The Art of Negotiating
Whether you are hiring, buying or selling, you need to be able to effectively negotiate deals. Yet few small business owners have formal training in negotiations.
Here, is a quick lesson on the art of negotiating.
Too many people buy into the sports analogy of negotiation as a "win-lose or us-versus-them" act. But in reality, there are four hallmarks of good negotiation — and only one is competitive.
No. 1 is that your counterpart feels they have won or done well. Often that involves treating them respectfully and courteously.
No. 2 is that assuming this is not a one-off deal — such as buying a used car — you are going to want to negotiate in a way that enhances rather than damages the relationship so it increases your capacity to negotiate successfully [with that person] in the future. This is something you should consider typically with those whose relationship you value, such as suppliers and your colleagues.
No. 3 is that while you're negotiating, look for opportunities that will create mutual benefit. Effective negotiation is either in part or largely about creating value, about creating something that doesn't exist in the absence of negotiations. It's about creating mutual benefit. Rather than pummeling your opponent, think about it as baking a large pie. You want to look for opportunities to create mutual benefit or value.
However, No. 4 is that, from a competitive point of view, while you're baking that pie, you should not only look for opportunities to create value, but make sure you claim your fair share. An effective negotiator is good at getting more than their fair share of whatever benefit is produced by the negotiation.
Make sure you don't neglect any of the hallmarks when you're negotiating", says Whyte. It's shortsighted to claim victory because you've reaped all the value in the negotiations and left your partner feeling "assaulted and pillaged. If you do that, you may have a good deal on paper, but it's not going to go anywhere.
One thing that is important is that you want to negotiate an agreement that you're happy with, that the other party can live with as well. Negotiations often fall apart — maybe not on the signing, but in implementing — because the other party realizes they are not getting a good deal. For example, you may not get the delivery of parts you expect, or the maintenance on machinery if you've lost the other party's goodwill.
Recommendsations for successful negotiating:
Prepare
It's the part that's the least fun, but the part that has the highest payoff. Before you go in to negotiate; Think about what you want out of the negotiation. We tend to focus on monetary issues as the key goal. But often times there are a number of other issues, such as getting service (For example, will your supplier replace defective parts?), creating goodwill (Will someone solve a problem for you that is not stipulated in the contract?) and finally, dealing with unexpected outcomes of delivery or implementation agreements. So sitting down and thinking carefully about what one wants to get out of a negotiation is important. Whether it's a supplier, client, or potential employee, there are a number of issues which are not just about money but which have value. Prioritize them. Which are the ones you care about the most and which ones are you willing to trade off?
Put yourself in the other person's shoes
Take a step back and think about what is important to the person you are negotiating with. For example, you may be willing to pay more for fast delivery. But perhaps fast delivery isn't a problem for your negotiating partner, and in fact, may help him out if he has a lot of stock in inventory. So you need to do some research. Talk to your own managers and other business owners. Tap into your networks.
Listen
One of the top five qualities of a good negotiator is how they listen. Active listening involves not only listening, but also repeating back to the person what you think they have said to make sure you understand it correctly. Listening is where you can identify what issues are important for the other party — and this is important information.
Rehearse
Practice negotiating the deal ahead of time with someone in your organization. It allows you to develop confidence in yourself. Particularly if you're a small business dealing with big suppliers or big clients.
Learn. Use negotiations as a learning opportunity for your entire company. Debrief after the meeting. Tell your top management team what went well, and what could have been better, so you develop some memory in the organization on negotiating skills.
Adapted from an article by Dianne Rinehart, February 2005