The 10 rules of negotiation
Negotiations are part of every day life. They start at 6:00 am on a Sunday morning when my daughter wakes up too early and the question arises who will take care of her; and on Sunday evening it ends with the discussion of who is turning off the last light in the corridor. And in between there are an estimated 100 to 200 other negotiations.
A few examples that you may also know from your everyday life: The old car is still running quite well, but the new one looks much better. In addition to negotiating with yourself (“It is actually still doing pretty well”), you have to negotiate with the car dealer (“I can’t guarantee whether the car will still be there tomorrow”).
The long sought dream home! Your wife has finally found it – and tells the real estate agent how enamored she is the first time you meet. Of course, he immediately agrees with your wife. “You don’t find a piece of jewelry like this every day!”
The promotion is pending. Your boss praises you beyond measure. If anyone deserves it, it’s you. What he does not mention: The crisis and the associated budget cuts have unfortunately also devoured the pay rise that was due. You now have more responsibility, but no more salary. Congratulation!
You were on vacation in Mallorca. The weather was as expected, but the hotel was not what the catalog advertised. You would like to get some of your money back. Is that possible?
Negotiations shape our everyday life. They take place permanently, even if we don’t even notice. And that is often the danger: Because – whoops – we have already lost again. When it comes to the question of who takes care of the children in the morning, that may be relatively harmless, but when it comes to money, then the fun usually stops. Therefore I have put together a list with the 10 most important rules for successful negotiation. It helps you both in personal negotiations in private and professional life as well as in professional negotiations with buyers or sellers.
1. Prepare for the negotiation
The first rule for successful negotiation concerns preparation: Here you define 80% of your success! It is therefore important to think about a few things in advance of a negotiation.
The more information you already have before the negotiation, the less you have to collect during the conversation. This allows you to concentrate fully on the negotiation itself, make fewer mistakes and can almost always use the weaknesses of the other side.
An optimal preparation consists of these three steps:
1. Determination of the initial situation (Starting Position)
2. Formulation of targets (Goals)
3. Selection of strategy and tactics
We will see later what has to be considered with the individual points.
2. Analysis of the initial situation
The analysis of the initial situation shows where you are and where the other is. You first need information about yourself, your motives, and strengths. What are your competencies and powers? What is the environment you are working in? Are there alternatives? How dependent is the other side on the result of the negotiation? Who is the decision maker? Who is coming?
Without this basic information, you will have a hard time defending your point of view and achieving your goals.
In my previous practice as a buyer, I noticed that I was repeatedly confronted with offers that were so clearly below those of the competition that I actually could hardly resist to say yes. The mistake that one often makes is to only look at the price and to look at the situation in isolation and not in connection with further developments.
A good buyer should therefore always collect additional information by questioning serious price differences. In fact, it often turns out that the products or services are not comparable one-to-one, but differ considerably in details that can be important. Of course, a seller will be very reluctant to admit that their offer is a political price or an entry-level price, with which he would like to open the door to a new customer.
Exact knowledge and analysis of the market therefore plays an important role in determining the initial situation.
3. Profiling of the negotiating partner
You will probably know the term “profiling” from relevant crime series. There, the investigators conduct profiling in order to track down a criminal with the most precise perpetrator profiles possible.
Understanding who is coming helps us by creating a personality profile of our negotiating partner in advance of a negotiation. After all, in order to be able to use the right strategy and tactics later on, we need to know who we are dealing with.
Questions that we should therefore ask ourselves are: Who is the negotiation partner? What makes that person tick? And how far do their decision powers extend? But personal aspects also play a role: hobbies, family, and preferences regarding food. All of these can be useful information to us.
As in this example:
We once coached a buyer who had to negotiate with a monopolist in a negotiation. We found out the following: The salesman was 50 years old, married, had an RV, had been on vacation in northern Italy for the last 20 years, liked to eat well, liked to drink expensive wine, and was an all-around pleasant person – except in negotiations. Then he was hard to deal with. Luckily we found out that our supplier had a plant in South Tyrol, a region in northern Italy.
How did we use this information? We moved the negotiations to South Tyrol and scheduled a Thursday morning, 8:00 am for the meeting. What did that mean for the salesman? He arrived the day before, in his RV, with his wife, and was looking forward to a long weekend in South Tyrol. His attitude had completely changed. In the negotiation all his aggression and bite was gone. After all, he was grateful for the wonderful weekend that the negotiation afforded him. The same negotiation would certainly have taken a very different course 600 miles north in Germany: He would have come in on Friday morning, gone through the negotiation without compromise, and pressing for time: His wife would have already waited in the car to go to Italy for the “short” weekend.
So, when we negotiate, we should always remember that they take place between people. And the more I know about my counterpart, the more I can respond to them.
4. Define the goals of the negotiation
Many detailed papers have been published on the subject of targets. So at this point the most important thing in a nutshell: You need a minimum target and a maximum target. Define at what point you will stop to negotiate (walk away) and what is the best result you can achieve. Make sure, however, that both goals are specific, measurable, attractive, realistic, and timely.
It is also useful to be clear about the goals of the other side.
5. Imagine your worst-case scenarios
What do you do if you don’t meet your minimum goal? You need a plan B.
A purchasing manager at a Bavarian company once had to negotiate with a true monopolist. It is important to know that the purchasing manager was typical “Bavarian Bull,” with a short neck and a white and blue checkered bavarian shirt. The monopolist sat there with a relatively casual and arrogant smile and absolutely did not want to move on price. At some point it was enough for the Bavarian buyer. He hit the table with his fist and yelled at the monopolistic salesman: “Get out of here. I don’t want to see you anymore. Out with you! ”
At first the salesman was flabbergasted. And you could see a huge question mark on his face. As a monopolist, he had never been talked to like that before. Which means, he was caught completely off guard. And what happened next? He didn’t leave the office, he reduced his prices. The purchasing manager had succeeded with his tactics. But the whole thing could have gone wrong. The monopolist could have stormed out, and the purchasing manager would have been left without his only supplier. Then the bavarian purchasing manager would probably gotten in trouble. But he couldn’t care less, because he owned nine houses in Munich. If he had been fired, he would have managed these houses until he retired. This personal worst-case scenario was better than my personal best-case scenario.
6. Define negotiation strategy and tactics
There are four key negotiation strategies that we can use: pressure, partnership, avoidance, and acceptance. We can implement these with various tactics.
For example, which tactics can we use when negotiating with pressure? First of all, there is the threat: if something does not happen the way we want it, the consequences are very unpleasant for the negotiating party. Or you mention the competition: How often do you think I’ve got a discount in the electronics store just because I brought a competitor ad with me? You can also create pressure with deadlines, namely time pressure: If an offer is only valid for this week or the delivery times will be much worse starting the next week, those arguments can force the opponent to make decisions.
7. Change to the meta level
In stressful situations, it is advisable to step out of the emotional micro-level in order to see the goal and the larger picture on the meta-level. Specifically, this means changing your perspective and seeing what happens from above, which means from a factual and objective level.
This can be illustrated with the following example: You are driving from Washington DC to Philadelphia to visit a customer. On the way, a traffic jam suddenly forms on I95. At the micro level, this means: things are only progressing slowly, there is no end in sight. The cause is also unclear. What options are there now? Either, you stay on this road and hope that the traffic jam will clear up quickly. Or, you turn around and head back home. Both solutions are not really effective. The solution is therefore to go to the meta level and look at the situation from a bird’s eye view. The traffic jamb is huge. But you see that in a few 100 yards there is an opportunity to exit. You can drive to the next intersection, and from there use small country roads to finally reach your destination.
8. How can a negotiation fail?
The most common causes of failure of negotiations are:
- Wrong or no goals
- Wrong or no strategy
- Wrong assessment of the other person
- No plan B
- Time management
Go through the negotiations in your mind, which in your opinion were not successful. Do you see the common denominator? Then you can work on this aspect and avoid it in the future.
9. Improve inner attitude
How important is the negotiation to me? How badly do I want to succeed? The personal motivation to really want to win a negotiation is often more important than hard facts. If you stand behind something half-heartedly, you have little chance of success.
In general, one can differentiate between two forms of motivation: Intrinsic motivation means that the execution of the action is reward enough in and of itself. For example, because you enjoy something or satisfy your curiosity. In contrast, extrinsic motivation has external rewards linked to the action, for example praise or bonus remuneration. An extrinsic motivation can also be the avoidance of punishment or censure.
10. Don’t be afraid
You can also apply the last rule for successful negotiations to other situations in life: It is impressive how we let fear steer us and dictate our lives. Both in private life or at work. How sometimes completely unfounded fears keep us from the chances of life. How people intimidating us rule over us and can dominate our life. Fear restricts the way we see and think.
Once upon a time in the Middle Ages there was a fist fighter who went from market to market. He had a bag of gold with him as a prize and was looking for an opponent with just as much gold. Whoever won the fight received both gold bags, the loser got nothing. The fighter was neither particularly strong nor particularly tall. And yet he won all the fights. When he won again, the bigger and stronger opponent asked him why he had lost despite being bigger and stronger. How is that possible? The smaller and weaker fighter replied, “When I go into a fight, I’m ready to die every time.”
Fortunately, there is little risk of dying in negotiations. So what’s the worst that can happen?
These were the 10 most important rules for successful negotiations. Pick two or three of them and focus on using them in the next negotiation. Once these measures are in place, move on to the next. You keep doing this until you think of all the rules at every negotiation and can use them successfully.