $19,500 and you will still have your objective bracketed. If the dealer's next move is to $24,200, you can also shift your position by $300 and go to $19,800.
There's a danger here, however. You should not become so predictable with your responses that the other side cannot detect your pattern of concessions. In this article we've illustrated bracketing with mathematically computed concessions to make the point clear, but you should vary your moves slightly so that your reason for making a move cannot easily be determined.
If you want to be a better bargainer, take a tip from the professional negotiators. Get the other side committed to a position first, and then bracket your objective. You're far more likely to end up with what you want.
In this environment, selling has become difficult for people who use outdated, manipulative tactics, or for those who aren’t quite sure what to do, or aren’t confident in their abilities.
In today’s challenging, hyper-competitive and ever-changing business environment, the ability to negotiate effectively with your customers and with people inside your organization is critical to your success and the profitability of your company. To be a successful salesperson, you must respond effectively to several key challenges:
- How to increase sales volume.
- How to enhance the profitability of each customer relationship.
- How to work effectively with tough, knowledgeable and demanding customers.
- How to differentiate yourself and your product or service from your competitors.
- How to utilize limited internal support resources most effectively.
In our personal lives, when we come into conflict with others, or when our interests seem to be in conflict with the interests of others, how we handle these encounters will determine not only whether or not we prosper, but ultimately, the degree to which we enjoy a full and satisfying life.
Your ability to negotiate gives you a sense of mastery (control) over your life. Essentially negotiation is analyzing information, motivating others, balancing time, resources and power to effect the behavior of others. It is learning how to meld your needs with those of others and develop innovative win/win solutions.
If you are selling and negotiating in a competitive environment with challenging prospects and customers, maybe it’s time to get real: real Negotiation™ is a strategic negotiation process proven to increase gross sales revenue, profitability and repeat business while enhancing even the toughest customer relationship.
Real Negotiation is based upon 4 stages of communication between business people and their customers:
Research > Explore > Advocate > Lend Assistance
- Research to build your negotiation success on a solid foundation of information and knowledge.
- Explore to gain a clear, complete understanding of the other party’s needs, challenges and ideal negotiation outcome.
- Advocate Solutions that are directly relevant to the needs you have discovered.
- Lend Assistance to help the other party achieve a win/win outcome, while at the same time maximizing your own potential for a significantly positive conclusion.
Win/win does not have to mean “splitting the difference” or meeting the other party half way. Since “winning” is often a matter of perception, the real Negotiation process helps you learn how to create a “win” for the other party while creating a bigger “WIN” for yourself.
We know you have many choices when it comes to negotiation training for your organization. Hundreds of choices. Thousands actually. But there IS a difference when you work with Frontline Learning, from our strategic analysis of your organizational needs to the tactical execution of sales training initiatives with quick, tangible ROI.
We believe our training/consulting responsibility goes beyond assessment and recommendation. A consulting engagement is not complete until the client has achieved successful implementation. We will assure that your objectives are translated into measurable performance improvement and bottom-line results.
So how can you improve your negotiation skills? Here are a dozen techniques to practice in every negotiation.
1. Be Prepared. This is not just the motto of the Boy Scouts. Preparation is the single most important element in successful negotiations. In negotiations, information is power. The more relevant information you have, the better your position is. Preparation for your negotiations cannot be overdone. Allow yourself adequate time to prepare prior entering any negotiation.
2. Understand The Needs of the Other Party. Put yourself in the other party's shoes. What would they like to gain from the negotiation? Write down as many possible goals as you can think of. Prioritize your list in the order that you believe the other party would. Identify the items you are willing to negotiate and those items which are nonnegotiable.
Tip - once you think you have a good understanding of what the other party wants from a negotiation, confirm this with them. You might say something like "I know if I were in your shoes, the most important things to me would be ______ and _____. Are those your biggest priorities?"
3. Know What Your Needs Are. What do you need out of the negotiations? More money? More flexibility? Better opportunities? Access to broader markets? Make a list of those things you would like to receive as a result of the negotiations. Refine and prioritize your list before starting the negotiation. Identify the items you are willing to negotiate and those items which are nonnegotiable. This list and the one created above will allow you to know what your true "bottom line" is.
4. Manage the Ongoing Relationships. With the exception of large purchases, most negotiations are between parties involved in a long term relationship. Whether the relationship is family, friends or business associates, it will be necessary to continue to deal with your "adversary" outside the context of the negotiation. Always be sensitive to the potential impact of your negotiations on these relationships.
5. Treat Every Negotiation as a Unique Situation. Every negotiation is different. Negotiating with a loved one is different than buying an automobile. Buying an automobile is different from negotiating with a new employer. The key difference is the relationship you wish to have with your adversary once the negotiations are complete. When negotiating with a loved one, you may be willing to make more concessions in the interest of harmony. When buying an automobile harmony may be less important than paying a fair price. Keep these intangibles in mind when creating and prioritizing your lists.
6. Understand The Situational Dynamics. In order to negotiate successfully, you must understand the dynamics of the situation. Identify your role and the role of your adversary. Know what are the "power positions" of each role. The dynamics of negotiating in a parent/child relationship are significantly different than the dynamics of and employer/employee negotiation. Be certain your desires are appropriate and achievable in terms of the situation.
7. Never Lie. Very few negotiations are a single contact event. With the possible exception of making large purchases, most parties involved in a negotiation have continued contact after the negotiations are completed. When you are caught in a lie, and it is inevitable that you will be, your future credibility will be lost.
It is possible to prepare to handle those areas where the need to lie may be felt. Examine the areas where your case is weak. Work to strengthen your case. In those areas that remain vulnerable, prepare how you wish to handle them should they arise.
8. Be Firm, and Fair. Negotiation is not an "I win, you lose" proposition. Webster's dictionary defines negotiate as "to bring about by mutual agreement". The best negotiators create "win - win" situations in every negotiation. This does not mean that you are willing to accept a lower offer just to help the other party "win" - this means you are willing to invest the time and mental energy needed to create a true win/win solution.
9. Don't Tip Your Hand. It's never a good idea to lie in a negotiation, but that doesn't mean you have to tell the other party everything (or anything) that might give them an advantage. Uncertainty is your key advantage in most negotiations. If your adversary knows what you desire most, your negotiating position is not as strong. Play it close to the vest.
10. Be Flexible. Understand that negotiation frequently involves compromise. Look for creative solutions to the problems presented in the negotiation. Make tradeoffs in order to gain those elements you most desire.
11. Winning Isn't Everything. It is easy to get caught up in the competitive spirit of a negotiation. Remember that the point of negotiation is to reach a common agreement on how to move forward. While it may be possible to bludgeon your adversary into agreeing to your terms, this does not create the "mutual agreement" that makes for a truly successful negotiation.
12. Quit While You Are Ahead. Too many people have to see just how far they can push a negotiation. They have to try to get just one more concession. This attitude can be a deal breaker. The best negotiations are brief and to the point. Get agreement on your major points and stop. Additional items can be addressed in subsequent negotiations.
5 Essencial principles
The ways that you conduct yourself in a negotiation can dramatically the outcome, and there are 5 essential principles you should remember. These principles are always at work for you and will help you smoothly get what you want.
1. Get the Other Side to Commit First. Top negotiators know that you're usually better off if you can get the other side to commit to a position first. Several reasons are obvious:
- Their first offer may be much better than you expected.
- It gives you information about them before you have to tell them anything.
- It enables you to bracket their proposal - present a counter-proposal which creates a "middle ground" that happens to be exactly what you ultimately want.
If they state a price first, you can bracket them, so if you end up splitting the difference, you'll get what you want. If they can get you to commit first, they can then bracket your proposal. Then if you end up splitting the difference, they get what they wanted. The less you know about the other side or the proposition that you're negotiating, the more important the principle of not going first becomes.
If both sides of a negotiation have learned that they shouldn't go first, you can't sit there forever with both sides refusing to put a number on the table, but as a rule you should always find out what the other side wants to do first.
2. Act Dumb, Not Smart. To effective negotiators, smart is dumb and dumb is smart. When you are negotiating, you're better off acting as if you know less than everybody else does, not more. The dumber you act, the better off you are unless your apparent I.Q. sinks to a point where you lack any credibility.
There is a good reason for this. With a few rare exceptions, human beings tend to help people that they see as less intelligent or informed, rather than taking advantage of them.
Of course there are a few ruthless people out there who will try to take advantage of weak people, but most people want to compete with people they see as brighter and help people they see as less bright. So, the reason for acting dumb is that it diffuses the competitive spirit of the other side. How can you fight with someone who is asking you to help them negotiate with you? How can you carry on any type of competitive banter with a person who says, "I don't know, what do you think?" Most people, when faced with this situation, feel sorry for the other person and go out of their way to help him or her.
Do you remember the TV show Colombo? Peter Falk played a detective who walked around in an old raincoat and a mental fog, chewing on an old cigar butt. He constantly wore an expression that suggested he had just misplaced something and couldn't remember what it was, let alone where he had left it. In fact, his success was directly attributable to how smart he was-by acting dumb. His demeanor was so disarming that the murderers came close to wanting him to solve his cases because he appeared to be so helpless.
The negotiators who let their egos take control of them and come across as a sharp, sophisticated negotiator commit to several things that work against them in a negotiation. These include being the following:
- A fast decision-maker who doesn't need time to think things over.
- Someone who would not have to check with anyone else before going ahead.
- Someone who doesn't have to consult with experts before committing.
- Someone who would never stoop to pleading for a concession.
- Someone who would never be overridden by a supervisor.
- Someone who doesn't have to keep extensive notes about the progress of the negotiation and refer to them frequently.
The highly effective negotiator who understands the importance of acting dumb retains these options:
- Requesting time to think it over so that he or she can thoroughly think through the dangers of accepting or the opportunities that making additional demands might bring.
- Deferring a decision while he or she checks with a committee or board of directors.
- Asking for time to let legal or technical experts review the proposal.
- Pleading for additional concessions.
- Using Good Guy/Bad Guy to put pressure on the other side without confrontation.
- Taking time to think under the guise of reviewing notes about the negotiation.
Warning: Be careful that you're not acting dumb in your area of expertise. If you're a heart surgeon, don't say, "I'm not sure if you need a triple by-pass or if a double by-pass will do." If you're an architect, don't say, "I don't know if this building will stand up or not."
Win-win negotiating depends on the willingness of each side to be truly empathetic to the other side's position. That's not going to happen if both sides continue to compete with each other. Effective negotiators know that acting dumb diffuses that competitive spirit and opens the door to win-win solutions.
3. Think in Real Money Terms but Talk Funny Money. There are all kinds of ways of describing the price of something. If you went to the Boeing Aircraft Company and asked them what it costs to fly a 747 coast to coast, they wouldn't tell you "Fifty-two thousand dollars." They would tell you eleven cents per passenger mile. Salespeople call that breaking it down to the ridiculous.
Haven't we all had a real estate salesperson say to us at one time or another, "Do you realize you're talking 35¢ a day here? You're not going to let 35¢ a day stand between you and your dream home are you?" It probably didn't occur to you that 35¢ a day over the 30-year life of a real estate mortgage is more than $7,000.
Effective negotiators think in real money terms. When that supplier tells you about a 5¢ increase on an item, it may not seem important enough to spend much time on. Until you start thinking of how many of those items you buy during a year. Then you find that there's enough money sitting on the table to make it well worth your while to negotiate.
Here are some other examples of funny money:
- Interest rates expressed as a percentage rather than a dollar amount.
- The amount of the monthly payments being emphasized rather than the true cost of the item.
- Cost per brick, tile, or square foot rather than the total cost of materials.
- An hourly increase in pay per person rather than the annual cost of the increase to the company.
- Insurance premiums as a monthly amount rather than an annual cost.
- The price of land expressed as the monthly payment.
Businesses know that if you're not having to pull real money out of your purse or pocket, you're inclined to spend more. It's why casinos the world over have you convert your real money to gaming chips. It's why restaurants are happy to let you use a credit card although they have to pay a percentage to the credit card company.
So, when you're negotiating break the investment down to the ridiculous because it does sound like less money, but learn to think in real money terms. Don't let people use the Funny Money Gambit on you.
4. Concentrate on the Issues. Effective negotiators know that they should always concentrate on the issues and not be distracted by the actions of the other negotiators.
Have you ever watched tennis on television and seen a highly emotional star like John McEnroe jumping up and down at the other end of the court. You wonder to yourself, "How on Earth can anybody play tennis against somebody like that? It's such a game of concentration, it doesn't seem fair."
The answer is that good tennis players understand that only one thing affects the outcome of the game of tennis. That's the movement of the ball across the net. What the other player is doing doesn't affect the outcome of the game at all, as long as you know what the ball is doing. So in that way, tennis players learn to concentrate on the ball, not on the other person.
When you're negotiating, the ball is the movement of the goal concessions across the negotiating table. It's the only thing that affects the outcome of the game; but it's so easy to be thrown off by what the other people are doing, isn't it?
Effective negotiators concentrate on the issues, not on the personalities.
You should always be thinking, "Where are we now, compared to where we were an hour ago or yesterday or last week?"
Secretary of State Warren Christopher said, "It's okay to get upset when you're negotiating, as long as you're in control, and you're doing it as a specific negotiating tactic." It's when you're upset and out of control that you always lose.
That's why salespeople will have this happen to them. They lose an account. They take it into their sales manager, and they say, "Well, we lost this one. Don't waste any time trying to save it. I did everything I could. If anybody could have saved it, I would have saved it."
So, the sales manager says, "Well, just as a public relations gesture, let me give the other side a call anyway." The sales manager can hold it together, not necessarily because he's any brighter or sharper than the salesperson, but because he hasn't become emotionally involved with the people the way the salesperson has. Don't do that. Learn to concentrate on the issues.
5. Always Congratulate The Other Side. When you're through negotiating, you should always congratulate the other side. However poorly you think the other person may have done in the negotiations, congratulate them. Say, "Wow-did you do a fantastic job negotiating that. I realize that I didn't get as good a deal as I could have done, but frankly, it was worth it because I learned so much about negotiating. You were brilliant." You want the other person to feel that he or she won in the negotiations.
Don't think of this as being disingenuous or manipulative. Look upon it as the ultimate in courtesy for the conqueror to congratulate the vanquished.
When the British army and navy went down the Atlantic to recapture the Falkland Islands from the Argentineans, it was quite a rout. Within a few days, the Argentine navy lost most of its ships and the victory for the English was absolute. The evening after the Argentinean admiral surrendered, the English admiral invited him on board to dine with his officers and congratulated him on a splendid campaign.
Effective negotiators always want the other parties thinking that they won in the negotiations. It starts by asking for more than you expect to get. It continues through all of the other tactics that are designed to service the perception that they're winning. It ends with congratulating the other side.
If you let these five principles guide your conduct when you're negotiating, they will serve you well and help you become a highly effective negotiator.
They want to pay more
People want to pay more when there is a true justifiable reason for doing and they don't think they can get a better deal elsewhere.
Yes it is true. People do want to spend more as long as they a) Have a justifiable reason for doing so, and b) They are convinced that they cannot get a better deal elsewhere.
Let's face it, does what you pay for something really matter? If you're going to buy a new automobile, does it matter if you spend $20,000 or $21,000? Not really, because you'll soon forget what you paid for it, and the slight increase in payments is not going to affect your lifestyle. What really matters is the feeling that you got the best possible deal. You don't want to go to work the next morning and have everybody crowded around to admire your new car when somebody says, "How much did you get it for?"
You say, "I worked out a terrific deal. I got them down to $21,000.""You paid what?" he replies. "My friend bought one of those, and he paid only $20,000. You should have gone to Main Street Auto Mall." That's what hurts-the feeling that you didn't get the best deal.
The objection that every salesperson hears most is the price objection. "We'd love to do business with you, but your price is too high." But in most cases this has nothing to do with your price. You could cut your prices 20 percent across the board and you'd still hear that objection.
Because the people you're selling to study negotiating skills too. They meet in groups at their conventions and sit around in the bars saying things like, "Do you want to have fun with salespeople? Just let them go through their entire presentation. Let them take all the time they want. Then when they finally tell you how much it costs, lean back in your chair, put your feet up on the desk and say, 'I'd love to do business with you, but your prices are too high.' Then try not to laugh as they stammer and stutter and don't know what to say next."
You learn the rules of the game, you practice, practice, practice until you get good at it, and then you go out there and play the game with all the gusto you can muster. Negotiating is a game that is fun to play when you know what you're doing and have the confidence to play it with vigor.
The next time you're trying to get somebody to spend money remember that they really want to spend more money with you, not less. All you have to do is give them a reason and convince them that there's no way they could get a better deal.
Negotiation and Persuasion
No comprehensive executive leadership development program, whether conducted over a season or a lifetime, could be complete without paying attention to the art of negotiation.
- Instead of letting this kind of thing work you up into a sweat, adopt the attitude that negotiating is a game.
- Whether you are working on a joint business venture, a new job, the price of an auto or your child's new curfew, negotiation is a key success skill.
- "Empathy" does not mean soft, emotional feelings of affection. It means the ability to put yourself in the other person's shoes, to see the world from his/her point of view.
- The ability to negotiate effectively can serve you in every area of you life.
- Tell the other party you want to come to a fair solution that maximizes the outcome for both of you, and propose some standard against which the results can be measured.
- But in long term relationship negotiations often single, difficult issues can be separated and addressed individually.
- Negotiating requires the confidence to ask for what you want, and the focus to get it. Negotiating also provokes strong emotions, and emotions can cloud a person's focus.
- In our everyday lives, conflict and disagreement is bound to happen because parents and children, employees and employers, and couples inevitably have differences in their opinions, values and goals.
- Many ordinary, commonplace situations can become sources of disagreements and conflict in personal relationships.
- Effective negotiation is a two-way process that encourages both sides to actively participate in making decisions. It also provides a way for people to learn to understand each other better and to grow in their relationships.
- Negotiation helps to create a healthy balance between "giving" and "getting." Everyone becomes a "winner" through negotiation.
As life becomes more complex and the world more diverse, your ability to use negotiation skills becomes more important. Negotiation requires time and patience. By practicing the negotiation strategies and skills suggested in this publication, you can make conflict resolution a regular part of your approach to managing relationships at home, at work and in the community. Negotiation can serve not only to preserve relationships, but to continually strengthen and improve them.
H. Lutkepohl, Introduction to multiple time series analysis, Springer-Verlag, Berlin, 1991.