2.2 Negotiation Strategy

So how do you respond when your counterpart appears to have more power or authority than you? In response to power, you must protect your or your organization’s interest by ensuring that you do not make an agreement which you should reject. And focus on enhancing the value of those assets which you do hold so that you maximize value on your side of the agreement. Just how do you protect yourself? Many organizations use a bottom line strategy, which they perceive to be the worst case scenario. In most cases of establishing a bottom line, a price point is established which is either the lowest price they will offer or the highest price they will pay. This is often a directive provided to the negotiator by a higher level person who has given the negotiator the authority to accept any number within the range. But certainly as far from the bottom line as possible. Such a strategy can certainly protect against offering a price below cost or with unacceptable margins, and does empower the negotiator with a, with boundaries. A bottom line strategy may also control the temptation to agree too early just to put an end to the process. A negotiator with a bottom line number has a much easier time resisting pressure and temptations in moments of feeling unempowered or less powerful than the counterpart. It can also be helpful if there are multiple parties negotiating for a single side. Establishing and agreeing to a bottom line ensures that no one in the group will tell the other side a lower number, or make a separate agreement on their own. But a bottom line has disadvantages. Most importantly, establishing a bottom line tends to keep the focus on price. As a result, conversations about other points of value are minimized or overlooked. Bottom line strategies also have the effect of limiting creativity. Since additional points of value are overlooked, creatively engineered agreements with a collection of value points cannot be created because they’re likely to require going below the bottom line. In order to get additional points of value, or going above it to secure additional benefits. The other problem with bottom line numbers is that they are either quite arbitrary or set too high. Consider how those numbers are determined. Generally, a thorough analysis of costs, margin requirements, and market conditions is not the means of determining a bottom line number. More often, it is a group of people who may have some of that, some of that information offering their opinion of what they would really like to get for their product or service, and not what a total package might look like. Since they are looking at it from the perspective of what they want and nothing else. The number is often set too high and deters conversation about additional options. The alternative to a bottom line strategy is to have a BATNA. Just about any book, article, or paper you read about negotiation will, at some point, refer to a BATNA. So what exactly is a BATNA? The acronym BATNA stands for the Best Alternative To a Negotiated Agreement. And was coined by Roger Fisher and William Ury in their book, Getting To Yes. I will speak more about developing a BATNA in module four. Time in a negotiation is often considered to be the time between the end of the selling of the product or service, and a deadline of some sort. Most business transactions have a deadline associated with the timing of the actual use of the product or service, or a budgeting constraint. However, the timeframe of the negotiation is considerably longer than that. The negotiation began long before the sale began, in the form of information gathering, trust building, and research. Also, the negotiation will continue long after the final agreement. Long-term, high value relationships are built and sustained through effective follow-through on negotiations and the actions taken following the negotiation. Viewing the negotiation as ongoing after the agreement will increase the likelihood of quality future negotiated agreements. Any negotiation can be affected by market conditions, the season, changes in the law, launches of new products, withdrawal of the problem, or outdated products or services, and a number of other factors. These factors should be considered when determining the timing of a negotiation, making the first offer, or finalizing the agreement. A great negotiator must be patient and wait for the timing of the negotiation to be in his or her favor. It is also true, though, that a quick resolution is sometimes in the best interest of both parties. It may be that competitive pressure might be greater later on, or your organization has an opportunity to fill a gap left by a competitor’s error. In such cases, it may be wise to finalize the agreement quickly, recognizing that it may not be the best possible agreement. But worth the risk for the sake of gaining an agreement with a valuable client. Making good decisions regarding power, authority, timing, and trust requires information. Taking the time to collect information about your counterpart, his or her organization, their market conditions, the organization’s place in the market. And their current suppliers will dramatically increase your power in the negotiation. The time to gather information begins as soon as you know that a, a negotiation is coming. Some of the information you need will be available for the, from the research done for the sales process. That, however, will not be enough. You need to know as much as you can about the situation your counterpart is experiencing in terms of current supplier, current price, market conditions affecting cost, changes within the organization. Who their clients are and how well they’re serving them, the mission of the company and how they are implementing it. Their internal costs and significant changes they may be facing, issues of supply. Past experiences with your organization and anything else that might affect the value of different options in the agreement. Knowing your negotiation counterpart’s position will give you a significant advantage. Not having this information puts you at a significant disadvantage. It’s important, also, to be well versed on the topic itself, as well as the position your counterpart is in. If you aren’t already, take the time to make yourself a subject matter expert on the topic and issues associated with the negotiation at hand. You do not want to be caught off guard because you were not aware of a recent event or specific technological aspect of the product or service. Be as much an expert on the subject matter of the negotiation as you are able. The location of the negotiation itself can have an impact on how the negotiation proceeds. In the case of live negotiations, it is generally considered to be a position of power to hold the negotiation at your own organization’s site. However, if you think there is a chance the discussion may not take on a collaborative tone or that you may need to take a stand by leaving, then you’re better off not being in your own location. Perhaps, you have heard stories or seen depictions in television shows or films of negotiators taking advantage of location to gain power. Actions such as putting the counterpart in a very low chair relative to the other negotiators. Separating oneself from the counterpart with a large table or desk. Or seating the counterpart such that the sun is directly in his or her eyes. These are all hostile acts that can and do affect the state, the emotional state of the counterpart. If you are the target of such an action, do not tolerate it. Ask for a different chair. Locate yourself to the side of your counterpart if there is a large table or move your seat so that you are not in the sun. Allowing yourself to be the victim of such behaviors gives your counterpart more power. Showing anger or frustration over it does too. So be civil, professional, and polite about your required changes. An interesting suggestion for negotiators choosing a collaborative approach is to sit on the same side of the table as your counterpart. Perhaps facing a whiteboard or a flip chart or a set of documents laid out in front of you. While this may sound minor, the body language of this approach indicates that you are together in solving a problem, resolving an issue, or developing a plan with the issue at hand being on the other side of the table. I have found this approach to be surprisingly effective. What about meetings that occur by telephone and online? These types of meetings are so common now that we must consider them in terms of negotiations. I still believe that the highest quality and highest value agreements occur when live face-to-face meetings are involved. But that is often not an option. The reality of teleconferences, Skype, and Google Hangouts, is that they offer you much less information about the non-verbal cues your counterpart is sending. They also allow your counterpart to communicate with other team members or other employees without your knowledge in the midst of the discussion. Of course, these concerns have both advantages and disadvantages, and can be both helpful and harmful to your interests. Be aware then, that when meeting with your counterpart live, but not in person. That you’re basing your opinions and decisions much more on actual words and tone of voice than when you have the full set of communication components, verbal, visual, and vocal. I must acknowledge here that these approaches are developed for and best suited to negotiations in the United States. Other countries and cultures have specific rules and traditions regarding location, timing, authority, and power. Such rules are best respected and adhered to, unless both you and your counterpart agree to proceed otherwise. In this module, I discussed power, authority, empowerment, trust, information, time, and location. These are all important factors to consider as you plan for your next negotiation. Understand your and your counterpart’s amount of power and level of authority. Take time to develop trust and gather as much information as you are able. Consider the timing of your discussions and agreement and take advantage of the best timing as much as you are able. Finally, think about the location for your discussions. Which location will provide you with the most information, the most advantageous physical location and position in the room? And what messages are you sending with the physical arrangement and proximity to your counterpart?