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One of the biggest challenges a negotiator can face, and the single biggest intimidation factor that confronts novice/ineffective negotiators, is that of sitting across the table from a party that seems to have the balance of power on their side.
Maybe the other party is a major computer manufacturer and you are representing a regional packaging manufacturer. Or perhaps you are a start up company with a great new product but no capital, and you are trying to negotiate a favorable financing deal with a large venture capital firm that has an army of lawyers and accountants to make your life miserable. How about the case of a small biotech firm trying to sell a piece of testing technology they have developed to a major pharmaceutical company?
In any situation involving a perceived imbalance of power– status, legal precedents, money, resources, staffing, experience, etc.– the side with the greatest amount of perceived power will demand and often receive extremely favorable terms "just because." In other words, they use this perception of holding the superior position to require you to accept their terms or take your business elsewhere. In some cases, the side with the largest perceived level of power may even use that perception of power to justify refusing to acknowledge your existence, must less discuss an agreement with you!
The most important thing to remember about power imbalances is this:
If you think you don’t have any power, you won’t, but if you think you have the power, you will! Just remain confident and keep working at it.
This isn’t really double talk; it defines an attitude that all effective negotiators have, in that they will keep working on the process until they discover ways to create the power they need to succeed.
One of the best ways to compensate for a perceived imbalance of power is by creating coalitions with other people or groups who will pool their resources or leverage their status versus someone with a more powerful position. In many cases, your negotiation may be linked to other negotiations that are all part of a bigger picture. For instance, suppose you represent a software manufacturer in a negotiation with a large company that is looking to purchase sophisticated, business management and compliance software. In the course of the negotiation, you discover that the company is also planning to purchase 500 new PCs to run the software. Here is an opportunity to build a coalition in which you could try to create a link with a major computer manufacturer to bundle the software and the hardware together, thus creating extra value for everyone in the deal and increasing the power that you both have in the negotiation with the buyer.
Coalitions also provide opportunities to develop BATNAS (BATNA is something we have discussed in previous articles; it stands for Best Alternative To a Negotiated Agreement and it refers to the plan you will fall back on in case the negotiation fails). This is actually the theory behind the way unions work. A group of people negotiating as one are usually able to create a larger set of beneficial contract concessions than a group of individuals negotiating their contracts separately. The same is true for coalition BATNAs. A group of people – pooling their skills and resources – probably has access to a more robust set of alternatives that could create value for them should the negotiations fail. In the case of a union, the entire group could go on strike and immediately cripple their employer’s operation (and perhaps gain quick concessions). A coalition could also band together to create their own company and create a competitor for the party they were originally negotiating with.
As a rule, coalitions make for the creation of stronger BATNAs, but in the end, coalitions are still made of individuals. Anyone who is operating as part of a coalition will have the benefit of the resources of the group, but that person must still consider his own personal BATNA. What if the coalition fails – what would he do then? What if the coalition elects a BATNA – a strike for instance – that does not satisfy his interest; what would his personal BATNA be then?
In negotiation, there is always the game within the game (within the game). Coalitions can create tremendous leverage, but coalitions can also quickly destabilize. Changes in coalitions can create dramatic changes in BATNAs. You must always be thinking five moves ahead and know what options you have and which ones you would choose no matter what changes may occur to the structure or the strategy of your plan.
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August Negotiation Quick Tip of the Month – Do Nothing, At Least for Now
Patient negotiators almost always have an advantage over impatient negotiators. It is always important to ask yourself if your opportunities will improve or weaken over the passage of time. What effect will time have on the opportunities of the other party involved? Often, new possibilities will emerge in the future that do not exist now. Can you afford to wait? Can they? If they can’t, or if they act like they can’t, you can afford to wait and resist the temptation to move too quickly. They longer you wait the more urgency they may begin to feel, in which case they will eventually make more concessions to you in order to get an agreement. Patience is also a form of power when it is used wisely.
