Negotiation 1: Successful negotiation
‘Negotiating’ is a term used a great deal nowadays, in newspapers, on television and on radio. It often seems to imply that only large companies or whole countries are involved, not individuals. However, we all frequently have to negotiate, even though we may not realise it.
In fact, all human interactions are characterised by some sort of negotiation between or among people trying to give to and take from one another. This process of exchange is continual and often goes unnoticed. Take time for a moment to consider why you occupy the position that you now do. How much negotiation did it take - at home, at school, at work, elsewhere - to enable your occupation of this position? Negotiating may be thought of as a process of bargaining to reach a mutually acceptable agreement.
Good negotiating skills are essential to the smooth running of your business. You need to be able to negotiate with many different types of people in many different business situations - whether you are negotiating a loan from your bank manager or the next pay rise with a union or staff representative. The skills, once learned, will stand you in good stead.
It may help your negotiations if you understand the attributes of a good negotiator. Being good doesn’t necessarily mean that you always come out on top in a negotiation - it means that you reach a conclusion that is satisfactory for your business. This might mean proceeding with a specific course of action or it may mean not proceeding because the terms are unacceptable.
Project North East (PNE), for example, buys old buildings, refurbishes them and divides them into smaller units, which are let on an easy in, easy out basis to new and growing businesses. The person who manages all this has become an excellent negotiator. He assesses a building carefully, determining how much finance will be required to refurbish and convert it. He calculates the most PNE can afford to pay. He makes an offer some way below that amount. He is then willing to negotiate, but never exceeds his original calculation because he knows we would then lose money. If the vendor is happy to sell to PNE, everyone is happy. If the vendor can do better elsewhere, that’s fine too.
Much has been said about so-called ‘hard’ negotiation - negotiating aggressively and getting your own way at all costs. The danger here is that you might win this time around, but at a potentially high cost. The other party may refuse ever to deal with you again; can you afford to destroy relationships in this manner?
It is arguably always better to look for a fair and mutually beneficial outcome; that way the door is left open for you to do business again in the future. You build, rather than break, relationships.
Steps in negotiation
In any successful negotiation you are concerned with three key elements:
- Your own objectives
- Other person's objectives
- Basis for negotiation
Firstly, you need to know your own objectives. Then you need to plan and prepare for your negotiations. It is assumed that you have a thorough knowledge of the subject under negotiation. This will often be the case, for example, when dealing with customers or suppliers. However, you will also find yourself negotiating leases on property or loans from the bank and may not feel totally confident about your knowledge. You should try to find out as much information as possible, from various sources, prior to the meeting.
You may need to think about the procedure for the negotiation, particularly if there are a number of negotiable points.
If the negotiation is at your request, you will wish to retain control as far as possible to establish the scope for reaching agreement. It can be important, therefore, that you create a friendly atmosphere to achieve satisfactory negotiations.
In any negotiation, you quickly need to discover whether there is likelihood that you might be able to reach a satisfactory agreement. This may be thought of as an overlap of objectives. For example, a seller may be seeking to maximise the sale price, but has a price below which they must not go. Similarly, a buyer may want to minimise the purchase price, but will have a maximum above which they will not buy.
When we are negotiating - particularly if we are new to the situation or acting as lead negotiator for the first time - there will be much that make us nervous. No matter how familiar you are with your subject, there are still pitfalls and perils when negotiating with an individual or a group of people. Things we might fear include:
- difficult questions that we struggle to answer;
- drying up - forgetting what to say;
- losing the attention of our counterparts, seeing them drift off and glaze over; and,
- not capturing their interest in the first place.
Being sufficiently well prepared will help overcome these fears and keep you in control.
Start by setting your objectives. Your objectives describe the intended outcome of the negotiation rather than the process itself. Their purpose is to let you know where you are going and to recognise when you have arrived. They allow the effectiveness of the negotiation to be evaluated after the event and allow you to select the most appropriate materials, approach and resources.
Your objectives might be quite complex, or might be expressed as simply as, ‘Get the contract’! It is a good idea to think about what you hope to achieve and to write that down before you start preparing.
There will be times when you are required to make a presentation, either formally or informally, perhaps as a prelude to or as a part of the overall negotiation process. Standing up in front of a group of people to speak is not something that comes easily to everyone; consequently thorough preparation is essential.
Think about how to best illustrate your points - is it appropriate to use props or samples in order to get the message across? Avoid using anything so complicated that it makes you nervous, but where appropriate do give people samples to handle or to look at.
Before you stand up in front of an audience, you should practise thoroughly. If possible, make your presentation to your colleagues and get feedback from them. However you prepare, be sure that you have run through everything at least three times before the actual event.
It is generally a fact that no matter how nervous a situation may make us, we have to get on with it anyway. Consequently, we must try to control things in the best way we know how, and an effective way is the three Ps - prepare, practise and participate. In other words, do as much as you can before the event, and don’t be a bystander during it - get involved, say your piece, argue your point and make a difference. You may be surprised at how much more confident you will feel!
Negotiation is largely about choice. What do you choose to offer or to concede, and what do you choose to accept or reject. Often the basis of a choice will be to solve a problem; you have reached an impasse in your negotiations and need to identify the best way forward. The word ‘problem’ is used deliberately here, because even if you are looking at an interesting opportunity for your company, your problem will be how to exploit that opportunity. On the other hand, you may really have a problem - your proposal was perceived to be insulting; your team have walked out so you cannot fulfil the order within the negotiated deadline; a key member of staff has just resigned; or, a competitor has started undercutting your prices. It should be remembered that in some instances, the best way forward will be quite simply to shake hands and walk away. There is nothing to be gained by striking a deal at all costs; it has to be mutually beneficial.
During the course of the negotiating process, you will face decisions to be taken or problems to be solved. Whilst you can anticipate problems during the preparation stage and formulate a strategy for dealing with them should they arise, you will inevitably have to think on your feet during the negotiation itself. If you are to come up with a solution, you must first be able to define the problem accurately. Once you are able to do this, you can begin to set objectives for the rest of the decision making process. Often these will be quite straightforward, but try not to be too constrained by what you’ve always done before.
In many cases the most logical course of action is not the best and by taking a more creative approach to a situation we can often come up with something much better.
Dr Edward de Bono, the originator of the concept of lateral thinking, is regarded by many as the leading authority on teaching creative thinking. He says that the simplest way to describe lateral thinking is to say; ‘you can’t dig a hole in a different place by digging the same hole deeper’. (Edward de Bono, ‘Serious Creativity’, HarperCollins Publishers, 1992.) In other words, you have to move sideways and look at the problem from a different angle. Get a fresh perspective, get away from the same old train of thought. In negotiating terms, this could mean a change of strategy. That which worked with the last customer (or last two, or last ten) might not be appropriate or effective this time around.
A manufacturer of aeroplane tyres held a creative thinking session in order to generate ways of boosting business. The question they were considering was how to encourage more airlines to use their tyres. One of the people present suggested that they should give the tyres away - that way they’d all use them! Strange as it may seem, that was the approach adopted, resulting in the tyre company winning a considerable amount of business from its competitors. In time, the competitors followed suit.
Thinking laterally, the solution that was generated was that instead of selling an airline tyres in the usual way, which represented quite a substantial cash outlay for the customer, they would give them the tyres and then charge them every time a plane took off and landed. This had benefits for both parties; the cost of tyres was spread over a longer period of time for the airline and the tyre manufacturer had a guaranteed and regular income. By thinking creatively, they found a different way to look at things. Rather than meeting with an airline that constantly tried to negotiate down the price of tyres, they took along a whole new approach to the negotiating process.
Creative thinking is also coloured by perception; true logic doesn’t always see the long-term implications of a decision. An example quoted by Edward de Bono concerns little Johnny, an Australian five year old, whose friends offered him the choice of two coins, the $1 coin and the smaller $2. Little Johnny always took the larger coin. His friends thought him stupid for not realising that the smaller coin was worth twice as much as the one he chose and, whenever they wanted to make fun of him, they offered him the same choice and he took the same coin. An adult observed this little ritual one day and pointed out to Johnny that the smaller coin was actually worth more, to which little Johnny replied, ‘Yes, I know that. But how often would they have offered me the choice if I had taken the $2 coin the first time?’
Human perception allowed little Johnny to make the choice he did - and, although it was a seemingly illogical choice, it paid off. The same could be applied to negotiating with prospective customers; do you want a one-off deal of $2 now, or would you rather have a dollar a week for the next six months? It pays us to use our ability to look at the big picture and perceive the possible results of our actions long-term.
Coping with criticism
When criticising someone else’s suggestion or proposal or dealing with criticism of one of your own, always resist the temptation to make a personal attack - go for the ball, not the player. Beware of politics and personalities. Keep all discussions firmly on a no-nonsense factual basis and deal with people fairly and rationally.
Criticism should be questioned - why is this not a viable proposal? Could it be that you or others are being constrained by the boundaries of rigid thinking? Perhaps there is a need for a more flexible approach. Also, whilst we should learn from our experiences, we should not make this an excuse to look back continually instead of looking forward.
We would suggest that as a matter of course you also conduct a post-mortem on the proceedings while they are fresh in your mind. Things to consider include:
- What went well? Why?
- What didn’t go well? Why?
- Were you sufficiently well prepared?
- Did you question to gain information effectively?
- Did you use that information to guide your proposal?
- Were you happy with the outcome?
- What will you do differently next time?
Regard networking as an essential part of the process of marketing your business – and, by implication, a helpful pre-cursor to any negotiating requirement. Being in a position, for example, to bring in additional support or expertise may well help in ensuring a successful outcome. Networking is simply the active cultivation of useful contacts and the use of those contacts, when appropriate, to help in achieving required objectives. In most cases, those objectives are locating information and finding new customers. Whilst networking is not a pre-requisite for successful negotiation, having a wide range of contacts often means that you can call on people for advice or assistance before undertaking a difficult negotiation.
Remember that networking is about communication and that communication is a two-way process. As well as using your network to gain information, use it to pass on any helpful little snippets that might come your way. People will appreciate your efforts and be more kindly disposed towards you if you have shown consideration to them.
Negotiating is a skill that impacts on all areas of life. You can negotiate good business for your company, you can negotiate satisfactory terms and conditions for you and your staff, and you can negotiate to get out of tricky situations, for example, if working relationships aren’t going well.
Always look for the common ground and the area of mutual advantage. Don’t try to get your own way at all costs, and take the long view - concentrate on developing relationships rather than destroying them.
So, what are the steps you can anticipate taking in a negotiation? What kinds of situations might call for your skills as a negotiator? And how can you make the most of each of them? These articles consider and answer these questions, introducing the basic skills of negotiation and then describing a number of business situations in which those skills will be necessary.
- Be clear as to what are your own objectives.
- Prepare thoroughly.
- Practice your pitch.
- Face up to your fears.
- Think creatively.
- Don’t be constrained by what you have done before.