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By James A. Baker
Founder and Chariman
Baker Communications
July 2009
I am still surprised by the number of people who come to us for negotiation training who fail to grasp even the most basic and obvious concepts of the negotiation process. For instance, one of the most common requests we hear from clients is that they want us to teach them how to convince a vendor or a customer to stopping pushing back on a particular price point and just accept the offer on the table. Folks, that is not a negotiation, that is a conversation, and probably not a very pleasant one at that.
The difference between a conversation about a business deal and a negotiation about a business deal is this: to be a genuine negotiation both parties focus on trading items back and forth until both sides receive enough value to be satisfied. I am not saying that “take it or leave it” conversations never occur, I am only saying that you should not call them negotiations.
If you want to enter into a genuine negotiation that will not only help you come away with a satisfying result but will also help you strengthen relationships with the other side for the sake of future business, you must understand four key principles:
Key Negotiation Principle #1 – Understand the Interests of both sides. Interests are the Why – the underlying motivators - that bring someone to the negotiating table in the first place. These may not always be obvious, but it is these underlying interests that will influence a negotiator’s vision for what constitutes a satisfactory agreement. Take a salary negotiation, for example; employees always love to get raises, but what if a particular employee is motivated by more than a desire for extra walking around money? What if an employee has a daughter entering college and has an urgent need for at least another $500 a month in their paycheck? The negotiation is not about money, it is about being able to adequately support this child during college. Even if the employer generously raises this person’s salary by $250 a month, it may not be enough to satisfy the underlying interest of the employee, and the employee may start looking for a position with another firm. On the other side of the table, the employer has interests, too. The employer may be faced with declining sales in a down economy which is forcing him to hold the line on salaries in order to help keep the company out of Chapter 11.
Key Negotiation Principle #2 – Understand the Issues for both sides. Issues are the What – the things that get discussed and traded during a negotiation. In a salary negotiation, these issues may be things like the hourly pay rate, the number of hours worked, the cost and type of benefits offered, etc. Both sides will try to leverage these issues to their advantage in order to do the best job of satisfying their underlying interests.
Key Negotiation Principle #3 – Avoid Intractable Positions. Positions are the How – the solution that makes the most sense to each side because it will create the maximum opportunity to get their needs met. In the salary negotiation above, the employee’s opening position is a request for an increase of $500 per month. The employer’s opening position is an offer of an increase of $250 a month. There is nothing wrong with establishing an opening position. Positions define the parameters within which the negotiation takes place. These two positions tell us that the employee is not likely to get more than a $500 increase and the employer is not likely to pay less than a $250 increase. Under normal circumstances, the negotiation will now begin and focus on something in between these two numbers. However, sometimes people get stuck in their positions and refuse to budge, perhaps because of fear, obstinence, hidden agendas, or a genuine conviction that there is only one solution that will work for them. However, once either side digs in to a position, the negotiating stops; it now becomes a take or leave it situation, and very often both sides walk away with nothing. Usually, this is not the best outcome for anyone.
Key Negotiation Principle #4 – Learn How to Give and Ask for Concessions. Concessions are at the heart of what turns a conversation into a negotiation. By making concessions, the parties involved abandon their “take it or leave it” positions and try to find ways to work together to achieve a solution that will provide a benefit for everyone. When asking for a concession, focus on asking for something that is of high value to you, but which might be perceived as of lower value to the other side. Conversely, when granting a concession, try to give something that is of comparatively low value to you in order to receive something that you value more. For instance, in the salary negotiation, the employee might be willing to work a few more hours per week(offering more value to the employer) in order to boost their take home pay (high value to the employee). The most important rule regarding concessions is that you must never give a concession without getting one in return. If you don’t obey this rule, the negotiation has now become a conversation again, and you are on the losing end.
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Negotiation Quick Tip – Don’t Be Afraid to Make the First Offer
Most people don’t like to make the opening offer in a negotiation because they don’t want to tip their hand too soon, and they would like to find out a little more about what the other side is thinking before they get in too deep. However, there is at least one very good reason to make the opening offer: it usually anchors the scope of the negotiation. As long as you have done your homework and understand the issues and the value in play, you shouldn’t hesitate to make the opening offer, because it is your best chance to create a dynamic that will get you most of what you want by making the other side come to you. It is also a good idea to make your first offer your “pie in the sky” offer; i.e., the best outcome you could possibly hope for. You are not likely to get that outcome, but by leading with it you are setting the bar so that the other side will have to reevaluate their position and adjust their outcomes based on your position. By making the first offer, you assure that the rest of the conversation will be conducted in terms that are more favorable to you.
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