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Negotiations Are Not
About Winning Or Losing
Entrepreneurs, their managers, and employees are constantly negotiating, arbitrating, and trading off priorities because they simply cannot avoid interacting as they go about their business with each other, and with outsiders such as suppliers, customers, bankers, and other key stakeholders.
In most instances, negotiations should be approached as a mutual problem solving process rather than one where one party wins at the expense of the other. Only when bargaining should you be looking to win something at the expense of the other party. So it is important to know the difference.
Negotiations lead to co operation, and involve exchanging information in order to resolve the different and sometimes conflicting needs of the parties. It requires an understanding of the other party’s circumstances and an honest desire to solve their problems, and your own, in such a manner that both party’s win. Bargaining on the other hand is competitive and seen mostly in situations where no long term relationship is envisioned, where neither party really cares for anything other than what is in it for them and both want the most from the exchange.
Successful negotiation is a process and skill that can be easily learned.
Firstly, be prepared. You need to gather as much information as possible about the other party. Specifically, you need to know about their general objectives in business, the specific needs they have and the available options they have that address them. Learn things about those who will be negotiating and making the final decision. Understand the time frames required.
Once you feel you know what the other party wants and why, how and when they need it, you can plan your approach. First set the parameters. These are the best, worst, and expected outcomes, any alternatives you may propose if your desired outcome is not possible, and your walk away conditions. Then develop your proposal. Phrase things in terms of benefits and reasons why both parties should enter into an agreement, and support the benefits with how and when they will be realized. Identify items of value for both sides and list them, assigning what you believe they are in order of priority. Practice your approach with your team and have them role play the other party, and challenge you.
During negotiations, it is important to be honest and always base your position on practical elements everyone can relate to, such as better operations, increased profits, etc. Ensure you actively listen, acknowledge the importance of their position, and look for ways to satisfy their needs. Validate your negotiating assumptions by asking relevant, open ended questions to learn more. Begin such sentences with words such as why, and what and how, and by all means take notes of their responses and important points. Never argue your points. The key is that you are working together to solve mutual problems and you need to show real and honest respect and concern for their position.
It also pays to know how the other party thinks and how they arrive at their decisions. Knowing this, you can tailor or if need be adjust your tactics to help them through the decision and reinforce why you are offering the best solution. Work through your list that identifies what they value to sweeten the pot. Be careful though to use this strategically, i.e. to add value to your proposal or extract concessions.
It is also important to show why you are different from other solutions they may be thinking about, and why you can deliver one that is better. This is where your home work really pays off. By knowing their needs, time pressures, industry conditions etc., you can craft sound reasoning and practical, valuable solutions.
If you reach a snag, or the other party makes an unexpected or major request, never respond immediately. You need to look at it carefully, understand its ramifications, and ensure you can live with it. Do not succumb to pressure tactics here. The last thing you want to do is promise something you cannot live with, cannot deliver, or cannot deliver well. If you can, leave it as an open item and move on in your discussion. When you come back to it, ensure you extract some concession from them that makes your concession work well for both of you.
It is inevitable that when you negotiate, you will run across the “bargainer”, someone out for the win at your expense. In this instance, take a long hard look at why you need to deal with this company, and be prepared to look for alternatives. If you really need the deal, be up front and tell them you are not looking to bargain but to establish a relationship where you both come out ahead. Then acknowledge and work with their concerns, but keep your walk away conditions in mind. Try and find their key concerns and “hot buttons” and respond to them, and focus on why you are the best solution that wins them the most. If they still want more at your expense, walk away and look for your second best solution. Any relationship will be more trouble that its worth so let your competition have them.
Do learn from every negotiating encounter. Look at how things went. What did you do well and what could be improved? Keep learning and practicing with your team, and look for ways to build better relationships with all the stakeholders of your business.
And remember, negotiations are not the same as bargaining. Yes, one party to negotiations can always gain more than the other, but as long as both parties benefit, it becomes a win-win deal and the basis for creating a sustainable relationship.
Which is what negotiations are all about.
© 2015 John B Voorpostel CPA, CA, CMB
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