In reality, most negotiations don’t take place late at night in stuffy rooms with hard-nosed adversaries. Most negotiations – between family members, among partners, among team members or coworkers, between you and your suppliers or you and your distributors, between sales people and customers – take place between people who have an ongoing relationship and want to maintain it. In those circumstances, driving a hard bargain is not necessarily a virtue.
While you may not need to be friends with your negotiating counterpart, negotiation can and often needs to be amicable. Negotiation can result in mutual gain.
So why don’t more people apply it? Perhaps, it’s because they don’t know how. In the absence of knowledge of a better process, the hard-nosed adversary image becomes the reality.
Rodney Hale, VP of Sales for a large high-tech company, recognized negotiation as a daily way of life for his sales people. His company uses virtual teams quickly formed to implement the project. Obviously, during this process, it’s important for the salesperson to maintain the relationships within the organization. Rodney saw that internal competitive pressures and lack of knowledge of alternatives to win-lose negotiation were beginning to wreak havoc inside his organization. Fortunately, Rodney had been trained in a better way and knew that better outcomes were possible. He was able to enhance his staff’s effectiveness and reduce internal conflict by providing training that enhanced their skills in negotiating for mutual gain. The approach Rodney knew about is based on work done at the Harvard Negotiation Project and the book, Getting to Yes by Roger Fisher and William Ury. There are five essential principles in this approach:
If you apply those five principles to any negotiation, you will move it toward the reality of mutual gain.
In every negotiation there are two important elements, the relationship and the substance of the problem. Often the relationship becomes entangled with the problem. Anger over the issue becomes anger directed at an individual. Egos tend to be involved with positions making it seem that any disagreement on the issue is a personal attack. Rather than adopt the adversary mentality, try to foster the notion that you are trying to resolve a difficult situation in a joint search for agreement that is fair and advantageous to both. If there are people issues, address them directly in terms of perception (Are your perceptions accurate?), communication (Are we being clear?), and emotions (Are they appropriate?), and work to resolve them as relationship issues. Separately address the substantive problem.
The most effective way to address the substantive problem is to focus on the interests behind the positions. Positions are your decisions already made; interests are what caused you to decide. For example, you may be negotiating with a key supplier for a decrease in their order delivery response time. Your stated position is that you need the component delivered within two days of your order, a 50% reduction in current response time. Your suppliers position is that she can’t meet you’re your two day requirement. If you step behind these positions to get at the real interests, you can open a dialog about possible solutions that will meet everyone’s needs.
Your real interest is in reducing ballooning component inventory costs driven by the doubling of your sales and your attempts to meet your own customers’ demands for short delivery times. Unless changes are made, the current order-to-delivery lead time for components will require leasing additional storage space to meet your increased daily component needs.
Your supplier’s interest are maintaining quality, controlling costs, and keeping you as a major customer. In order to meet your doubles production requirements and reduce the order-to-delivery time by one-half, she will have to quadruple her daily production. She is very concerned that the level of production with faster turn around time will jeopardize quality and will require a significant increase in staff in a very tight labor market. Just by uncovering those interests, you will have moved the discussion away from a focus on two-day turnaround to a broader set of issues that may be amenable to some creative collaboration.
People involved in negotiations often do not see the need for options; they see the answer clearly. Without alternatives to consider, you can guess the results: negotiations end with a compromise, each side getting something less than a whole loaf. It doesn’t need to be that way.
Broadening your options gives you more room to negotiate. You can begin by brainstorming with your own team – what other solutions are there? Remember, the brainstorming technique is used just to generate ideas; the evaluation of those ideas comes later. You may even brainstorm with your negotiating counterparts, but be sure to clearly separate the brainstorming from the negotiations. No idea should be taken as a commitment.
You can also look for areas of mutual gain. You might begin by looking for interests that you and your negotiating counterpart share. In our example, you both have an interest in maintaining component quality. By acknowledging your shared interests and reaching agreement that quality standards will be maintained, you have set the stage for working together on more difficult issues. Look as well at differing interests, those that are different but do not conflict. You may be able to dovetail those interests as another place to reach agreement. In our example, your interest is in avoiding additional storage costs. Your supplier’s interest is to avoid a huge increase in labor costs, and to keep you as a major customer. Your supplier’s interests are different from yours, but they do not necessarily conflict. Your suppliers interests are different from yours, but they do not necessarily conflict. Recognizing this may open your discussions to include other options. Your supplier may be able to increase production to a lesser degree and take on some of the storage costs herself so that she can supply the volume you need on a daily basis at a cost lower than that required to quadruple her output.
But, what if you face a situation where the interests of the parties are in conflict even when other options have been considered?
Where interests conflict, negotiations often come down to a test of wills – what each side is willing to accept or give up.
Negotiation becomes simply a contest of stubbornness, an effort to force the other to back down. A far better approach is to evaluate alternatives and make decisions based on objective criteria rather than a test of wills. The more you can use independent standards of fairness, efficiency, or objective merit, the more likely you are to reach an outcome that is both fair and wise. Finding and agreeing on those standards may require negotiations as well, but the time you spend negotiation objective criteria is an investment that will move the underlying issues along more smoothly toward a wise outcome.
If independent standards are not obvious, consider using an objective process as an alternative. We have all used the old “one cuts, the other chooses” method of cake distribution. In the example we are using here an alternative might be to use the industry best practice standard for delivery time as the base, and any order requesting delivery faster that the standard will require you to pay a higher price based on a pre-determined schedule reflecting the increased costs. You could agree that your procurement department would be able to review your supplier’s cost structure every quarter if you desire. Whatever the standards or processes might be, they provide objective criteria for you and your counterpart to test the merit and wisdom of any proposal.
What happens if all of this effort fails to move you to an acceptable agreement? Typical negotiators identify their “bottom line” – the worst acceptable outcome. While this may protect you from a bad agreement, it may also keep you from creating a wise one. You may certainly have a bottom line, but there is a better way to evaluate a proposed agreement.
Before you enter into negotiations, you need to identify your BATNA – your Best Alternative To a Negotiated Agreement. This is the option that you would exercise, outside the negotiation, if this agreement were not to happen. You obviously need to develop this alternative solution to be the best that it can be.
With this in mind, your BATNA becomes the independent standard against which you evaluate all of the proposed agreements as the negotiation process unfolds. If the negotiated agreement is not at least equal to or better than your BATNA, then you do not need to enter into an agreement. You can walk away and exercise your best alternative and you will be achieved a better outcome than if you agreed to the proposal.
Of course, you may believe that lack of agreement means you have failed. That notion is wrong and potentially costly. Keep in mind, you began negotiating to find a solution to your problem. Negotiation is a means to this end. Not the end in itself. From that perspective, terminating an unproductive negotiation and going with your BATNA should be counted as success, not a failure.
People who can negotiate deals or resolve problems and still maintain relationships are increasingly valuable. It is becoming too costly for organizations to continue the win-lose approach. We need to move out of the stuffy rooms into the fresh air in light of collaborative negotiation. We can bargain intensely, but our focus on mutual gain will create better results for everyone and maintain the important relationships.
The good news is that there is a process that can drive those results, and the skill scan be learned. Our work with clients has demonstrated over and over again the value of this approach. By adopting the philosophy and techniques of principled, interest based negotiating, by following the broad steps outlined here, and developing the skills to implement those broad steps, you can elevate your negotiating effectiveness to a new level.