By Michael Walsh

What's missing too often in negotiation?

Preparation.  There are three primary reasons why negotiators are
unprepared:

1. They assume that "just talking" is low risk.
2. They think that preparation takes too much time.
3. People don't know how to prepare well.

There is a systematic approach available to preparing for a negotiation.  By following the seven steps listed below, you will find that you can prepare for a negotiation within a 20 minute time
period:

1. Focus on interests (rather than just positions)

2. Options - spend time clarifying many in advance

3. Alternatives - be clear on your Plan B and your worst case scenario

4. Legitimacy - use external standards to keep it fair.  I was once in a share purchase negotiation where the vendor pulled out part way through because the clause stating the interest on the amount outstanding was listed at 8%.  Instead we changed it to prime + 2% and the vendor was happy again.  At the time, prime was 6%, so it made no difference to the actual deal, except to protect the vendor
is rates rose.   Using an outside source legitimized that portion
of the arrangement.

5. Communication - listening, clarity in speaking.  Be careful to say only what you mean.  We had one client once who was buying the rights to a phone number from a third party.  He had decided that we would pay up to $20,000 for this number, but wanted to pay as little as possible.  The third party wanted access to our client to do more business in the future.  We were negotiating with the third party at the level of between $8,000 and $10,000 with additional provisions to provide the third party with access to our client (which was no problem for the client).  Everything was going fine, until the client let it drop that there was no way he could go higher than $20,000 for the rights under question.  His little "faux pas" in the discussion cost him dearly.  The third party immediately got inflexible, requiring $20,000 (instead of the $10,000 she was previously seeking) in addition to access.  The client, realizing he was beaten, consummated the deal and learned the value of watching what is communicated at the negotiation table.

6. Relationship - will the outcome damage or enhance the relationship?  Good outcomes enhance relationships.  By looking at this item and asking yourself the question, "Will this outcome damage or enhance the relationship?" sometimes that is enough to check, and subsequently alter strategies, and the results as well.

7. Commitment - think through in advance what specific promises you are willing to make and what you require of the other party.  Too often we see situations where after a long negotiation, one party says, "If you just take out this one clause (or add this one
clause) we have a deal."  The only problem is that the clause in question may change the entire workability of the deal.  This is where good deals turn bad, or where deals are lost unnecessarily.

Unprepared people promise too much without thinking, or hold back and lose the deal.

Sudden Preparation Template

Here is a list of 8 questions you can ask yourself when preparing for a negotiation.  These questions form a template to generate quick preparation for any negotiation.

1. What are my intended outcomes (interests)?
2. What are the other person's (possible) interests?
3. What are some of the options of agreement?
4. What is my Plan B?
5. What is my worst case scenario?
6. What are some possible external standards?
7. What is/are my reserve price / terms / limits?
8. What is my game plan?

By following these steps, you will be better prepared for your negotiations while you seek to gain and keep more customers at a profit, as you grow your business consistent with your goals and commitments in life.

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!

By Michael Walsh

Almost everywhere you go in business you hear about the great deals that were negotiated.  It seems that negotiation is a larger and larger part of our business reality.  Yet, we seem to differ widely on just what it entails.

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

Like so many words, negotiation is used in different ways for varying 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 has 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 arises, so that conflict never shows up.

There are two main types of negotiation.  These are:

1. Dealing with problems, issues, and concerns.  This may include conflicts with co-workers, customer concerns, 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 collapse the distinction between people and issues.  While this is a natural inclination many of us have when emotionally stressed, it camouflages what the real issue is, and increases the chances for potential conflict to turn real.

"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 attributions and 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, where agreements are reached is 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, absent some other measuring stick (for value), everyone will start with price as the differentiating factor.  A shopper may be asking for a reduced price, but through active listening 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 others ways to accomplish this "interest" 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, not just positions.

Stay tuned for part two of this three-part series on negotiation.