Powerful Negotiation Skills

Critical steps of a negotiation

A key aspect in almost all areas of finance is negotiation. As a business owner, you need to negotiate with your customers, employees and suppliers. As an employee, you will need to negotiate with your bosses, colleagues, and your customers if you are in a sales-related job. As a manager or team member, you will need to negotiate with other team members and/ or other teams. The list is endless. This article sets out the steps of a negotiation that you can follow if you are going to be involved in an important negotiation.

 

1)   Draw up a conflict map

A conflict map is critical to a successful negotiation. You can draw up a quick conflict map as follows:

·        List down the parties

First, list down all parties that are interested in the outcome of the negotiation. This includes all parties, including those that are not part of the negotiation. By generating this list, interesting insights can sometimes emerge. For example, you may be able to identify parties currently excluded from the negotiation whose interests align with yours. You may then wish to include these parties in the negotiation.

·        List down the goals, interest and limitations

For each party listed, list down their goals, interests, as well as the limitations that they face. For example, does your negotiation counterpart in the supplier organization have the authority to grant you the sales discounts that you are requesting? This may require some research.

·        Analyze the information

Identify areas of common interests as well as areas of conflict between the goals and interests of the various parties.  Emphasizing areas of common interests during the negotiation helps to maintain goodwill. Negotiation strategy will be directed towards resolving the areas of conflict in your favour.

For more details on conflict mapping, you can refer here.

2)   Plan the negotiation

The following questions will help you prepare for the negotiation.

i)        What is the style of negotiation of the counterparty? For example, if your counterparty is an aggressive, intimidating personality, are you prepared to deal with his aggressive behavior?

ii)       What negotiation style/ strategy will you adopt?

iii)     What is the minimum outcome that you can accept from the negotiation?

iv)     What is the minimum outcome that your counterparty most likely will be able to accept?

v)      Who is in a stronger negotiating position?

vi)     Are there any “out-of-the-box” solutions that will enable the needs of all parties to be better met?

 

3)   Select your negotiation technique

Negotiation tactics and strategies are often over-rated. What determines whether a negotiation is successful is whether all parties can ultimately walk away from the negotiation table with their objectives satisfied. 

Some of the negotiation techniques that are used include:

·        Aiming high

With aggressive negotiators, it is sometimes necessary to aim high as they will over-aim in the other direction. With such negotiators, if you do not aim high, you will only find the bid going even lower.

·        Building on common ground

This technique is useful when you are dealing with a friendly negotiator and you are seeking to preserve goodwill. Begin by identifying common ground on which all parties can agree, then build on the common ground.

·        Making the cake bigger

Offer alternatives that may be agreeable to the other party, without changing the terms. Find win-win solutions. 

 

4)   Negotiation

One of the keys to successful negotiation is to practice, practice and practice. Rehearse the negotiation with a friend and play out the various possible scenarios to reduce the possibility that you will be caught off-guard during the actual negotiation. During the negotiation itself,

·        Listen actively

Your negotiation counterparty may reveal hidden agendas and needs at any time, and you must listen actively to remain to catch such revelations.

·        Never give away concessions

It is a matter of discipline to ensure that for every concession you give, you get something in return, even if that is simply a commitment by the counterparty to close the deal immediately.

·        Keep in mind the overall situation at all times

Some negotiation tactics involve separating out single issues and introducing new ones later. The objective is to gradually erode the counterparty’s position. You need to keep in mind the overall situation to identify such tactics. If you find that you are the subject of such a strategy, do not be afraid to point this out and re-open issues previously agreed.

·        Keep accurate notes

Bring an aide along who can keep accurate notes. Negotiations usually involve a series of meetings. Reviewing the notes after each meeting can provide useful insights into the negotiation that can benefit future meetings.

Common negotiation errors and pitfalls


1) Negotiating without preparation

This is the worst pitfall that a negotiator can face. If not prepared, you should refuse to negotiate until you are ready. Negotiation without preparation can have serious consequences besides losing the negotiation. For example, commencing a fee negotiation without knowing the market rate may result in over-asking, which will not reflect well on you, and may also insult your negotiation counterpart, resulting in loss of goodwill.

It is also necessary to practice for negotiations, especially if you are a novice negotiator. A first-time presentation of any case will rarely make a good attempt. Practicing with a friend may throw up unanticipated issues and challenges that you may not have considered. There are sufficient challenges during the negotiation itself without the additional stress of a first-time presentation.

2) Negotiating with the wrong person

It is easy to avoid this situation if good preparation has been done. You should ask yourself if the other person is in a position to give you what he wants. For example, I have seen cases of lengthy price negotiations by salespersons with purchasers who with insufficient authority to grant the contract size requested by the salesperson. There are also cases of negotiations by purchasers with salesperson with insufficient authority to grant the discounts requested. Imagine the frustration of having to re-negotiate the whole deal with another person.

3) Failure to keep the big picture in mind

It is essential to keep in mind the big picture. What is your final objective? A failure to do so may result in you achieving certain minor victories at the expense of major losses. For example, if you are negotiating prices with an important customer, your most important objective should be to preserve the relationship. If you can obtain a higher price at the expense of the relationship, it may not be worth it.

Similarly, a failure to keep the big picture in mind may cause a novice negotiator to focus on winning a sub-component of the negotiation at the expense of the ultimate objective. In attempting to prove a point and be right on the immediate issue at hand, it is too easy to let slip comments that may jeopardize the ultimate objective. This is sometimes due to ego, which we will come to in the next point.

4) Allowing the ego to dominate

Negotiation is basically communication, and ego is a big factor in any communication. Ego is a double-edged sword. We may be able to use ego to our advantage if the negotiation counterpart has a strong ego. In that case, one technique to pull the negotiation in your favor may be to pander to his/her ego. On the other hand, you should also be able to hold your own ego in check and not let it be used against you in the negotiation.

A failure to hold the ego in check can result in the ego being used against you if you are up against a good negotiator. I have also seen cases where strong egos caused negotiations to degenerate into pointless screaming contests.

5) Possessing an adversary mindset

There is a popular phrase that says “Thinking makes it so”. This is especially applicable to negotiations. If you think in a certain way, it will almost certainly show up in your bodily expressions, your tone of voice, the way you act, and the way you respond to the other party. If it shows up, you can be almost certain that your negotiation counterpart will sense it and respond in kind. The negotiation will become more defensive, which enhances the chances of a deadlock.

A negotiation need not be adversarial in nature. A “win-win” mindset will be more beneficial to the negotiation. The negotiation should be viewed as a means to solve a problem that involves both yourself and your negotiation counterpart. This will allow more room for creative ideas to develop which can satisfy the needs of all parties concerned.

6) Not taking notes

This is one of the most common mistakes. There are many benefits to taking notes. Negotiations are rarely completed in one meeting, and keeping notes will help you to prepare for future negotiation meetings. These notes should not be limited to just the content of the negotiation but should also include information regarding your negotiation counterpart, his negotiation style and tactics, etc. This will give you valuable information to work with when preparing for the next time you have to negotiate with him/her again.

7) Negotiating under pressure

Never negotiate under any kind of pressure. If you must do so, be prepared for a less desirable outcome.

Many kinds of pressure exist. The most common is time pressure. The other is what I call choice pressure, which means that you have no choices available and you must work with your negotiation counterpart. In such cases, you are unable to walk away and you can be almost certain that your negotiation counterpart will exploit this to his/her full advantage.

8) Giving freebies

A negotiation is an exchange. For every concession you give, make sure you obtain a concession in return. For example, if you are a buyer in a price negotiation, you should only lower your bid if your counterpart increases his asking price by an equal or higher amount.

Giving free concessions is charity, not negotiation.

9) Excessive focus on yourself

Novice negotiators are usually anxious and constantly worry about what they will say next, or whether they will achieve a good outcome. When they do this, they fail to pay attention to what is going on around them, which may offer clues on how to obtain a better negotiation outcome. Most importantly, they fail to actively listen to their negotiation counterpart, which is a big mistake because the negotiation counterpart has a lot of information to offer which they need to know in order to obtain the best negotiation outcome.

Another error that novice negotiators make as a result of their excessive focus on themselves is to keep on thinking about how they could have improved on what they have said. They may regret on what they have just said, or they may regret failing to say something earlier, or they may regret not saying it in another way that could have brought better negotiation benefits.

As a negotiator is reacting in real time, it is always possible to have reacted better in retrospect. However, that is over, and novice negotiators, through their regret, fail to focus on the ever-changing situation and risk missing information and opportunities for a better negotiation outcome.

10) Being intimidated

Some negotiators specialize in intimidation. They may intimidate through their forceful personalities, high positions, or simply loud voices. Some negotiators arrange the position of the negotiating room so that they are in a position to intimidate (e.g. one tactic is to allow themselves to sit on a higher chair so that they can look down on their negotiation counterpart, to make the latter feel small).

Do not be intimidated. It helps if you are aware of these tactics (which you do now), and even more so if you are well-prepared.