Most people dread the idea of having to negotiate. The average person feels like effective negotiation is something that must be studied, practiced, and refined. But, the truth is, we all negotiate, practically daily.
Professionally, you may find yourself negotiating a job offer, or negotiating the terms of a contract with a supplier. Personally, we’ll haggle over the price of a new car or an expensive piece of furniture. Then, there are the tiny negotiations we never think much of, like trying to convince your toddler that mashed carrots are quite delicious.
In short, negotiations happen every day, and being able to negotiate for what you want is a skill that can benefit everyone at the negotiating table. Today, we’re going to take a closer look at the basics of negotiation, and teach you effective negotiation tactics that will surely help you when it comes time for your next negotiation.
What is Negotiation?
By the book, negotiation is a conversation between two or more parties that aims to settle on a beneficial outcome for all parties involved. Generally, there will be one or more points of conflict that the negotiation hinges upon, and the negotiation itself will involve smoothing out those conflict points to reach an outcome that will satisfied all involved parties.
From an individual perspective, negotiation aims to resolve any conflicts while gaining an advantage for yourself.
At the start of a negotiation, the negotiating parties will state their position, and then concessions are made on both sides until an agreement is reached. A successful negotiation also hinges upon the level of trust that the parties have for each other. For the negotiation to be successful, both parties must trust each other to implement the solution that has been negotiated.
People are constantly negotiating, whether they realize it or not. Negotiations happen on a professional level within businesses, organizations, or governments and on a personal level, in instances like marriage, divorce, or when making significant purchases.
There are also professionals whose entire job revolves around negotiations, such as union negotiators, peace negotiators, hostage negotiators, and more.
The Seven Elements of Negotiating
Negotiation can be broken into seven main parts, as illustrated in The Handbook of Dispute Resolution, which has become an authority on all things related to the art of negotiating.
Our interests are at the core of what drives us in a negation. While they are often unspoken, our interests inform our position in negotiation, and the goal of every negotiation is to reach a resolution that serves these interests.
Experienced negotiators will spend much of their time negotiating trying to understand the underlying interests at play, which will give them a clearer idea of what the other party is genuinely looking for.
When negotiating, every party must leave the table feeling like they’re being offered a legitimate and fair offer by those sitting across the negotiating table. If a party feels like they’re being taken advantage of unfairly, it’s unlikely that you’ll be able to reach an equitable resolution.
The relationships between the involved parties play a significant role in the way negotiations play out. Relationship dynamics become especially crucial in negotiations when your counterpart is someone whom you have a connection with, such as a business or personal relationship.
To negotiate successfully, you’ll need to effectively manage the relationship dynamics at play, especially if you’re negotiating with people you’ll be doing business with again in the future.
Negotiations don’t always play out the way we hope they will. Before you sit down at the negotiating table, you should always have a plan in place for what will happen should negotiations fall apart.
This concept is often referred to as your BATNA, or best alternative to a negotiated agreement. Through this analysis, you can determine a course of action for how to proceed if you can’t get what you need through negotiating.
For example, if you’re negotiating the purchase of a new car, but you can’t manage to reach equitable terms with the sales department, your best alternative to a negotiated agreement may be to walk away from the table, and visit a competing dealership.
When negotiating, options are the different remedies available to the negotiating parties that may be able to satisfy their position. Options can include things like contingencies, conditions, or trades, and in some cases, they provide a way to create value and satisfaction for the negotiating parties.
In negotiating parlance, commitments refer to offers, agreements, commitments, or promises that are made by one party. A commitment can be something as simple as an offer to meet at a prearranged date and time, or as complex as a signed contract outlining the entire negotiation.
The final foundation of negotiation is communication between the two parties. Regardless of where your negotiation is taking place, communication will be a crucial component in the success or failure of the negotiation.
In any scenario, your goal should be to communicate as clearly and effectively as possible. But, how you choose to interact is entirely up to you, and it can be used as a negotiating tactic.
You may choose to approach the negotiating table as a friendly collaborator, or with a hardline position from which you don’t intend on waivering. The key here will be to identify the best style of communicating for the negotiation at hand.
The Stages of Negotiation
While each negotiation is different, most discussions follow this basic framework. So, whether you’re negotiating on behalf of your company, or for a better deal on your cable bill, this framework will prove helpful in steering the negotiating process.
Preparing to Negotiate
Before any formal negotiations take place, you should do as much homework as possible to address the conflict at hand. Ensure that you and any other parties who will be negotiating for your position are entirely clear on the facts at hand.
Beyond clarifying the facts, it can also be helpful to perform a preliminary analysis of what the other party is looking for in the negotiations. That way, you’ll have a better idea of what they’re negotiating for, and what you may have to concede.
This preliminary research can help save time later at the negotiating table.
The Discussion Process
Once the preparation phase is complete, it’s time to begin the actual negotiations. During this phase, both parties will have an opportunity to lay out their position, and start negotiating towards an end.
During this part of the negotiation, you must listen as carefully as possible. Feel free to ask questions to clarify key points. It can also be helpful to take notes on all of the crucial aspects of the negotiation so you can better understand your counterpart’s viewpoint.
Set Your Goals
Once each party has laid out their position in the negotiation, it’s helpful to define your goals. Define your goals in order of importance to make clear what’s most important to you. From there, the clarification process can begin. As each side clarifies their goals, it’s often possible to find some common ground between the parties, which can make it easier to come to an equitable conclusion.
Shoot for a Win-Win
As you continue the negotiating process, begin to focus on achieving a win-win outcome for both parties. Ideally, each party should leave the negotiating table satisfied with the result and the concessions they’ve had to make. Each party should also feel like their position has been heard and respected.
Of course, there will be situations where the negotiation doesn’t have a win-win outcome, but achieving one should always be your ultimate goal. During this time, it’s helpful to consider all of the available avenues to making a win-win outcome, such as alternative strategies, compromises, options, or contingencies.
Agreement & Implementation
Ideally, at this point, the negotiation will reach an equitable conclusion where both parties are satisfied with the outcome.
Once an agreement is reached in principle, all parties involved should ensure that they are crystal clear on what the deal means, and what will be expected of them moving forward.
Finally, a plan to implement the discussed outcome will be put in place, and the negotiation will come to a close.
Failure to Agree
The outline above is a bit rosy in the sense that it assumes both parties have been able to reach the desired outcome of the negotiation. However, that isn’t always the case. Sometimes, the negotiation process breaks down before either party is prepared to concede to an agreement.
In this instance, both parties must understand when it’s time to walk away from the table. You can always live to fight another day. If the negotiation isn’t moving along, this invites the opportunity for fighting and animosity as both sides become more embroiled in the argument.
Instead, simply call the meeting to a close, and revisit it at a later date. When the parties meet again, start the negotiating process anew, so that each aspect of the negotiation can be clarified and discussed once more. If the negotiation is especially contentious, it may be a good idea to bring a mediator in to preside over the talks.
Tips For Effective Negotiation
Whether you’ve been honing your negotiating chops for years, or you’re brand new to the negotiation arena, we have some sage advice that will help you negotiate your position more effectively.
One of the smartest tips you’ll ever receive is to practice active listening when you’re at the negotiating table. When people communicate, they don’t just do so with their words. A person’s tone and body language can also provide valuable insight into their position.
As a people, we tend to begin formulating our rebuttal while our counterpart is still speaking. Not only does this affect our listening ability, but you’ll miss out on valuable inferences that you can use to inform your negotiating position.
When they’re finished speaking, paraphrase what they said to clarify that you understand them completely. Not only will this demonstrate your ability as an active listener, but they’re also likely to follow suit and pay you the same degree of attention when you’re speaking.
Put Yourself in Their Shoes
The better you understand your counterpart, the better you can prepare for the negotiation. By putting yourself in their shoes, you can anticipate any objections they’re likely to have during the negotiation. Consider these objections carefully and be prepared to respond with fact-based information that supports your position.
Keep Your Emotions in Check
To negotiate effectively, you’ll need to maintain an even keel throughout the entire process. There will no doubt come a time in a negotiation where you aren’t happy with the direction the discussion is going in. When you get to this point, it’s critical that you recognize it, and address it immediately.
Negotiating from an emotional place is counterintuitive to the win-win approach that you should be striving for in all your negotiations. You may end up making concessions you wouldn’t otherwise make out of frustration. Or, you may allow communication to break down because you’re upset with how things are going.
Take a moment to pull yourself together and level your head before continuing the negotiation process. If necessary, don’t be afraid to ask for a recess until cooler heads can prevail.
It’s almost always a good idea to establish rapport with the people against the negotiating table from you. By creating a rapport, there’s a better chance that the parties can work collaboratively towards a goal. Not every negotiation will provide an opportunity for small talk before you get down to the brass tacks of the situation. But if it does, you should utilize it.
In many cases, we end up negotiating with people with whom we’ve already established a relationship. The same ideas apply to these negotiations, as well. If possible, spend a few minutes catching up to remind all parties of the familiarity between everybody at the table.
Take the Lead
In negotiation, stating your position and making your offer first allows you to take the offensive, instead of being forced to counter throughout the negotiating process. Research suggests that the first number on the table in a negotiation is what both parties anchor to in their counteroffers. Based on this premise, if you start high, you’ll end high, and vice versa.
If You Can’t Be First, Make Sure You’re Last
While it can be beneficial to take the lead, it isn’t always possible. There are sure to be times when your counterpart begins the negotiations and makes the first offer. When this happens, you must provide a counteroffer Research suggests that by doing so, both parties end up happier.
Let’s say the offer your counterpart provides is more than you were expecting, and you’re already happy with it. If you take that offer without countering, the other party may leave the table feeling like they had an opportunity to negotiate a better deal, and they blew it. By making a counteroffer, you’ll end up with even better terms than what you hoped for, and they’ll feel like they received a bargain.
Know the Way Out
Earlier, we discussed the importance of your BATNA, or best alternative to a negotiated agreement. Hopefully, all your negotiations go smoothly, and you’ll never need to walk away from the table. But it’s something you should always be prepared for.
When you’re negotiating, your most significant source of power is the threat that you’re willing to walk away from the table and take a different deal elsewhere.
As a shrewd negotiator, you’ll need to analyze your BATNA carefully. Depending on how confident you are with your alternative, you may be more likely to walk away from the table in favor of one of your other options.
Learn When You Can (and Can’t) Walk Away
In many negotiations, we’re negotiating for something we want, not necessarily something we need. Your ability to differentiate between want and need can make you a more effective negotiator.
In most cases, we’re negotiating for something we want. Whether it’s a new car, a contract, a job offer, or a million other things, we’re at the bargaining table because there’s something we desire. In almost all cases, there are alternatives available that can serve the same function.
You may want to rent a particular building or want a specific car. But, if the terms are untenable, there are probably plenty of alternatives you can pursue. Don’t let how much your heart wants something to cloud your head’s decision making.
But, if you’re negotiating for something you need, you may not be afforded the same luxury. Say you had a pipe burst in the middle of a snowstorm at 3:00 am, in cases like this, you may not be able to walk away from the table, and you’ll need to negotiate accordingly.
Iron Out the Details in Advance
Long before anyone takes a seat around the table, the agenda for the negotiation should be completely ironed out, and all involved parties should know exactly what to expect from the meeting.
Details like who will be part of the negotiations, when and where they’ll take place, and what the focus of the meetings is are all critical. By ironing out these procedural details in advance, you’ll save valuable time at the negotiating table to discuss what’s most important.
Ask Thoughtful Questions
The more questions you ask at the negotiating table, the more informed your position will be as you negotiate. But, not all questions are good questions, in this case. You should avoid asking anything that can be answered with a simple yes or no. Instead, focus on asking things that ilicit a more thoughtful response, as these can help inform your position.
Instead, ask thoughtful, open-ended questions that promote a more detailed response. Not only will you learn more about your counterpart’s position, but you’ll also be able to build a rapport in the process.
Use Timing to Your Advantage
In some cases, your timing can provide you with an immediate position of strength in the negotiations.
Let’s say you were purchasing a car; you’ll be operating from a position of strength if you come to the dealership at the end of the month when the salespeople are making a final push to meet their sales goals.
Or, if you were looking to rent a building in the middle of the year, you may be able to negotiate more favorable terms by agreeing to a short term lease that ends January 1st, or a longer contract that ends in January of the following year.
Make Your Concessions as Impactful as Possible
In any negotiation, you’ll probably need to make some concessions before you arrive at an equitable solution. Smart negotiators have made an art form out of making the concessions that make appear much more significant than they are.
You can do this, too. As you listen to your counterpart’s position, pay special attention to the aspects of the negotiation that they’re most passionate about. Chances are, you’ll find at least one instance of something exceptionally important to them that’s less important to you. Conceding to this point will mean much more to them than it does to you, and it can add strength to your negotiating position.
Get When You Give
We just discussed the importance of making sure your concessions have maximum impact. It’s also essential that when you make vital concessions, you receive something of value in return. Doing so helps to keep all parties on a level footing, so you aren’t negotiating from the point of perceived weakness.
For example, let’s say your counterpart is asking for a 20% discount on you’re asking price, and it’s a concession you’re prepared to make. Instead of accepting it at face value, get something in return. Perhaps in exchange for that 20% discount, you can ask for more favorable delivery terms for yourself.
Present Multiple Offers at Once
During most negotiations, it’s common to make an offer and then negotiate from there. If it isn’t working, an alternative proposal is made, and so on. Instead, offer your counterpart several equivalent offers all at once. In some cases, one of those offers will be satisfactory, and you’ll reach an equitable agreement, saving time in the process.
In other cases, your counterpart will reject every offer you’ve put forth. At this point, take the opportunity to ask which offer was most in line with what they need, and why. You should receive valuable inference into their thinking, and what you’ll need to do to reach a solution that’s agreeable for all parties.
Learn the Art of Framing
Everyone wants to feel like they’ve emerged victorious in the negotiation. In many cases, that’s entirely possible, provided that you frame the negotiation in an attractive light.
Say you’re negotiating a raise with one of your employees. Perhaps they’re asking for a $20,000 increase in salary, but you’re only prepared to offer a $15,000 increase. Instead of focusing on the fact that it’s $5,000 less than they’ve asked for, highlight that it’s $15,000 more than what they’re currently making.
Use Contingents to Your Advantage
Too many negotiations get hung up on minutiae, like how an agreement will be carried out over time. Rather than walking away from the table over these simple disagreements, or spending additional time at the negotiating table, consider using a contingent contract to meet the needs of each party.
For example, let’s say that you’re negotiating with a contractor for property renovations, and the contractor claims that all work can be completed within a 6-month timeline. If that timeline seems unrealistic for the scope of the work being done, consider a contingent contract, which will reward the contractor for meeting or exceeding the agreed-upon timeframe, or punish them for failing to meet their deadlines.
Set a Plan for Success
Once you’ve reached an agreement in principle, most of the heavy lifting is done, and congratulations are in order. But, you’ll be able to ensure that all parties stay on the same page and that each aspect of your agreement is carried out along the proper timeline by planning carefully for implementation.
Placing milestones at various points of the contract can help ensure that all parties are moving towards the final resolution in a timely manner. It can also be helpful to agree upon regular meetings to discuss progress and update the timeline for completion.
Finally, add a clause to the contract that addresses any disputes that may arise throughout the contract so that you’ll have the groundwork set for how to address such concerns if they crop up.
To engage in effective negotiation, both parties must come together with the end goal of mutual satisfaction for everyone involved. Whether you’re a seasoned negotiator, or if you’re preparing for your first negotiation, the tips here can help set you down the path to success.
When negotiating, always remember to listen actively, and approach each negotiation to create a win-win situation that makes everyone happy.