You need to know that at the end of the day, it is not about the deal. Negotiation is always about human interaction. So, how do we engage with others to achieve greater understanding and better agreements?
- Have a strategy meeting prior to the negotiation. Conduct it internally. Invite several different team members. Your business development person will see it differently than the salesperson, or the general counsel, or the operations person. Caveat: include persons that will not strive to give the right answer. You do not want the people across the table who approach the interaction thinking they will be rewarded for coming up with the right answer. Instead, reward people who come up with great arguments.
- Know what happens to you if you do not end up with a deal. Think through carefully as a team: What is your walk away point? How bad or how good is it if you don’t get this deal? Caveat: do not become obsessed with what happens if you do not have a deal. Instead, flip it and frame the negotiation as What happens to the other side if there is no deal? When you frame the negotiation around what happens to the other side if there is no deal, then you essentially make it about the value that you bring to the table for the other side. Ask: What can I do for the other side that no other person can do? If you frame it this way, you have a greater opportunity to create and capture value in every deal.
- First negotiate the process, not the substance. The process is about how we are going to get from where we are today to where we want to be i.e., the deal, the finish line. The substance are the terms, price, etc. The process is about figuring out the essential questions: What are we going to be discussing during the meeting? Who will be in the room? What other important issues do we care about and need to discuss? When will we be able to touch on those? Negotiating the process before you dive in the substance asks the key determinant questions. How long does it take an organization like yours to do a deal like this? Who are all the people that need to be signed on before this deal goes through? What are some factors that might speed things up? What are some factors that might slow things down?
- Normalize the process. When a successful mediator first confronts both sides of the transaction, one of her opening lines may be: “You two think you may hate each other today. But, we are going to be at this for a week. About three days into this process, you will hate each other more than you have ever hated each other, and when that happens, there is one thing I want you to remember. That is normal.” If the mediator did not start the interaction this way, then in three days when the emotions have gotten stronger, and where there is more anger and anxiety than before, what will both sides want to do? They will think this is not working causing them to quit the process entirely. The mediator is normalizing the process. Normalizing the process is something we should do in negotiations of all kinds, not just ugly conflicts. There’s a story of a Chinese man who refused to negotiate with Westerners if they did not get on a plane to China, and then drove some 3 hours to get to the factory. His rationale is that “Until they have done that once, they do not know how it works here. The first time something goes wrong, they will assume it is because we are stealing from them, or because we do not know what we are doing.” You need to normalize the process for the other side even when you are selling to them. Too often we do not do it, because we are too busy trying to seal the deal. Instead, when you let them know along the way “This is normal. We will get there, but this is how we get from here to there.” Delays, disruptions or other bumps in the road will not be relationship killers.
- Ask more questions. Ask why and figure out what is actually driving the other person’s demands. A lot of people do not know when to stop talking. Not enough people ask enough questions. The greatest mindset you can take on as a negotiator going into every interaction or future negotiation is to walk into it with a learning mindset. You are there above all to learn as much as you can about all the parties that are relevant to this negotiation, whether they are in the room or not. Ask: What are their interests? What do the care about more? What do they care about less? What keeps them up at night? Why are they doing this deal today, rather than 6 months from now or a year ago? What are their constraints? What are some things they can and cannot do? How are they seeing this situation? Think about the questions you ask. Write down all you wish you could know. When you are finished coming up with every question you can think of, then add 10 more to the list. This is where your team will help you. Make sure you ask the right questions, depending on the context, the situation, where in the process you are, etc. In general, why is more important than what. Your job as a negotiator is to try and get underneath that and figure out why they want these things. What are things that are driving them? What are underlying motivations? When you shift the conversation from what to why, you often find more ways of resolving the dispute, the conflict, the deadlock. What is their real fear? What are they concerned about? Is it that they never want to give it or is it a specific amount of time? What’s the story here?
- Think about all of the things that can go wrong and have a way of dealing with them. If there is a weakness in your argument, it is almost always better that it first comes out of your mouth first. If it comes out of their mouth first, it becomes a bigger theme. The fastest way to lose credibility as a negotiator, is to walk in and make it sound like you think your product or solution is right for everyone. Even if you believe it to be true, the moment you express it, you will lose credibility in their eyes if they do not believe it. They assume there are other interests, ideas or motivations. What you need to be thinking about is if there is a weakness in your argument, a counterpoint, how are you going to manage those. Have a learning mindset, but respect the fact that the other side sees the world differently.
- Do not seek to get the other side to give an opening offer first. Mostly everyone thinks that if the other party makes the opening offer first, you will be better of. There may be occasions when that could be a better tactic. However, being a party that presents the offer first will help you control the frame better. You set the reference point. You shape the expectations. There is tremendous power that sets the opening offer first, thereby creating the opening expectation.
- Never let the offer speak for it self, whether opening or counter offer. Tell the story that goes with it. We are asking for X, because … Here is our model, our analysis. Here are our assumptions. The richer the narrative, the more likely it is that your number will stick. It is more likely that the other side will feel the need to come up with a compelling reason before they choose to ignore it. It is much easier to ignore an offer that does not come with the story, the justification or the narrative, then it is to ignore one that does not have any of those features to it.
- Label your concessions. Do not leave it up to chance how they will interpret what you are saying. As a negotiator, you want to manage the attributions people make of what you are doing. When you make a concession, the exact same concession in a negotiation can seem like a nice gesture. It can seem like a wise approach to a negotiation, but a concession can also seem like a gift, a weakness, desperation, a naivete. What do you want them to think when you make a concession? Ideally, you want them to think you are wise and nice, not naive or desperate. Caveat: the same concession can be interpreted in many different ways. One of the things you always want to be doing – whether choosing to call them back, or not call them back – is to think about the attributions they are going to make. Get into the habit of trying to manage the attributions. How you do it depends on the situation. You need to think about if you will come across as desperate if you make it now, or later. Ask: How do I make sure that the right attribution gets established?
- Do not engage in mindless haggling. Do not take a rich and complex negotiation and turn it into a series of haggles such as today we talk about price, tomorrow we talk about financing terms, then we talk about exclusivity… The better approach in a negotiation is to negotiate multiple issues simultaneously versus a series of haggles that deal with one issue at a time.
- Have comprehensive offers and counter offers that you give. In your next negotiation when you need to make an offer, do not make an offer. Instead, make a package offer – two or three offers at the same time. Instead of saying “my offer is this price with these terms,” give them a few available packages: “we can do an option A, an option B, or an option C.” When you give them a few different ways of doing it, you signal flexibility, and can say legitimately “we know what works for us, but we also want to make sure it works for you. So if you can do it, this is what it would take.” If you don’t have flexibility in one way, you are showing you have flexibility via other terms. You can say “I know where we need to get. I am flexible in how we get there. So as long as you can meet these needs, we are going to be flexible on style, structure and anything else that you need.” When you show more flexibility in the deal structure, all of a sudden there are more degrees of freedom for them to give you what you need to be able to say yes happily.
- Initial reactions matter. If someone makes a ridiculous offer, do not waste any time before you reject it or signal it back to them. Sometimes, if you do not have authority to say yes or no, send them credible signals. If you tell them I have to check back with the principal before I give you an offer then the signal you give them may not be credible.
- Understand and respect the other party’s constraints. Give the other party the benefit of the doubt. When you know where their hands are truly tied i.e., having less flexibility, the more likely you can navigate the deal in the direction that will get you what you want all the while allowing them to say yes. Put yourself in their shoes. There may be an issue where there are hard constraints. Think about why they may reject your legitimate demands. It doesn’t do you any favors to see the other party as irrational. Usually, what looks like irrationality to us is either a) ignorance, or b) they have interests that we do not fully appreciate. When someone is saying no to what you know is the best offer they will ever get; if they will be worse off if they walk away, versus saying yes, maybe it is not irrationality, but ignorance. The solution is to educate them. How do we educate them about the value we bring to the table? Or, they have different interests. Maybe accepting this offer will make them look bad. We need to get into the habit of writing the other party’s victory speech for them. How will this person say yes to what I am proposing and still be able to declare victory? If there are other stakeholders – their voters, investors, partners, significant others,etc. – how are they going to pitch this and look good after this deal. Understand their real problem.
- Ignore ultimatums made to your side, so you never force them to choose between doing what is smart and doing what makes them look good. If the other side makes an ultimatum – whether in person, over the call, or email – your response should always be simple. Ignore it. Do not ask the person to repeat, or explain what they said. Pretend the ultimatum was never said and touch on everything else, but the ultimatum. Why? A week, month, or a year from now, there may come a time when what you said you will never do, you realize you must do or later realize it is in your interest to do. Sometimes what comes as an ultimatum may not be the real ultimatum. However, if it is a real ultimatum, they will keep repeating it over and over during the entirety of the negotiation. You, on the other hand, should make an ultimatum only if it is real. The one on which you will actually follow through. Even if it is real, do not use it if you can find a better way to achieve what you are trying to get.
- Do not let the negotiation end with a no. Instead, aim it to end with yes, or an explanation as to why not. If you have no other way but to walk with a NO, probe and push to learn what exactly would make a difference. Ask the other side to paint you the picture in which they actually say yes. Ask them what would that world need to look like. Knowing this, you may know how to address that issue.
- After the meeting, send an email or text memorializing what was said. This allows you to confirm that you are on the same page and that what you thought you agreed to has actually been agreed to. Confirm where things are. This also allows you to frame the situation correctly. In the event you realize after the negotiation that you may have came off desperate, aggressive, or unclear, this writing will allow you to re frame the substance. In addition, this will allow you to gather more details or information you may have missed during the negotiation.
- Finally, never ever lie. Always speak the truth. Why? First, it is ethical and the right thing to do. Second, credibility as a deal maker is key. Make sure you are being honest. Most people lose credibility and reputation little at a time. Every great negotiator will tell you that guarding your credibility is the most crucial leverage you will ever have. When the other party knows you say what you mean will keep the doors open that otherwise would not stay open.
Source: Deepak Malhotra Shares His Award Winning Negotiation Tips, CNBC (June 9, 2017).