Are you flexible?

We are not asking if you can touch your toes or excel at yoga, rather, can you change your tactic, expectations and goals depending on the situation? Can you re-prioritize? Are you capable of reassessing?

Flexibility is a very important trait in business negotiations. Flexibility is a key to compromise, which in turn is key in reaching concessions and conclusions.

Flexibility is also key in choosing the right negotiation tactic. Tactics work differently with different people or with changing market situations. In order to choose the right tactic, you must be flexible. Don’t try to stick with a tactic because it worked yesterday.

Dr. Chester L. Karrass counsels that negotiators should reassess their tactics in answer to the following questions:

1. Can I combine tactics for better results?
2. Is this a good time to change tactics?
3. How will the opposition interpret this tactic?
4. Will this tactic have unintended consequences?

Use your business judgment to reassess your tactics, and change course if necessary. Being inflexible, just like in yoga class, will leave you stuck in one place and not able to move more freely.

What do you do to flex you tactics muscles? Have you lost a negotiation do to inflexibility?

What is your mission?

Before you go into any negotiation, you prepare. You know what you are willing to do to reach your goals. But are your goals in line with your company’s goals?

Most companies and organizations have a mission statement (and some even have a vision statement), which outlines the company’s goals in the market. As a business negotiator representing your company, you should be familiar with the mission. The mission can help organize your negotiation priorities.

Entrepreneur Magazine gives the following definition for a mission statement:
A sentence describing a company's function, markets and competitive advantages; a short written statement of your business goals and philosophies.

The article goes on to say the following:

“The mission statement reflects every facet of your business: the range and nature of the products you offer, pricing, quality, service, marketplace position, growth potential, use of technology, and your relationships with your customers, employees, suppliers, competitors and the community.”

(Read full article here: http://www.entrepreneur.com/encyclopedia/term/82494.html)

It is imperative for negotiators to understand exactly what they are representing. A company’s mission statement helps encapsulate this. Also, when you enter any negotiation you have a certain set of goals, both for the negotiation and for the company. In fact, in deciding your goals for the negotiation, you should have a sense of where these fit in the overall company business strategy.

If you are not aware of your company’s mission, it is time to familiarize yourself with it. If your company does not have a mission statement, it can be extremely helpful to develop one.

How familiar are you with your company’s mission statement? Is it helpful to you when you negotiate?

Telephone Negotiations

Should you negotiate on the telephone?

A few weeks ago we discussed online negotiations, but a far more common not-in-person negotiation takes place on the telephone. How and when should you negotiate on the phone?

Let’s start with the when.

According to Dr. Chester Karrass, “a phone negotiation is the ultimate quick-deal maker.”

Here are some situations when the phone works best:

• You are dealing with a hard-to-reach person
• You want to say no easily
• You don’t want to seem concerned
• You want to sound tough or resolute
• You want to keep the discussion short
• You want to equalize your status
• You want to limit the amount of information
• You want to talk more, listen less
• You are prone to interrupting frequently
• And last but not least , you want to keep costs low (no flying a team across the country)

Let’s discuss how to negotiate effectively over the telephone.

The first rule is the rule for all negotiations: be thoroughly prepared, and be better prepared than the other party.

A few dos:

• Make a checklist to avoid omissions
• Take notes during the conversation
• Confirm agreements by repeating them back in your own words
• Have a ready excuse to break off the conversation
• Talk less to get the other party to talk more

A few don’ts:

• Don’t start a phone negotiation when you know you won’t
have time or you are in the middle of other things.
• Don’t multi-task during the phone call. Remain fully engaged
in what is being discussed during the call.
• Don’t start a conversation unless you know your issues
and you have a position on them
• Don’t be afraid to call back if there are errors in your calculations
or you decide you want to revisit an important issue.

Risks:

• When on the phone you can’t look the other person in the eye to determine
their emotional reactions to what you are saying. The message you think
you are sending might not be the message they are receiving.
• You may end your call thinking you have agreement when you really have no
agreement from the other side.
• If you use your cell phone you may not have the opportunity to write down
the results of your call until later. When you do document what happened on
the call, what you write down may be different from what was actually
agreed to.

Do you routinely engage in telephone negotiations? If so, when are they most effective for you?

Strategic or Tactical Negotiation?

When you enter a business negotiation, chances are you have thought about what you want to achieve. Perhaps you have even planned for the negotiation. But are you being strategic or tactical?

Many people trip up on the difference between strategy and tactic, and the easiest way to explain it is that tactics are what allow you to achieve your strategy.

Dr. Chester Karrass talks about three types of planning:

1. Administrative planning: Focused on providing information to teams/individuals to ensure the outcome of both strategies and tactics.
2. Strategic planning: Focused on achieving your long-range goals
3. Tactical planning: Focused on getting the best results from a specific negotiation

In Dr. Karrass’ view, the most important type of negotiation planning involves strategy. Your strategy planning will be centered on information such as: product-market goals; worth analysis, price and cost analysis. Using a strategy planning session, you will formulate goals, from least to most important. With these goals in mind, you can envision where a specific negotiation fits and how it can help achieve those goals.

An example:
Strategic decision: After a worth analysis, the company decides to buy parts rather than manufacture them.
Administrative decision: Team will enter a business transaction with ABC parts supplier, based on the quality and reliability of their parts.
Tactical decision: To negotiate a price of no more than $X per part under a two-year exclusive contract.

Have you entered a negotiation without an understanding of your long-range goals? Did it affect the outcome? Please share your views in the comments.

Can (Should) You Negotiate OnLine?

It was inevitable that negotiations would migrate to the online world.

In a very insightful article (http://www.nytimes.com/2009/04/26/realestate/26cov.html),

the New York Times reports on the increasing use of email for real estate negotiations.

It is now common in New York for offers to come in via email to mobile devices, speeding up negotiations for real estate.

As the article points out, there are several advantages to using email in negotiations:

• It is a written record (something that Dr. Karrass recommends)
• Keeps all parties informed
• Gives parties time to digest information

But there are pitfalls to negotiating online. The main one is anonymity. For instance, some real estate agents are now sending low-ball offers via email, so they don’t have to see the reaction on the other side. And being able to see the other party’s reactions, and gauge emotions is important when negotiating. This type of "soft" information is very useful in helping you to assess the situation, and figure out where you stand vis-à-vis the other party

It is easy to have misunderstandings via email. You have to wait for a response instead of being able to clarify things quickly as you would in a face-to-face interchange. Also, email is notoriously bad at communicating tone. Any humor, sarcasm or even encouragement is lost in electronic communications.

If you are going to negotiate online, it is important that you know the other party well. As the article states: "One of the keys to a successful online negotiation is to make sure agents and clients have met to establish a relationship."

Perhaps it would be wiser to leave email negotiations for small transactions, and meet in person for important negotiations.

Have you conduction negotiations online? Did it work for you?

Think About It

Hi. I’m the new blogger at Negotiation Space.

I’m using the name Considered Response.

I picked it not only because I hope that’s what you’ll get from me when you chime in or ask a question, but because it’s one of the negotiating behaviors that I consider most important.

When a question hits the negotiating table, is it wise to answer immediately?

(Note: There is no answer to these behavioral questions that is always right in every negotiating circumstance. There are no slam-dunks, no “cookie-cutter” methods in negotiating. Otherwise, we might be able to have computers no it for us. But it’s always the top folks, the important people in an organization or department who make the deals. That’s because negotiation requires critical thinking and discernment, an ability to judge context and behave appropriately in the given circumstances. So you probably won’t see me using the words ‘always’ or ‘never’ very often…)

But let’s look at the question this way: you ask your negotiating counterpart a question, or you lay a proposition out for their consideration. How do you feel if they come back with an immediate answer? Probably like they have an automatic response to that inquiry ready, so you’re getting their stock reply. Or like they don’t care to give the issue any special consideration for some other reason. Either way, your position hasn’t been given much weight in the discussion, and often that doesn’t feel too good. How would most people negotiate if they were dealing with someone they thought didn’t respect them? They would likely become more competitive and entrenched in their own position.

How about if they take some time – overnight or a week, or two weeks- to respond?

Don’t you feel like their answer has more weight, that it’s the product of consideration rather than improvisation? Doesn’t that consideration have some value to you, whether or not the response matches your expectations or desires? And, importantly, aren’t they giving you more time to think about the negotiation and consider possibilities you might not have if they’d answered right away? Such as alternatives or even why their position might not be so bad after all…

Our world is moving faster and faster. Sometimes we trap ourselves into thinking the quickest response to a negotiating question is best. Not always true.

The next time you’re in a negotiation and somebody asks you something or asks you for something:
Think about thinking about it.

Until next time…

Considered Response

Re-Negotiate Your Agreements

Re-Negotiate Now

Times change. What once made good business sense, now no longer works. Effective negotiators are now reviewing past agreements to determine which need to be re-negotiated to bring them back into balance.

In the Effective Negotiating seminar we discuss what we learn from various cultures around the world. Re-negotiating is a central premise in the Asian culture – China in particular. When a Chinese organization makes an agreement, it usually is an agreement ‘for now.’ The agreement simply paints a picture of a fixed point in time--today. As things change, the Chinese expect the agreement to change, regardless of what is written on the paper called ‘the contract.’

Think about it. This makes a lot of sense. It is a very practical approach you should take into your negotiations.

Over time, facts and knowledge change. You now know more than you did when you made the agreement. Use this knowledge now to make it a better agreement.

Negotiating pressures, power and expectations also change over time. How does this impact your agreements? What needs to be changed now to bring the agreements back into equilibrium?

It is a wise negotiator that builds contingence plans into all of their agreements.

Relationships change. Hopefully you now know the other party much better than you did when you made the initial agreement. How does this impact your ability to re-negotiate a better agreement for both sides?

Today most of us face a tough economy. Costs have changed; now is the time to re-negotiate prices and terms. The original ‘work sharing’ formula for your teaming agreement is not actually happening – it is time to re-negotiate. Changes and modifications need to be made to existing agreements to enhance value for both parties.

It is important you survive and continue to prosper. Your success depends on your skill and ability to negotiate to keep existing agreements in place, and when necessary, to re-negotiate profitable alternatives.

You Have Negotiating Pressure

The current economic climate is creating pressure on most negotiations. Uncertainty prevails and many decisions are being delayed. Now is the time for you to stop and analyze your current negotiations. Identify and clearly understand the pressures you are having to respond to --- from all kinds of different sources.

Buyers are being asked to bring costs down. Salespeople are being asked to increase volumes and margins. Manufacturing people are being asked to increase plant efficiencies and productivity. Engineers and managers are being asked to do more with less. There is not a day that goes by that we don't hear about another downsizing.

Now, more than ever, please remember that in any negotiation there are pressures and problems on BOTH sides. Yet it is human nature to immediately focus on our own problems and pressures and forget about the other party. Don't fall into this trap!

Take the time to fully analyze all of the potential problems and pressures on the other party. If you don't know, invest some time to do some investigative work and find out. Your analysis will provide clues to ways you can come to agreement. Just by recognizing the other party also has certain problems and pressures increases your negotiating power, and strengthen your negotiating position.

Think about your negotiation. You know your needs (your pressures). The other party has needs too, which they feel as their pressures. Ask yourself, "What's on their sheet?" Try to use the negotiating process as a tool to help you find opportunities for a Both-Win solution -- an agreement that takes the pressure off both you and the other party.

Negotiating Pressure

It's a fact: Identifying the pressures on the other side increases your negotiating power and strength.

The current economic climate and ongoing political unrest around the world is creating pressure on many negotiators. Decisions are being delayed. Buyers are being asked to bring costs down. Salespeople are being asked to increase volumes and margins. Engineering and manufacturing professionals are being asked to increase plant efficiencies. Managers everywhere are being asked to do more with less.

Any given negotiator is probably felling pressure from a variety of sources.

Now, more than ever, you must remember that in any negotiation there are pressures and problems on BOTH sides.

Yet, its only human nature, we almost always focus on our own problems and pressures and forget about the other side.

One of the key concepts discussed in the Effective Negotiating seminar is -- "You've got more power than you think." Just the recognition of the pressures on the other party will increase your power and strengthen your negotiating position.

You know your needs -- your pressures. The other party also has needs, which they feel as their pressure. Remember to ask yourself that key question -- "What's on their sheet?" This will help you identify the other party's pressures.

With this information use your negotiation as a tool to help find opportunities for a Both-Win solution--an agreement that takes the pressure off both you and the other side.

Building a Dossier to Negotiate Better Next Time

When learning to negotiate with another party, it is important to discover their personal negotiating characteristics. At the same time the knowledgeable negotiator on the other side of the table is learning how to deal with us.

Even though we try to do business only with cooperative business partners, the old military admonition, "Know thy enemy." Certainly applies.

Here are a few characteristics that will be useful to understand your other party's approach to negotiation:

• What range to negotiate do they leave themselves? In other words, historically, is there a consistent pattern from where they open to where they close?


• Concession valuation: It was interesting to learn that not everyone values concessions the same way. Some count concessions, while others look at the total value of the concession.


• People who count concessions are bargainers who are very comfortable with the tit-for-tat approach. Dr. Karrass reminds us that if we must give a concession in return, make sure it is less costly than the one gained.


• How does the other party respond to deadline?


• Can we believe their deadline?


• How good is their planning?


• How is their team synergy?


• Do they use ploys like Good Guy-Bad Guy?


• Does the boss come in at the eleventh hour as the bad-guy?


• How much emotional content do they use in the negotiation process?


• Do they have non-verbals that signal a willingness to close?


• Is there someone on their team who talks too much?


• How well do they honor agreements once they have been made?

These are a few ideas on reviewing and recording at the end of this negotiation to learn how to negotiate with the same party next time.

Quote: "People tend to replicate behavior which has proved to be successful in the past." Chester Karrass

The Circle of Discovery

Most students of the negotiation process agree that the best negotiators will perform a thorough process of discovery prior to sitting down with the other party.

The process of discovery itself requires resolving some internal concerns, such as:

1. How much do I really need to know? (In the next article we'll discuss some of the characteristics of the other party it would be helpful to know.)

2. What is going to be the best approach to discovering each of these points of information?

3. When does it become too much to ask?

4. When should discovery start?

5. Who, in our organization should be assigned each of the points to discover?

6. How will we verify the information we do discover?

7. Who in the other party's organization will we use as a source?

8. How can we deal with our people's philosophy toward discovery?

Now, hold a mirror up to the above list and prepare your organization for the other party's discovery process:

1. What is safe and / or appropriate to share with the other party? Some of these issues must be made available to create the best agreement possible for both parties.

2. What is the best way to disclose?

3. Who is the most appropriate person to disclose vital information?

4. How do we train our vulnerable people to not disclose information we do not want disclosed?

I will never advocate lying, but it is imperative your folks have permission to not answer a question! Here are some ideas on how not to answer a question and still maintain our integrity:

· "Wow, great question, but that answer can only come from Penny in Engineering."

· "Why is that important to you?"

· "I am not authorized to answer that question."

· "You know, we used to provide that type of information to trusted folks, like yourselves, but then we realized that our friends changed jobs, and their replacement never seemed to have the same level of confidentiality as the first person. Pretty soon our propriety information became street knowledge. Now, after being burned a few too many times, no one in our organization is authorized to disclose this type of information."

Some relevant quotes for you:

Remember, a loose woodpecker inside of the ship may be a greater danger than all the storms on the outside.

"I have never been hurt by what I didn't disclose, but I have oft regretted what I did say."

"It is better to remain silence and be thought of as a fool, than to open your mouth and remove all doubt."

"Silence creates confidence in your position."

"Wise folks speak when they have something to say and fools talk when they have to say something."

Negotiating: Breaking An Impasse

You did everything right, yet you find yourself at an impasse with the other party.

What do you do now??

Too many negotiations break down for the wrong reasons. Impasses are not always caused by world-shattering issues or great matters of economics. Many breakdowns are the result of simple things like personality differences, fear of loss-of-face, troubles within the organizations, a poor working relationship with the boss, or the sheer inability to make a decision.

Any consideration of how to break an impasse must take into account the human factor. It may not be what you do, but how you do it that becomes the critical factor. Here's several moves that may be useful in averting or breaking an impasse:

1. If the impasse involves money – offer to change the shape of the money. A larger deposit, a shorter pay period, or a different payment stream works wonders – even when the total amount of money involved is the same.

2. Change a team member or the team leader.

3. Eliminate some of the uncertainty. This can be done by postponing some difficult parts of the agreement for renegotiation at a later time when you have more information.

4. Change the scope of risk sharing. A willingness to share unknown losses or gains may restore a lagging discussion.

5. Change the time scale of performance. Maybe it’s OK to complete 60% over 4 months rather than 3 months. It might be easier to start slower and still complete the job within the desired timeframe.

6. Assure satisfaction by recommending grievance procedures or guarantees.

7. Move from a competitive mode to a cooperative problem-solving mode. Get engineers involved with engineers, operations people with operations people, and bosses with bosses.

8. Change the type of contract: fixed price, indexed or scaled price, time and materials, percentage of savings, percentage of increased sales, and percentage of profit created.

9. Change the base for calculating percentages: a smaller percentage of a larger base or a larger percentage of a smaller but more predictable base may get things back on track.

10. Create a list of options or alternatives that need to be discussed. Or change the order of discussion.

11. Suggest changes in the specifications or terms.

Impasse breakers work because they re-engage the other party in discussions with his or her organization and team members. These icebreakers help create a climate in which new alternatives can be developed. Surprisingly, sometimes the introduction of new alternatives has the effect of making old propositions look better than ever.

Try to pre-plan a face-saving way to reopen discussions should an impasse occurs. If you set the stage before the impasse sets in, you are in a better position to handle the problem.

Negotiating Understandings and Agreements

An Understanding is an expression of mutual viewpoint and attitude on an issue. An Agreement is a conclusive commitment to mutually acceptable terms. And a Procedure is a way of doing something.

You're probably wondering what this has to do with negotiating. What difference does it make? After all, isn't a deal a deal?

When you're negotiating it's not enough to simply reach agreement. Even when two parties have the best intentions, Agreements break down for a variety of reasons. Breakdowns occur because those responsible for implementing the Agreement often do not understand the common viewpoints, attitudes, and backgrounds that brought about the Agreement. Sometimes the breakdown occurs because neither party knows how to make the Agreement work or how to prove what is, or is not working.

A good Agreement should not only spell out the work and money involved, but should also discuss the understanding behind the Agreement and a Procedure for measuring cost in the event that additions or deletions of work occur. A poor Agreement simply leaves the parties bickering about whether verbal understandings are being met and whether costs are being accumulated fairly.

The next time you are in a negotiation, better say to yourself, "It is not enough just to reach agreement on terms. Are there any understandings and procedures that ought to be documented in detail right now, while they are fresh in our minds?"

The Best Negotiators?

Years ago I asked a seminar group to identify the best negotiator they had ever met. There was no response, so I suggested they think of a short person. Finally someone ventured, "You mean a kid?"

That was the answer I was seeking. Think of a brand new baby. How long does it take that child to discover their negotiating power?

Think of some of the characteristics of a good negotiator:

• Identify sources of power. Every infant learns to trade quiet and serenity for food, holding, walking, changing and adult babble.
• Aspire a little higher to do a little better. Children are never reluctant to ask for more than they believe they will get. A parent sits there and wonders, "Why did she ask for that: she knows I will say "NO"? The child, however, is thinking, "Ya never know!"
• Precondition the other party. Have you ever had a child open a negotiation with you by using this preconditioning: "I know you're going to say NO, but....."? Or, "All of my friend's parents are letting them go to that party next Saturday" Have you ever been preconditioned for a bad grade in math by learning about the wicked witch of algebra just before the report cards are issued?
• Get something in return for a concession. Does this sound familiar: "If you let me do....., I'll do.....for you."?
• Control the first concession. Every child understands that if the parent makes a large first concession it is usually a sign of weakness, guilt, or a need to get this negotiation over quickly. This encourages the child to ask for more.
• Be willing to take on higher authority. The higher authority in any two-parent family immediately becomes the one who has not said "NO" yet.

These are but a few of the intuitive negotiating characteristics a child brings into the world with them. Consider this: You were that child once; what happened?

Jim Sauerwein

Note from the Author . . .

We are very pleased with the readership of this site, but we would like to ask a favor.

If you don't have a comment on a particular article, how about a question regarding negotiation?

Perhaps you would share with the readership a difficult negotiating problem you have or are encountering.

We would like to hear from you. Is there a topic you would like us to discuss?

Jim Sauerwein

Favorite Negotiating Books

Every week or so, I am asked what my favorite negotiation books are. Of course Karrass' classic, The Negotiating Game will always be my favorite. Here is a list of some of my other favorites:

• Bargaining for Advantage by Richard Shell, Viking

• Smart Bargaining by Graham and Sano, Harper House. This one is out of print, but Amazon always seems to have a few used ones.

• What They Don't Teach You at the Harvard Business School by Mark McCormack

• Bargaining for Results by John Winkler, Pan

• Friendly Persuasion by Bob Woolf, Putnam (Good for sports fans)

• Getting Past NO by W. Ury, Bantam

• The New Negotiating Edge by Gavin Kennedy, Nicholas Brealey (pub)

• Getting to YES by Fisher, Ury and Patton, Penguin

• Beyond Negotiating by Carlisle and Parker, Wiley

• On Negotiating Mark McCormack, Dove

• Think Before You Speak Lewicki, Hiam, Olander, Wiley

• Getting Ready to Negotiate by Fisher and Ertel, Penguin

Of course, Harvard Business School always publishes good compilations. Some that I have read recently are: Negotiation, On Mergers and Acquisitions, and On Negotiation & Conflict Resolution.

Jim Sauerwein

What Is Profit?

The next time someone tells you that they have to make a reasonable profit, begin the discovery process to learn their definition of the word Profit.

Do not assume that their definition of profit is the same as yours.

• In a volume dependent manufacturing business profit might mean keeping the production lines running at full capacity 20 or 24 hours a day. A higher volume passed over the same fixed costs will make all of the business more profitable. Your volume may make your partner’s business more profitable overall.
• Profit might be in helping a commissioned salesperson achieve his/her quota for this reporting period. There were times in my marketing career when I would reduce the price a little for the sole purpose of helping a salesperson achieve quota. That was a profit in morale.
• Profit might be defined as boxing the competition out of a big order. I know company presidents who will "steal" an order from the competition just to win a contest. Is there such a thing as profit in ego?
• Those selling organizations which consider market share a primary target will take a lower profit to enhance their market penetration.
• Reducing a price to entice a first-time customer to try a new product or service is no more corrupt than your grocery store offering "loss-leaders" to get you into the store.
• Lowering the price on a unit of capital equipment in order to create an after-market for spare parts, service parts and consumable items is no different than Gillette offering us a low- price razor handle to insure a high volume on their most profitable item --- the blades. Think about the price of Hewlett-Packard printers in relation to the price of the replacement cartridges.

What is profit? Before your next big negotiation, discover how your other party defines profit, then help them succeed by doing business with you.

Jim Sauerwein