Negotiating Is Not Haggling
Many people picture negotiating as a form of distasteful haggling – ruthless fighting and squabbling for the best price in a contract negotiation or some other business situation. However, negotiation in real life rarely resembles petty haggling, and there are good reasons for that.
Negotiations Are Not About Conflict
If negotiations were inherently a win-lose kind of situation, then the side with more leverage (usually the buyer) would always win.
If negotiations were a win-lose thing, then the side with more leverage would always win.
However, buyers don’t usually press for the lowest possible price. If they did, vendors would be forced to mitigate their financial losses somehow. More often than not, those types of situations lead to troubled projects and painful ordeals for everyone involved.
It’s about the Problem That the Buyer Wants to Solve
If negotiations were only about the price, then there wouldn’t actually be much to talk about.
The primary reason for negotiating is that one side needs something that the other side can provide. In a business context, this usually means that the buyer has a problem that needs to be solved.
You are not negotiating against someone. You are negotiating with that person, to explore possible solutions.
This underlying aspect of negotiating opens additional avenues to explore and search for win-win solutions. Possible solutions are then evaluated against their implicit price. Also, keep in mind that the price for the buyer is not simply the price of the product or service. It always includes other costs, including the labor involved, process changes, prestige, individual career benefits, and a dozen other intangible “costs” that the inexperienced seller might not consider while negotiating.
Negotiations Are Not Only about Big Contracts
Most human interactions, in certain ways, are a type of transaction. Thus, working with people requires effective negotiating skills on a daily basis, which is great for two reasons.
Most human interactions, in certain ways, are a type of transaction.
First, there is the general benefit of practicing your negotiating skills every day. Once I became aware of this perpetual learning process, I began to observe and analyze my interactions and behaviors with others. As a result, my negotiating skills improved much faster, because I was finally paying attention to the dozens of negotiations we undergo each and every day.
All of us undergo dozens of negotiations each and every day.
Second, this means that you have a golden opportunity at the start of each individual project. Numerous small negotiations gradually strengthen trust and establish communication channels. As a result, bigger negotiations later on will be much easier.
Searching for a Win-Win Solution
Good negotiators rarely have a use for conflict; instead, they put their energy toward finding win-win solutions. It’s easier to do, and it forms a much stronger basis for a long-term relationship that is based on collaboration, rather than competition.
To find possible win-win approaches, you often need to expand out from the basic premise. You need to identify things that cost you little, but might be of great value to those on the other side of the table.
To find possible win-win approaches, you need to identify things that cost each side little, but might be of great value to other parties involved.
Also, you should explore the situation from the opposite perspective. Come up with several items that are valuable to you that the other side might be able (and willing) to easily provide.
The fact is, the more potential actions and concessions that you have on both lists, the easier the negotiations will be. That is precisely why it’s crucial to learn as much as you can about the other parties involved in any negotiation process.
Identify Other Parties’ Goals
Before entering a negotiation, your homework is to find out how each involved entity operates internally, what their current situation is, what internal goals and relationships they have, and which individuals are involved at certain levels of the business and decision-making.
The same types of companies tend to operate in similar ways to one another. This means that in the analysis of any company or individual, you can at least start with an educated guess. Then, keep your eyes open and observe in order to confirm, reject, or refine your conclusions. This is not as difficult as it sounds; just by paying attention and remaining engaged in the situation, such observations quickly become second nature.
Identify other parties’ needs, to be able to put something on the table.
By identifying other parties’ goals and needs, you will be able to put something on the table that they value, which progresses the plot of negotiating, so to speak.
When dealing with almost any company, you have to be aware that companies are beasts with many heads. Different departments have different goals, which make it easier to come up with something that someone values.
Remember That You Are Dealing with Individuals
Company is an abstract term. You are always communicating with one or more individual people, each of whom has their own priorities that guide everything they do. Rarely would those individual intentions be opposed to their company’s best interests, but the personal element can still give you additional negotiation opportunities.
Negotiating is not about big contracts, it’s about actual people communicating.
Several years ago, I was a senior consultant for a services vendor on a project. A responsible person on the buyer’s side was about to retire and didn’t feel like putting much effort into the project. Once I had demonstrated goodwill and my ability to deliver, she let me manage both sides of the project, while presenting some decisions as her own to avoid chaos. What I traded was additional effort on my part in exchange for having the freedom to shape the project into what I decided was best for both sides.
On another project, a buyer’s project manager expressed his ability to pay much more if the project costs were distributed differently among items in his department’s budget spreadsheet. I suggested reshaping the project plans to make use of that fact, and we easily agreed that my company would solve several additional project issues. This meant less of a headache for him and extra work and profit for my company.
You are dealing with individuals, so find out how someone’s results are evaluated and when.
You have to find out how someone’s results are evaluated and when. For example, if there is an upcoming board meeting, most department managers will greatly appreciate it if you provide them with something presentable at that meeting.
You don’t have to be a detective to guess some people’s priorities. For example:
- Procurement is usually expected to lower your price slightly, so build that little extra cost into your proposal and let them do their job.
- Salesmen’s results are usually evaluated each quarter, so it can be very important for them to boost their sales figures before the quarter ends.
- Occasionally, when managers or salespeople have done “too well”, they might prefer to close the deal in the next quarter to avoid their target figures going up.
- To boost growth, corporations sometimes reward revenue instead of profit. In that case, it is possible to get ridiculously low prices if you simply agree to purchase more.
The possibilities for creative and savvy negotiating are endless – you just have to know who you’re dealing with.
Few Simple Techniques Can Go a Long Way
Effective negotiating is considered the “top of the pyramid” among communication skills. While becoming a good communicator is essential for just about anyone, specific negotiation techniques can be their own field of study.
Fortunately, most of us can fare quite well by relying on a basic “identify possibilities and find a win-win solution” approach, along with a small playbook of simple techniques. For example, most people are strongly affected by other people’s troubles. When you need something badly, you can often get what you need simply by asking and being genuine about the situation.
Watch for Precedents
Precedents are powerful, so you should never give anything away for free. That being said, this doesn’t mean that you should be a hard nut all the time for every person you deal with. Instead, just formulate a deal that will be relatively easy for the other side to accept.
Precedents are powerful. Thus, you should never give anything away for free.
Another prudent thing to do is to “prime the pump” with your own precedents. If you expect the change request procedure to be troublesome, then take your first opportunity to make a formal change request that will be readily accepted. Preferably, it should consist of adding clear value (but not too much) for the other side, for no additional cost.
Changing “If” To “What” by Using the “List Approach”
When you know that something might develop into an issue, make it easier for everyone involved by removing it from the spotlight. For example, the other party’s boss might be generally opposed to approving any extra working hours incurred, regardless of how aware his team might be that those are unavoidable. Instead of fighting the general unwritten policy, it’s much easier to create a detailed list of concrete work items and negotiate the list. This way, you are restating the issue from “whether they will pay” into “what they should pay and how much.”
Instead of fighting the general type of objection, it’s much easier to create a detailed LIST of concrete work items and negotiate the list.
The above “list approach” also works well for clearing up the “grey zone”. For example, in a complex system, requested changes often can’t be clearly divided into neat ‘defect’ or ‘improvement’ categories. For example, the warranty may cover defects, but improvements need to be paid for. If you have a lot of these requests, investigating and then negotiating each one could paralyze your project. You could agree on a much simpler process: to periodically go through the whole list instead. This way, it’s much easier to agree whether something is a defect, an improvement, or if you will simply split the costs. This works because everyone understands that they won’t lose much if an individual item is “won” by either side, so only the most important items will be disputed or discussed at length.
How to Prepare for Trouble
When you expect trouble, you need to be prepared, but different kinds of trouble require different types of preparation.
Some people always request concessions simply because that’s how they believe their competence will be evaluated by their boss. For them, broaden the list of your own requests so that you are able to make more concessions, as counterintuitive as that may sound. Furthermore, if you expect real problems, plan to divert attention from topics that are of great importance to you. To do that, you need bait. Add an otherwise reasonable demand or two of your own to the agenda, but which you know are both unacceptable and touchy topics for them. Discuss those at length, and don’t give in too easily – make them work for it.
If someone’s personal goal is to get concessions just to be able to show off, indulge them by preparing such concessions yourself. Then make them work for it.
By using bait and extraneous demands, what you are actually doing is making it possible for even very stubborn or challenging individuals to achieve their personal goals. If they need concessions, but don’t care what they are, you are, in fact, providing these concessions. If they need a public fight that they will win, then you are providing both the fight and their eventual “victory”. What’s amusing here is that sometimes these “problematic people” are perfectly aware of what you are doing, but have no problems with your approach. After all, they got what they wanted.
There are times when you have to deal with a frantic attack from the other side of the table that seemingly comes out of nowhere, intentionally putting major pressure on you in hopes that you will break. It might be that the other side needs a scapegoat and you are one of the candidates, or it might be the other side’s idea of “artillery preparation” to soften you for their real proposal. Whatever the underlying reason, an effective way to deal with it is to burn all the allotted time on something inconsequential to you. For example, if their team is from two or more departments, you can raise an issue that is one of the hotly debated problems between those two factions. This should be relatively easy if you know them, and shouldn’t be too difficult even if you have to fish for something to use. At that point, just sit back, be neutrally sympathetic to both sides, and let them fight each other until the allotted time is up.
When a frantic attack comes seemingly out of nowhere, burn the allotted time on something inconsequential to you.
Higher Authority Principle
One of the basic principles you should remember is to always have a higher authority that you can refer to. Even when your hands are completely free, it can be very useful to take a time-out to “consult with your boss”, while in reality, you simply need time to investigate an approach or a proposition that caught you by surprise. A variation of this technique is to make a provisional concession that still “needs to be approved” to make it look more important than it actually is.
Always have a higher authority that you can refer to.
Even Basic Negotiating Skills Make a Difference
Some people are quite sensitive about whether some tactics may verge on deliberate manipulation. Quite the opposite is true. I simply believe in doing my homework to prepare for any type of trouble, which does occasionally happen. When someone actually is trying to manipulate my decisions, I simply feel obligated to take the necessary measures to neutralize their tactics.
I sincerely believe that the best results are achieved by:
- Being a good communicator.
- Having the best interests of both sides in mind.
- Preparing adequately for the situation.
When you approach negotiations in this way, everything becomes much simpler. You genuinely work to achieve a win-win outcome, and everything else falls into place.
Let’s visualize this type of negotiation. They usually go something like this:
1. Identify the most important points of how each side can help the other. Think in terms of “what problems each side needs to solve.”
2. Actively observe and keep track of what’s happening in your project’s environment at all times.
3. Identify the “trade goods”, i.e., what each party (be it a company, department, or an individual) might be eager to get from the arrangement. Be concrete and specific. Ambiguous fluff simply won’t do.
4. Talk with everyone, test the waters, and refine those ideas that look promising.
5. Estimate the maximum that you can achieve for your own side. Then, decide on a realistic target and stick with it, unless something changes.
6. Keep in communication with everyone and start putting the pieces together. Repeatedly emphasize your “deal breakers”, so everyone is perfectly clear concerning where you stand on critical issues.
7. Periodically put everything that’s on the table on paper. This makes it easy to visualize the key topics of the discussion, while greatly increasing trust among the parties involved.
8. Usually, you will be able to agree on the majority of issues, leaving only a few points of contention unsolved. Don’t be afraid to “agree to disagree” on these final issues. This avoids the deadlock that you might get stuck in, and from which no one will benefit.
9. Since you have already established good lines of communication and substantial joint results, work together to develop a strategy to reach an effective compromise.
There is no magic or secret tricks in any negotiation that you find yourself a part of. All you need are common sense and clear communication.
- Check the infographics I’ve made on negotiations.
- Leave a comment, I’ll be glad to know what you think.
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- Check the all-time classic on people and communications in general, “How to Win Friends and Influence People” by Dale Carnegie
- I like books by David Lieberman. You can check e.g. “Never be lied to again” where the author analyses a number of common situations.