TEC – Negotiating For Success – Jack W. Kaine
Negotiating For Success
Jack W. Kaine
THE POWER OF NEGOTIATION
Whether we realize it or not, negotiation is one of the most crucial skills contributing to success in our professional and personal lives. Lawyers, diplomats, and purchasing agents may exercise negotiation techniques more often than most of us do, yet we all negotiate. Management meetings, customer complaints, and contracts are just a few of the day-to-day business applications of negotiation.
Whenever two or more people share information with the intent to change a relationship, negotiation occurs. According to this definition, we negotiate with clients, employees, vendors, and family members constantly. Successful negotiation changes these relationships in a positive way.
FITTING FLEXIBILITY INTO THE PICTURE
Tunnel vision leads to head-on collisions and disasters in negotiation. Remember, there is usually more than one way to accomplish anything.
A cautionary note: Never want anything so much that you won’t accept something else. You can invest an inordinate amount of time, money and ego into achieving a specific end result, but fail to see alternatives that would as easily satisfy your needs.
Negotiating from a flexible position can bring you tremendous strength. In negotiation, inflexible positions can break either party or cause the discussion to break down altogether.
Before you enter a negotiation, ask yourself the following question: If you can’t negotiate a successful agreement (as defined by your ideal scenario), how else will you satisfy your needs? What alternative solutions can you create?
HOW MUCH IS NEGOTIABLE: MORE THAN YOU THINK
Often in negotiation we accept information without questioning it. If you are told that something is non-negotiable, it probably is. Yet, more is negotiable than you may think. Deadlines, for example, may be negotiable. When you are given a specific deadline, you may want to ask, “Is that when you need it, or is that when you want it?” Don’t hesitate to question the certitude of the information you receive.
DUMB IS SMART
When negotiating, you have to ask clarifying and probing questions. You must realize that the dumbest question is the one you don’t ask. There is no dumb question in a negotiation. Dumb is smart, and smart is dumb. Many people are reluctant to ask questions, for reasons of timidity or ego. People tend to withhold information from someone who acts like he knows everything. Yet, if the other party is perceived as having a modest knowledge of the situation, people tend to share more information. The questions you ask and how you ask them can determine how much the other party is willing to share with you.
ASSESSING THE STAKES
There are many decisions to be made during negotiation. Consider the following two questions prior to, and throughout, negotiation:
- What are you trying to gain?
- If the negotiation is unsuccessful, what will you lose?
Be aware of the consequences of your decisions. Ask yourself what will be gained and lost by the decisions you make. Before you negotiate, you have to develop a firm walk-away position. This will set a limit of where you don’t want the negotiation to go. It will also ensure that you don’t waste your time with a negotiation that won’t result in what you want.
CONDITIONS IN A NEGOTIATION
When you negotiate, three conditions must be present:
- The terms can be varied: If you can’t vary the terms, you are not negotiating. You are selling.
- Most negotiations are centered around a scarce resource, or what is perceived as a scarce resource: When negotiating, ask what specific issues need to be discussed. What are the scarce resources? Time, money, and communication will always be factors. Buyers, sellers, and information are scarce resources. The primary reason negotiations fail is because we don’t understand why we are negotiating. When we don’t understand the issues, ego takes over. Never allow a negotiation to boil down to one issue.
- Each party must gain by negotiating, rather than not negotiating: Make sure it is to the other party’s advantage to actively negotiate, rather than stall or introduce obstacles. The opposing party wouldn’t negotiate if they really thought they could get your product/service under better terms elsewhere.
STEP ONE: GAIN CONTROL OF INFORMATION
The three elements to control in a negotiation are information (ignorance), time, and positive climate. The only reason you are negotiating is out of ignorance. If a fair and impartial decision were known to all parties prior to the negotiation, it would eliminate the need to negotiate.
YOUR FIRST NEGOTIATION IS ONE OF TRUST: If people don’t trust you, they won’t share information with you. If they don’t trust you but they appear to share information, the information may be designed to deceive and mislead you. Further, if they distrust you, they won’t feel you are credible.
Establishing trust is difficult when we begin negotiating before we understand with whom and for what we are negotiating. Mother problem is the propensity to quote price up front. Gather information from the other party before you discuss a price. You want them to see the price issues from your perspective, so you must be able to explain how you arrived at your price.
NEVER ARGUE: No one ever wins an argument. When difficulties arise, ask questions to gain understanding of the other party’s position. When they state a position (price) that you find unacceptable, ask how they arrived at it and what system they used to determine it.
Good negotiators are soft on people and hard on problems. The issue is not with the person, but with their thinking. If you see the person as a problem, you will always be facing a problem.
Ask “what,” not “why” questions. “What” questions are fact oriented. “Why” questions are emotional. “What caused you to do that?” is more effective than “Why did you do that?” Be persistent and focused in your questioning to get the information you seek.
There are always two sides to every story. If you want someone to see an issue your way, you must first see it their way. You are not prepared to negotiate until you can state the other party’s case better than they can. Only then are you in a position to respond to it.
DO YOUR HOMEWORK: After completing your research, you can ask questions, then listen to how filly, accurately, and honestly the other party answers them. Many people abuse rather than use the information they possess. For instance, if you know the selling price, ask the other party what it is to test their honesty. If their answer is not what you expected, ask how they arrived at their price before you assume they are being dishonest. It’s possible they may be using a different system or procedure than you did.
One of the mistakes often made in negotiation is sharing too much information too soon. This error puts the excessively open party at a competitive disadvantage, and should be avoided at all costs.
STEP TWO: GET TIME ON YOUR SIDE
Time is one of the most important and least understood elements in a negotiation. Time is power. The party with the longest deadline will always have the decided advantage.
Every negotiation has a deadline, whether stated or implied. Deadlines are important because they pressure people into making either/or choices. Without deadlines, decisions would be very difficult to make.
Ask yourself the following questions:
- Is a self-imposed or organization-imposed deadline making it difficult for you to negotiate?
- Are those deadlines real or can you arrange for an extension to benefit yourself and your team?
- What deadline is pressuring the other party?
Just as there is pressure on one party to buy, there is pressure on the other party to sell. You can’t gain leverage until you understand the other party’s point of view.
Warning for the wise: Do not pre-negotiate with yourself Pre-negotiating involves developing a proposal and then reworking it to lower the price. The problem with pre-negotiation is that the concessions you make before you reach the negotiating table have no value for the other party. The other party must be aware of the concessions to appreciate them.
Forbearance can be an effective tactic when time is not important but timing is. If you cannot control the deadline, you must control the pace. Forbearance involves inaction, which puts pressure on the other party.
Tactics do work, but they have drawbacks. You can manipulate a person into doing something, but it isn’t in your best interest to do so. If you foster an atmosphere of manipulation, you detract from the relationship and create distrust. Tactics are amoral. They should only be used to defend yourself against unscrupulous negotiators.
Follow these tips for defending yourself:
- When tactics are used against you, identify them: “Good guy, bad guy,” “limited authority,” “low balling,” etc. Understanding the name of the game helps you start to gain control.
- Get tactics out in the open: This makes it impossible for the other party to use them.
- Talking weakens your position: The more you talk, the more ground you lose.
STEP THREE: POSITIVE CLIMATE CONTROL
In order to get information, you must give it. By creating a positive atmosphere, people will be more open with you.
We all have four “selves:”
The Public Self: The public self consists of what is known about the parties before the negotiation begins. Our public self encompasses how we dress, where we meet, what we say, who we bring, etc.
Image: Are you presenting yourself visually as the powerful person you want to be? How do you dress for the negotiation? You should dress noticeably, but marginally better than the person with whom you will be negotiating. Power begins with the image you create. If the other party wears an open-neck shirt, wear a tie. If they wear a sport coat, wear a suit. If they dress in a suit, wear a dark suit, etc.
Meeting place: Ideally, the early meetings should be at the other party’s place of business so you can collect information. However, the crucial meetings should be held at your location. Take as many people as you can, without causing a stir, to the meetings on their turf. While there, meet people in as many levels of the organization as you can. It is surprising what people in an organization will tell you. Try to meet informally the people in the organization who are above the buyer level–at the golf course, association meetings, civic groups, etc.
Handling the tactic of limited authority: If you encounter the tactic of limited authority, try to meet at the other party’s place of business. Limited authority may also be used with the “good guy, bad guy” tactic.
If you ask the other party if they have the power to make the decision, you challenge their authority. It is best to ask “How will the decision be made? Who will be involved, and what steps will you have to go through? What are you looking for?” Asking these questions can elicit information that will help you gain a stronger footing in the organization.
If you are dealing with someone with limited authority, negotiate as hard as you can on the first issue. If the person says, “Looks good to me,” it really means they haven’t received approval for the plan, although personally it may be appealing. Ask what “looks good to me” means. If they have to go to someone else for approval, explain that one agreement is based on the foundation of another. If agreement isn’t reached on that issue, it is pointless to move to the next.
Ask them to get the necessary approval. Follow the same procedure with the second issue. Eventually, the boss will come in to negotiate with you directly.
Sometimes the appropriate party isn’t available. In that case, it is appropriate to say the following: “We will both treat this as an open-ended agreement that can be changed by either party.” This notifies the other party that if they change the agreement, you may change it also.
If you want to put pressure to get final approval, add that you have seriously underestimated the number of hours required to complete the project, and extra time will allow you to confirm a new estimate with your staff This move notifies the other party that you are likely to make changes if given more time, and a better deal might be had by resolving issues now.
Agenda: Never negotiate without an agenda. It is the guiding force behind the information exchange. Your agenda doesn’t have to be formal or shared with the other party. If you don’t like the word “agenda,” you can consider it a checklist to ensure items are not overlooked during negotiation.
If a formalized agenda is necessary, take the initiative and develop it. That puts you at an advantage. If you don’t know what issues are important to the other party, have them notify you of the items they wish to have included on the agenda. When you receive their list, study it both for the issues on their list, as well as those that are missing from it. This can be helpful in your preparation.
Then, add the issues you want to discuss. Arrange them in the order you prefer, and notify the other party of the final agenda. You can make items non-negotiable by never allowing the other party to arrange the agenda.
- The Blind Self: We all have blind spots. Your biggest inhibitor to future success is past success. Having found a style that works, you may rely on it without thinking. No matter how many times you have negotiated with someone, regard each negotiation as a fresh start. Time changes people. If you become too predictable, you may be easily blind-sided.
The outcome of a negotiation depends more on how you begin than with any other factor. Your opening remarks should be scripted, yet so well-rehearsed that they sound spontaneous. It’s easier to launch a negotiation on a positive note than to overcome a bad start. As Will Rogers said, “You never get a second chance to make a first impression.”
Concessions: Making a concession is an art. You should never make a concession the minute you know you can make it, because it will be viewed as a sign of weakness. Making one concession poorly can initiate runaway concessions.
Even if you know you can conclude on a point, say, “I don’t know. Let me see what I can work out. I’ll have to get back to you about that.” This approach creates some uncertainty, which adds value to the concession when you make it.
You should never make a concession unless you can explain that certain new information changes your position. This supports the concession and makes it harder for the other party to ask for another one.
- The Private Self: It is on behalf of this “self’ that the real negotiation takes place. The private self represents our hopes, fears, aspirations and goals. Do not divulge this to the other party unless you really trust them.
- The Hidden Self: Unknown to both yourself and the other party, it can be called the subconscious. Never allow the hidden self to come into play.
The subconscious will accept any challenge you feed it and work on it 24 hours a day, whether you realize it or not. In a relaxed state, ideas, alternatives, and options can break through your subconscious. The more options you have, the stronger your position.
When you start negotiating, a narrow window of opportunity for agreement opens briefly. The parties don’t yet know if they can trust each other. To expand the window, offer information about yourself or your position and solicit feedback. As the window opens wider, continue to gradually divulge information.
Consider how you build trust in your personal relationships. Have your closest relationships always been harmonious? Often, trust is not established until a problem has been successfully resolved.
When you are thinking about changing a pricing structure or the way you do business, start talking about it in the negotiation long before you do it. People must be prepared, and doing so will allow you to test the water and determine whether you are making a wise move.
AGREEMENT AND DISAGREEMENT IN NEGOTIATION
Negotiations are built on agreement, not disagreement. When you encounter disagreement in a negotiation, reframe the discussion. As soon as the negotiation becomes competitive, stop. Ask the other party how they feel about the discussion. (Avoid the word “negotiation” because of the emotional baggage that comes with it.)
If the party expresses discomfort with anything, you can agree. By doing so, you have introduced an element of agreement to the discussion. Then make the observation that you are both looking at the discussion as having a win-lose outcome. Suggest refocusing on areas where you have already reached common ground, so you can build from there. What you focus on has a great deal to do with what you get.
We all want power in the negotiation. Power is a function of having options and being willing to take risks. Options indicate your ability to control resources. Risk takes willpower and mental toughness. If you won’t take a risk, you can’t have power.
FIVE DECISIONS MADE IN A SALE
People make five decisions when buying:
- They must decide a need exists: If there is no need (whether real or perceived) for your product/service, no one will buy it, regardless of price.
- They must decide that your product or service will satisfy their needs: When presenting a proposal to another party in negotiation, discuss what you don’t want them to do as well as what you would like them to do. Be prepared to discuss all of their options since you know they are considering all the options too. If you openly address those options, you will appear trustworthy and you can put your own spin on the topic. Confronting the “downside” possibilities also prevents the other party from holding them out as a threat later in the negotiation.
- They have to decide you are the proper source of supply.
- They have to decide the price is right.
- They have to decide the time to buy is now.
Never issue an ultimatum unless you are willing to follow through on it. The stock and trade of a good negotiator is credibility. When you are on the receiving end of a “take it or leave it” threat, you could handle it this way: ask, “Is that really something you want to do? Is it in your best interest? Let’s think it over and talk about it later.” This allows you to reset the clock so when you return to the negotiations the other party will be more rational. You need to create cooling off periods.
The ground rules for a relationship are determined early in the negotiation process. It may be important to walk away from the table early in the negotiation if problems arise. You must be able to walk away from a bad deal to make a good deal.
Before you begin negotiations, decide what you will do if you can’t get a deal. The party with the best walk-away position has a decided advantage in any negotiation.
Historian Charles Beard maintains that history has taught us four lessons. Reviewing them can further your negotiating efforts and help you accomplish your goals.
- Those whom the gods destroy, they first make mad with power: You can use or abuse your power.
- Do good things and they wilt come back to you: The converse is just as true. Deception and manipulation will not go unnoticed. What goes around, comes around.
- The bee fertilizes the flower it robs: If you expect your needs to be met, first help meet the other party’s needs. The best negotiators are altruistically ego-centered.
- When it finally gets dark enough, you can see the stars: Most negotiations are only concluded in the last 10% of time allocated. There is nothing more demanding, frustrating, challenging, or rewarding than developing good negotiating skills. Perseverance is crucial. Invariably after an impasse, you will be rewarded with loyal vendors, employees, and customers.