The Concept of Negotiation
Negotiation is vital for an organization’s overall effectiveness. Organizational effectiveness is a product of activities within a system – internal and external. Negotiation is critical to establishing the internal system (structure, people, functions, plans, measures, etc) and the organization’s relationship to the external system (markets, suppliers, technology, etc). Negotiation is also critical to optimising the performance of activities internally and externally (principally through communication).
We have all experienced negotiation when asking for salary raise, when purchasing a new house, or when creating a specification for a broadcast studio. Negotiating is nothing other than a process for finding a compromise that balances incompatible values, goals, wishes and requirements, which design engineers call “sorting trade-offs”. Competing requirements frequently appear among individuals, within a single person, or as part of a technical situation. While we all negotiate and sort trade-offs, few of us have considered that there is a formal technique that makes the process efficient, thereby leading to an optimum solution with a minimum of stress, anxiety and acrimony.
I did not invent what I am about to describe, but I have used it successfully in a wide variety of engineering, business and personal situations. For those who want to explore the topic further, I strongly recommend the popular book: getting to Yes.Negotiating Without Giving In by Roger Fisher and William Ury. It is available for a few dollars at your local bookstore. It originated from Harvard University’s Program on Negotiations, and the principles have been applied to disputes, labor conflicts and purchasing a house. These techniques are just as useful to engineers functioning in their technical profession.
There is a right and wrong way to negotiate. The right way begins with goals; the wrong way begins with a proposed solution. Consider a professional example. An engineer who asserts that the radio station needs a new license to broadcast with more power is beginning with a solution. But an engineer who asserts that the station should try to expand its listening audience is beginning with a goal. The former fixates on a single solution, while the latter includes the possibility of installing repeater stations, broadcasting over the internet, or syndicating programs over a national network.
Now consider a personal example. An engineer who desires a shorter workweek is proposing a solution, but an engineer who wants time for a personal activity is an engineer who wants time for a personal activity is articulating a goal. There may be many ways to find extra time that do not involve changing the structure of the workweek. Perhaps there are periodic intervals when the engineer must but not when there is nothing for him to do. There are solution would be for the engineer to use that free time for his personal needs. Beginning with goals, and ending with a solution, there are five recognizable stages in a negotiation process.
Stage 1: All the parties articulate their values and goals while being careful not to include hidden solutions. For example, a station manager may articulate the following goals: increase profitability for the owner, increase listener’s loyalty, establish a unique sound that is recognized among advertisers and create a pleasant working environment for the staff. As a personal level, an engineer may desire to earn a large income, have an opportunity for professional growth, be within walking distance of his home and become well known in the industry.
Stage 2: Each party sorts their goals in order of priority. It is unlikely that a solution exists that will satisfy all goals. Some goals are obviously more important than others and the least important ones can be abandoned if the highest priority goals are for most people, figuring out what is most important stage. Give it the time it deserves.
Stage 3: The parties engage in a dialog to understanding each other’s list of goals. One must not challenge the list since it is a given. Because nobody can tell another person what he should want, one must respect everyone’s right to have a personal set of goals. Goals are not negotiable.
Stage 4: The parties brainstorm for a comprehensive list of possible solutions but without regard for their quality or utility. With a large enough list, there is the likelihood that some variant of a solution, or some combination of solutions, will match the highest priorities for all parties. Through this process shared interests emerge.
Stage 5: Only now, do the parties explore how to select a solution that matches the highest priorities. Inventing solutions is everyone’s job, and that job requires solutions that optimize the collective needs of all parties. By devaluing everyone’s low priority needs, trading takes place. Everyone contributes because everyone’s situation is public. However, goodwill is still required for the process to work tries to force a solution that matches his goals ignoring the goals of the other party, the process becomes a deadlocked stalemate without a solution.
Negotiation techniques are primarily for sales but can also apply to other negotiations such as debtnegotiation, contracts negotiating, buying negotiations, salary and employment contracts negotiations and to an extent all other negotiating situations.
Good sales negotiation can easily add 10% to sales revenues, which arguably goes straight to the bottom line as incremental profit. Good purchasing negotiation can easily save 10% of the cost of bought in products and services, which again arguably goes straight to the bottom line as extra profit. Sales negotiation is an increasingly important part of the sales process. Negotiation starts when the buyer and seller are conditionally committed to the sale and not sooner if you are the sales person (the sooner the better if you are the buyer). Negotiation generally results in a price compromise between the seller and buyer i.e. the seller and buyer increases from their starting positions. Good negotiation by managers, in dealing with staff, can easily reduce staff turnover by 5-10% which reduces recruitment and training costs by at least the same percentage. It can also improve quality, consistency and competitive advantage, which for many companies is the difference between ultimate success and failure. Good negotiation by executives with regulatory and planning authorities enables opening new markets, developing new technologies, and the choice of where the business operates and is based, all of which individually can make the difference between a business succeeding or failing.
Relieve yourself from Stress. Get it here
Successful debt negotiation with creditors enables a business to continue trading. Failure to negotiate debts often leads to business closure. Salary negotiation affects individuals and organizations and good negotiation skills on both sides, produce positive outcomes for all.
These negotiation techniques discussed above deal mainly with sales negotiation are written from the point of view of the seller to access the view point of a buyer, if you are want to know how buyers tend to behave a classic is just what you need. Below is the full spectrum using real estate or property scenarios:
Always Counter: Opening offers are just that most buyers except they will have to increase their initial figure. To not come back with your offer – any offer – makes you a greedy bad guy. You never know where the talks will wind up if you don’t counter. A prime principle of successful negotiating is that when it’s over, all parties feel they got what they wanted.
Know Your Bottom Line: have you done your homework? Using a property or real estate scenario, you should know how much it costs each month you stay in your home. Know the realistic value of your home in today’s market, not based on what you paid for it or how much you love your home.
Having a recent, professional appraisal is a powerful tool to have in your hands.
Have Backup Options: it’s not fun to think about, but it will strengthen your position during negotiations to have some plans in case you are on the market longer than you like. Patience is an asset when it comes to dealing. Not only do you not want to feel desperate, you don’t want the buyer to think you are desperate.
Want to be an agent? Register here.
Be the Mystery Seller: The more a buyer knows about you the more leverage he has. At the same time, it’s just smart negotiating to learn as much as you can about the prospective buyer. If he is relocating from a state where prospective buyer. If he is relocating from a state where property values are high, your place may seem like a bargain, and you can anticipate an easier road to a price agreed upon. If he has been house hunting for two years, he is either very choosy or
Fiddle With Contingencies:Be creative. You can say, “I won’t come down another 200,000 naira, but I will leave some furniture for you, “the one you didn’t want to move anyway.
If you can’t give in on the big things (money), negotiate minor points. Delay the closing to meet their schedule, or move the closing up to make them happy. This tactic makes buyers feel like they are getting things for nothing.
Offering to pay the buyer’s closing costs doesn’t sound like a big deal, but it is. Most buyers are stretched and need to finance most of their purchase. If they don’t have to roll in the closing costs to their mortgage, it means more to them than the actual closing costs amount. You have saved them a boatload of interest money.
All these things indicate that you want the deal to go through. The buyer feels like you are on his side rather than fighting him.
Build a Relationship on Integrity: Always take the high road. The usual vibe of negotiating is adversarial. Buyers and sellers always assume it is a competition. That’s wrong. Assume the best of your buyer, and behave in a way that shows you are willing to work with him. One false step and you’ve destroyed credibility and trust.
Get Outside Support: Whenever negotiating seems to be deadlocked, refer to a third party. It’s like calling in a umpire to make a call. A third party can justify your position with facts and figures. An impartial third party can diffuse an emotional situation or clear up a deadlock.
Much it could cost you to reject the offer. Review your negotiating options. Or, stick to your price, but ask them for additional favours or contingencies.
Want to be an affiliate? Register here.
Modern collaborative approaches to negotiating
In modern times, the aim of negotiation should focus on creative collaboration rather than traditional confrontation or a winner-takes-all result (especially in training negotiation and negotiation role-plays). The modern and ideal aim of negotiations – which should be reinforced in training situations – is for those involved in the negotiation process to seek and develop new ways of arriving at better collaborative outcomes by thinking creatively and working in cooperative outcomes by thinking in cooperation with the other side. Negotiating should develop a ‘partnership’ approach – not an adversarial one. As such, negotiating teams and staff responsible for negotiating can be encouraged to take a creative and cooperative approach to finding better solution
Excellent opportunity to develop and improve synergies between and benefiting both sides, within the negotiated outcome.
That said, it is still important to understand and to master the traditional techniques and principles of negotiation; if only to provide a defence and strategy where the other side is firmly committed to an old-style confrontational approach. Hence, these techniques are explained below.
Negotiation tips, techniques and principles as propounded by Lade Adeyemi
First and most importantly, positioning is everything in negotiation. The way that the situation is initially approached, and when, are more influential on outcomes than all of the other negotiating tactics and techniques combined. (Technique 1 and 2 are absolutely critical even before you start a negotiation.).
Want to monetize your website? Register here.
- Have an alternative
Whether you are buying or selling, if you can’t walk away because you need the deal so badly or because the other side is the only game in town, then you are at a serious disadvantage. If the other side believes you are the only game in town then you have the advantage. No other factor is so important: the more you need to secure the deal, theweaker your position, so avoid negotiating whe you need the business badly (for the same reason, never find a house and fall in love with it before you sell your own). The same will apply to your customer, which is why buyers almost always give you the impression that they can go somewhere else – even if they can’t or don’t want to.
This also means that when selling you must create an impression that there is no alternative comparable supplier. You have to create the impression that your product or service is unique, and that the other person has nowhere else to go. The way you sell yourself and your product
Tactile and it comes into play before you even start to negotiate. If your product offer is not unique remember that you are part of it. You can still create a unique position for yourself by the way that you conduct yourself, build trust, rapport and empathy with the other person.
Establishing a position (or impression) of uniqueness is the single, most effective technique when you are selling, whereas denying uniqueness is the most powerful tactile of the buyer.
- Negotiate when the sale is conditionally agreed and not before, if buying the opposite applies.
negotiate when the sale is conditionally agreed and no sooner (buyers tend to try to negotiate before giving you any commitment – don’t let them)
Or, put another way; don’t get drawn into negotiating until you’ve got agreement in principle to
Find more concessions later, and ensure a better finishing point for the customer.
If you are not sure that the customer is conditionally committed to the sale, then ask a conditional closing question e.g. “If we can agree the details will you go ahead?”
If you’re buying, then the opposite applies: start to negotiate for concessions before agreeing you want to buy (try this when you next buy something – you’II be amazed at what you can secure without giving any commitment in return).
- Aim high – Aim for the best outcome. When buyers aim low, they tend not to go first.
If you’re buying, aim very – even ridiculously – low, but do it
Want to be a referrer earning every day. register here.
Starting point is to the eventual finishing point, the more difficult it is to give the other person concessions along the way and ultimately arrive at a win-win outcome.
Many negotiations are little more than a split-the-difference exercise. They shouldn’t be, but that’s often the underlying psychology and expectation. So it’s logical that to achieve the best possible finishing position you should start as ambitiously as you can (without losing credibility of course).
If you have the option to hear the other person’s offer first, then do so. It’s a fact that whoever makes the opening offer is at a disadvantage. If you go first, the other person can choose to disregard it and ask for a better offer. And the other person avoids the risk of making an offer themselves that is more beneficial than you would have been prepared to accept. It’s amazing how often a buyer is prepared to pay more than an asking advice, but avoids having to do so been
Price than he anticipates if he hears what the buyer is prepared to offer first.
- Let the other side go first –Try to avoid ‘going first’ on price if you can. (Buyers will often be trying the same tactic.)
If you know the other person’s starting point before you have to give your own, then this is clearly an advantage to you. For example, if selling, ask the other side if they have an ‘outline budget’.
Sometimes, you will be pleasantly surprised at what the other side excepts to pay (or sell at) which obviously enables you to adjust your aim. Letting the other side go first is a simple and effective tactic that is often overlooked.
Side to ‘go again’ or at least re-think their expectations or stance, which can amount to a huge movement in your favour, before you have even started.
- List all of the other side’s requirements before negotiating – Get the other person’s full ‘shopping list’ before you start to negotiate (buyers usually do the opposite – they like to pick concessions up one by one indefinitely)
Establish in your own mind what the other person needs, including personal and emotional aspects. Everything that is part of or related to a deal has a value. Everything has a cost to you or your organization, even if it’s not on the price list. Negotiation isn’t just about price and discount. It’s about everything that forms the deal. It’s about specification, colour, size, lead-time, consumables, contract length, penalty payments, get-out clauses, delivery dates, stock-holding
Terms. All these and more are called variables and each one affects the cost. Some affect the cost more than others; buyers and sellers nearly always place a different value on each. It’s critical therefore to know exactly what your buyer wants before you start to negotiate. Get the full list of issues written down and commit him to it. This is vital if you are to keep a track on the values of the deal and the eventual outcome. You also avoid your position being eroded bit by bt by the late introduction of concessions required.
Your buyer’s personal and political requirements are important too, and the bigger the deal the more significant these factors are. You need to understand what they are; particularly the political and procedural needs within the other person’s organization or situation that affect the deal. These issues will concern the way that the organizations relate to each other; who talks to whom the justifications and reports are prepared;
Remember that when you sell to someone in an organization or group, your buyer is staking his personal reputation within his situation on you, and will not do so lightly, so you need to understand all of his needs and concerns.
Only then you can begin to understand what the implications, costs and perceived values are.
- Trade concessions – don’t give them away –Never give away a concession without getting something in return (buyers tend to resist giving any concessions at all).
This is a matter if discipline and control. It’s simple. Never give anything away without getting something in return. If you do, you are not negotiating you are simply conceding.
Agreement which must be unanimous can then be used to close the deal.
- Keep the whole picture in your mind – Keep the whole package in mind all of the time (buyers tend to divide and erode your position, bit by bit).
The buyer’s tactic will be to separate out single issues or introduce new ones later. If you allow this to happen your position will be eroded.
Think about the knock-on effects to the whole situation every time a concession is requested. The overall value and profitability of a deal depends on its component parts. When you element, you change the whole, so keep situation in mind – keep assessing effects arrangement, understand the effects and change or
Searching for variables, concessions, ‘bargaining chips’, incentives. (Buyers will look for your concessions but will tend not to offer their own).
A variable tradable is any factor that can be altered and which has a real or perceived value. You are not a mind-reader and the other person may not be totally open, or even fully aware of all the possible variables that are of interest, so keep looking for them.
Prepare and estimate values of real and perceived variables before the negotiation, and keep looking for new ones during the negotiation.
If the other side involve them in looking for variables too-for
- Keep accurate notes – Keep accurate notes and show that you are doing it (the buyer stands to benefit from any lack of record. Some buyers conveniently forget things that are not in their favour, even concessions you’ve won from them).
Controlling the negotiation is vital. The other person may forget, misunderstand or attempt to distort interpretation of what was discussed and agreed. Keeping notes shows that you are in control, professional, can’t be out-flanked and enables you to summarise and assess continually.
- Summarise and clarify the negotiation as you go – Summarise and confirm understanding continually (As mentioned above, it’s your loss – not the buyer’s – if you allow misunderstandings to develop).
Rapport and the trust, which is critical to being able to do business in the first place.
Getting positive agreement throughout the process also is psychologically important; it strengthens trust and commitment and helps to ease the other person into an agreeable frame of mind.
After the negotiation, obviously, it is essential to give the other person clear written confirmation of the deal.
More information on Negotiation
These days, we are much more determined to press for concessions and the best possible price. Buyers, particularly consumers, are more confident and financially aware.
Where competitive pressures exist, prices are driven downwards
What’s on offer elsewhere and they use this knowledge to secure the best possible deal.
In the face of these increasing pressures we need to have:
- Very good negotiating skills
- Commercial understanding (to appreciate the value and implications of each element within a deal, for giving justification and explanation, etc.)
- Very good communication skills e.g. empathy (so as to able to communicate a commercial position whilst maintaining a good relationship)
- A consistent corporate policy and authorization structure covering discounting and giving of concessions.
Organizations that have several points or people through which negotiations can take place must perform well in these areas. A chain is only as strong as its weakest link.