Tag archive: negotiation-skill
Negotiation = Entrepreneurship?
Do you have to be a negotiator to be an entrepreneur or do you have to be an entrepreneur to be a negotiator? There is synergy between these two roles. Merriam-Webster defines an entrepreneur as “one who organizes, manages, and assumes the risks of a business or enterprise.” According to Dr. Chester Karrass, good negotiators have a high need for achievement. To achieve, it could be argued, you have to be ready to take risks. The overlap between an entrepreneur and a negotiator comes down to assuming risk. So, people who do best in negotiations are hungry for success, and are willing to take a risk to reach that success. Ditto for entrepreneurs. It is not really surprising that good negotiators are entrepreneurial, because what they are doing is putting themselves out there in a bid to succeed. So, you don’t have to an entrepreneur to be a negotiator, but you must be entrepreneurial. According to Lyve Alexis Pleshette, writing in the PowerHomeBizcom website: http://www.powerhomebiz.com/vol69/entreskills.htm there are five skills every entrepreneur needs: 1. Sales and marketing skills 2. Financial knowledge 3. Ability to self-motivate 4. Time management skills 5. Administration skills To those very necessary skills, we would add negotiation skills. Entrepreneurs will not succeed in getting their businesses off the ground if they don’t negotiate for what they want. Conversely, perhaps learning the skills of negotiation also increases your entrepreneurial spirit. As you become a more confident negotiator, you will also become more able to identify what you want and how to get it. Your thoughts?Read more »
Do You Need a Mediation?
Webster’s defines mediation as “intervention between conflicting parties to promote reconciliation, settlement or compromise.” The U.S. Equal Employment Opportunity Commission (EEOC) defines mediation as "a fair and efficient process to help you resolve your ...disputes and reach an agreement. A neutral mediator assists you in reaching a voluntary, negotiated agreement." The emphasis, which the EEOC includes in their definition, is on fairness and efficiency. If you are interested in labor meditations, please read more about the EEOC and negotiation here. By understanding those definitions, it seems that every business and diplomatic negotiation could use mediation. After all, what is negotiation if not the act of reaching an agreement? However, not every negotiation requires a mediator. Many times, the parties are able to reach an agreement on their own. On the other hand, certain situations such as deadlock or when communications have been compromised by heightened emotion, benefit greatly from mediation and even require mediation to be able to conclude negotiations. A mediator helps to diffuse conflict and to reach accord. He or she acts as a communications go-between. Dr. Chester Karrass tell us that mediators bring the following to a negotiation:Read more »
- They suggest realistic expectations
- They listen to both sides without bias
- They help stimulate alternative thinking or different approaches to a resolution
- The may suggest a compromise that neither party considered
- They may give both parties an “out” or a way to save face
Negotiation = Entrepreneurship?
Do you have to be a negotiator to be an entrepreneur or do you have to be an entrepreneur to be a negotiator? There is synergy between these two roles. Merriam-Webster defines an entrepreneur as “one who organizes, manages, and assumes the risks of a business or enterprise.” According to Dr. Chester Karrass, good negotiators have a high need for achievement. To achieve, it could be argued, you have to be ready to take risks. The overlap between an entrepreneur and a negotiator comes down to assuming risk. So, people who do best in negotiations are hungry for success, and are willing to take a risk to reach that success. Ditto for entrepreneurs. It is not really surprising that good negotiators are entrepreneurial, because what they are doing is putting themselves out there in a bid to succeed. So, you don’t have to an entrepreneur to be a negotiator, but you must be entrepreneurial. According to Lyve Alexis Pleshette, writing in the PowerHomeBizcom website, there are five skills every entrepreneur needs: 1. Sales and marketing skills 2. Financial knowledge 3. Ability to self-motivate 4. Time management skills 5. Administration skills To those very necessary skills, we would add negotiation skills. Entrepreneurs will not succeed in getting their businesses off the ground if they don’t negotiate for what they want. Conversely, perhaps learning the skills of negotiation also increases your entrepreneurial spirit. As you become a more confident negotiator, you will also become more able to identify what you want and how to get it.Read more »
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. 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.Read more »
Negotiating During Economic Turbulence
During times of economic turbulence (LIKE NOW!) most negotiations get tougher. Don't reduce your bargaining power by making mistakes. Now is not the time! Here are eight common negotiating missteps people make. Despite their good intentions "not to do that again," mistakes like these happen over and over. Don't fall into these negotiating traps!Read more »
- Do not underestimate your negotiating power. Most people tend to have more power than they think. Make a systematic analysis of your power -- understand your strengths. Your negotiating power rests on a foundation of more than just competition or financial matters. Your commitment, knowledge, risk taking, hard work, and your negotiating skill are also real sources of power. Don't assume the other party knows your weaknesses. On the contrary, assume they do not, and test that assumption. You probably have more power than you think.
- Don't be intimidated by status. We all become so accustomed to showing deference to titles and positions that we carry these attitudes into the negotiation. Remember that some experts are superficial; some people with PHD's quit learning years ago; some people in authority are incompetent; a specialist may be excellent in their field but without skill in other areas; learned people, despite high positions of power and authority, sometimes lack the courage to pursue their convictions, or sometimes don't even have a strong conviction on the issue being negotiated.
- Remember not to be intimidated by statistics, precedents, principles or regulations. Some of today's decisions are being made on the basis of premises or principles long dead or irrelevant. Be skeptical. Many premises or principles may not apply today -- or do not apply for your specific situation. When necessary, challenge them!
- Do not forget that the other party is negotiating with you because they believe there is something they can gain by being there. You may discover that this negotiation, no matter how small, is part of a larger framework in the other party's objectives. This fact alone may provide you greater negotiating power that is apparent from the situation. Be positive in your approach. Assume the other party wants an agreement as much as you do. If it appears they do not -- find out why.
- Don't focus on your own problems or your possible losses if a deadlock occurs. In all likelihood, there are consequences for the other party as severe as your own. Concentrate on their problems and issues. These will reveal opportunities for possible ways to agree.
- Most negotiations require some concession making. Don't set your initial demands too close to your final objective. There is sufficient evidence to conclude that it pays to start high. Don't be shy about asking for everything you might want and more. Many times your demands are too modest, or too easy to achieve. The other party may not know what they want, or may have a set of values quite different from your own. Remember never to give a concession without obtaining on in return. Don't give concessions away free -- or at least without a thought provoking discussion with the other party about what they are getting. A concession granted too easily does not contribute to the other party's satisfaction as much as one that they struggle to obtain.
- It is a mistake to assume you know what the other party wants. It is far more prudent to assume you do not know, and then proceed to discover the realities of the situation by patient testing and discussion. If you proceed to negotiate a deal on the basis of your own untested estimates, you are making a serious mistake.
- Never accept the first offer (even if you like it). Many people do. There are two good reasons not to: First, the other party is probably willing to make some concessions. Second, if you do accept the first offer, there is a distinct chance the other party will feel that their offer was foolish and they should have asked for more. Immediately their satisfaction with the agreement will be reduced, and they may find ways to spoil the agreement later. In either case, the negotiator who takes the first offer too fast makes a mistake.
Your Negotiation Challenges
Negotiation is one of the most difficult jobs a person can do. It requires a combination of diverse traits and skills. The process of negotiating demands good business judgment and a keen understanding of human nature. There is no other area in business where the alchemy of power, persuasion, economics, motivation, and organizational pressures come together in so concentrated a fashion and so narrow a time frame. But – nowhere is the return on investment potential so high! Today economic pressures around the world are causing organizations to put more pressure on their negotiators. In other words—you! Buyers and supply management professionals are being asked to cut costs and increase efficiencies. Sellers and marketing professionals are being asked to increase volumes and increase margins. Engineering, system analysts, IT professionals, manufacturing managers, and HR managers are being asked to do more with less. There is a lot of negotiating going on! Here are some of the key attributes good negotiators exhibit: 1. An ability to negotiate effectively with members of their own organization and win their confidence. 2. A willingness and commitment to plan carefully; know the product/project, the rules and the alternatives; and the courage to probe and verify information. 3. Good business judgment; an ability to discern the real bottom-line issues. 4. The ability to tolerate conflict and ambiguity—it comes with the negotiating process. 5. The courage to commit oneself to higher targets and to take the risks that go along with it. 6. The wisdom to be patient—to wait for the story to unfold. 7. A willingness to get involved with the other party and their organization— to understand all the various personal and business issues. 8. A commitment to integrity and mutual satisfaction. 9. An ability to listen with an open-mind. 10. The insight to view the negotiation from a personal standpoint—discover the hidden personal issues that could affect the outcome. 11. Self-confidence based on your knowledge and your planning. 12. A willingness to use experts and an understanding of how a team might be valuable in the negotiation. 13. A stable person; one who has learned to negotiate with oneself and to laugh a little; one who doesn’t have too strong a need to be liked so they can feel free to disagree when the need arises. Research shows us that skilled negotiators create better agreements. But we are not born with these skills, it takes training, practice and persistence. Be confident in your ability to negotiate. You have the tools and skills to create good, long-lasting agreements that will satisfy all parties.Read more »
An independent study by the McKinsey Consulting Group indicates "the fastest and most effective way to enhance corporate earnings is to raise prices." There are a variety of ways to increase earnings. Obviously a company can raise prices or reduce costs. A company can also often enhance earnings by increasing their volume of business – provided there are no additional costs – this is referred to as "business efficiency." What is surprising about this McKinsey study is the huge impact just a small price increase has on corporate earnings – as compared to the impact for the same amount of cost savings. McKinsey says that "for a typical S&P 1500 corporation, a 1 percent increase lifts operating profits by 8 percent. This impact is nearly 50 percent greater than what would occur with a 1 percent reduction in variable costs (such as direct labor) and more than three times greater than the impact of a 1 percent increase in sales volume." So anyone negotiating a sale needs to remember what just 1 or 2 percent can do for the company’s bottom line. Be careful with your concessions. If you are forced to provide a price concession, don't forget to ask for something in return. During your discovery process, search for "Both-Win" ways to help your customer while at the same time enhance the price you are going to get. And don't give it away! The impact of a few percentage points in price goes both ways. From McKinsey: "A decrease of 1 percent in average prices has the opposite effect, bringing down operating profits by that same 8 percent if other factors remain steady. Managers may hope that higher volumes will compensate for revenues lost from lower prices and thereby raise profits, but this rarely happens; to continue our examination of typical S&P 1500 economics, volumes would have to rise by 18.7 percent just to offset the profit impact of a 5 percent price cut. Such demand sensitivity to price cuts is extremely rare. A strategy based on cutting prices to increase volumes and, as a result, to raise profits is generally doomed to failure in almost every market and industry." In the course of a business transaction, there are many negotiations taking place where price erosion can occur. There are often a variety of discounts, incentives, promotions and other giveaways that help close a deal. After an order is placed there may also be cash discounts, prompt payment discounts, extended payment terms (i.e. 60-90-120 days to pay), volume discounts or even rebates. Some negotiations even deal with 'performance penalties' that provide customers discounts if for some reason delivery schedules are not met or orders are not filled according to plan. Each one of these elements, if not negotiated appropriately, allows profits to "leak away." Prices are impacted by hundreds, sometimes thousands, of individual negotiations each day. Standard and discretionary discounts allow percentage points of revenue to drip off the table one transaction at a time. At the end of the day, you have to look at what really the company is really putting into its pocket. With all of these negotiations happening, there are ways to find and capture an additional 1 or 2 percent. It pays to use your negotiating skills!Read more »
The Past, The Near Future, and The Far Future Partners
Every agreement we make involves the past, the near future (transition period), and the far future. People, systems, designs, equities, costs quality, production and relationships are affected by new agreements. Almost every negotiating agreement between two parties in the workplace affects others and their work. When next you deal with others in the workplace pay close attention to what your “Three Partners” have to say and help the other party also to do so. Moving from the past to the future is always harder than it appears to be. The suggestions that follow can make the path less difficult in workplace negotiations.Read more »
- The “Past Partner” says, “This agreement must specify what we must do as we change from past to new arrangements.” Our work, costs and procedures will change in real and psychological ways.
- Old ways and controls must be brought in harmony with new ways.
- Conflicts will arise between the old and new that will require early planning and resolution.
- The design change now negotiated may profoundly affect production, cost and end-user satisfaction and habits.
- Old inventories and equipment have to be disposed of or used in different ways. New purchases may be required to meet the changed design.
- The “Transition Partner” says, “On the day and for a short period after we incorporate the new agreement, problems will arise that must be addressed. Chaos will ensue if we don’t take care of these matters now.”
- People will not know what to do or how. Training will be needed before the new arrangement goes into effect and immediately after it starts.
- No one will know where anything is or how to find it. Old and new ways of doing things will be mixed together in a mess.
- Records and recordkeeping will change.
- Electrical, physical or computer connections will continue to need changing. We will experience downtime expenses and delays during the transition. Skilled people must be readily available to manage the confusion.
- The “Future Partner” says, “As we get into the new agreement and live with it for a while, things are sure to change. Future needs, upgrades and alternatives will arise. Anticipate those needs now.”
- Upgrades will be demanded of the new systems or design. Can we get favorable deals now to procure these upgrade options later?
- Things break down over time. Can we assure that the same or better service we will need later will be available? Can warranties be lengthened?
- At some point in the future the arrangement we are now negotiating will be obsolete. How can we move this to a future agreement?
- How can we get the organization to welcome future changes and be part of them when they come?
- What improvements or options do we want now that will help in the far future?