Negotiation is the most misunderstood business tool, and also an outright phobia for many managers and leaders. It is for this very reason, that negotiations are avoided and bad deals are accepted.
So what is negotiation? Negotiation is a process between two or more parties with different stands on a given matter, by which a mutually beneficial agreement is reached.
Whether or not you are aware of it though, you find yourself in negotiation situations on a daily basis (and you don’t need to be a professional negotiator or trader for that) – when dealing with co-workers, family members or trades people, when buying clothes, a car or a house, at a job interview, etc.
The fact is that we were born with negotiation skills. Think of the ways babies get their needs met. However, as children we are taught that good boys/girls do not ask for things and they wait nicely until things are offered to them. Do you see when the pattern was formed and how we have been conditioned? The result was that we stopped asking for things, which also means that we stopped negotiating and just took the offers given to us without questioning them.
In contrast, let’s turn our attention to the Asian and Middle Eastern mentality. While travelling in those countries, on many occasions, I have noticed many times the puzzled look on merchants’ faces when Western tourists accepted the asked price at once and without any objections. Their expression was literally saying: ‘What? You are not even attempting to negotiate? But this is part of the game!!??’
Going back to the daily negotiations, whether it is with your stakeholders or your teenage children, imagine how much more money and/or benefits you could have if you would be able to understand the negotiation process and gain the ability of using it with everyone all the time, every time.
In order to demystify negotiation and to enable you to use this tool to your advantage, I have created a series of articles on this topic, which are based on a training I offer to my clients.
- Opening the negotiations with your minimum acceptable price/position
A classic error for people with fear of negotiation. In fact they don’t even think that they are in a negotiation process, they simply put forward their minimum conditions and hope that they will be accepted. In this case, if you are lucky your negotiation partner is equally inexperienced in negotiation, otherwise you might just have turned into a ‘shark bite’. Best is to open the negotiation with your ‘ideal’ position, because lowering your position is easy, going up is almost impossible. (More on the concept of ‘ideal position’ in my next article).
- Negotiation is a fight – you win or lose
If this is your chosen game, even if you win short-term, is hard to imagine that you will be successful long-term, as your ‘opponents’ will become resentful and perhaps even revengeful. If you both are in the same industry, odds are that you will meet again, apart from the ‘unpleasant’ reputation you will build as a result of this attitude.
Instead, best is to aim for a win/win outcome for all parties. This way you will also build relationships, which will benefit you long-term. Shift your perspective from a limited pie to an expandable one. What other benefits, future contracts or leverage can you bring into the negotiation? Best approach is to have a rather collaborative attitude and search for a solution, which all parties are happy to accept.
- Negotiation means to compromise and meet halfway
This is the biggest misconception about negotiation. Fact is that compromise is how to not negotiate. Let’s say in a price difference scenario when the price you are prepared to pay is $2000 lower than the asked price, compromise would mean to meet in the middle. Whilst so-called ‘split the difference’ tactic has its place in negotiation, it is not advisable to use it as your first and only tool. Both parties would walk away feeling that they have been ripped off by $1000.
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If you really have to accept the higher price, ask for an extra benefit to be included, such as more favourable payment terms.
If you are the seller, inquire the possibility of future business in exchange of lowing the price. (This is also an example of an expandable pie from the point 2).
Now take a moment to reflect at the times when you experienced any of the above examples. How could you have used the above tools to your advantage? How different would have been your outcomes?
The transformation to a skilful negotiator won’t happen overnight. However what you can do straight away is to start implementing the above strategies one step at the time. You can start small, in a safe environment, when there is not much at stakes and as you build your negotiation muscle and become more confident, you can aim at more important negotiations.
More on Negotiation Strategies and Tactics in my next article.
By Corina Lorenzi, Business & Executive Coach
