Negotiation Space

Negotiation is about preparation, skill and organization. The more you are able to get organized prior to a business negotiation, the higher your likelihood of success.

In the book The Negotiating Game, Dr. Chester L. Karrass has proposed a four-part program to improve negotiation performance.

The four parts are these:

1. Improve negotiation planning. Planning is crucial, and depends on various steps such as improving information gathering; understanding the difference between strategic, tactical and administrative planning; and high-quality analysis.

2. Establish a broad-based negotiation training program. Negotiation training offers high return on investment due to improved skills it imparts.

3. Improve the negotiator selection process. Not everyone has the temperament or knowledge to be a good negotiator, even if he/she has lots of negotiating experience. Selecting the right people for the job is a function of disciplined observation and some psychological profiling (those with low self-esteem, for example, are not good candidates for negotiation).

4. Establish a high-level negotiation activity. This is especially important in large organizations, which would benefit from having an elite group of negotiators to conduct essential corporate negotiations. This elite group could also create a negotiation climates among all departments of the business and assist in selecting good negotiators at all levels.

As Dr. Karrass concludes:

A skilled negotiator can change the outcome by as much as five or ten percent. For a large firm this may mean tens of millions of profit dollars….These gains can be realized by organizing to win.

How are you organizing your negotiations?

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?

Dr. Chester Karrass covers the anatomy of the negotiation process in his book The Negotiating Game. He says that in any exchange between parties, five levels of bargaining take place.

1. Share-Bargaining Process

This process is concerned with the division of money, property, power or status. The goal of share-bargaining is to find agreement resolving any conflict of interest in your favor, thus making it so you are not doing anything to improve the other party’s bargaining position.

2. Problem-Solving Process

In this process, both parties try to work with each other to help solve problems together. There are always opportunities to solve mutual problems. For success in this process, you need a non-judgmental and communicative climate. Both parties will need to be empathetic rather than combative to assure mutual gain.

3. Attitudinal Bargaining Process

Attitudinal bargaining takes place in every negotiation, especially in any involved in long-term relationships. It assumes that the desired relationship can be structured through the negotiation. There are five major types of relationships: extreme aggression, mild aggression, mutual accommodation, open cooperation and direct collusion. This process deals with choosing the right type of attitude to counteract the other party’s relationship to you.

4. Personal Bargaining Process

This process is an internal struggle to reconcile competing needs and goals between yourself and the outside world.

5. In-Group Bargaining Process

Negotiators are often working on behalf of a larger group—that is the people in their organization, country or social group. There is often conflict between personal and group goals, facts, methods or values.

What do you think? Are you aware of each of these processes?

In business negotiations, your target is the price you intend to achieve or better.

Setting a reachable target is a key factor in planning your negotiation. Dr. Chester Karrass advises:

How we set targets in negotiation determines how we will settle. A well though out target forces the negotiator to test the other party’s power, to challenge their assumptions, and to resist giving in too easily.

Both experience and research indicate that those who aim higher in negotiation do better than those that do not. If you aspire to less, you will get less, and vice versa. However, when you aim high, and set a high target, you will have more risk and may even face deadlock.

Dr. Karrass says:

Another problem with setting high target is that one must work harder, prepare more carefully, and be more persistent to achieve them.

Clearly, the issue goes beyond aiming high to do well in negotiation. Dr. Karrass offers three tips to reach better targets:

1. Increase your aspiration level

2. Clarify your target and don’t specify fallback positions

3. Everything you say and do before a negotiation affects the other party’s expectation and target

Aim high! With that, we wish you a very Happy Independence Day weekend. We are off on Monday to enjoy the fireworks.

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?

Memorial Day is observed on Monday, and most businesses (although not retail since there is a tradition of holiday sales) in the United States are on holiday. Most people will have a long holiday weekend, marking the unofficial start of summer. How does this relate to negotiation?

Chance to rest

Negotiators do best when they are well rested. A long holiday weekend is a good chance to relax and recharge.

Chance to remember

Memorial Day is, after all, a day to remember those who have sacrificed for the country. In towns and cities across the United States memorial commemorations and parades will be held in order to honor the U.S. military. It is a good time to think about goals and priorities, and about what is important.

Chance to plan

Although summer does not start officially until June 21, it is a great time to start planning for summer and for the third and fourth quarters of the year. Perhaps it is a chance to find new inspiration and new goals.  Perhaps it is a chance to start a “swipe file.” Christopher Penn explains on his blog, “Awaken your Superhero,”  how creating a swipe file is a great way to charge up your creativity and inspiration. You collect materials, such as a great negotiation case study, an inspiring quote, a useful website, in a file (which can be electronic) to look back on and get some great ideas.

Karrass wishes our Negotiation Space readers and friends an enjoyable Memorial Day Weekend! We won’t be posting on Monday in honor of the holiday, but we will back next Wednesday.

Every business negotiation begins for one simple reason: the desire to achieve a goal. Perhaps you are trying to buy new materials at a better price or you are aiming to get a larger sales territory. You have clarified and refined exactly what you want to get from the negotiation, right?

According to Dr. Chester L. Karrass, writing in his book The Negotiation Game,

It is possible for a negotiator to increase the satisfaction of both parties through a disciplined approach toward problem-solving.

The key to achieving your negotiation goals therefore, is to improve your problem-solving approach. To do this, ask the following four questions:

1. How can both parties benefit when you work toward the achievement of your joint goals?
2. How can both parties benefit when you work actively to help achieve the other party’s goals?
3. How can both parties benefit by you helping the other party to work for his/her goals?
4. How can both parties benefit by you giving up some goals in favor of others?

Notice the main theme in these problem-solving questions is trying to achieve benefit for both parties. If you enter a negotiation without considering the other party’s goals, you will not achieve a win-win negotiation.

What other strategies do you actively use when planning your negotiation? Do you prioritize goals? Do you analyze possible outcomes? Let us know in the comments.

One of the most important parts of your pre-negotiation preparation involves information gathering and research.

Your first step is to figure out what information you need to know. For instance, you may need to know pricing history, or market highs and lows. Although having more information could be helpful, targeted information will be easier to use and strategize about.

The second step is to find sources for the information you want. Is this information available on the public record or are their specialized databases that you may need to access? You will need to know what your company has access to and what you will need to get from outside sources. You will also need to establish whether you need to allocate funds to research. Some sources are free, but some are paid (specialized databases like LexisNexis have subscription and/or usage fees).

The third step is to gather and analyze the data.

Finally, your will need to study the data, share it with your team and decide on your negotiating strategy.

Inc. Magazine has published a very useful guide on “How to Research Your Competition.” Among the suggestions it offers are:

Check out industry analyst reports (some are fee-based).

Check out social networks: companies are putting out information via LinkedIn, Facebook, Twitter, etc.

Attend industry trade shows and conferences.

Another way to keep up with both your industry and your competitors is to set up Google Alerts (go to http://www.google.com/alerts ) You will get news about the terms you define (for example “automobile tires” or “San Francisco real estate market”).  It is important to note that Google does not have access to paid databases, but it pulls from blogs, newspaper and tv websites, and other sources.

How do you conduct research? Please share your best tips in the comments.

If you are seeking to improve your business negotiation results, there are many negotiating tactics and strategies that you can deploy.  However, we want to highlight two simple solutions are 1) to meet in person (not virtually or over the phone) and 2) to identify common yet dangerous blind spots.

Meeting in person

It used to be that business negotiations almost always took place face to face. In the wired world, technology has allowed for people to meet using web technology and talk to each other without being in the same location. Businesses have embraced web/phone meetings as a cost-saving method, but does it improve your business negotiation result?

In  “Why Face to Face Meetings Matter” author Rieva Lesonsky writes that new research out of the Cornell University School of Hotel Management indicates that face-to-face meetings are best when:

• You are trying to capture attention/support
• You want inspire positive emotions
• You want to build relationships

In any business negotiation you are always trying to build a positive relationship with the other party while trying to get them to pay attention to your point of view.  Lesonsky adds that:

You can email, tweet and even talk on the phone all you want, but there’s no substitute for the kind of energy and connection that happens when you actually get together with a colleague or customer in person.

Avoiding blind spots

We all have our blind spots—wrong assumptions or holes in our research or knowledge—that can be very detrimental if you aren’t aware of them and let them derail your business negotiation.

Wharton Professor Richard Shell says that there are three types of assumptions that can negatively impact your negotiation.

• Assuming that a high level of conflict exists
• Assuming that everybody thinks the same way
• Overestimating the other party’s power and/or underestimating your own power.

Read why Professor Shell thinks these are dangerous blind spots in the article “Three Assumptions that Undermine Your Success.”

Even the most experienced business negotiator makes mistakes…after all, we are all human. There are a few common negotiation mistakes that can derail a negotiation, according to Harvard Business School Professor James K. Sebenius. Prof. Sebenius says these six mistakes are:

1. Neglecting the other side’s problem.
2. Letting price bulldoze other interests.
3. Letting positions drive out interests.
4. Searching too hard for common ground.
5. Neglecting BATNAs (acronym for “best alternative to negotiated agreement”).
6. Failing to correct for skewed vision.

Sebenius discusses all of these in the Harvard Business Review magazine, but in an excerpt online, the focus is on the last one—failure of perception. All people have biases, and in a negotiation they may fall prey to self-serving biases—that is, interpreting (perhaps incorrectly) what the other party says or does to bolster one’s own position.

Another issue that arises from having biased perceptions is the inability to assess the other side correctly. Sebenius says that some negotiators become entangled in partisan perceptions, expecting the other side to act in a certain manner. What is more, expecting the other side to act in a certain manner may actually be a self-fulfilling prophecy.  For instance, if you expect the other side to reject your offer without considering it, you may give a half-hearted offer, which will lead the other party to reject it out of hand. This in turn, ends up bolstering your opinion of the other party, which leads to a path of adversity not cooperation.

To avoid making any of the six negotiation mistakes, negotiators must practice self-awareness and self-analysis. Sometimes it is important to take a step back to be able to view one’s actions more clearly. You may ask yourself/your team the following questions:

• How are you approaching the negotiating table?
• What are you really seeking to accomplish?
• How can you best work with the other party to reach your goals, and theirs?
• Are there other paths to agreement?
• What is causing blocks?

Have you made some of these common negotiating mistakes? If so, how did you overcome these mistakes?