It is often said that good negotiators are born with the talent, that they take risks and trust their instincts. Those notions are the first mistakes to conducting an effective negotiation. Good negotiators are made through many hours of practice, they take only calculated risks, and always come to a negotiation well prepared. The last thing you want is to walk away knowing that money has been left on the table, as they say; or that you have settled for too little or for terms that are worse off than your original situation; or even to walk away when making a deal is still possible.
Preparation is key, first and foremost. It is good to start by outlining the parameters of your maximum and minimum limits of requirements and concessions. These parameters can help the negotiating parties identify their bargaining range during the course of the negotiation, which will in turn help find an outcome most favorable to both parties. The bargaining range is the distance between the reservation points of each party, i.e. the overlap between what the parties are willing to agree on. If there is no overlap in the bargaining range, then the parties will not be able to reach an agreement favorable to both without either or both making concessions.
An important part of preparing for a negotiation is in knowing your BATNA: Best Alternative To a Negotiated Agreement. This is your alternate plan in case the talks get out of hand – basically, the back up plan. Finding your BATNA requires preparation before the negotiation; for example, in the negotiation for buying a used car, finding your BATNA would require knowing how much you could buy similar cars elsewhere, which would then prevent you from paying more for that car compared to the alternative car.
Preparation will also allow you to find your leverage, as well as your opponent’s strengths and points of leverage. If possible, it would be useful to know your opponent’s BATNA as well, in order to have a better idea what your leverage is worth. Overall, it is important to remember to take a flexible approach to your plan. Circumstances could take an unexpected turn from either side, or due to events beyond either party’s control; so it’s good to keep an open mind.
Once you are in the negotiation, your objective should be to work towards a wise agreement, efficiently, and amicably. One of the most important skills to learn is how to avoid positional bargaining, even though that may go against your natural instinct. Positional bargaining is stating what you want the end result to be from the start, and making that your position during the negotiation. Stating a position tends to lock the negotiator in one place, and the more that position is highlighted and defended, the more the negotiator’s ego is identified with that position, making it very difficult to alter it should a better solution present itself. This is even worse when the negotiation involves more than two parties, each with their own position.
Instead, the focus should be on conducting a “principled negotiation”, or a negotiation on the merits. This has four main elements:
1. People: separate the people from the problems. It can often be easy to forget that negotiators are people first, with emotions, values, different backgrounds and view points, and of course, they are unpredictable; and so are you. Positional bargaining tends to entangle the relationships with the substance of the problem. Instead, deal directly with the people problem; understand their viewpoint (even if disagreeing with it); don’t deduce their intentions from your fears; speak about yourself and not about them so as to avoid making unfair assumptions; and don’t react to emotional outbursts.
2. Interests: focus on the interests, not the positions. The difference is easy to miss, yet crucial. Interests motivate people, whereas a position is something decided on; i.e. your interests are what cause you to make those decisions. Behind conflicting positions lie compatible interests, as well as conflicting ones. It is important to realize that each side will have multiple interests, and so it would be most effective to discuss these interests to find common ground to work with.
3. Options: invent options for mutual gain. Most parties to a negotiation will see the end product as a single decision, thereby treating a negotiation as a lateral process, an “either/or” situation. In fact a more effective way is to approach a negotiation as a dynamic process with multiple avenues of agreement and plenty of room for invention. Broaden the options on the table rather than looking for a single answer, and search for mutual gains.
4. Criteria: insist on using objective criteria. Arguing on the basis of each party’s will is costly and time consuming. Instead, you could negotiate on the basis of an independent source that is mutually agreeable. Objective criteria can be established based on fair standards and procedures, giving the parties a commonly accepted basis to work on instead of working against each other.