Negotiating

Table of Contents

Cover Page

Title Page

Skilful negotiating will improve your life

Know when to negotiate

1.1 Be clear what negotiating is

1.2 Consider alternatives to negotiating

1.3 Decide if negotiating is your best bet

1.4 Know who you are dealing with

1.5 Aim for win-win outcomes

1.6 Learn to deal with different cultures

Prepare clear objectives

2.1 Plan your approach

2.2 Anticipate the other party’s approach

2.3 Use a framework to guide you

2.4 Decide on the most important issues

2.5 Know your team roles

2.6 Plan your tactics

Discuss your respective positions

3.1 Let both parties set the scene

3.2 Understand the other party’s viewpoint

3.3 Clearly state your opening position

3.4 Ask plenty of questions

3.5 Listen more than you talk

3.6 Re-assess your tactics

3.7 Use numbers that suit your case

3.8 Consider cost, price and value

3.9 Summarize before any proposal

Deal only in packages

4.1 Packages must be easy to understand

4.2 Let them offer the first package

4.3 Make your first package challenging but credible

4.4 Be confident with your opening package

4.5 Don’t get ‘salami-ed’

4.6 Know when to adjourn

4.7 Give the other party a choice

4.8 Show that you are flexible

4.9 Tailor your language

Bargain your way to success

5.1 Movement allows agreement

5.2 “If” is the biggest word in negotiating

5.3 If you concede, attach a condition

5.4 Make your first concession small

5.5 Make concessions work for you

5.6 Focus on solutions not problems

5.7 Always secure a counter-proposal

5.8 Use fair procedures

5.9 Constantly compare your objectives

5.10 Counter the ‘nibble’

Find common ground

6.1 Invent options for mutual gain

6.2 Link all your issues in the final package

6.3 Try not to say “take it or leave it”

6.4 Hold your nerve and know when to close

6.5 Be aware of body language

6.6 Fully agree what’s been agreed

Put it all together

7.1 Deal with a world that is getting smaller

7.2 Remember the key points

7.3 Check your negotiating qualities

7.4 Develop yourself as a negotiator

Jargon buster

Further reading

About The Author

Copyright

About the Publisher

Skilful negotiating will improve your life

Many people think that negotiating is just about money and business. It isn’t. We do it instinctively, as children, in our families, and in our communities as well as in business, management, industrial relations and all levels of government. Sometimes we negotiate without realizing it.

I first woke up to negotiating as a young sales manager 35 years ago. Since then I have modified the framework, and learnt as I have gone along. I have collected best practice from all over the world, run training courses on the subject, negotiated with trade unions, and worked with my clients as they have reached agreements with both their employees and customers. I have seen people make all the classic mistakes because they don’t know how to negotiate effectively. I’ve also seen the other side – the huge benefits that come from good negotiating.

This book captures all that experience in the form of 50 secrets presented over seven chapters. If you use these secrets they will help you seize opportunities, make more money, develop relationships and maximize what you will achieve with the rest of your life. The chapters are:

■ Know when to negotiate. There are alternatives to negotiation. Before you start, you need to be sure what is meant by negotiation, and what the alternatives are.

■ Prepare clear objectives. If you know what you want to finish up with, then you are halfway there.

■ Discuss your respective positions. Reaching agreement is much more likely if each party understands where the other is coming from. This is about setting the scene – listening more than you talk, before you propose anything.

■ Deal only in packages. You can’t bargain if you only talk about one thing. You just argue. This chapter shows you how to reach agreement by trading packages.

■ Bargain your way to success. Once you have exchanged packages, then you bargain (compromise) your way to agreement. There may be several stages to this.

■ Find common ground. You don’t want to move apart. You do want to reach agreement and come together. Here’s how.

■ Put it all together. This is a summary of the key secrets and the ideas behind them. They are all important, but this chapter will help you decide on the most important factors in the specific situations that you will find yourself.

Whether you are engaged in buying, selling, industrial relations, domestic disputes or family matters, you are negotiating more often than you realize. Sometimes you will negotiate with someone just once and never see them again. More often we negotiate with people who we have an ongoing relationship with, and we want them to come back to the negotiating table with good feelings towards us.

Follow these secrets so that you can negotiate sucessfully in any situation.

Know when to negotiate

Negotiating is about ‘give and take’. It is a means by which we compromise and agree a way forward. This chapter looks at how you can decide whether to negotiate or use some other process. It also emphasizes the importance of achieving outcomes satisfactory to both parties. In most negotiations we want the other party to feel comfortable with what has been agreed so we can move forward and develop an ongoing relationship that is valuable to both of us.

1.1 Be clear what negotiating is

If you are to be good at negotiating, you need to know what it is, and what it is not. It is not selling; it is a system of ‘give and take’ that allows two parties to reach agreement. It is about compromise.

Many people confuse selling with negotiating, and this is likely to make them poor sellers and poor negotiators. If you sell, you are persuading a customer that they want something. You negotiate with them then you agree how much it is worth, how many they will have, when you will deliver it, and the payment terms that will apply. In other words you will agree, or negotiate, a package.

The concept of packages is crucial to understanding negotiation. If the only thing you discuss is price, you can’t negotiate. You will simply

one minute wonder Look at today’s newspaper. It will contain many stories that involve negotiating. World leaders will be negotiating with one another; companies will be negotiating with their employees, and opposing sides in wars – with luck – will be negotiating peace.

“Man is an animal that makes bargains; no other animal does this – no dog exchanges bones with another”

Adam Smith, Scottish economist, author of The Wealth of Nations

haggle or argue. When you introduce two or more variables, you have a package on which you can reach a mutually acceptable compromise.

To fully understand what negotiating means you have to appreciate that in most business situations you don’t negotiate with someone just once in your life. Usually, you will negotiate with them many times, possibly over many years. So it is helpful to think of those that we negotiate with as a partner.

Usually you need your negotiating partners to leave a negotiation with you feeling that they’ve ‘won’. Of course, you want to win too. When both parties feel that they have won, this is called win-win.

So, to help you understand what negotiation is, I have introduced a few key ideas that will be fully developed later in this book:

 Give and take. This is the essence of negotiating.

 Packages. These are what you deal in.

 Partner. This is who you negotiate with.

 Win-win. This is how you want to end up, with both parties happy and ready to do business with each other again.

Hopefully, you will recognize that these ideas are not just the stuff of reaching commercial agreement – they also allow communities to thrive and allow us to co-exist as human beings.

This book will show that you negotiate more often than you realize. Once you realize you are doing it, you will be more successful.

Before you start negotiating, be clear that you are prepared to ‘give and take’.

1.2 Consider alternatives to negotiating

You are trying to reach a commercial agreement, secure an industrial relations agreement, solve a problem or resolve a dispute. Negotiation should take place when you need somebody’s consent to a proposal, and they need yours before you decide to agree. But you should only negotiate if negotiation is the best way to achieve your objectives.

Consider that there are many alternatives to negotiating, and in some situations they may give you a better result.

 Persuade. Persuade them that what you are proposing is the best option. This is a buying or selling approach that might be used in connection with a price rise or one of the terms of the contract. It doesn’t cost you money.

 Impose. Just tell them what they must do, or what you must do (you could say you have no choice). Shops are effectively doing this when they offer goods on a non-negotiable basis. Sometimes price rises or purchasing conditions are presented as non-negotiable.

 Instruct. It’s a less severe form of impose, but you are still dictating the terms if you choose to do this.

 Postpone. Put it off till circumstances change. An example of this would be putting off price rises or reductions in a commodity such as oil or metals, because the short-term situation is too volatile. You could choose to allow the market to settle down.

 Leave it to chance. Allow the situation to be dictated by outside events, such as linking a price to the dollar or inflation.

 Give in. This is an option, but not one you will enjoy. Sometimes governments, companies or individuals have to give in because the odds are 100% against them.

 Problem solve. If both parties can work on solving the same problem this may be a good idea. Employers and a trade union might co-operate to decide how best to deal with a financial crisis.

 Arbitrate. Allow another person or body to solve this for you. An industrial tribunal could resolve an industrial dispute.

 Plead. Rely on an appeal to someone’s good nature. This is only a good idea if you can rely on their good nature, or if it’s not important to you.

Whether one of these alternatives is a better option than negotiating depends on many factors – you, your boss, your negotiating partner’s circumstances, the market in which you operate, the short term, the long term, your confidence levels and risk, to name but a few. We will study these options in more detail in 1.3 and give you ideas on how to decide on the best option.

Before you embark on any negotiation, be sure to recognize that there may be better ways of solving the problem.

1.3 Decide if negotiating is your best bet

There is no point in using brilliant negotiating skills if you shouldn’t be negotiating. In 1.2 we listed the main alternatives to negotiating. Here we will explore the advantages and disadvantages of those approaches.

 Persuade. If you can persuade them to your point of view, you’ve no need to negotiate. On the other hand, it can take forever. It won’t succeed if there is a serious clash of interests – if for instance your partner’s position in the market place is badly affected.

 Impose. This can save you time and money, but it may ruin long-term relationships. Your partner may decide that you have stopped thinking win-win and are thinking only of yourself.

case study As a sales manager, I regularly negotiated a large contract to supply aluminium products to a US-owned company. One year we agreed to use an American source of primary ingot as the basis of our costs. We neglected to consider the possibility that our costs might shoot through the roof because of changes in the dollar-sterling exchange rate. We took a chance on there not being a significant change in the exchange rate. Months later there was a massive change, and our hard-won agreement was put at risk – we had left one major issue to chance. After that, we learnt to put exchange rate limits in all our agreements, and negotiated a mechanism that kicked in outside those limits.

 Instruct. It’s quick, but people like to be offered choices, so are put off by being told what’s going to happen.

 Postpone. A good idea if the problem might go away, or if you think conditions will change in your favour. A bad idea if conditions change for the worse.

 Leave it to chance. A good idea if it seems fair. A bad idea if one party suffers so much that the agreement is sunk.

 Give in. A good idea if you have no choice whatsoever – it’s going to happen anyway. A bad idea if it destroys your credibility or if it will cost you in the long term.

 Problem solve. A good idea if you can work together on the same problem. A bad idea if each party has a seriously different agenda.

 Arbitrate. A good idea if both parties will accept the outcome. A bad idea if one party will be unhappy with the decision of the arbitrator.

 Plead. It shows you in a conciliatory light, as someone who is reasonable. But it puts you at the mercy of others, and may make you appear weak.

Once you have considered these options, but have then decided that negotiating is your best bet, we can focus on the techniques that will allow you to negotiate successfully.

Consider the advantages and disadvantages of alternatives to negotiating before embarking on a negotiation.

1.4 Know who you are dealing with

Whether we seek to impose a decision on someone, or leave things flexible, or negotiate, depends on the other party as much as on us. If you are to succeed, whatever you decide to do must depend to a large extent on who you are dealing with.

These are some of the things that you need to consider about the other party when negotiating:

 Expectations. What are their expectations going to be? Why do they have those expectations?

 Behaviour. How will they expect you to behave? How will they behave? Are they naturally aggressive, or conciliatory? Will they make

case study I used to negotiate regularly with an Indian family that had a significant position within the aluminium industry in Europe. Whichever member of the family I negotiated with, I needed to recognize that they would always inflate the volumes that they were going to take in order to get the best price. They talked big and took a lot smaller. I had to develop a strategy that coped with this. One tactic I used was to go right back to square one with a fresh package for the reduced volume. That was not well received. Instead I made sure that my concessions on specification and price were still going to be acceptable to me when the volumes inevitably started to reduce, and I built that into my first package.

extreme demands or will they be more reasonable? Will they react in a logical way or will they expect you to behave in a particular way, because that’s the way you have behaved in the past? If you suddenly behave differently, how will they react – will it increase or reduce your chances of reaching agreement?

 Culture. What culture do they come from? We will return to this in 1.6, and elsewhere – because understanding their background is a vital part of understanding what will appeal to them and what will turn them off. This will be the difference between success and failure.

 Preferences. Will they want to negotiate one-on-one or will they turn up as a team? Is the other party likely to see the world through positive or negative eyes? Is their glass half full or half empty? Do they look at the big picture or the detail?

 Pressures. Even if they turn up on their own, has their boss exerted pressure on them to get a particular result? If there are such pressures on the other party, I would call this ‘having a monkey on their back’ and you need to be aware of it.

 Options. How important are you to them? How important is it for them to reach agreement? What’s their best alternative to reaching agreement?

Understand who you are dealing with and be sensitive about them and their situation.

1.5 Aim for win-win outcomes

Whether you are a buyer, a seller, or involved in industrial relations, you will usually negotiate with the same people on a regular basis. You will want to develop a relationship with them so that they want to do business with you again. You will both want to feel that you have made a good agreement – we call this feeling ‘win-win’.

We are going to consider outcomes – the end results of negotations. It is crucially important to know your own objectives – where you want to finish up – before you set off. There are four possible outcomes to any negotiation:

1 Failure to agree. When it is appropriate for the negotiators to go their separate ways, because there is simply nothing on which they can possibly agree.

“Begin with the end in mind”

Stephen Covey, author of The Seven Habits of Highly Effective People

2 Lose-lose. When both parties refuse to move, when it was in both their interests to do so. Neither side achieves its objectives nor do the two parties generate solutions to their problems. This leads to total disillusion and frustration with the negotiation process and a danger of souring long-term relationships through a loss of respect and trust. When they come to reflect on this after the event, both parties are likely to regard it as an opportunity missed and will not be proud of themselves.

3 Win-lose. When movement is predominately one-sided. The side that did not move ‘wins’ whilst the side that did all the moving ‘loses’. In a win-lose situation, individuals are usually more concerned with victory rather than relationships. Too much effort is put into achieving short-term goals rather than long-term objectives. A ‘them and us’ attitude is created and the long-term relationship between the parties is jeopardized.

4 Win-win. The experienced negotiator will work towards creating two-way movement that is felt to be reasonably split between the two sides. Movement is aimed at bridging any gaps between them. During the negotiation, channels are developed and kept open for two-way communication. With an emphasis on flexibility, solutions are proposed that enable both sides to achieve their objectives. Satisfactory decisions are arrived at and long-term relationships are enhanced. There is a perception that both parties have demonstrated reasonable movement, the lifeblood of negotiations. Once the meeting is finished, there is a spirit of partnership as the two parties set about making the agreement work.

If you want to do business with someone in future, aim for a win-win result from every negotiation.

1.6 Learn to deal with different cultures

I would define culture as ‘the way we do things around here’. What is meant by ‘around here’? It means wherever in the world you are doing business. To succeed as a negotiator you need to understand where the other party is coming from.

It is very dangerous to generalize on the subject of culture – you could say there are as many cultures as people you deal with. The important thing is to be prepared for others to think and behave differently from you. The usual advice for dealing with the Japanese is to be very, very patient. Yet no culture is entirely predictable, so don’t be surprised when you encounter some Japanese who expect you to hurry up!

case study The Japanese have a very special approach to negotiating. In my experience they are very difficult to read (like good poker players) and frequently need the approval of their colleagues on key issues. I have negotiated with Japanese agents over substantial supplies of aluminium sheet for making freight containers. As negotiators, they are not aggressive, but patient and firm. The specific Japanese approach that I would like to share with you is their tendency to go over the same ground again and again. Once at 6:00pm, I felt we were minutes from agreement. We had been hard at it for three hours. I should have known when they said “can we just check on the specification” that it would take another four hours!

“If you negotiate with Japanese clients, ask questions. When you think you understand, ask more questions”

John L Graham, professor of business, University of California

Nor can you make generalizations about gender differences. When men are negotiating with women, some feel a gentle approach is called for, but many women will object to being patronized in this way. Some women want to prove themselves better than men, and will therefore prove as combative as any man.

Some businesses have reputations for being aggressive in everything they do – in employing people, in buying, and in selling. If you deal with them, your tactics need to be adjusted to suit theirs – with an aggressive first offer for instance. Other companies that you will deal with have an approach that is very much concerned with respecting the rights of their employees or their suppliers. You simply have to know who you are dealing with!

Your negotiating partner’s behaviour may be very different to your own, so be prepared to allow for this.

Prepare clear objectives

The old maxim ‘proper preparation prevents poor performance’ is as crucial in negotiating as it is in presentations, sales visits and other areas of business. This chapter provides you with a preparation framework that allows you to define your objectives, anticipate the other party’s approach, and develop your own strategy and tactics. Thus prepared, you have a much better chance of reaching an agreement satisfactory to both sides.