Elements of Effective Negotiation (Part Two)
By Michael Walsh
The most effective negotiation strategies occur before you are ever at the negotiating table. They are as follows:
A. Know your Plan B and you Worst Case Scenario, in the event that the negotiations don’t generate the results you seek.
B. Set your reserve price / terms / floor / ceiling / limit
C. Love 3 Houses
Know your Plan B and your Worst Case Scenario
One area that many people avoid is the reality check 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 is your worst case scenario, then you can set your limits. The limits you set are the ones you will not go past. They represent your "bottom line"
requirements for the negotiation to progress to a conclusion that you deem acceptable.
By setting your limits, this does not compel you to share those with the other party(ies) involved in the negotiation. It is a level of planning that you do for your own benefit. If you are unclear about the financial and non-financial consequences of your arrangements, then you may end up with arrangements that you later decide are unacceptable. By formally setting your boundaries for the terms and conditions of any deal you strike, then you are forcing yourself to qualify for yourself, in advance, when to walk away.
Sometimes the best deals are the losses we avoid by passing up the wrong arrangements. By clarifying your limits, you will be ensuring that you do not get stuck with unprofitable deals.
Love 3 Houses
Norm and Marjorie were in the market for a home in a particular neighborhood. They were very excited by the possibilities that one particular house offered, and decided to explore it in a Sunday afternoon Open House, being held by the realtor involved.
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, when 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.
The Love 3 Houses tool 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 the first option as to get in your own way during a negotiation. This is somewhat different from the Plan B planning, as the purpose of this tool is to support you in separating yourself emotionally from any particular outcome long enough to avoid letting emotions get the better of you during a negotiation. Access to your intellect will serve you well, but only if it is not clouded by irrational thoughts.
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 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 to you, and you will enjoy the negotiation process more, and be more settled with the outcome, no matter how it turns out.
Stay tuned for Part Three of this series!
Filed under Business Development by Michael Walsh.
