10 Rules for the Conduct of Negotiation
Negotiation is omnipresent in life. It starts on Sunday morning at 6:00 am, when my daughter gets up way too early and we have to face the question of who is taking care of her, and it finishes on Sunday evening with the discussion about who gets up to turn off the forgotten light in the hallway. At a guess, around 100 to 300 negotiations lie in between.
Here are a few examples, which may sound familiar to you: the old car still in quite good shape, but the new one looks much better. Besides negotiating with yourself (the old car still does it quite well), you have to face the negotiation with the car dealer (“I cannot guarantee that this car will be still available for tomorrow”).
The long sought-after dream house! At last your wife found it – and doesn’t’t hesitate to share this fact with the real estate agent on the first walk-through. Of course, the real estate agent immediately agrees with your wife. “It is not every day that you find a gem like!”
It is promotion time. Your boss praises you to the skies. If there is anyone deserving to be promoted, it is definitively you. What he doesn’t mention: Crisis and related budget cuts have unfortunately swallowed up the long expected pay raise. So, now you are officially in charge, but the money remains the same. Congratulations!
You spent your vacation in Mallorca. Weather was as good as expected, but the hotel was not really according to the catalogue description. You would like to get a partial reimbursement. Is this possible?
Everyday life is shaped by negotiations. They happen all the time, even when we are not even aware of it. Often, this is the danger: you don’t even know you are in the middle of a negotiation and, presto, you have already lost it. This may not be a big deal when considering who takes care of the kids in the morning. But when it comes to money issues, it’s no longer fun and games. This is why I have put together a list of the 10 most important rules for successfully conducting negotiations. These rules will be helpful both in your personal everyday negotiations, as well as in your professional negotiations with procurement agents and suppliers.
1. Preparing the Negotiation
The first rule for a successful conduct of negotiation concerns its preparation: This is where you accomplish 70% of your success! Thus, it is important to give some thought to the negotiation in the run-up. The more information you have been able to gather before negotiation start, the less you need to put together in the course of the discussion. This allows you to completely focus on the negotiation, make fewer mistakes and nearly always take advantage of your counterpart’s weaknesses.
The optimal preparation consists of the following three steps:
1. Determining the initial situation
2. Defining the goals
3. Selecting the strategy and the tactics
We will now address what needs to be considered in each of these steps.
2. Analysis of the Initial Situation
An analysis of the initial situation will show where you are positioned and where your counterpart is positioned. What you need in the first place is information about yourself, your motivation and your goals. What are your authorities and powers? Which goals do you pursue? Are there any alternatives?
Without this basic information, it will be difficult for you to successfully persist in your viewpoint and achieve your goals.
In my former position as procurement agent, I was confronted more than once with offers from suppliers that were clearly below the competitors’ offers. It would have been a shame to turn down such a clear-cut attractive offer, wouldn’t it?
The mistake that is often made in a situation like this is: first of all, looking only at the price and, in the second place, contemplating the situation in isolation from its context and disregarding future developments.
Thus, a good procurement agent should always gather additional information by questioning substantial price differences. In fact, it often turns out that the products or services at hand are not really comparable, but substantially differ in relevant details. It might also be the case, that the low price is meant to be a political price or a special offer to start doing business together. Of course, the supplier may be reluctant to admit to this. Accurate knowledge and analysis of the market also play an important part in determining the initial situation.
3. Profiling your Counterpart
You may have heard of “profiling“ in crime thrillers and detective stories on TV. There, detectives do it to obtain the most precise profile of the bad guy in order to catch him.
Profiling is also helpful to us. In the run-up to a negotiation, we create a personality profile of our negotiation counterpart. We need to know whom we are dealing with, in order to apply the right strategy and tactics. Questions to that end should be: Who is the counterpart? How does he or she tick? What is the scope of his or her authority? Furthermore, personal aspects may also be relevant: hobbies, family, preferences as regards food, politics and religion. All of these could be important pieces of information for our purposes.
Take a look at this example:
Once we coached a procurement agent who needed to face a monopolist in a negotiation. While profiling the counterpart we found out the following: the supplier was 50 years old, married, had a motorhome, had been spending his vacations in Italy for the past 20 years, loved good food and good wine and was an absolutely jovial guy – except during negotiations. There, he was just nasty. As luck would have it, our client had a plant in South Tyrol.
So, what did we do? We scheduled the negotiation to start on a Thursday morning at 8.00 am in the South Tyrol premises. What did this mean for the supplier? He arrived a day earlier, in his motorhome, accompanied by his wife, looking forward to an extended weekend in South Tyrol. In such disposition he arrived at our client’s place – and didn’t feel confrontational at all. After all, he was grateful for the nice weekend he was just about to have. For sure, the same negotiation would have gone off in a completely different manner had it taken place 800 kilometers further up north: He would have come in on a Friday morning and would have gone through the negotiation in his take-no-prisoners style. We should always bear in mind that negotiations take place between individuals. The more I know about my counterpart, the better I can reach out to him or her.
4. Defining Negotiation Goals
A lot has already been written and published on the topic. So let’s keep it down to the essentials: what you need is a minimum goal and a maximum goal. So go ahead by defining what is the least you want to achieve and what is the best you could achieve. But do make sure that both of your aims are realistic and measurable.
It is also helpful to consider the goals that your counterpart may have in mind.
5. Imagining Worst-Case Scenarios
What do you do if you are not able to achieve your minimum goal? What you need is a plan B. Let’s have a look at the following example:
Once again, the head of procurement of a Bavarian company needed to face a full-fletched monopolist in a negotiation. What you need to know beforehand: The head of procurement was a real Bavarian hothead, shaped like a bull, wearing a checkered shirt in the colors of the Bavarian flag. The monopolist was quite nonchalant smiling arrogantly, absolutely not willing to go down with the price. At some point during the negotiation, the head of procurement had had enough. He banged his fist on the table and yelled at the monopolist: “Get out of my sight. Get the hell out of here!” The monopolist was shocked. Nobody had ever told him anything like that before. So, he was caught on the wrong foot. Totally unprepared. What happened next? He went down – but with the price and not with the elevator. The tactics of the head of procurement were successful. Nevertheless, the whole thing could have easily backfired. The monopolist could have gone away and the head of procurement would have been left without a supplier. Probably, he would have had to pay the piper. But, what did he care? He already owned nine houses in Munich. Had he lost his job, he would have taken care of administrating his properties until reaching retirement age. In this case, his personal worst-case scenario was better than my own best-case scenario.
6. Determining Negotiation Strategy and Tactics
There are four main negotiation strategies that can be applied: pressure, partnership, evasion, concession. All of them are applied by means of different tactics.
For instance, which are the tactics we could deploy if we pursue a negotiation strategy based on pressure? First of all, we could make use of threats: If we don’t get our way, the negotiation counterpart will have to suffer the consequences. Or we could mention competition: You wouldn’t believe how often I got a discount at the retailer of consumer electronics and appliances, just because I had the competitor’s ad in my pocket. Pressure can also be created by means of deadlines. A few examples for time pressure: an offer expiring by the end of the week or delayed delivery times as from the next week. Any of these could force your negotiation counterpart to make a decision.
7. Transitioning to a Meta-Level
When a negotiation reaches a standoff or an impasse, it is advisable to transition from the emotional micro-level to the meta-level, to be able, once again, to visualize the goal and the way to get there. In practice, this means changing the perspective and placing the focus “on” rather than “in” the situation. The situation can now be considered at a factual and objective level.
Here is an example to illustrate this transition: You are driving from Stuttgart to Ulm to a meeting with your customer. All of a sudden, there is an unexpected congestion on the highway. At a micro level, this means: cars are moving slowly, no end of the congestion in sight. The congestion source is also unclear. What are the options? First of all: you stay on the highway and hope that traffic quickly goes back to normal. Second option: you leave the highway and drive back home. None of these solutions seem to be getting you closer to your target. The solution should be transitioning to the meta-level and taking a bird’s eye view on the situation. You will then realize: in a couple of kilometers you will find a highway exit that will lead you to the next junction and from there you can reach your destination by driving through the villages next to the highway.
8. What Could Cause my Negotiation to Fail?
The most common causes leading to failure of a negotiation are:
- wrong goals or lack of goals
- wrong strategy or lack of strategy
- wrong assessment of the counterpart
- lack of plan B
- time management
Now, go through those negotiations you were involved in the past, which in your view did not go well. Are you able to recognize the common denominator? Then you can work it out and avoid the mistake in the future.
9. Improving the Attitude
How much does the negotiation matter to me? How deeply do I feel about it? Often, how strongly you wish to win is more important than hard facts. If you support your cause only halfheartedly, you have only slight chances of success.
Generally, there are two kinds of motivation: intrinsic motivation, i.e. executing the action is, in itself, already the reward. This may be the case, if you enjoy doing something, or if by doing that something you satisfy your curiosity. By contrast, motivation is extrinsic, when there are external rewards tied to the action. For instance, a compliment or a bonus. Extrinsic motivation may also consist of avoiding a penalty or reproach.
10. Feel No Fear
The last rule for successful negotiations can also be applied to many other situations in life. It is impressive, to what extent we allow fear to determine us as individuals and our (private and business) life as a whole. It is amazing how sometimes completely unfounded fears prevent us from taking of the chances that life has to offer. How scaremongers take control over us and dictate our lives. Fear limits a person’s perception and mindset.
In medieval times, there was a boxer, who used to travel from town to town. Carrying a sachet filled with gold he would use as a wager, he went around looking for an opponent. The winner of the fight would get both sachets filled with gold, the looser would go away empty-handed. The boxer was neither particularly strong nor notably tall. Nevertheless, he would win every single fight. After one of these successful fights, he was approached by his much taller and stronger opponent, who wanted to know how the boxer could possibly defeat someone as big and strong as him. The little and weaker of the two responded: “Everytime I go into a fight, I am prepared to die.”
Are you, too?
Luckily, chances to die in a negotiation are rather low. So, what’s the big deal?
These were the ten most important rules for a successful negotiation. Pick out two or three of these rules and focus on applying them in upcoming negotiations. Once you have mastered those rules, go ahead and pick out a few more. Continue doing this, until you are able to remember and successfully apply all of them in each of your negotiations.
Bildquelle Titelbild: © Fotolia 2015 / Orlando Florin Rosu