Negotiation is a larger and larger part of business reality. You often hear about some great deal that was negotiated. Paraphrasing the Stones, “You can’t always get what you want, but if you try sometimes … you just might find, you get what you negotiate.”

What is negotiation? Is there always a winner and a loser? What about this “win-win” that people talk about? How do you do that, anyway?

Definition of Negotiation

Like so many words, negotiation is used in different ways in various situations. The formal dictionary definition of negotiation is: to discuss with the view of reaching an agreement; to settle (a transaction, treaty, etc.).

In order for negotiation to be present, there must be a real or perceived disagreement either present or possible.

It’s been said that every human interaction has the potential to turn into a conflict. If this is true, then a working definition of negotiation might be: managed conflict. The best time to manage conflict is before it happens, so that the conflict never shows up.

There are two main types of negotiation. They are:

1. Dealing with problems, issues and concerns. This may include conflicts with coworkers, concerns of customers or difficulties with suppliers, to name a few.

2. Tapping opportunities. Examples might be seeking a new promotion or pay increase, up-selling a customer or securing a new account.

How do you keep negotiations effective? There are three main elements to consider.

1. People versus Issues
2. Positions versus Interests
3. Protect the other party’s self-regard

People versus Issues

One of the traps we fall into in human interactions is to erase the distinction between people and issues. While this is a natural inclination when emotionally stressed, it camouflages what the real issue is, and increases the chances for potential conflict.

“Joe is such a jerk! He never shows up on time. We end up waiting around for him to waltz in whenever he pleases. What an insensitive jerk!”

What is the issue here?

Joe may be a jerk (or maybe not . . . we haven’t heard Joe’s side yet), but the issue is that he is late, and that people have to wait. By setting aside judgments about the people and sticking to issues, it is far easier to implement effective negotiations to resolve conflicts and to move situations forward on a productive footing.

Positions versus Interests

Regardless of your stated position in a negotiation, or the stated position of the other party, agreements are reached at the level of your (and their) interests. Not the positions!

What is it that they really want out of this negotiation?

Statistics indicate that 23% of the buying public makes purchase decisions based upon price alone. The other 77% use some other measure of value. However, without a measuring stick for value, everyone will start with price as the differentiating factor. A shopper may be asking for a reduced price, but you may detect that she is really interested in high quality, and to feel important as a customer of yours.

One way to feel important is to gain a preferential price. However, there are many other ways to accomplish this value which do not reduce your profits.

By discovering what the interests of the other party are, and overlaying those with your interests, you are much more likely to achieve an outcome that will serve both sides better.

Protect the other party’s self-regard

Maintaining safety in an interaction is critical to keeping it productive. By actively protecting the other party’s self-regard, you will increase your ability to keep people and issues separated, and focus on interests, and not  positions.

Tools for Effective Negotiation

The most effective negotiation strategies occur before you are ever at the negotiating table. They are as follows:

• Know your Plan B and you Worst Case Scenario, in case the negotiations don’t generate the results you seek.
• Preset your reserve price / terms / floor / ceiling / limit
• Love 3 Houses

Know Your Plan B and Your Worst Case Scenario

An area that people avoid is the strategy on what to do if the negotiation doesn’t turn out the way they want. We all know intellectually that sometimes things work out and sometimes they don’t. Yet emotionally, we are surprised and upset when things don’t go the way we want. The way to protect our confidence in these situations is to use the intellect instead of the emotions.

• What is my Plan B, or my best alternative, if this negotiation doesn’t work out?
• What is my worst case scenario?

By answering these two questions, we are better armed to deal with the uncertainties of a negotiation, and we will be clearer on how to conduct the interactions when the time comes.

Set your Reserve Price / Terms / Floor / Ceiling / Limit

Once you know what your Plan B is, and what your worst case scenario is, you can set your limits. The limits you set are the ones you will not go past. They represent your requirements for the negotiation to progress to a conclusion that is acceptable.

Setting your limits does not compel you to share those with the other parties in the negotiation. It is a level of planning that you do for your own benefit. If you are unclear of the financial and non-financial consequences of your arrangements, you can end up with arrangements that are unacceptable.

By formally setting your boundaries regarding the terms and conditions of any deal you strike, you are forcing yourself to quantify for yourself, in advance, when to walk away.

Sometimes the best deals are the losses we avoid by passing up deals with the wrong arrangements. By clarifying your limits, you ensure that you do not get stuck with unprofitable deals.

Love 3 Houses

The tool called “Love 3 Houses” refers to the strategy of actively developing options and alternatives to your initial, most preferred arrangement. By developing a number of options, you will not generate such a strong emotional link to one option. You stay out of your own way during a negotiation.

This is different from Plan B planning. The purpose of this tool is to support you in separating yourself emotionally from a particular outcome during a negotiation. Access to your intellect will serve you well, but only if it is not clouded by irrational thought and actions.

Norm and Marjorie were in the market for a home in a particular neighborhood. They were very excited by the possibilities that one house offered, and decided to explore it in a Sunday afternoon Open House.

While Norm was having a brief chat with the realtor in the living room, Marjorie was checking out the rest of the place. Norm was already working on the price, mentioning that the living room was a little dark, and that this house was on a particularly busy street. A loud sound came from the kitchen. Marjorie, obviously thrilled with what she was seeing, shouted to Norm, “Oh look at this view! I love this kitchen! Norm we have to have this home!”

The realtor quietly smiled, knowing that the price negotiation just ended. The price would become firm, and he knew they would still buy.

Too often I have seen people pay too much for things or enter into bad arrangements because they could not park their emotions (or sometimes their ego) long enough to do what made the most sense for them.

This is also one of the sources of “Buyer’s Remorse,” that feeling just after a purchase or transaction where you feel, “Oh my gosh! What have I done?”

If you “Love 3 Houses,” you will have a number of options available. You will enjoy the negotiation process more, and be more settled with the outcome, no matter how it turns out.