Negotiating

Negotiating distills negotiation theory and practice to give you a practical advice on how to become a successful negotiator. It addresses questions such as: “Should I make the first offer?”; “How should I present and respond to offers?”; “How can I obtain concessions from my counterpart?”; and “How can I make concessions effectively?”

Many people shy away from negotiation because they think it implies conflict. In fact, negotiation is what you make it. When undertaken with confidence and understanding, negotiation is a creative interpersonal process in which 2 parties collaborate to achieve superior results.

Good negotiators are made rather than born. Although some may be naturally gifted and intuitive (possessing, for example, the ability to empathize with others), most have developed their principles and tactics over time and recognize that negotiating is a largely rational process.

To be a successful negotiator, you have to feel psychologically comfortable in the negotiation situation. This means being able to tolerate uncertainty, deal with unexpected behavior, take measured risks, and make decisions based on incomplete information. You need to think about solving problems and creating opportunities rather than winning or losing: if you are confrontational, you are likely to have a fight on your hand. And if you “win” there will necessarily be a loser, with whom you may have to work in the months to come.

Many effective negotiators will use their intuition to a certain extent (to know the right moment to make a concession or present an offer, for example). However, most of the negotiating task requires systematic processes such as masterful due diligence, identifying interests, and setting clear objectives.

Skilled negotiators are able to recognize the myths and focus their energy on the true negotiation dilemmas, balancing their approach and making the difficult decisions needed to achieve the most successful outcomes in their negotiations.

Do the research: Information is power. Find out as much as you can about your counterpart before you sit down to negotiate.

Settings the limits. You should always go to the negotiating table with clear answers to the following questions: Why do you want to negotiate the deal? How will this deal create value for you? What are your “deal breakers”? What must you have from the deal, what would you like, what are you willing to give away? There may be alternative outcomes that you would be willing to accept — what are they?

Avoiding escalation of commitment. It can be easy to fall into the trap of competing with the other party at all costs, to ensure that you get that “win.”

Are they authorized to make binding decisions? If not, who are the “players” behind the scenes who will make the final decision?

Never underestimate the risks associated with poor preparation: when you fail to plan, you plan to fail. The most common errors in forward planning include:

Availability bias: It is very easy to find information that is widely available. So make a real effort to uncover information that is obscure and not so easy to obtain.
Confirmation bias: Do not filter out important information because it does not fit with your existing point of view and beliefs.
Overconfidence: If you underestimate your counterpart you will neglect to plan well. If you already think you know how a negotiation will end, you may exclude new sources of information and overlook creative solutions.
Relying on secondary information.
Information asymmetry: Do you really know as much as you think? To be safe, you should assume by default that you know less than the other party.

The 4 types of thinking styles:

The rational self: Tend to be logical, analytical, fact-oriented, and good with numbers.
The safekeeping self: Tend to be cautious, organized, systematic, neat, timely, methodical, obedient, and risk-averse.
The feeling self: Tend to be friendly, enjoy human interactions, engage in open communication, express their emotions, enjoy teaching, and are supportive of others.
The experimental self: Tend to think holistically and see the big picture. They are also often creative, comfortable with uncertainty, future-oriented, and willing to take risks.

Bundling the issues. Effective negotiators do not negotiate a single issue at a time because this implies that there is a fixed pie and only leads to a win-lose scenario. Instead, they bundle several issues together. Trade-offs can then be made between negotiators because negotiators do not place equal importance on every issue.

Trust involves a willingness to take risks. It has to do with how vulnerable one is willing to make oneself to a counterpart. There are many benefits to having trust between negotiators: it promotes openness and transparency, and makes the negotiators more flexible. Negotiators who trust each other take each other’s words at face value and do not have to verify their statements. This reduces emotional stress and other transaction costs, and makes the negotiation process more efficient. Trust also means that the likelihood of achieving good and lasting agreement is also higher.

Equality: fairness is achieved by splitting the pie equally.

Equity: the outcome should relate to the contribution made by each party.

Needs: regardless of their contribution, each party should get what they need.

Power sources:

Information
BATNA: having attractive alternative
Resources
Needing the deal
Time: the fewer deadlines you are pressed with, the more power you have
Sunk costs: the more willing you are to let go of your sunk costs, the more power you have
Skills

When in a weak position, do not underestimate the power of personal likability. People do business with people they like and whom they can trust to keep their promises and deliver good value.

You should present your offer first when you are confident in the thoroughness of your due diligence and also when you suspect that your counterpart is ill-informed. By going first, you will “anchor,” or set a benchmark, that will be used as a reference point for the counteroffer.

If you are not fully informed, do not go first. Consider the other party’s first offer, do not respond to it, and do your due diligence.

It is generally true that people like to receive good news or benefits in installments, rather than all at once. Skill negotiators, therefore, tend to make multiple small concessions in order to increase the level of satisfaction of their counterparts.

Inexperienced negotiators often make a first sizable concession as an expression of goodwill. However, this can set the expectation that there are many concession to be provided. Experienced negotiators, by contrast, tend to untangle the relationships from the concessions. Sometimes, in order to set the tone of reciprocating concessions, these knowledgeable negotiators concede first by making a concession on a minor issue.

Impasses usually generate negative emotions and sometimes deep feelings of resentment. Prior to and during the negotiation process, you should always be sensitive to the other party’s concerns, feelings, and, particularly, their self-image.

Managing deadlock situations:

Do’s:

Anticipating potential impasses and planning in advance how to deal with them.
Being open-minded and flexible, and finding creative solutions.
Reacting calmly and using your emotional intelligence, because you know that deadlock situations can be resolved.

Don’ts:

Believe that you can just think on your feet if a problem arises.
Thinking that deadlocks always lead to “no deal.”
Leaving the negotiating table early because you are deadlocked with the other party.

If you are facing an impasse, experts suggest that, in the intensity of the moment, you should first take time out to cool down. This will help to defuse the emotional situation and you can resume the discussion at a later time.

When you reconvene, start with any existing mutual benefits. Impasses often occur after some progress has been made. So, it may be useful to frame the impasse in the context of what has already been achieved and highlight the potential losses to both parties if agreement is not reached.

If you are still deadlocked, you may need to try expanding the pie. If you maintain a zero-sum, fixed-pie mentality toward the negotiation, this will restrain your creativity in negotiating for the best deal. The purpose of negotiation is not to win an argument, but to find solutions that would maximize the benefits for both parties.

To keep from feeling that you have not made the best possible deal, never accept the first offer that is made, even when it is a great offer. Always negotiate a little.

There are 3 types of emotional approach in negotiations: rational (having a “poker face”), positive (being friendly and nice), and negative (ranting and raving).

When negotiators are emotionally overwhelmed, their mental capacity to negotiate effectively is impaired. You need to be aware of the emotions you are experiencing and be able to monitor and regulate them, and you need to find ways to empathize with the other party.

Competitive tactics:

Making a highball / lowball offer: a negotiator assumes that you are not fully informed and tries to take advantage by making a very high offer as a seller, or a low offer as a buyer.
Playing good guy / bad guy
Applying time pressure
Separating the issues: a negotiator insists on reaching an agreement on a single issue before moving on. This prevents you from bundling issues together and creating opportunities for trade-offs.
Using emotional blackmail: a negotiator tries to intimidate or influence you by fabricating anger, frustration, or despair. They try to emotionally shake you and make you feel responsible for the lack of progress.
Nibbling: the deal is done, but at the last minute the negotiator asks for another small concession. Most negotiators concede, fearing that the last-minute demand might derail the deal if it is not fulfilled.

Most negotiators underestimate the importance of implementation. If not considered, the intense process of negotiation can undermine your ability to achieve your goals after the deal has been signed. For example, if you have used hard negotiation tactics to push the other party to agree to the deal, the other party may feel, upon signing the contract, that they have been unfairly treated and sabotage the deal, or fail to deliver.

Many business situations are too complex for a solo negotiator to be fully informed about every aspect of the deal. In such cases, working in a team may give better results, though this requires a high degree of internal coordination and a smooth flow of information between members.

3% of men in negotiations lied to men, but 24% lied to women.

There are 3 ways to reach a decision. The first is unanimity. The second is the majority rule. The third, and usually best, decision-making rule is consensus: making a decision that not all the team members agree with fully, but that all can live with.

Working in a team can lead to a lack of focus and consistency, so appoint a chief negotiator to lead your team and agree in advance each member’s roles and responsibilities. Avoid falling into “group think,” when team members feel pressured to conform to an existing group mindset and reluctant to present ideas that conflict with it. It can also be easy for a team to create a false sense of cohesiveness: “us,” the good team, versus “them,” the bad team. If this happens, genuine conciliatory attempts made by the other party can be dismissed as dishonest “tricks” and rejected, resulting in missed opportunities to make a deal.

Coalitions are temporary entities driven by self-interest, so partners are easily seduced to defect once the payoffs elsewhere become higher.

Indian negotiators are more concerned with getting good outcomes than with the efficiency of the negotiation process, and may negotiate for weeks or even months to get the best deal.

Dignity and prestige are gained when individuals behave morally and achieve accomplishments. Face is a formidable force in the Asian psyche that negotiators in Western organizations must be particularly aware of.

You risk insulting your Asian counterpart if you emphasize penalties for not honoring commitments in detail. Contracts are short and merely a tangible expression of the relationships being created. They are not treated as “fixed” legal instruments.

Another differentiator is the level of comfort of individuals in ambiguous situations. Business people in China and Japan like to avoid uncertainty, preferring structured and clear situations in which they are able to make decisions after careful evaluation of a large amount of information. Contrast this with some Western societies, where people are more comfortable with ambiguous situations and are prepared to make quick decisions based on a limited amount of information.

Be aware too that there are differences in communication styles: Asians may be “high context” (indirect, implicit, and suggestive), while those from the West are “low context” — more direct and specific.

57% of people who thought they had been assertive in negotiations were seen as under-assertive.

Master negotiators have superior negotiating capabilities in 3 major areas: the ability to understand and analyze issues (cognitive skills); the ability to manage emotions, especially negative ones (emotional skills); and the ability to connect with others by developing relationships and trust (social skills).

Thinking strategically. Negotiations are rarely a one-on-one business, so master negotiators spend time analyzing the interests of the “players” who are not at the table, how the power balance lies, and what opportunities exist to increase their own power.