Negotiation Basics

C:\Users\Darren\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.IE5\39XQYYJK\MC900070875[1].wmf

We can do our best to persuade others to our side — but what if the other party is as assertive? Then it’s time for some bargaining! In this module we will discuss some basic negotiating skills that can help you in both getting the best deal for yourself, and engaging the other person into an amicable discussion. We will discuss negotiation in its four stages: preparation, opening, bargaining, and closing.

Preparation

C:\Users\Darren\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.IE5\OVV8IZ9R\MC900055019[1].wmf

Half the battle of negotiations is won during the preparation stage. Think of it as similar to strategizing before a war. You have to know ahead of time what the other side’s strengths and weaknesses are, as well as your own. This will provide you with the knowledge on which approach to use. 

The following are some tips in preparing for a negotiation:

  • Research what is standard for the area. To make sure that you don’t get shortchanged, know the going rate for what you are offering or buying. For example, know what the standard salary is for a person with your background in a particular industry before going to a salary negotiation.

This advice may seem basic, but you’d be surprised at how many people actually forget to look in their backyards before a negotiation. Look for the strengths of your position and capitalize on them. Similarly, identify your weaknesses so that you can anticipate possible attacks.

  • Know your boundaries. This advice is related to the first one. As you study your interests and position, it is important to reflect ahead of time how much you are willing to concede, and what’s non-negotiable for you. Having your boundaries clear in your mind will prevent you from making agreements that you’d regret later. It will also help you make the right amount of allowances for bargaining. Note though: don’t dismiss the possibility that you might change your boundaries in the middle of the negotiation proper.
  • Step into their shoes. You know what’s the best way to prepare a bargaining stance? Pretend to be the other party. Ask yourself: if you were the other side, what do you want to see or hear in order to give in? 

If you can do extensive research about the players of the other party, as well as their position, better. Are you going to be dealing with people who are known to be difficult? Well, what makes them difficult? Do they have strong feelings about you? You can use information like these to help you plan your strategy.

  • Identify areas of bargaining. Now that you have studied your position, as well as the other side’s position, it’s now time to identify the common ground you can work on. A way to do this is to look for mutual interests. If you can emphasize that a move stands to benefit both parties in a satisfactory way, then you are more likely to get an agreement.
  • Prepare yourself mentally, emotionally and physically. Negotiations can be a taxing endeavor. You need to be alert; in control and unemotional (but not emotionless) while you negotiate, so make sure you’re in the right condition. In some cases, a lot of games and posturing will take place. So before going to the bargaining table, meditate, aim for a clear head, and get a good night’s sleep. 
  • Set up the time and venue for the negotiations. A significant element of negotiations is context. You have to make sure that the negotiation will be at a place and time when all parties feel at ease, as uncomfortable people are less likely to make concessions. This means you have to check even the tiny details of room temperature and space before you start a negotiation. 

Moreover, you have to ensure that the seating arrangement is conducive to a friendly discussion. Two parties seating themselves from across each other may seem confrontational. Sitting too far away each other can send the message that you’re not interested in finding common ground. Using dissimilar chairs can communicate a power play.

Opening

C:\Users\Darren\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.IE5\31B2RP17\MC900367818[1].wmf

The way that you open a negotiation can set the tone for the whole bargaining session. It is important then that you pay attention to how you or the other party opens the negotiation. 

The following are tips and techniques on opening a negotiation:

  • Express respect for the other party, and openness to the negotiation process. Negotiations have traditionally been perceived as a combative endeavor, but this need not be the case. In fact, simple courtesy can break the ice between two negotiating parties, and promote a reasonable discussion. So invest in pleasantries and small talk. Smile. At the end of the day, you are both just people with interests to pursue, and you can accomplish this without having to put anyone down. 
  • Ask for more or higher than what you really want. Always assume that the other party will want to haggle with you, so ask for something greater than what you would be willing to accept. The excess is your bargaining allowance. Remember too, that the other party might just be willing to give you more than what you think you deserve, so there’s nothing wrong with starting immodestly. 
  • Don’t accept the first offer. Keep in mind: the other party would expect you to haggle too! Chances are, you’d receive an initial offer lower than what a person or company is willing to give — so invest in time convincing them you’re worthy of more.
  • Put your strengths on the table. Here’s a cardinal rule in negotiation: always negotiate from a position of strength. Don’t beg or defend your weak points. Instead, illustrate from the onset the best about what you have to offer, and send the message that you’re worth your asking 

Bargaining

C:\Users\Darren\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.IE5\ZKNEI80I\MC900361058[1].wmf

The heart of a negotiation process is the actual bargaining. There are times when bargaining is easy, especially if the meeting point of two positions does not require much sacrifice from either party. But there are also occasions when bargaining can be quite tedious. Negotiators can hold on to their stances stubbornly, either because they really don’t think they can afford a concession, or they want you to be the one to yield.

The following are some tips to bargain more effectively:

  • Listen. Beginner negotiators are often more focused on what they want to say that they forget an important element of the process: listening. Take time to carefully listen to what the other party is saying to you; they can give you clues as to what is of value to them, and what counter-offer can make them give in. Similarly, note their non-verbal behavior to get clues regarding your pacing and demeanor.
  • Concede to get concessions. In the previous section, we discussed about the skill of “giving in without giving up.” You can use this skill too during negotiations. Your concessions can be a way to sweeten the pot, or communicate to the other party that you also have their best interests at heart. For example: you can concede to lower the price of the goods you’re selling, if they agree to buy a higher volume.
  • Anchor your position on objective data. This tip is related to the skill of using facts to bring people to your side. If you want to strengthen your bargaining position, make references to objective standards. For example, stating that you are offering a lower amount than the standard retail price of a good or service can strengthen your bargaining position.  
  • Present options. Everyone likes to have a choice; it’s empowering and keeps a person from feeling trapped. If you can afford it, create packages that the other party can choose from. You can win more if you have a “there’s something for everyone approach.”
  • Mind your phrasing. If you want something, make sure that it’s phrased in such a way that is positive, and a benefit to the other party. For example, don’t say that you want a higher salary because you have a graduate degree. Instead, say that your graduate degree can contribute positively to their bottom line. If you can show how your position furthers the other party’s interest, then negotiations can proceed much more smoothly.

Closing

C:\Users\Darren\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.IE5\39XQYYJK\MC900388898[1].wmf

How you close a negotiation is as important as how you open one. You want to make sure that you leave the bargaining table with a satisfactory agreement for both sides. You also want to ensure that you end positively. After all, a settled deal means the possible start of a new relationship. 

The following are some tips in closing the deal:

  • Be sensitive to signals that it’s time to close. Always be sensitive to changes in the dynamics of the discussion, so that you will have fair warning that it’s time to close. For example, the lessening of objections and counter arguments from the other party can be a sign that they have all the information that they need to make a decision. Similarly, requesting for a contract is an often signal that a decision has been made; all that’s needed is to formalize it.
  • Here is some advice to consider before making a final offer. Haggling back and forth can take a while, but if you took the advice on setting boundaries before a negotiation, you’d know when you’ve reached your boundaries. If you sense that you are at that point of giving your final offer, and the other party seems to be as well, then issue a gentle but firm warning. For example, you can directly say “this is my final offer” or “I think I’ve reached a decision.” The advice is a signal to the other party to give their final offer as well.
  • Increase the pressure. If the other party still seems hesitant, and you are ready to close the deal, then perhaps it’s time to put pressure on them. Common ways to do this is to give a deadline to the offer (“This offer will expire by 2PM.”),  or showing that you have other options to consider (“I also have a proposal from XYZ company.”)  
  • Summarize. Another way to close a negotiation is to present a summary of what has been achieved so far, highlighting both the issues that have been resolved as well as what actions are expected of the participants so far. For instance you can say “we seem to agree on so-and-so details of the deal; we look forward to signing the contract tomorrow.” 

A summary is a positive way of ending a negotiation because it makes everyone feel that the time was well-spent. This is true even if the negotiation did not result in a mutually-agreed upon resolution. By emphasizing the idea that you moved forward despite lingering issues, you set the stage for further discussions. 

  • Seal the commitment. Follow the ceremony that indicates a deal is formalized. Often this means signing the contract. In more informal settings, this can be a handshake. While they may seem like meaningless rituals, they are a sign of commitment to what has been agreed upon, and must be embraced warmly.
  • Thank. Lastly, end your negotiation with gratitude. Aside from observing the ethics of relationships, it shows your appreciation for the other party’s time and consideration. 

Case Study

Drew was invited to an interview for a new position as a bank manager. Before going in, Dave researched about the bank, learning about its financial situation, regional strengths and weaknesses, and overall company ethos. He also researched what kind of salary and benefits were standard for someone of his background entering the position. When he had a good idea of what he should expect, he looked at himself and his own strengths and weaknesses. He thought about areas where he could improve, and skills he had that made him stand out. When he finally went in for the interview, he was confident in his knowledge and negotiated terms that were better than what he expected.