Having had the privilege of training many negotiators all over the world for some years now, one of the key obstacles we frequently come across is the issue of mindset. Put simply many of us go to the negotiating table with a less-than-ideal definition of what “negotiation” actually is!
We think that in some way we are required to outsmart our negotiating counterparties in a confrontation or competition. This in turn often leads to defensive or even aggressive behaviours that actually move us further away from the result we are seeking. We forget that a crucial aspect of negotiation involves being able to effectively explain and “sell” our solution to the other party. After all, if all sides are incapable of walking away from the negotiating table feeling satisfied with the outcome, then what is the point of negotiating in the first place?
To explain more about how the negotiation process works and how you can nail your negotiations, we’ve put together this post. In it, we lean on everything we’ve learnt from over 20 years of experience in working and training alongside some of the best sales and negotiation professionals on the planet.
And furthermore, we’ve condensed everything here into a free “Negotiation Checklist”, which you can download using the form below to help guide your next negotiation. Whether you’re asking for a raise or thrashing out a new business deal, it has something for everyone.
What Is A Negotiation?
Contrary to what many people think the negotiation process, when it is effectively being conducted, has nothing to do with haggling or competing. On the contrary, the best negotiators are deeply concerned with creatively finding ways of assisting their counter-parties to meet their objectives as well as their own.
The Business Dictionary defines negotiation as:
Bargaining (give and take) process between two or more parties (each with its own aims, needs, and viewpoints) seeking to discover a common ground and reach an agreement to settle a matter of mutual concern or resolve a conflict.
We can see from this definition that the negotiation process hinges on an understanding of the sometimes hidden needs and priorities of our counter-parties, as well as an ability to make and receive concessions (the give and take part).
Usually we will negotiate when there is a deal we wish to achieve that has the potential for both parties to walk away with a win-win outcome. Regardless of whether we are negotiating with a client or someone else, perhaps with our boss for a pay rise for example, the underlying structure and principles of the negotiation process remain the same.
Opportunities to negotiate often reveal themselves at critical junctures. Perhaps we are seeking a promotion, or maybe we need to cut costs in our business and therefore need to revisit our relationships with existing suppliers? Whatever the scenario, we need to be fully prepared with a complete understanding of the distinct structure and stages of the negotiation process.
Why do we negotiate?
In a corporate environment, there are many reasons for needing to negotiate – and there are numerous benefits associated with these. For instance, we may wish to build better, longer-lasting relationships with our clients or suppliers that are based on value, and not purely on price. This way our relationships will be more likely to produce rewarding great outcomes for both parties.
Perhaps we wish to achieve higher sales margins, negotiate a lease or service delivery, or to create the most efficient workable solutions with our suppliers. Whatever the reason, having an effective negotiation framework based on goodwill will help us to achieve our objectives, and will raise our reputation both within our organisation and with our peers and counterparties alike. If we can secure a reputation for being a firm but fair negotiator this will undoubtedly serve us well in all our future negotiations.
Who is this guide for?
This guide is for those who are responsible for conducting negotiation activities within their organisations and who would like to establish a clear framework for finding agreements and avoiding common pitfalls.
It is aimed at those who wish to understand the stages of a negotiation, how to prepare in the best way, how to build trust through questioning and listening, and what to do if the counterparty is in a stronger position.
The Negotiation Process
So what are the stages of the negotiation process, and why is it essential to know what is required in each stage? Put simply once we know where we are in a negotiation, it will be possible to employ the right skills to stay ahead. An appreciation of the distinct structure of a negotiation will act as a roadmap for us.
The stages are as follows:
- Walking away (if necessary)
In the following sections, we’ll look at each in a bit more detail.
How to prepare for a negotiation
In the words of Benjamin Franklin, “by failing to prepare, you are preparing to fail”.
This is especially true where negotiation activities are concerned.
It is important to ask ourselves if we should be going to the negotiating table in the first place. If there is little major advantage to be gained, it may be better to desist from taking this course. Why? Because it can be an immensely costly activity in terms of time and resources for all concerned.
Should we decide that a formal negotiation is the best path, we need to be clear about what we would like to gain from our negotiation activities. What is our best outcome? At what point will we need to walk away if we cannot achieve our key objectives? This will protect us from caving in to unreasonable demands and agreeing to an outcome we may regret.
It will also be useful to consider those things we are willing to concede during the negotiation. If we do not have our concessions pre-planned there is a risk we may inadvertently give away too much, thus undermining our position.
It’s really valuable to complete this pre-negotiation planning for your own position, but you may also want to then consider it from your counter-parties position too. How valuable will these negotiations be for the counterparty? As such, what are they likely to want to achieve? What will be their most likely sticking points and what will they be willing to concede? How will all that affect your objectives?
Answering these questions for yourself and your counterparty means you’ll have a much fuller picture of how the negotiation is likely to progress. It also means you can anticipate (and then plan for) any issues or opportunities that may slow down or enhance the process.
Researching the counter-party
Another important step in preparing for a negotiation is to equip ourselves with a full understanding of our counterparties wants, needs and desires. This will help us to create workable solutions that take into account our counterparties’ “hot buttons”. Once we know what these are, it will enable us to appeal to them where possible, making it easier to “sell” our proposals.
A good place to find useful business information regarding our counterparties is online. LinkedIn can be especially useful – it is here that they will often reveal their plans and priorities in their profiles and posts. Alternatively, many companies now promote their aims on their website’s ‘About Us’ page. And you may want to have a read through all the recent news about the company in question – to better understand their background and current situation. Sometimes this news will be available on their own blog or via a media publisher.
If we cannot find valuable information online, then we will need to ensure that we ask powerful questions during our negotiation activities, and listen very carefully to our counterparties’ answers so that we don’t miss any key signals (more on this later).
And, if possible, we should try to meet our counterparties for an initial discussion prior to conducting our negotiation activities. We can use this as an opportunity to create a list of both shared and potentially opposing interests, so that we can begin formulating our negotiation strategy to take into account any potential stumbling blocks.
Once you’ve started negotiations, every action you take (or don’t take) will have an impact on the outcome. So clearly we need to get things right.
There are four points presented here to help:
- Active listening
- High gain questioning
- Bargaining & compromising
Plus, we’ll share some situation-specific advice for those who find themselves in either a position of power or a position of weakness during the negotiation.
In a negotiation, many of our counter-party’s needs are hidden. The ability to listen effectively is perhaps one of the greatest skills a negotiator can develop to help uncover those needs.
Unfortunately, the simple fact is that many of us are better at expressing our own opinions than we are at listening to others. The problem is not a new one, as far back as Ancient Greece the Stoic Philosopher, Epictetus, advised:
We have two ears and one mouth so that we can listen twice as much as we speak.
Clearly, the Ancient Greeks were a garrulous bunch.
Nonetheless, with Epictetus in mind, we should consider using a technique known as active listening. This is a structured method of listening, which involves:
- Placing full attention on the individual while they are speaking (often we will be distracted by internal and external concerns)
- Encouraging them to speak
- Refraining from pre-judging what they have to say and jumping in too soon
- Asking better quality questions as we have gathered a higher level of information by employing this technique
High gain questioning
In order to gain the most from active listening, it is essential to deploy perfectly constructed, well-timed “high gain” questions.
A “high gain” or power question will encourage our counter-parties to think deeply about their needs, and therefore will potentially provide us with better information. We can use this to formulate better proposals and, crucially, to find ways of creating options for mutual gain. After all, the very best negotiators hold the needs and desires of their counter-parties as close to them as their own!
So what are some examples of high gain questions? They could include:
- What would you and your colleagues really like to achieve from this negotiation?
- What does a win-win outcome look like for you?
- Tell me about the key things that are must-haves for you?
- What do you see as potential stumbling blocks?
Pro-tip: Do your counter-party’s answers to these questions match up with the pre-negotiation planning you did? If so, great job – you correctly anticipated their position.
Bargaining & compromising
It is an undeniable fact that we will need to make compromises on the road to securing our win-win outcome. However, it is essential to keep in mind that we are aiming to achieve our best outcome, and not a half-hearted compromise as our end result. Always aim high.
In order to make concessions in the most effective manner it is essential to prepare these in advance, to avoid giving away too much in “the heat” of a negotiation. It is also vital that we connect each concession that we grant to a condition. If we do not do this then our counterparties will fail to appreciate the value of our concessions, and will take them for granted. Worse still, they may develop an incorrigible appetite for yet more of the same!
We also need to remember that true negotiating has nothing to do with positional bargaining (which is more like haggling.) In positional bargaining, the two sides are locked in a tug of war, each more interested in defending narrow positions rather than achieving win-win outcomes through creating opportunities for mutual gain.
We often think that if we put up a wall in a negotiation, our counter-parties will think that we are much more self-confident and capable than perhaps is necessarily the case.
While it’s certainly true that we should not speak too excessively – as this may give away information that could be detrimental to our cause – it’s still beneficial for our counterparties to see our human side. Otherwise how on a personal level can they relate to us?
Defensive barriers run the risk of leading to misunderstandings and even suspicion.
It is best to adopt an assertive, but collaborative style where we seek to include our counter-parties in all decision-making. One useful way of testing the water is to draft a proposal and to submit it to our counter-party for review. This will quickly reveal how close or far away we are in securing a win-win outcome.
If we do not involve our counter-party at all stages there is a very palpable danger that they may jettison our final proposal out of suspicion that they were never fully involved in its formulation.
What to do if your opposition has more power?
Margaret Neale, the Adams Distinguished Professor of Management at Stanford Graduate School of Business, once stated, “there is often strength in weakness”.
She is undoubtedly right. Sometimes those in positions of power can become rather short-sighted concerning the needs of others, which in turn can become their Achilles heel.
Complacency may hamper their ability to properly do their homework, and they may miss opportunities that those who are in a meeker position will be better able to capitalise on through agility and ingenuity.
Also, we need to remember that power is often a matter of mind-set. To a certain extent we are as powerful as we choose to project to our audience. If we are clear about our goals and the undeniable value of what we have to offer, then we’ll both feel and appear more confident, and confidence is usually always infectious.
So long as we are fully prepared and have a clear appreciation of our counterparties’ goals, as well as our own, we will be in a strong position to create win-win solutions.
Asking the right questions will also boost our level of control. When our counterparties are speaking and we are listening the balance of power is usually always in our favour!
We should also try to stay open-minded in the negotiation, because the moment we project defensiveness this will undermine us. By proactively seeking to collaborate with our counterparties we will boost our influence at the negotiating table.
What to do if you have more power
If we are fortunate enough to be in the position of power, then what we choose to do with it will depend on how much we value the relationship with the counter-party. We may decide to adopt an aggressive transactional style, and hammer out an outcome that is very much weighted in our favour.
While it is likely that we will enjoy an easy “victory”, we will almost certainly damage the relationship in the process. While this may be of little immediate concern, we need to remember that in the future our counterparties may return to the negotiating table seeking revenge. Worse still, our professional reputation may become tarnished as our offended counterparties spread the word concerning our aggressive and unfair behaviour.
If we find ourselves in a position of unassailable power it is far better to use this advantage in a constructive manner, by tirelessly working to create opportunities for mutual gain. This way we will gain our counterparties’ undying respect and our reputation will grow as a business characterised by ethics and fair play.
When it comes to successfully closing a negotiation, there are two key points:
- Reaching a wise agreement
- Planning the next steps
Reaching a wise agreement
Wise agreements are those that satisfy all parties’ interests and are based on good will. When seeking productive long-term relationships with our counter-parties a wise agreement is essential. If we prioritise our own short term aims and agenda at the expense of everything else, we run the risk of damaging our relationships.
In contrast to wise agreements, sloppy agreements, which have not been carefully thought through and have been hastily constructed, leave all parties open to unforeseen risks and unfortunate repercussions.
So, take the time to carefully consider all points of the agreement and research what impact this may have on your business in the short, medium and long-term. Find any potential issues or unresolved areas and make sure these are tied up before signing on the dotted line.
A wise agreement may be a matter of due diligence, but remember we’re always striving to reach a wise agreement from the very start of the negotiation process. As far back as the planning stage, we already know what we want to achieve. Does the agreement reflect that planning?
Planning the next steps
For an agreement to be truly “wise” it is essential that all parties are clear about what is required of them once the desired outcome has been achieved. In other words, what is the plan for implementing the agreement? Who will carry out the necessary actions and by when?
We also need to decide what shape the agreement will take. Is a more casual agreement sufficient or do we need a more formal contract with clear and detailed stipulations?
If all parties are unclear about the next steps there is a very real danger that things will drift and the outcome we worked so hard to achieve will never be fully implemented, if at all.
If a negotiation is not able to reach a successful conclusion, we need to consider walking away. In this section, we’ll explore ‘walking away’ in a bit more detail.
When to Walk Away
Walking away from a negotiation is an option that should never be discounted by any negotiator.
As mentioned in the planning section earlier, it is vital to have a set walk away point before even entering the negotiation. This will protect us from caving in to undue pressure and to agreeing to terms that could be highly detrimental.
Walking away from a negotiation can actually signify strength to our counterparties. If we have made a great effort to remain positive, creative and collaboratively minded in our negotiation, but our counterparties refuse to concede to the requirements we have set as the bare minimum threshold of what is acceptable then walking away will undoubtedly be the best option.
Most importantly, we should never under any circumstances give in to threats, bullying or coercion from our counterparties. No mutually productive relationship can ever be forged on this basis.
How to Walk Away
So if we need to walk away, how do we do it?
It’s best to be completely transparent with our counterparties about why we’re walking away. It is essential to clearly state the reasons for our decision. This will avoid any misunderstandings or ill-feelings.
It is also important to communicate with our counterparties as to whether or not we wish to revisit our negotiation with them at a later stage or if we wish to postpone indefinitely. This choice will depend on the level of importance we attach to our relationship, combined with the scale of differences that exist and whether those differences are likely to be reconcilable in the longer term.
Negotiation is undoubtedly an art that improves over time with practice. By placing the needs of our counterparties at the heart of our approach, we will be better able to build trust, and to find ways for creating options for mutual gain.
With fine-tuned listening and questioning skills, and with careful preparation and planning, it’s possible to achieve more effective win-win outcomes. Or, at the very least, you’ll know when to leave the negotiating table and avoid a deal which has no benefit to you or your company.
We hope you found this guide useful, and ideally there will be lots of information you can take to improve your own negotiating process. If you would like a more actionable, easy-to-read version of this guide, then we’ve created a free downloadable checklist, which you can use before any negotiation to better plan and prepare. You can download the checklist using the form below.