Here is my new blog post for January – HAPPY NEW YEAR!
Note that it is a follow-up to my last two blogs posts on Conflict Management because when we negotiate we are often in conflict as we tend to disagree and are in opposition. This blog post includes: A model to use when planning the negotiation, and a model to use during the actual negotiation.
This information is adapted from my Leadership: Theory, Application, and Skill Development 6e (Chapter 5), Cengage, 2016 book with Christopher Achua. If you share this information with others, please be sure to reference this source.
At certain times, negotiations are appropriate, such as when conducting management– union collective bargaining, buying and selling goods and services, accepting a new job and compensation offer, and getting a raise—all situations without a fixed price or deal. If there’s a set, take- it-or-leave-it deal, there is no negotiation.
All Parties Should Believe They Got a Good Deal. Negotiation is often a zero–sum game in which one party’s gain is the other party’s loss. For example, every dollar less that you pay for a car is your gain and the seller’s loss. But it doesn’t have to be an “I win and you lose” negotiation. Like power and politics, negotiating is not about taking advantage of others, it’s about building relationships and helping each other get what we want.
To get what we want, we must sell our ideas and convince the other party to give us what we want. However, negotiation should be viewed by all parties as an opportunity for everyone to win. When possible, make the pie larger rather than fight over how to split it. If union employees believe they lost and management won, employees may experience job dissatisfaction, resulting in lower performance in the long run. If customers believe they got a bad deal, they may not give repeat business.
Negotiation Skills Can Be Developed. Not everyone is born a great negotiator. Taking the time to learn how to negotiate before entering a deal is the best way to arrive at a successful settlement. Following the steps in the negotiation process can help develop negotiation skills.
The Negotiation Process
The negotiation process has three, and possibly four, steps: plan, negotiations, possibly a postponement, and an agreement or no agreement. These step-by-step guidelines are discussed in this section. However, in making it apply to varying types of negotiation, you may have to make slight adjustments.
Plan. The key to any negotiation is preparation, so develop a plan. Know what’s negotiable and what’s not. Be clear about what it is you are negotiating over. Is it price, options, delivery time, sales quantity, or all four? Ask yourself, “What exactly do I want?” Planning has four steps.
Step 1. Research the other party(or parties). Put yourself in the other party’s shoes. Try to find out what the other parties want, and what they will and will not be willing to give up, before you negotiate. Find out their personality traits and negotiation style by networking with people who have negotiated with the other party before. If possible, establish a personal relationship before the negotiation. If you have experience working with the other party (e.g., your manager or a potential customer), what worked and did not work in the past?
Step 2. Set objectives. Based on your research, what can you expect from the negotiation—what is your objective? Set a lower limit, a target objective, and an opening objective. The objective may be price, but it could be working conditions, longer vacation, job security, and so on. Follow steps a, b, and c: (a) Set a specific lower limit and be willing to walk away; do not come to an agreement unless you get it. You need to be willing to walk away from a bad deal. (b) Set a target objective of what you believe is a fair deal. (c) Set an opening objective offer that is higher than you expect; you might get it. Remember that the other party is probably also setting three objectives. So, don’t view their opening offer as final. The key to successful negotiations is for all parties to get between their minimum and target objective. This creates a win–win; everyone got a good deal.
Step 3. Try to develop options and trade-offs. In purchasing something as well as in looking for a job, if you have multiple sellers and job offers, you are in a stronger power position to get your target price. It is common practice to quote other offers and to ask if the other party can beat them.
If you must give up something, or cannot get exactly what you want, be prepared to ask for something else in return. If you cannot get the higher raise you want, maybe you can get more days off, more in your retirement account, a nicer office, an assistant, and so on. Based on your research, what trade-offs do you expect from the other party?
Step 4. Anticipate questions and objections, and prepare answers. The other party may want to know why you are selling something, looking for a job, how the product or service works, or what are the features and benefits. You need to be prepared to answer the unasked question, “What’s in it for me?” Don’t focus on what you want, but on how your deal will benefit the other party.
There is a good chance that you will face some objection—reasons why the negotiations will not result in agreement or sale. Be prepared to overcome the no’s you are bound to encounter. Unfortunately, not everyone comes out to state their real objections. So, we need to listen and ask open-ended questions to get them talking so we can find out what is preventing the agreement.
Negotiations. After we have planned, we are now ready to negotiate the deal. Face-to-face negotiations are generally preferred because you can see the other person’s nonverbal behavior and better understand objections. However, telephone and written negotiations (e-mail) work too. Again, know the other party’s preference. Handling negotiations also has four steps.
Step 1. Develop rapport and focus on obstacles, not the person. The first thing we sell in any negotiation is ourselves. The other party needs to trust us. Smile and call the other party by name as you greet them. Open with some small talk, like the weather, to get to know them. Deciding on how much time to wait until you get down to business depends on the other party’s style. Some people like to get right down to business; others, want to get to know you first. However, you usually want the other party to make the first offer, so don’t wait too long or you may lose your chance.
“Focus on the obstacle, not the person” means never to attack the other’s personality or put others down with negative statements like, “You are being unfair to ask for such a price cut.” If we do so, the other party will become defensive, we may end up arguing, and it will be harder to reach an agreement. So even if the other person starts it, refuse to fight on a name-calling level. Make statements like, “You think my price is too high” to calm them down.
Step 2. Let the other party make the first offer. This usually gives you the advantage, because if the other party offers you more than your target objective, you can close the agreement. For example, if you are expecting to be paid $55,000 a year (your target objective) and the other party offers you $60,000, are you going to reject it? On the other hand, if you are offered $50,000 you can realize that it may be low and work at increasing the compensation. Ask questions like, “What is the salary range?” or “What do you expect to pay for such a fine product?” Some say there are exceptions to the rule, such as salary negotiations for experienced professionals because if you state your requested salary first, the first number influences the rest of the negotiation.
Try to avoid negotiating simply on price. When others pressure you to make the first offer with a common question like, “Give us your best price, and we’ll tell you whether we’ll take it,” try asking them a question such as, “What do you expect to pay?” or “What is a reasonable price?” When this does not work, say something like, “Our usual (or list) price is xxx. However, if you make me a proposal, I’ll see what I can do for you.”
If things go well during steps 1 and 2, you may skip to closing the agreement. If you are not ready to agree, proceed to the next step or two.
Step 3. Listen and ask questions to focus on meeting the other party’s needs. Create an opportunity for the other party to disclose reservations and objections. When you speak, you give out information, but when you ask questions and listen, you receive information that will help you to overcome the other party’s objections.
If you go on and on about the features you have to offer, without finding out what features the other party is really interested in, you may be killing the deal. Ask questions such as, “Is the price out of the ballpark?” or “Is it fast enough for you?” or “Is any feature you wanted missing?” If the objection is a “want” criteria, such as two years of work experience and you have only one, play up the features you know they want and that you do have, and you may reach an agreement.
If the objection is something you cannot meet, at least you found out and don’t waste time chasing a deal that will not happen. However, be sure the objection is really a “must” criteria: What if the employer gets no applicants with two years experience and you apply? You may get the job offer.
Step 4. Don’t be too quick to give in, and ask for something in return. Those who ask for more get more. Be persistent, don’t just give up. If our competitive advantage is service, and during negotiation we quickly give in for a lower price, we lose all the value in a minute. We want to satisfy the other party without giving up too much during the negotiation. Remember not to go below your minimum objective. If it is realistic, be prepared to walk away.
When we are not getting what we want, having other planned options can help give us bargaining power. If we do walk away, we may be called back; and if not, we may be able to come back for the same low price—but not always. If other parties know we are desperate, or just weak and will accept a low agreement, they will likely take advantage of us. Have you ever seen a sign on a product saying, “must sell—need cash”? What type of price do you think that seller gets? You also need to avoid being intimidated by comments such as this (said in a loud voice): “Are you kidding me? That’s too much.” Many people will quickly drop the price, but you don’t have to be intimidated.
However, when you are dealing with a complex deal, such as a management–union contract negotiation with trade-offs, be willing to be the first to make a concession. The other party tends to feel obligated, and then we can come back with a counter trade-off that is larger than the one we gave up.
Avoid giving unilateral concessions. Recall your planned trade-offs. If the other party asks for a lower price, ask for a trade-off such as a large-volume sale to get it, or a longer delivery time, a less popular color, and so on. We need to send the message that we don’t just give things away.
Postponement. Take your time. When there doesn’t seem to be any progress, it may be wise to postpone the negotiations.
The Other Party Is Postponing, and You May Create Urgency. The other party says, “I’ll get back to you.” When we are not getting what we want, we may try to create urgency. For example, “This product is on sale, and the sale ends today.” However, honesty is the best policy. The primary reason people will negotiate with you is that they trust and respect you. If we do have other options, we can use them to create urgency, such as saying, “I have another job offer pending; when will you let me know if you want to offer me the job?”
But what if urgency does not apply—or does not work—and the other party says, “I’ll think about it?” You might say, “That’s a good idea.” Then at least review the major features the other party liked about our proposed deal and ask if it meets their needs. The other party may decide to come to an agreement or sale. If not, and they don’t tell you when they will get back to you, ask, for example, “When can I expect to hear if I got the job?” Try to pin the other party down for a specific time; tell the person that if you don’t hear from them by then, you will call/email them. If you are really interested, follow up with a letter (mail/e-mail) of thanks for their time, and again highlight the features you think they liked. If you forgot to include any specific points during the negotiation, add them in the letter.
One thing to remember when the other party becomes resistant to making the agreement is that the hard sell will not work. Take the pressure off. Ask something like, “Where do you want to go from here?” If we press for an answer, it may be no agreement; however, if we wait we may have a better chance. To your manager, you might say, “Why don’t we think about it and discuss it some more later?” (then pick an advantageous time to meet with your manager).
We also need to learn to read between the lines, especially when working with people from different cultures. Some people will not come right out and tell us there is no deal. We should be persistent in trying to come to an agreement, but we also don’t want to waste our time chasing a deal that will not happen.
You Want to Postpone, and the Other Party May Create Urgency. Don’t be hurried by others, and don’t hurry yourself. If we are not satisfied with the deal, or want to shop around, tell the other party you want to think about it. You may also need to check with your manager or someone else, which simply may be for advice, before you can finalize the deal. If the other party is creating urgency, be sure it really is urgent. In many cases, we can get the same deal later; don’t be pressured into making a deal you are not satisfied with or may regret later. If we do want to postpone, give the other party a specific time that we will get back to them, and do so with more prepared negotiations or simply to tell them we cannot make an agreement.
Agreement. Once the agreement has been made, restate it and/or put it in writing when appropriate. It is common to follow up an agreement with a letter of thanks, restating the agreement to ensure the other parties have not changed their mind about what they agreed to. Also, after the deal is made, stop selling it. Change the subject to a personal one and/or leave, depending on the other person’s preferred negotiations. If they want a personal relationship, stick around; if not, leave.
No Agreement. Our goal is to come to an agreement, but rejection, refusal, and failure happen to us all, even the superstars. The difference between the also-rans and the superstars lies in how they respond to the failure. The successful people keep trying, learn from their mistakes, and continue to work hard; failures usually don’t persevere. When there is no agreement, analyze the situation and try to determine what went wrong to improve in the future. We may also ask the other party for advice, such as, “I realize I did not get the job; thanks for your time. Can you offer me any suggestions for improving my resume and interview skills, or other ideas to help me to get a job in this field?”