Negotiation Space

Planning is an essential step in negotiation, and part of planning is gathering information. You will want to know about issues such as:

• Current market conditions
• Industry trends
• Pricing trends
• Company information

Dr. Chester Karrass provides useful questionnaires for planning purposes in his book “In Business As In Life—You Don’t Get What You Deserve, You Get What You Negotiate.”  He suggests you should have a strategy to gather information. In order to structure your thinking about information gathering, he provides some questions. Following are some key questions to start creating your information gathering strategy. A full list is available in the book.

1. What kind of information do you want to know? (look at list above for some ideas)
2. Where can you get this information?
3. Can you learn anything from past negotiations with this party?
4. How much business are you doing with this party?
5. How well is this company doing?
6. What don’t you want the other company to know about you?

The more detailed information you are able to gather, the better you will be able to negotiate. Keep in mind that the other party will most likely be gathering information about you. It is just as important for you to know what information will tell the other party about you and your position.

How do you plan to get good information? What are your main sources of information?

Your aim for any business negotiation is to make a deal with the other party. You probably want to achieve the best deal possible.

In order to make a better deal, there are two key moves you can make:

Shift into cooperative mode: There are two major modes of negotiation: competitive and cooperative. Karrass teaches the cooperative mode, which focuses on creating additional value so that the parties have more to share. We also call this the both-win approach.

By being cooperative you will reduce tensions. To start the shift, set the stage with an atmosphere that is conducive toward a both-win outcome. This mean avoiding posturing, anger, strong and pointed remarks and instead showing the other party that you want to do business and that you are willing to work toward a mutually agreeable situation.

The cooperative mode may seem counter intuitive since many people enter a negotiation with the desire to resolve conflicting interests, which may lead into a competitive mind-set.  The advantage of cooperation is getting to a better deal.

Build in negotiation acceptance time: Acceptance time is central to negotiation. You must allow time for the other party (or people in general) to accept new idea or new ways of doing things. Most people resist change and will need to become used to a concept before they accept it. If you plan for acceptance time, you will have a smoother, better negotiation leading to a better deal.

How do you achieve a better deal? Please share your strategies and tactics in the comments.

Negotiation strategies and tactics can be used across the whole spectrum of business and personal negotiations, from salary negotiations to buying a house. However, certain types of negotiations use certain tactics or strategies more than others. For instance, if you are negotiating a lease, you will want to focus on the terms of the contract as well as the price.

In the article “The top ten common lease negotiation issues and how businesses can navigate them” from the SmartBusiness Orange County website, Sonia Lister and Spring Robinson provides smart tips that apply directly to lease negotiations.

Leases are complex and detailed documents that spell out deadlines, term limits, notice periods, costs, and other issues that should ALL be negotiated to the advantage of both parties.

First on their list is the letter of intent, which gives an advantage to the tenant. The letter of intent is not binding, but spells out the terms of your negotiation. Many times these business terms are NOT re-negotiated.

Another issue Lister and Robinson suggest planning and negotiating for is flexibility of the lease. Companies can grow and need more space, and they can also shrink and need to decrease their office capacity. When negotiating a lease, it will be important to build in future flexibility based on changing needs.

Dr. Chester L. Karrass warns against signing any STANDARD lease. He writes: “Standard terms and conditions exert a power of their own that I call ‘the power of legitimacy.” Standard leases have far more protections for landlords than tenants, and yet many of these terms are negotiable and changeable.

Which  negotiation strategies and tactics have you applied in lease negotiations?

One of the tenets behind a win-win negotiation is that all parties must be satisfied with the deal. It isn’t a win if someone feels he/she got the short end of stick, right?

In fact, Dr. Chester L. Karrass writes the following in his book “In Business as in Life, You Don’t Get What You Deserve, You Get What You Negotiate:”

The basic principle of win-win negotiating is that there is ALWAYS a bigger and better deal for both parties if they are willing to search for it. Both buyer and seller increase their PROFIT and SATISFACTION without hurting each other.

Maurice E. Schweitzer has an interesting take on satisfaction, in this article on the Harvard Law School Program on Negotiation website. He writes that satisfaction is important because this ensures that the parties will uphold their contractual negotiations more readily and also, that the other party will likely recommend you/refer business to you AND seek you out as a partner for future negotiations.

Clearly, satisfaction is a key component of a successful negotiation. How do you ensure it? Schweitzer writes that negotiators must manage expectations, both before and during a negotiation. There are ways of doing this. For instance, Schweitzer writes:

Your reaction to an opening offer can also influence your counterpart’s expectations. By reacting with a surprised look, a laugh, or a flinch, you can lower your counterpart’s expectations about the feasible bargaining zone. Conversely, by appearing very cooperative or particularly eager for agreement, you may raise your counterpart’s expectations.

Dr. Karrass also writes about expectations. He says:

Every demand, concession, threat, delay, piece of information, deadline, authority limit and question has an effect on people’s expectations.

Being able to  manage expectations is a necessary skill that  help you reach a satisfactory deal. What are your thoughts?

Here at Negotiation Space we discuss business negotiations, although we have touched on diplomatic or international negotiations. Within business negotiations there are negotiation strategies for sellers and buyers, for teams and individuals, larger businesses and mom-and-pop operations. We have discussed real estate transactions, and salary negotiations. However, we have not discussed if there are any differences in negotiations by industry or segment.

The question is: If you are involved in agriculture or manufacturing (or any other industry), is there a difference in the way you negotiate?

In the article “Purchases, Negotiations and You,” which is directed to Information Technology (IT) professionals, the author shares many negotiation tips and strategies that transcend IT transactions and are applicable to all business negotiations.

The article advices IT professionals who negotiate to:

• Build a team
• Buy bulk
• Add value
• Sweeten the deal
• Do your homework
• Study the details
• Read the contract

Clearly, all of these suggestions are applicable to any business negotiation.

The article quotes Anthony Bosco, who is vice president and CIO of Day & Zimmermann, a Philadelphia, Pa.-based business services company:

Negotiation is not a game of war, or tic-tac-toe, or one-upmanship, you don’t need to strong-arm the guys across the table. They do not have the power to make the decision anyway. Instead, arm them with information — ammo really — so they can take it back to their bosses and get what you actually need.

He goes on to say:

You lose credibility if you try to beat up a vendor with something you are not really knowledgeable about, know what you are talking about, know what a fair price is, and know what the industry is moving towards in general before you enter negotiations.

These suggestions–Thinking win-win and being prepared– from Bosco, although directed to an IT audience, certainly hold true for any type of negotiation.

What do you think? Do you negotiate differently if you are in different industries?

We spend most of our time here at Negotiation Space discussing ways to move your business negotiation forward. But what happens once you have concluded the negotiation and you have a deal?

After you are done celebrating your new deal, you must give some thought to putting the deal into practice. In many cases, the agreement you have reached is the first part in a long-term relationship between your organization and the other party. Your goal now is to maintain a positive and productive relationship.

According to the article “What to do when the ink is dry” from the Harvard Program on Negotiation, there are a few steps to take. These are:

• Maintain open and clear communication. Make sure the communication is going both ways. Further, to ensure that there are no misunderstandings, you may want to have a face-to-face meeting, whether in person or on a video-conference call.

• Establish and maintain mutual respect. In order for organizations to do business with each other, there must be respect.

• Maintain trust by being reliable. Deliver on the terms of your agreement. Be upfront when things are not going as planned.

• Indicate and maintain your commitment to a long term relationship. Is your company in it for the long-haul? Be sure the other party knows that you want to make this work (and make it a win-win for both sides).

What do you do after you have reached an agreement?

Who is on your team? Many business negotiations involve a team. However, not all team members are equal in status or in authority. There will almost always be a team leader, who will be responsible for choosing team members and making final decisions. The other members of the team are experts in other functional areas like sales, engineering and pricing.

Priorities, decision-making and attitudes toward risk can vary greatly among team members, and a team leader will have to be able to manage these differences and any potential conflicts. It will also be important to have good communication among team members and an understanding of the goals and strategies prior to the negotiation.

Dr. Chester L. Karrass cautions that you should never negotiate with a second-rate team by your side. If you are the team leader, you should always select members that you respect and that are expert in the area that you need. Don’t select team members because they are “nice guys” or you owe them a favor.

It is important to understand that the team will be making strategic decisions together. The team must be able to reach a consensus on issues such as:

• Whether to buy or not
• Time limits
• Technical limitations
• Future potential

If you are involved in high-stakes negotiation, you may also want to have a psychologist on your team.  According to Dr. Karrass, sit-in psychologists can serve as trained observers who can detect certain subtle behaviors that an average observer may not see. Psychologists can also help increase team performance by assisting in resolving internal conflicts that arise from personality clashes and other tensions.

Who is on your team? How do you select team members?

Negotiation Space always monitors interesting and insightful articles and posts regarding business negotiations. Today we found three useful articles that we want to share.

On MSN.com we get “The Most Common Negotiating Mistakes—and How to Avoid Them.” The article lists several mistakes that are easily avoided (and many that we have discussed here on Negotiation Space). Here are three:

• Being too pushy: allow people to say no.
• Sending subconscious messages: Body language is part of communication, and you need to aware that others may be able to read your thoughts.
• Thinking short-term: Many negotiations take place in the context of long-term relationships. It is wise to think about the long-term impact instead of short-term gain.

Being able to be persuasive is an important part of a negotiator’s skill set. Over on the Harvard Business Review, William Ellet , a lecturer at Harvard, writes about “The Practical Art of Persuasion”. Ellet teaches a course on persuasion, and he says there are several steps to take to develop a persuasive argument. First is understanding who your audience is. Second, is creating the right argument. He suggests the following questions to formulate your argument:

What are the best arguments I can make to achieve my purpose?

Do I need to include arguments that will appeal to different segments of the audience?

What evidence do I need to support my arguments? How much do I need?

Harvard Business School Program on Negotiation discusses the hardest step of all in business negotiation: “How to Get to the Table.” Many times, because of lack of trust, the parties are unable to sit down and talk to each other. The article says:

When outside facilitators or brokers aren’t available or appropriate, stakeholders can get to the table by underplaying the significance of the negotiation. Talks can be termed “exploratory” or “informational”; contentious issues can temporarily or permanently be taken off the table. When emotions run high, getting new faces involved may break the deadlock.

If you come across a great negotiating story, feel free to share in the comments.

Part of your business negotiation preparation is to research the other party: market, product and company background. An excellent place to start is the company’s annual report. All publicly traded companies are required to produce one, and many privately-held companies do so as well.

Annual reports provide a wealth of information. As Investopedia.com describes, annual reports typically have the following sections:

• Financial Highlights
• Letter to the Shareholders
• Narrative Text, Graphics and Photos
• Management’s Discussion and Analysis
• Financial Statements
• Notes to Financial Statements
• Auditor’s Report
• Summary Financial Data
• Corporate Information

These types of data and information are valuable to a negotiator. However, you may have difficulty tracking down annual reports if you are not a stockholder. According to the Ask Matt column in USA Today:

Annual reports are increasingly going online, with much of the data they contain being delivered electronically. So, your first step would be to determine if you really need to dig out the actual annual report at all. If you’re just looking for historical financial data, such as revenue and earnings, you might be better served getting those data from an online service.

(…)

If you still think you want the old annual report, start at the investor relations section of the company’s website. Most companies keep an archive of annual reports there.

If you can’t find the annual report, the next place to look is with the chief regulator: The Securities and Exchange Commission. The official version of the annual report is called the 10-K.

Having this information at your fingertips is a good way to understand the other party’s financial and corporate structure.

What are your main resources for pre-negotiation competitive research?

Just like a heart bypass procedure can be life-saving, a negotiation bypass can save your negotiation. And similar to when you are treating a heart condition, a bypass is a serious tactic that should only be used when absolutely necessary.

In negotiations, a bypass “seeks to open new communications channels for a variety of legitimate reasons.” (Karrass, Chester: Give and Take). The reasons include:

• Breaking an impasse
• Getting to the real decision maker
• Reversing a prior decision
• Negotiating with someone easier to deal with
• Testing an offer.

It is easier for a buyer to bypass a salesperson than for a salesperson to bypass a buyer. The selling side is interested in making a sale, perhaps even at the expense of a salesperson’s pride. On the other hand, buyers can decide not to buy for a variety of reason, and can retreat or look elsewhere.

There is a problem when bypassing the party you have been dealing with: anger and even hostility. Going above someone’s head or talking to other people in the organization will result in ruffling feathers, awkwardness and may make some people truly unhappy.  The bypass can even backfire. According to Dr. Karrass: “The bypass or end run works only against groups that are so poorly coordinated that they let it happen.”

There are ways of lessening the emotional impact of a bypass. For instance, you could attempt to talk to the alternative party when the original party is on vacation or on leave. You could also use the explanation that the operation requires a higher up to supervise, or you could even change the negotiation venue to somewhere where the person you want to negotiate is located.

Have you had to bypass the party you were in negotiations with? How did you handle it?