Winning negotiation strategies
by: Gary McDougall
by: Gary McDougall
Do you consider yourself an effective negotiator? Have you already negotiated something today? Chances are, if you spoke with your children this morning or have engaged in a conversation with a colleague or co-worker today, you have probably already negotiated something.
Negotiation is defined as a discussion between at least two people, during which at least one of the people has a desired outcome or agenda. Likely, if you had any interaction with your children this morning, it involved negotiation. “Get up and get dressed because it is time for school.” The conversation you had with your co-worker this morning may also have been a negotiation. “Where do you want to go for coffee?”
Likely, you are already an effective negotiator as most people learn negotiation skills at a very young age and have been practicing them since childhood. Some of those strategies are effective and some, not as effective.
The purpose of this article is to build on the negotiation strategies you already employ and to offer suggestions on how to be more effective during those negotiations. Whether you are negotiating over the sale price of a new car, or negotiating a multimillion dollar contract on behalf of your organization, these skills help to create value.
In negotiation, one of the common challenges we face is the struggle between achieving our substantive outcome while maintaining or improving the relationship we have with our counterpart. In negotiation circles, this struggle is referred to as the negotiator’s dilemma.
If the relationship you share with the person with whom you are negotiating is not an issue, for example you will never see the person again, then this is not a significant consideration. Typically, when you purchase a home, the relationship you share with the vendor will not be an ongoing relationship. When you engage in a negotiation with a person at a flea market, the chance that you will share an ongoing relationship is remote and, therefore, you can focus more on the substantive outcome than on the relationship. Being a hard bargainer with someone you will never see again is less costly than being hard-nosed with someone you frequently interact with.
In the context of business negotiations for example, there is a stronger likelihood that you will engage in a long-term relationship with the person with whom you are negotiating. In many business negotiations, relationships last for many years and in some cases, decades. Relationship in the context of these negotiations is therefore, more significant.
Hand-in-hand with the negotiator’s dilemma is a concept called the negotiator’s mindset, which refers to the assumptions we make when we perceive we are engaged in the process of negotiation. When we refer to this process as negotiation, many of us make a number of assumptions including the assumption that the other side is going to try to take advantage of us, they are not to be trusted and we had better be careful.
The mere mention of negotiation often conjures up images of mistrust, slippery tactics and sub-optimal outcomes. Perhaps there may instead be value, in referring to this process as problem solving, brainstorming, or just discussion. Imagine calling a business associate and telling them you would like to schedule a meeting to negotiate a deal. What assumptions do you think they are likely to make?
A position is defined as: The stance that both parties take respecting a particular issue or point of discussion. Negotiating based on positions creates sub-optimal outcomes and this is a concept that is worth exploring in some detail.
One of the deeply embedded patterns we often fall prey to during our negotiations is the practice known as traditional positional bargaining. This negotiation style subscribes to the practice of entering the negotiation by opening with an extreme position and operating under the assumption that our counterpart will do the same.
For example, we enter the negotiation knowing that we would be willing to pay $10 for a particular item. Assuming $10 is the price we are willing to pay, we often build in a small cushion and our opening offer is $5. We take a position that is not reflective of how much we value the item, but we know we must start low as we expect the other side to start at $20. We have the expectation that they will also build in some negotiating room and accordingly, they artificially inflate their price to allow for this carefully choreographed dance.
One side knows the other side is going to start high, so they start low and the games begin. One side expresses their extreme position and the other side expresses a contrary extreme position. One side makes a small concession, and the other side reciprocates. One side makes an additional concession and the other side reciprocates. This process goes back and forth until both sides arrive at a price they are satisfied with. This is referred to as positional bargaining or in some circles as distributive bargaining. Sound familiar?
There are many shortcomings associated with engagement of this kind of positional bargaining process, yet we seem inclined to continue with this kind of strategy. Clearly, it sets up an oppositional relationship between the negotiating parties. Engagement of positional bargaining also incents people to artificially inflate their positions in order to accommodate the negotiation.
Basically, this process is based on lies, as neither party actually believes their opening position is fair. The additional downfall of this process is that it takes far more time to reach an outcome. Try this the next time you go to purchase groceries at your local supermarket; you will be there a lot longer than normal.
It is interesting to note that these kinds of negotiations do not just take place at flea markets; rather they take place during many negotiations here in our culture. If you have ever purchased a house or a car, there is a strong likelihood that you engaged in this process.
If traditional positional bargaining is a sub-optimal way in which we negotiate outcomes, could there be a better way of getting to a solution that meets both parties needs? Absolutely. Instead of focusing on positions of both parties, there may instead be value in looking at the interests of both sides.
An interest is defined as: The reason or motivation a person has or holds that supports their position or drives their behaviors. In essence, interests are defined as: What is truly important to both sides and include: concerns, hopes, expectations, assumptions, perceptions, beliefs, fears, values and needs.
Consider the example of a prospective tenant looking to move into an apartment and engaged in a negotiation with the potential landlord. The tenant insists on moving into a ground-level apartment and the landlord advises there are no ground-level apartments available. The tenant suggests the landlord evict one of the existing tenants from the ground floor to create a vacancy. The landlord flatly refuses, advising it would compromise their integrity to evict a tenant. The tenant escalates and departs. This is an example of a positional negotiation, with both sides focusing on the what.
Shift now to an interest based negotiation between the same two participants. The tenant insists on moving to a ground-level apartment and the landlord advises there are none available. The landlord then asks why that is an important consideration, thereby shifting from a positional negotiation toward an interest-based discussion.
The prospective tenant advises that they are deathly afraid of fire and don’t want to live any higher than the ground floor for ease of escape in the event of a fire. The fact remains there are no ground level apartments available, however, knowing the underlying interest of the tenant and the motivation for insisting on a ground-level apartment, allows the landlord to come up with other options that meet both parties interests. One such option might be to rent an apartment on another floor to the tenant, with close proximity to the fire escape.
The point to be made is this: When we remain positional, our potential outcomes become limited. When we focus on the what we miss the why. Interests (the why) are powerful motivators behind our behaviors and seeking to understand the interest behind the position, is an outstanding way to create value.
To be an effective negotiator, it is important that one understands the difference between options and alternatives. An option is something that both parties can do together; if the negotiation is successful, what options are available to both parties. What are the things both parties can agree upon that meet their collective interests? If this negotiation is successful, what are the potential solutions or outcomes that are available? A simple way to remember this difference is this: Options are the things that are on the table.
One efficient way of generating and identifying the various options is to engage in a brainstorming session with the other party and identify as many options as possible. Once the long list is complete, it is prudent to evaluate the list of options against the interests of both parties and determine which option meets those identified interests.
In simple terms, alternatives are those outcomes that are available to both parties, in the event the negotiation fails. If a suitable solution is not reached and the parties decide to abandon the negotiation, the alternatives are those outcomes that the parties will walk away to. Alternatives are characterized as away from the table. (Options are on the table whereas alternatives are away from the table.)
When evaluating alternatives, it is important to recognize and understand the value of each alternative and to have a good sense of which alternative is your best alternative. This process of evaluation is referred to as identifying your BATNA (best alternative to a negotiated agreement).
Identification of your BATNA becomes important as, in many cases, your BATNA represents your negotiation leverage. If this negotiation is not successful, you will defer to your best alternative. If a BATNA represents a better alternative than what you might hope to achieve during the negotiation, it may be a good idea to exercise the BATNA and walk away from the negotiation.
For some, understanding the concept of the BATNA is difficult and perhaps an example may be helpful. You are in negotiation with a car dealership in pursuit of purchasing a new car and during your negotiations you discover a similar car for sale at a different dealership for slightly less money. Given the new information and the opportunity to purchase the car for a more attractive price, your bargaining position became stronger.
While it is a good idea to present your BATNA during the negotiation, it may be wise to avoid presenting it as a threat. “I just want you to know that I have discovered a similar car at another location and the price is slightly lower than you are asking. It is my preference to do business with you, so to that end is there anything we might do to reach an agreement?”
It is also important to understand the differences between a bottom line and a BATNA. A person’s bottom line represents the maximum amount they would be willing to pay, or the minimum amount they would be willing to accept. When we are discussing a bottom line, we are still in negotiation and at the table and, therefore, still exploring options.
The BATNA, however, represents the walk-away option that both parties will defer to if the negotiation is not successful.
While many books advocate our ability to negotiate anything and get to yes, there are times at which a negotiator must evaluate their BATNA and if that represents a better option, walk away.
The final consideration in the negotiation process is the concept of the benchmark. In short, the benchmark is an independent assessment of a fair outcome or solution. Benchmarking is another way in which one party in the negotiation can validate the position they are holding. A person negotiating the sale of their car holds a strong position if they bring to the table other examples of similar cars for sale and at the same price point.
In order for the benchmark to be credible, it must come from an independent and disinterested source. The benchmark of “my friend told me this is what my car is worth” does not qualify as a strong and credible benchmark.
As noted in the opening paragraphs, we spend much of our personal and professional time engaged in negotiation. Sometimes we don’t realize we are in this process, yet so many of our interactions are really negotiations. If we can effectively find the balance that exists between getting our substantive needs met during this process, while maintaining or improving the working relationship, we have truly created value.
Gary McDougall is a retired police officer who served with the Calgary Police Service for 25 years; the last eight years of his career, Gary was a member of the Hostage/Crisis Negotiation Team. He served as both a team leader and training coordinator for the Calgary Hostage Negotiation team and upon retiring in 2006, Gary formed a company called Conflict Solutions. He is currently on the speaking circuit, delivering training in a number of disciplines which include effective negotiation skills, conflict management, dealing with difficult clients, ethics in the workplace and workplace violence issues.
Gary is also a member of the Canadian Speakers Bureau as well as a lead instructor for the National Tactical Officer’s Association and in that capacity, he travels around North America teaching crisis intervention and hostage negotiation skills to law enforcement agencies.
Gary is a graduate of the FBI Hostage Negotiators Training School and has also served as an instructor at the FBI Training Academy in Virginia, assisting in the training of new FBI Hostage Negotiators.