Whether your negotiation challenge involves taming bears or the more enjoyable task of collaborating to look for maximum value, the cornerstone of success is preparation. To approach negotiation as a spontaneous transaction, like haggling over an item that catches your eye in a yard sale, may win you a prize now and then, but far more often will net you poor results and the remorse that inevitably follows.
I have heard countless tales of woe from people who went into a negotiation blindly, imagining that all they needed was quick wits. "I figured that if I could get the other guy to reveal what he wanted, then I could knock him down from there," explained one humiliated company rep who had been sent for negotiation coaching. Unfortunately, as he had found out the hard way, there are a couple of fundamental problems with this approach.
First, how can you get a good deal, much less create a value-enhancing relationship, if you don't know whom you're dealing with, what they're looking for, where their problems lie, and why they are better off working with you than not? At minimum, if you don't know the competitive environment in which you're negotiating, how can you prevent yourself from becoming the victim of those who would seek to gain bargaining advantage by feeding you false or misleading information?
By following a reactive strategy (basing everything on what the other party says), the unprepared negotiator loses his or her ability to guide the negotiation in a positive direction. Additionally, it becomes impossible to gauge the truthfulness of others' claims or the sincerity of their declarations. The unprepared negotiator is left helplessly wondering, as one client plaintively asked me, "What do you do if your customer tells you that your prices are higher than the competition's?"
The answer, of course, is that you need to know where you stand before you walk into the negotiation. Put another way, you have to understand the sense of what you're saying before you start talking. How else can you justify your terms or build trust? Neither solid relationships nor fair outcomes are built on blind faith.
Successful negotiation doesn't start with hello. Rather, it takes place in three stages, two of which begin well before opening words are spoken:
The first two stages—understanding and anticipating—will normally take up anywhere from two-thirds to three-quarters of the negotiator's time. Most of that time will be spent in advance of the first meeting, but not all of it. For while the stages of negotiation begin in a defined order (starting with understanding, then drawing on that knowledge to begin anticipating, and finally, using the information and planning to connect more effectively with the other party), none of the stages has a clear end point. Indeed, the connecting stage, when the negotiators are meeting and actively exchanging information about themselves, is a prime opportunity for clarifying your understanding of the other party (which until then had been partly guesswork) and correcting erroneous assumptions.
The dynamic of the three stages, therefore, can be represented as a helix in which the shade (representing understanding) grows ever deeper as each new stage adds depth to, but does not replace, the previous one:
The Three Stages of Negotiation
Let's look at these stages one by one.
To be an expert negotiator, the first thing you should do, well before meeting the other side or presenting a proposal, is examine everything of relevance you can about
Yourself or your organization. What is your current situation? What are your goals in this relationship? What particular strengths do you bring to the table? What weaknesses, if any, do you need to diminish?
The people or organization you will be negotiating with. Who are they? What about them most attracts or concerns you? How do they stand apart from others? What kind of reputation do they have? What is their current situation? Historical baggage? Future ambitions? How are they likely to view you or your organization?
Your competitors. Whom are you likely to be competing with or compared to? How do you set yourself apart from them? What advantages do you offer? What advantages do they have over you? What terms do you expect the competitors to offer? How can you justify the difference between their and your terms?
Their competitors. Who or what else might be able to satisfy your goals? What do you know about them? What possible advantages or disadvantages do they offer?
External environment. What external factors (such as economic trends or political change) will have an impact on the parties, the issues, or the negotiation terms?
This examination does take time, but the results it yields are invaluable. The expression "knowledge is power" is not an empty cliché. The benefit that knowledge delivers in confidence alone is more than worth the effort. Confidence plays a major role in any negotiation. Studies in every field of endeavor have shown that you are more likely to succeed at something if you believe it is within your ability to do so. Confident people also spend less time worrying and second-guessing everything, so they can dedicate more of their mental energy to creative problem-solving. And they project a more trustworthy and competent demeanor. People are more willing to go along with someone who comes across as secure and knowledgeable.
On the other hand, when you lack knowledge and the confidence it gives you, the negotiation can come to feel so punishing that you just want to get it over with. A negotiator from a well-known appliance manufacturer told me of his miserable experience once when negotiating the acquisition of a smaller company, which had a more prepared team. "I came in with nothing but a target price in my mind, prepared to listen to what the other side had to offer. They came in carrying this enormous stack of information on our company, their company, economic trends, you name it. As soon as I heard the sound of those books landing on the table—THUD!—I knew I didn't have a chance of getting the terms I'd hoped for. They began peppering me with questions, half of which I couldn't answer. I actually found myself agreeing to their terms just to end the humiliation. It was a disaster."
Another beneficial result of understanding is that it enables you to build trust. Genuine trust must be based on solid understanding, not blind faith. By understanding the landscape before entering into the negotiation, you will be able to test the honesty of the other side and to challenge dubious assertions. Knowing the facts in advance will enable you to judge when your negotiation partner is being reliably honest, in turn creating a firm foundation from which to take your relationship to a higher level of openness and cooperation. It's next to impossible to build trust and openness if there is no basis for knowing whether what you are being told is true or not.
The more you understand others, the better you will be able to connect with them. Generalizations are useful, but at the heart of every negotiation—just as of every relationship—are individual needs, wants, fears, and preferences. When you view your negotiation counterparts as stereotypes (your basic car salesman, a typical big company, and so on), you make it impossible for them to see anything special in you. Connections are by nature particular.
One of the first corporate negotiation training programs I ever conducted was the result of finding that connection. I was living in Bangkok when I was approached by the director of a large American multinational. He was looking for someone to train the company's Thai sales staff, who he felt were getting low-value deals and allowing themselves to be run over by their biggest customer. He had heard that I was teaching negotiation at the local business school, so he asked what I could offer them.
Instead of responding with a proposal for a standard negotiation training program, I invited him to lunch in order to understand his situation and hear his perspective on what his team needed. Over the meal I asked a lot of questions about the particular situations his salespeople faced: who their big customer was, how it approached negotiations, what specific problems he saw in various team members, what kinds of changes he would like to see, and so on. From the length of the lunch, it was clear that he enjoyed sharing his thoughts. Who wouldn't like talking to someone who was so interested in understanding his problems and listening to his views?
Toward the end of the lunch I asked him if he was looking at any other training providers. By then we had built enough trust that he openly confessed that in fact his head office had recommended that he use a well-known overseas training firm and that he had initially approached me only to fulfill their competitive-bidding vendor requirement. However, he said, as a result of our conversation, he very much wanted me to put in a serious proposal.
I put a lot of thought into what I had learned from our conversation. My deeper understanding of the company's problems and personalities allowed me to find a number of points of connection where I could offer value that I believed the overseas company could not. The preferred firm certainly had impressive credentials and slicker materials, but I understood from the manager that what he really wanted was someone who could help Thai salespeople better negotiate within a distinctively Thai environment. The manager didn't want generic negotiation training, no matter how professionally packaged. He wanted someone who would help his specific team negotiate more effectively with a specific customer.
Based on the knowledge I had gathered, I included in my proposal my experience living in Thailand, working in a Thai university with Thai MBAs, and my understanding of the local business culture and its challenges. Knowing that the manager was concerned about the behavior of particular employees, I offered to interview the sales team prior to the course in order to customize the program, to develop materials specific to their situation, and to prepare a brief post-training assessment. Most important, I suggested that the final day of the class be a genuine planning session to prepare the team for the next big negotiation, which he had told me would be coming up in just over a month.
Are you surprised that I got the contract? I admit that I was at the time, since the manager had to go against the recommendations of his head office in order to award it to me. Then again, I had made it easy for him to justify his decision, by showing a deep understanding of his situation and, based on that knowledge, pointing out which of his concerns I would be able to satisfy better than the competition either could or would be able or willing to invest the time to do. How great do you think the likelihood of my winning the contract would have been if I had submitted a generic proposal?
Once you have a good understanding of the situation as well as the goals and personalities of the people you'll be negotiating with, it's time to consider the best approach to get maximum value from your negotiation. I prefer the term "anticipating" to "planning" because it is unrealistic to imagine that you can plan out the step-by-step flow of a negotiation. There will always be surprises.
However, even though you can't plan out every step in advance, you will still be far ahead in the negotiation if you spend some time considering the best approach to take and anticipating what is likely to occur thereafter. Anticipating
Allows you to hit the right note at the start and gives you a rough idea of where you'd like to take the negotiation from there
Helps you prepare responses for questions or objections that are most likely to arise
Insulates you against the power of those who use emotional or aggressive tactics
The one thing you can plan with precision is your opening statement, which is vital for setting the direction of the ensuing talks. The opening statement establishes the overall tone of the negotiation, gives a sense of the kind of relationship you are hoping to build, provides an opportunity for you to demonstrate your confidence and knowledge and to alleviate any negative feelings, and outlines the general outcomes you're aiming to achieve.
Considerable thought must go into the opening statement. Based on the understanding you acquired in the first stage, consider the kind of approach that will resonate most positively with the other negotiator. What image do you want to present? What should the overall atmosphere be like? In most negotiations, you are seeking to send out the positive yet assertive message that you
Have done your homework
Are confident of your strengths
Would very much like to work with the other party, if a reasonable agreement can be reached
Put a high probability on your reaching that agreement
In some cases, such as when the negotiation involves a dispute, the opening statement is also an opportunity to calm strong emotions that might otherwise obstruct the process. Anticipating includes considering how the other party is likely to react to you (or, in multiparty negotiations, to one another). If you anticipate a high level of animosity, for example, instead of ignoring it and plunging ahead with your demands (which usually ends up with a fight bursting out across the negotiating table), you will get much better results if you address those negative feelings at the outset. For example, you might open with the words, "In the past we've exchanged some harsh words over this issue. I understand that you're angry and that we've sometimes given you cause to be. But I hope we can put the anger aside today, and find a way for both of us to move on productively." By anticipating and dealing with personal feelings at the start, you stand a much better chance of reducing them to a workable pitch, enabling the two sides to cooperate long enough to solve the problem.
Although you have less control over the negotiation after the opening statement, there is no less need for preparation for the give-and-take that will follow. In fact, anticipation is critical to ensuring that the negotiation stays on a constructive and profitable track. A relationship negotiator imagines in advance how the other party is likely to respond to his or her opening statement and to the terms initially proposed, then prepares explanations, rebuttals, questions, or even written evidence to allay those expected concerns and challenges.
If you are raising your price, for example, you can rationally anticipate that the buyers are going to want to know why. If you've prepared a response and they don't ask, you've lost nothing but a few minutes' time. However, if they do ask (a far more likely scenario), you will be much more persuasive by being ready with a good reason and convincing evidence supporting your decision. Conversely, in a falling market, you can safely anticipate that the buyers will push for price reductions. Instead of being caught off guard and then caving in, by predicting their concerns you may be able to come up with trade-offs they would value enough to allow you to hold your price as high as possible.
Anticipation works both ways. In addition to anticipating the challenges you are likely to receive from other parties you need to spend some time before the negotiation imagining the positions they will likely take as well as the arguments they are likely to make. Then you can plan the questions you will ask to challenge those positions, in order to ensure that the final agreement benefits you fairly.
I think of this process as the "IQ" of negotiation. IQ refers to intelligence, of course, but it also serves as a reminder that intelligence in negotiation is a combination of the information you provide to earn the other party's trust and agreement, followed by the questions you must ask to ensure that the other side provides you with the level of information you need in order to achieve a confident and high-value agreement.
This IQ process benefits from brainstorming and practice to prepare for likely challenges. Especially if the negotiation is an important one or if you've had difficulties with a particular negotiator in the past, it's valuable to sit down with a colleague or family member to role-play the upcoming negotiation. First, you imagine every question the other side might ask or objection they might raise, then your colleague plays that role while you practice your response. Those who have gone through this process invariably report back improved results, saying that they retained much better control of the negotiation than they had in the past.
This role-play exercise is particularly useful if you are the type of person who has difficulty thinking on your feet or who is prone to get flustered when directly challenged. By anticipating, you won't have to come up with a quick answer, because you will have an answer ready. Anticipating also helps to take away the shock factor. If you know in advance that you will be dealing with someone who uses aggressive tactics or emotional blackmail, role playing ahead of time makes those behaviors predictable and therefore less alarming. Once you accept that you're dealing with a screamer, the noise won't rattle you as it would if it came out of the blue—in the same way that you jump when someone sneaks up from behind and shouts "Boo!" but are unaffected when you know it's coming.
Finally, it's time to talk! Though much of the art of connecting will be covered in Chapter Eleven, let's spend a few minutes here on what you can think about in advance to start the relationship on the right foot when you finally meet, whether physically, by phone, or by e-mail.
Most important, remember that you are negotiating in the hope of reaching an agreement. It can be easy to lose sight of that basic goal in the heat of the negotiation. We all fall prey to the thrill of competition now and then. Often we will fall into the trap of speaking only about what we want, forgetting that we are trying to get another party to cooperate with us. Then we wonder why the negotiation isn't going anywhere.
How much more effective we would be if, before plunging ahead with our positions and arguments, we spent a few minutes thinking about the other party, their likely preconceptions or concerns about us, and what we could do to help put them into a cooperative, rather than a defensive, frame of mind. Things you should consider include
Style—What, if anything, do you know about the manner of the individuals you will be negotiating with? How have they approached past negotiations, either with you or with someone you know? Do they like to chat a bit or get straight to business? Do they like lots of detail and evidence, or do they prefer bullet points and big-picture summaries? Do they like to take their time mulling things over, or do they move quickly? How can you modify your own style to enable you to work most effectively together?
Knowledge—How much is the other party likely to know about the topic under negotiation? What information should you be ready to share to fill in the blanks or give them a more balanced understanding?
Values—What are the guiding principles of the other negotiator or organization (for example, as evidenced in past encounters or on their website)? How will those values potentially come into play in this negotiation? How can you speak to those values?
Authority—Does the other negotiator have the power to say yes, or is he merely a gatekeeper? How can you work with him to move the negotiation to a decision-making level? Do any obstacles stand in the way of his authority to agree? What can you do to help remove those obstacles?
Perceptions—How is the other party likely to view you and your organization? What potentially negative preconceptions should you seek to counter? What image do you wish to project?
Receptivity—How open and welcoming is the other negotiator likely to be to you or your message? Why should she care about this issue? What obstacles (such as age, status, or cultural difference) might block her receptivity to you? What steps could you take to generate more comfort and openness?
This is a long list, and you probably won't have answers to all of the questions on it. But any amount of time spent in advance, thinking of your counterparts, how they might perceive you, and most important, what they care about, will give you a great advantage going into the negotiation. Finding ways to connect from the moment you walk in the room will spare you from the misguided start that can painfully prolong or even doom a negotiation.
If nothing else, remember this: Your counterparts are not interested in hearing what you want. They want to know why they should care, how they benefit, and why they should agree. It's hard to provide answers to those questions unless you've spent some time looking at the world from their perspective.
In the next part of the book, we will put all of these lessons together into the five-step GRASP negotiation process, which generates value-maximizing and sustainable agreements through understanding, anticipating, and connecting.