Advanced Negotiation Skills (2): The Art of Preparation

10/7/2014

negotiation_skills_for_business_leaders

We all have to negotiate, whatever we do, whether at work, home or play. Most of us learn through bitter experience that if we want to win really good deals, we need to invest time and effort in preparing effectively.

Yet curiously, it seems that many Brits take a special pride in ‘winging it’! I polled some 25 different nationalities on how they perceived the strengths and weaknesses of other nationalities. Most said they saw the Brits as being generally amiable, keen to do a deal and flexible. But, even more said they found us unprepared, naïve and untrained. How shameful is that!

This doesn’t mean to say that this criticism applies to you. But it might well apply to your sales teams or key staff, as a business leader you should certainly be aware that this is how we might be perceived by others.

  1. What do we each want / what can we each give?

All negotiations should involve trading positions – not making charitable donations by collapsing in stages while receiving nothing back in return!

So an essential part in planning any negotiation must include determining:

  • What do we need and what else might we ask for?
  • What is that worth to us and what is it likely cost to them?
  • What are they likely to need from us and what else might they ask us for?
  • How much is that likely to cost us and what is it worth to them?
  • What else might we be prepared to offer to get what we want?
  • What else might they offer us to get what they want?

Note two important principles already covered in my first article on this topic here

  • First, be sure to separate your essential ‘Must Haves’ from your nice-to-have ‘Would Likes’ in your preparation and don’t confuse them!

    Equally, what are theirs likely to be and how might you best check them out?

    (Of course, most skilled negotiators will seek to make their ‘Would Likes’ seem like ‘Must Haves’.  But a ‘Must Have’ means just that.  So what will each side really ‘die in a ditch for’?)
  • Secondly, keep looking for ‘variables’ – in your side’s position and theirs. 
    Are their less expensive ways for you to meet their stated needs? 
    Are there also other valuable prizes you might ask for that might cost them little, or even nothing?

    For example: I might be quite unable to offer my staff a pay-rise, but I’d be very happy to suggest a payment-by-results bonus scheme.

    Or: If I can’t offer my customer the price reduction they have demanded, I can certainly look at other ways at reducing both parties’ costs – for example, by negotiating larger contracts, greater forward-order visibility or even less-expensive specifications.
  1. Who are they? – and how do they behave?

In principle, we should never enter a negotiation without knowing who the other side are and what their roles are – just as we need to make sure we agree our own negotiating team’s roles. 

As part of our essential preparation, we need to find out:

  • As much as possible about the organisation we are dealing with and their history with us.
  • Who will be on their negotiating team and how have we have observed their negotiating behaviours in the past.
  • Who will have the authority to agree any deal. 
  1. Where does the balance of power lie?

This is a really critical part of preparing a negotiation.  While being as realistic as possible, your task is to:

  • Build up your power-base so you can exploit it.
    For example, how can you ensure their need to settle with you is at least as great as your need to settle with them?  Clearly, being the sole supplier of what your customer needs is highly advantageous to you, just as is having many suppliers is if you are buying.

  • Verify their power base and seek to diminish it.
    So if you are a supplier with many competitors, what can you do to make your offer the uniquely attractive?  If you are a customer facing a sole-supplier, what can you do to make yourself less dependent upon them?

Really skilled negotiators work very hard at this, often by creating pressure points that may not actually be real.

For example, “this offer is only valid today”, “we are in no hurry to do a deal”, “we will have to withdraw our labour if you don’t give us…”, “we are thinking of relocating our sourcing to the Far East”.

And note: managing the time available to conclude a deal is really critical. You should never find yourself conceding a deal because you ran out of time!  

  1. What now?

Finally, we need to decide how we are going to proceed.

  • Is our negotiating team the right one for this particular deal?
    Do they have the required skills, do they know what their roles are?

  • Who is going to make our opening statement when we meet and what will this be?
    This will need to include our formal agenda.  What will be on it and how should we best present it?

  • How high can we pitch our opening bid?
    As ambitiously as possible, but not so much as to make any deal impossible?

  • Are we after a short term deal, or one for the long term?
    Are we expecting a collaborative win-win deal, or do we need to prepare for a more combative one that may result in Win-Lose, Deadlock, or even no deal at all?

Important Lessons

If you ever heard a colleague suggest: “Let’s go and see what they have to say”, you will know they probably haven’t prepared properly.  (Shouldn’t they already know what the other side is likely to say?) 

Preparing to do any deal takes time, research, imagination and patience. It should often be seen as a team effort to get deeply inside the other side’s position.  All the research shows that unprepared sides rarely win good deals.  So don’t take the risk!

As a Vistage UK Blog reader you can access a free preview of Jeremy's book: How to Negotiate Better Deals.

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Topics: Sales, Negotiation