The art of price negotiation: the management style (2)

In part 1 of this article, I delved into the two main types of negotiation and further supported it with 5 styles of negotiation. These laid the bedrock for the development of this paper enabling me at this final part of the paper to discuss preparation strategies for negotiation and to point out some common mistakes to avoid in negotiation and finally draw a conclusion to knit the whole discussion. When these strategies are aptly encapsulated, it prepares the negotiator adequately for management success.

It is perceived by many that good negotiators are those who possess a natural flair for negotiation. In as much as I will not downplay an inborn trait in negotiation, it is very important to point to the fact that negotiation is a skill and like every skill it can be honed through constant practice and preparation for specific negotiation before one participate in a deal.  Negotiation is best achieved when parties in the negotiation know the issues, assess their competence in specific negotiations, and know the other party in the negotiation aforehand.

Preparation is a necessary ingredient for successful negotiation. In effective preparation for parties in negotiation, it is important to know the reasons for the negotiation, and the extent and limitations each party can accommodate. Knowing what the other party wants and also knowing their limitation will help in the negotiation process. It is also important to ask the right questions during the negotiation process so as to elicit the right information that will accrue to your advantage in closing the deal. Where parties differ in views on particularly issues during the negotiation, it is important for one party to be innovative by proposing solutions that fosters mutual understanding and collaboration. To wit, not an adversarial position.

A well prepared party in a negotiation has an upper hand. Since they are mentally and emotionally prepared for the negotiation, their “antennas” are positioned to receive sharp signals thereby having a sharp clarity and able to lead the process. They think quickly and answer promptly to queries and comments.

Seven elements are widely accepted and postulated as the most viable approach to negotiation. These approach was first outlined by Roger Fisher, William Ury and Bruce Patton in their best seller “Getting to Yes: Negotiating agreement without giving in.” The seven elements are: interest, options, legitimacy, alternatives, communication, relationship and commitment. These elements equip negotiators to prepare adequately for negotiation after they have imbed them in their management lessons and practices.

The 7 strategic elements for negotiation preparation

  1. Interest

Interest in negotiation must be considered mutually. To be a strategic negotiator using the first element requires that you do not only consider your interest in the negotiation but also that of the other party. Mutually beneficial interest of parties in negotiation ensures “win-win” situation which builds and/or enhances the business relationships among the parties. Though it is in the interest of a party going into negotiation to have in mind to win. It is best when the other party do not feel cheated. It smacks on business ethics and muddles business relationship with an inadvertent loss of trust.

It is always good to find a common interest among the parties in the negotiation. List those interests and share with the other party during the negotiation process. Setting a common ground for the negotiation give parties the confidence that mutual interest will be achieved.

  1. Options

Management negotiation is not always about how much money is involved. Particularly, the nature of business negotiations always have a posture that assumes that how much profit a party makes shows their dexterity in the negotiation. Having options other than direct financial rewards and/or gains equally ensures agreement in negotiation.

An option in business negotiation though may not be a direct financial benefit, reaching an agreement on an optional basis has a financial implications since those gains and/or rewards can be quantified in financial terms. Take for example an organisation that has a medical facility for its employees, family and community. In negotiating employee benefits, offering medical care for employees’ families may be an option to offering financial rewards. Knowing that they and their families’ health will be fully taken care off gives them a sense of value and self-worth and are likely to give off their best for the success of the organisation.

  1. Legitimacy
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For fairness to prevail in the business negotiation, there is the need to create legitimacy in the negotiation. Legitimacy refers to taking away the prejudice of one party’s intent to cheat the other. Legitimacy ensures standardization and a measure to which the negotiation can be assessed as fair and just. By using or benchmarking on industry’s best practice is a way of ensuring legitimacy. Being open to the law assures parties in the negotiation that they will willingly abide by the laws that governs the business they will engage in.

  1. Alternatives

The philosophy behind alternatives is to ensure that at every given time, there is no reason for failure or disappointment because an alternative plan is in place. The alternative must be equally good as the original plan hence the acronym BATNA spelt out as Best Alternative to a Negotiated Agreement. Having alternatives in negotiation should be the prerogative of all parties.

Alternatives are also known as “plan B” or “fall back plan”. This offers parties in negotiation an advantage to walk away from the negotiation knowing that they have an alternative plan to meet their need if their expectation is not met at the original negotiation process. This happens often when there are other competitors in the industry who are willing and open to negotiate with them at a mutual interest.

  1. Communication

Effective communication is necessary for successful negotiation. Keeping in mind that communication is a dialogue and not a monologue is important for parties in negotiation. The communication process prior to the negotiation, during and after the negotiation must be kept open to ensure continuous transparency.

The communication must be lateral. It should not revolve around one person for which reason his/her absence will break down the negotiation process. In any case there must be alternative leaders in the negotiation process so as to keep the negotiation communication open at all times. Negotiation communication is aimed at ensuring clarity for all parties to reach an agreement based on sound understanding devoid of technical jargons and ambiguities.

  1. Relationship

Building a continuously strong relationship among business entities inures to a better future of mutual interest. It is important for parties to assess the level of their relationship prior to the negotiation and determine how they want their future relationship to be. If they are of the same mind that they want to build or continue a healthy relationship, then that will inform their current mannerism during the negotiation. Collaborative agreement is a good way to ensuring lasting and continuous relationships. Ensuring that all parties in the negotiation walk away with a sense of gratitude is another sure way of building good relationships.

  1. Commitment  

Knowing the level of commitment of the parties in the negotiation goes a long to reaching an agreement in a negotiation. Are the parties present in the negotiation decision makers? Do they have the power and/or mandate to close the deal? Depending on the nature of the negotiation, if the parties present do not have the power to make decisions it will affect the negotiation process and the deal may not be closed. It is therefore important to have fully committed parties present so as to have a good deliberation that will lead to closing the deal.

7 common mistakes to avoid in negotiation strategy

  1. Unpreparedness

Good preparation ensures success. Effective negotiators are those who prepare by planning and following through their plans. Through preparation you are able to draw out strategies for the negotiation. Good planning gives a clear picture of how to navigate the negotiation process successfully. It enable the parties in the negotiation to have a consensus-ad-idem at the start. By planning, you are able to have a goal to reach and also prepare a checklist to follow during the negotiation. Unpreparedness for a negotiation is a common mistake to avoid. Don’t be complacent but rather follow through by preparing effectively.

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  1. Failure to further negotiate

Usually when you go into the negotiation at a position of weakness, your ability to further negotiate through is weakened. When you consider your business so fortunate to be at a negotiation with a fortunate business, you easily accept an offer which if you had further negotiated you would have gotten something better. Failure to further negotiate has led to many businesses getting far less at the negotiation table than they would have received only if they had mastered their skills by further negotiating.

  1. Ignoring the other party

Ignoring the other party in the negotiation can lead to failure. You cannot have a successful negotiation when you ignore the party by your failure to study them closely and preempt their strategy for the negotiation. Using the technique called “framing”, you are able to influence the other party by shaping the issues for them. Once the other party accepts it, it enables you to reduce your risk level thereby avoiding failure.

  1. Cross-cultural negotiation

This happens when an investor is negotiating in another culture. Failure to take notice of the cogniscance of reality of the culture in which you intend to invest is a common mistake for failure. For example if an invest wants to invest into meat production in community that does not consume meat, it will certainly be imposing selling the meat to inhabitants of the community and sometimes the people may even revolt against the establishment of the meat production factory in their community.

Having cross-cultural knowledge will help in the negotiation process to tell the community that even though you are setting the meat production factory in the community, the meat is not intended to be sold to inhabitants of the community.

  1. Anchoring and adjustment

These are part of negotiation dynamics which when missed leads to failure in negotiation. It involves setting the parameters for the negotiation process. This is when the negotiator grabs the opportunity to watch where the anchors are set and negotiate from that point.

In a price negotiation for a sale of property, a prospective buy may offer a price lower than the asking price and instead of the seller out rightly rejecting the offer, they tell the prospective buyer that their price is not good enough instead of acknowledging the offer with a counter offer. By giving a counter offer, it sets the pace for negotiation. This means that the seller has anchored the price at a point different from the initial asking price.

 

 

  1. Giving up too early

Another common mistake in negotiation is when one party in the negotiation gives up too early at the first offer given. This is a strategy which is contrarily used in developing countries. Prices are not accepted at the first offer. No matter how much the asking price is, they will further negotiate for the price to be reviewed downwards. The intention is not to be adversarial but rather to engage the negotiation process.

  1. Celebrate meaningfully

When you close a good deal, do not celebrate in the presence or better still do not be over joy in the presence of the other party in the negotiation. When you do that, it gives the other party a sense of defeat and they will look forward into a future to retaliate.

Conclusion

There are several different approaches to negotiation, depending on the nature of negotiation a business is involved with and the approach to use. Each approach has its own strengths and weaknesses. Sometimes multiple approaches may be required to close a deal and sometimes walking away from the negotiation becomes the best choice. Whichever way you look at it, negotiation is a skill that can be learnt and enhanced. To be a good negotiator is to continuously learn the skills and practice them. Walking into a negotiation prepared ensures maximum success.

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