Article

Negotiating for Winners

September 1, 2007 By: William Lynott Paperboard Packaging

Distill business-text wisdom into valuable tips on gaining ground during negotiations.

You may not think of yourself as a negotiator, but Harvard Business School professor Michael Watkins says you are.

"A good part of your time is spent negotiating," he writes in his book, Breakthrough Business Negotiations. "There is no skill more essential to success for a business owner than the ability to carry out a successful negotiation."

He's right, of course. Whether you're dealing with suppliers, employees, financial sources, or customers, you're involved in the complex process we call negotiation. Your skill in making deals will directly affect the success of your business. Watkins teaches to break the negotiating process down into four simple steps:

1. Diagnose the Situation

"The first step in preparing to negotiate from a position of strength is to diagnose the particulars of the situation thoroughly," Watkins writes.

In particular, you need to learn:

1. Who are the players? Who will, or could, participate? The key parties to a negotiation may seem obvious — and sometimes they are, but not always. There may be players in the background who can influence the outcome, or new players may enter the discussions and unexpectedly influence the talks. If you're negotiating with an equipment dealer, you need to know whether the person or persons you're dealing with have the authority to make a deal.
2. What are the rules of the game? There are basic rules and codes of conduct that apply to all business negotiations, and others that vary according to the circumstances.
3. Define your BATNA. The next step is to define your walk-away position. What is the least you are willing to accept to enter into an agreement? Establishing this value as a benchmark, and keeping it clearly in your mind, will help you avoid getting so caught up in the heat of negotiations that you turn down an alternative deal that was actually better than your walk-away position. Negotiating experts Roger Fisher and William Ury call the walk-away position your Best Alternative To A Negotiated Agreement (BATNA).

In other words, a BATNA is a planned course of action you can take in case you are unable to reach an agreement. Depending on what's at issue, it could be to go to court, refuse to renew your lease, or change suppliers.

Take time to think through your BATNA. It will clarify your alternatives and strengthen your negotiating position.

2. Shape the Structure

Once you have diagnosed the situation and have a clear idea of who the players are, the issues to be resolved, and the rules to be followed, it's time for you to shape the structure of the negotiations.

"The biggest mistake is to approach the 'game' as fixed," Watkins writes. "People in business tend to focus too much on what will happen during negotiations, and not enough on influencing the context in which deliberations take place. You should pay more attention to who is, or could be, involved — as well as what's at issue and how the situation should be framed."

Here are the key things he suggests addressing before negotiations begin:

1. Self-assessment. In past negotiating, have you tended to accept the situations and structures as the other party presented them? If so, you should determine not to fall victim to that pitfall again.

One way to shape the game is simply to invite other players into the negotiation. You must also take great pains in building, maintaining and improving your BATNA. Self-knowledge in terms of your walk-away position will add hidden power to your position.

1. Set the agenda. Virtually all negotiating pros agree that having an influence on setting the agenda is a crucial step in successful negotiations. By helping to define the issues discussed and setting their priorities, you put yourself in a position of strength when the discussions begin.
2. Control information. Information is power. Arguably, there is no other activity where this old axiom is truer than in negotiations. Exerting control over who gets access to what information is another way to gain strength in discussions.

3. Manage the Process

The third step in breakthrough negotiations is determining the best way to handle the face-to-face negotiations. Among the steps important to this phase are:

1. Sensitivity to early interactions. "How a negotiation begins," Watkins writes, "tinges everything thereafter. Initial impressions, based on limited information, persist and are resistant to change."

Watkins stresses that mutual respect at the beginning of the process increases the likelihood of eventual agreement, but bad blood at the beginning of the discussions can poison all that follows.

In what he calls "irreversibilities," Watkins observes that negotiators often walk through doors that lock behind them. In particular, he cautions against trying to take back a concession once you have made it. Any action that undermines trust is likely to provoke an irreversible change in the attitude of the other participants.

1. Tipping points. Keep yourself aware of thresholds in negotiation that Watkins calls "tipping points." These are the sensitive points in the talks where even tiny concessions or refusals can lead to major shifts in positions. "Always be aware of your own emotional thresholds and coping mechanisms to avoid being pushed over the edge. Be very careful when raising issues that are hot buttons for the other side."
2. Emotions. Emotions, either real or feigned, play a part in most negotiations. However, you must keep any display of anger under careful control. Emotional outbursts of any sort can easily escalate, generating emotional conflicts that make rational judgments all but impossible.

4. Assess the Results

Once negotiations have begun, Watkins suggests that you step back periodically to evaluate how well you are doing.

Author Ury calls this "going to the balcony," or taking a look from a distance. Ask yourself:

1. Do you have a clear view of the situation? If your view of the situation is incomplete or flawed, you are unlikely to meet your objectives.

This is the point at which you should re-examine your initial assessments. Who are the parties? What are the rules? What issues will be negotiated?

1. Are you building your BATNA? A strong BATNA builds bargaining power.
2. Are you channeling the flow? "Channeling the flow of a negotiation is like directing the course of a river," writes Watkins. "You can dam it or you can reroute it."
3. Are you learning, individually and organizationally? Every negotiation is an opportunity for you to learn and to become better prepared for your next negotiating experience. However, learning does not come automatically simply because you went though a negotiation.

When negotiations are over, you must ask yourself, "What went well? What could I have done better? What did the other side do well, and what did I learn from them?"

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