These are the core ideas that help people reach agreements. It is like having a set of
guidelines to follow when you are trying to solve a problem with someone else.
1. Separate the People from the Problem:
: Focus on solving the issue, not attacking the other person.
Detailed Explanation:
This principle emphasizes the importance of distinguishing between the
people involved in a negotiation and the actual problem being
negotiated. Often, negotiations can become emotionally charged,
especially when personal relationships are involved or when strong
opinions clash. By separating the people from the problem, negotiators
can avoid personal attacks and focus on finding mutually acceptable
solutions. This involves recognizing that everyone involved has their
own perspectives, emotions, and interests, and that these should be
acknowledged and respected. Instead of viewing the other party as an
adversary, negotiators should strive to see them as partners in
problem-solving. This requires active listening, empathy, and a
willingness to understand the other party's point of view. For example,
if two colleagues are negotiating a project deadline, they should focus
on the project's requirements and constraints, rather than blaming each
other for past delays or disagreements. By focusing on the problem,
rather than the people, negotiators can create a more collaborative and
productive environment, increasing the likelihood of reaching a
successful outcome.
This also helps to preserve relationships, even
when difficult issues are being discussed.
2. Focus on Interests, Not Positions:
: Understand why someone wants something, not just what they want.
Detailed Explanation:
This principle highlights the importance of understanding the underlying
interests of all parties involved in a negotiation. Positions are the stated
demands or solutions that parties present, while interests are the
underlying needs, desires, and concerns that drive those positions.
Focusing on interests allows negotiators to explore a wider range of
potential solutions and find creative ways to satisfy everyone's needs.
For example, two companies negotiating a contract might have
different positions on the price. However, by exploring their underlying
interests, they might discover that one company is primarily concerned
with cash flow, while the other is concerned with long-term profitability.
This understanding can lead to creative solutions, such as a flexible
payment schedule or a profit-sharing agreement. Understanding the
"why" behind what someone wants, allows for more creative solutions.
Often, several different positions can satisfy the same underlying
interest. Focusing on interests also helps to build trust and rapport, as
it demonstrates a genuine interest in understanding the other party's
perspective.
3. Invent Options for Mutual Gain:
: Brainstorm different solutions that benefit everyone.
Detailed Explanation:
This principle encourages negotiators to explore a wide range of
potential solutions before making any commitments. This involves
brainstorming creative options that can satisfy the interests of all
parties involved. By generating multiple options, negotiators can avoid
getting locked into a single solution and increase the likelihood of
finding a win-win outcome. This requires a collaborative and creative
approach, where all parties are encouraged to contribute ideas and
suggestions. For example, in a negotiation between a landlord and a
tenant, they might explore options such as a rent reduction, a lease
extension, or a property improvement in exchange for a longer-term
commitment. Inventing options for mutual gain also help to build trust
and rapport, as it demonstrates a willingness to work together to find
solutions that benefit everyone. It is important to separate the process
of generating options from the process of evaluating them. This allows
for more creative thinking and avoids premature criticism of ideas.
4. Insist on Using Objective Criteria:
: Use fair standards and facts to decide on the best solution.
Detailed Explanation:
This principle emphasizes the importance of using objective criteria to
evaluate potential solutions. Objective criteria are standards or
benchmarks that are independent of the parties involved in the
negotiation. This might include market value, industry standards, legal
precedents, or expert opinions. Using objective criteria helps to ensure
that the negotiation is fair and impartial, and it reduces the likelihood of
subjective biases or emotional arguments. For example, in a
negotiation over the sale of a property, the parties might use the
appraised value of the property as an objective criterion. This provides
a fair and impartial basis for determining the price. Insisting on using
objective criteria also helps to build trust and credibility, as it
demonstrates a commitment to fairness and transparency. It is
important to agree on the objective criteria before discussing potential
solutions. This helps to avoid disputes over the criteria themselves.
Tactics and Techniques of Negotiation
What are Negotiation Tactics and Techniques?
These are the specific actions and strategies people use during a negotiation to try
and get what they want. They are like the moves you make in a game of chess.
1. Active Listening:
: Really paying attention to what the other person is saying.
Detailed Explanation:
Active listening involves paying close attention to both the verbal and
nonverbal cues of the other party. It means not only hearing the words
being spoken but also understanding the underlying message,
emotions, and interests. This technique involves asking clarifying
questions, summarizing key points, and demonstrating empathy. Active
listening helps to build rapport, gain valuable information, and avoid
misunderstandings. For example, instead of interrupting or formulating
a response while the other party is speaking, a skilled negotiator will
maintain eye contact, nod their head, and use verbal cues such as "I
understand" or "That's interesting." They might also ask open-ended
questions like, "Could you elaborate on that?" or "What are your
concerns about this?" Active listening shows respect and encourages
the other party to share more information, which can be crucial for
finding mutually beneficial solutions.
2. Building Rapport:
: Making the other person feel comfortable and building a connection.
Detailed Explanation:
Building rapport involves establishing a positive and trusting
relationship with the other party. This can be achieved through small
talk, finding common ground, and demonstrating empathy. Building
rapport helps to create a more collaborative and cooperative
atmosphere, which can lead to more productive negotiations. For
example, a negotiator might begin by finding a common interest, such
as a shared hobby or a mutual acquaintance. They might also use
humour or tell a personal anecdote to create a sense of connection.
Building rapport also involves demonstrating respect and
understanding for the other party's perspective. This can be achieved
by acknowledging their concerns, validating their feelings, and showing
a genuine interest in their needs. A comfortable environment makes it
easier to have a productive negotiation.
3. Anchoring:
: Making the first offer to set the tone of the negotiation.
Detailed Explanation:
Anchoring involves making the first offer or setting a high or low initial
demand to influence the other party's perception of value. This
technique leverages the psychological principle that people tend to rely
heavily on the first piece of information they receive. For example, in a
salary negotiation, a job candidate might anchor by stating a high
salary expectation, which can influence the employer's perception of
the candidate's worth. However, it is important to ensure that the
anchor is reasonable and justifiable, as an extreme or unrealistic
anchor can damage credibility. The first number that is said, often has
a huge influence on the outcome.
4. Using Objective Criteria:
: Using facts and fair standards to support your arguments.
Detailed Explanation:
Using objective criteria involves relying on independent standards or
benchmarks to support your arguments and proposals. This can
include market data, industry standards, legal precedents, or expert
opinions. Using objective criteria helps to ensure that the negotiation is
fair and impartial, and it reduces the likelihood of subjective biases or
emotional arguments. For example, in a negotiation over the price of a
property, the parties might use the appraised value of the property as
an objective criterion. This provides a fair and impartial basis for
determining the price. Using objective criteria also helps to build trust
and credibility, as it demonstrates a commitment to fairness and
transparency.
5. The "Good Guy/Bad Guy" Technique:
: One person acts tough, and the other acts nice to get you to agree.
Detailed Explanation:
The "good guy/bad guy" technique involves two negotiators playing
contrasting roles. One negotiator acts tough, aggressive, and
unreasonable, while the other acts friendly, understanding, and
reasonable. The "good guy" then offers concessions or compromises
to appear helpful and reasonable, while the "bad guy" continues to
apply pressure. This technique can create a sense of urgency and
pressure, leading the other party to make concessions they might not
otherwise make. However, this tactic is easily spotted, and can cause a
lot of damage to the relationship between the parties.
6. The "Nibble" Technique:
: Asking for small extras at the end of a negotiation.
Detailed Explanation:
The "nibble" technique involves asking for small concessions or extras
at the end of a negotiation, after an agreement has been reached. This
technique leverages the psychological principle that people are more
likely to agree to small requests after they have already made a larger
commitment. For example, after agreeing on the price of a car, a buyer
might ask for free floor mats or a full tank of gas. However, it is
important to use this technique sparingly, as it can be perceived as
manipulative or unfair.
7. The "Walk Away" Technique:
: Threatening to leave the negotiation if your demands are not met.
Detailed Explanation:
The "walk away" technique involves threatening to end the negotiation
if the other party does not agree to your demands. This technique
leverages the psychological principle that people are more likely to
make concessions to avoid losing a deal. However, it is important to
use this technique cautiously, as it can damage relationships and lead
to a complete breakdown of negotiations. This technique should only
be used when you are fully prepared to walk away from the deal.
Example Of a Roleplay Negotiation.
Scenario:
Company A (You): A small, growing tech company specializing in AI
powered marketing tools. You are looking to lease a new office space in a
prime downtown location to accommodate your expanding team.
Company B (Me): A commercial real estate agency representing the landlord
of a desirable office building.
Your Goal:
Secure a lease for a suitable office space at a favourable price and with
flexible terms.
My Goal:
Secure a long-term lease at the highest possible price and with terms that
protect the landlord's interests.
The Negotiation:
Me: "Welcome to the offices of 'Downtown Properties.' I am happy to show you the
available space on the 10th floor. It's a fantastic location, with stunning city views
and modern amenities."
You: "Thank you for having us. The space does look impressive. However, location
is just one factor for us. We are a growing tech company, so flexibility and cost are
crucial. Before we go up, could you give me a general idea of the leasing terms?"
Me: "Certainly. The standard lease term for this space is five years, with a monthly
rental rate of $6,000. This includes basic utilities and building maintenance."
You: "Five years is a significant commitment for a company like ours. We are
growing rapidly, and our needs could change. Also, $6,000 is a bit higher than our
budget. Could we discuss some flexibility on the lease term and rental rate?"
Me: "Well, the landlord prefers long-term leases to ensure stability. However, we
might be able to offer a three-year lease with an option to renew. As for the rental
rate, $6,000 is the market rate for this prime location."
You: "A three-year lease with an option to renew is better. What about the rent? We
have done some market research, and we believe a fair rate for this space would be
closer to $5,000 per month. Could we also discuss some tenant improvements, like
installing additional network cabling?"
Me: "I understand your position, but $5,000 is significantly below our target.
However, to show our commitment to finding a mutually beneficial agreement, we
could offer a rental rate of $5,750 per month. As for tenant improvements, we could
include basic cabling, but any extensive modifications would be at your expense."
You: "That's a step in the right direction. $5,500 would be more in line with our
budget. And regarding the cabling, we would need to have a clearer understanding
of what 'basic cabling' entails. Could we get a detailed list of included
improvements?"
Me: "We can definitely provide that. How about this: $5,600 per month, and we will
provide a detailed list of included cabling within 24 hours. We can also include a
clause that allows you to sublease a portion of the space if your team grows faster
than expected."
You: "The subleasing clause is a good addition. How about we finalize at $5,550,
and we have a deal?"
Me: "Alright, $5,550 it is. We will draw up the lease agreement with all the agreed
upon terms, and we will send it to you for review. We are happy to have you as a
tenant."
You: "Excellent. We look forward to moving in."
Analysis:
Active Listening: Both parties listened to each other's concerns and needs.
Focus on Interests: You focused on flexibility and cost, while I focused on
long-term stability and market rates.
Invent Options: We explored different lease terms, rental rates, and tenant
improvements.
Objective Criteria: You used market research to support your rental rate
proposal.
Compromise and Concessions: Both parties made concessions to reach a
mutually agreeable outcome.
Building Rapport: Both parties remained professional and friendly.
Buyer and Supplier Bargaining Strength
What is Bargaining Strength?
It is about how much power a buyer or a supplier has in a negotiation. Imagine a tug
of-war; bargaining strength is like how much each side can pull.
1. Buyer's Bargaining Strength:
: How much power the person buying something must get a good deal.
Detailed Explanation:
Buyer's bargaining strength refers to the ability of buyers to influence
the terms of a transaction with suppliers. When buyers have strong
bargaining power, they can often negotiate lower prices, better quality,
or more favourable terms. Several factors contribute to a buyer's
bargaining strength. One significant factor is the number of available
suppliers. If there are many suppliers offering similar products or
services, buyers have more options and can easily switch to a different
supplier if they are not satisfied with the current one. This increased
competition among suppliers gives buyers more leverage in
negotiations. Another factor is the size and importance of the buyer's
purchases. Large buyers who purchase significant volumes of goods or
services are more important to suppliers, and suppliers are more likely
to offer them favourable terms to maintain their business. Furthermore,
the availability of substitute products or services also influences buyer's
bargaining strength. If there are many substitutes available, buyers
have more options and can easily switch to a different product or
service if they are not satisfied with the current one. Finally, the buyer's
ability to vertically integrate, meaning that they could produce the
product themselves, increases bargaining power. For example, a large
retail chain that purchases a significant amount of clothing from various
manufacturers has strong bargaining power because it can easily
switch to a different manufacturer if it is not satisfied with the current
one. They also have the possible ability to create their own
manufacturing plants.
2. Supplier's Bargaining Strength:
: How much power the person selling something must get a good deal.
Detailed Explanation:
Supplier's bargaining strength refers to the ability of suppliers to
influence the terms of a transaction with buyers. When suppliers have
strong bargaining power, they can often charge higher prices, reduce
quality, or impose less favourable terms. Several factors contribute to a
supplier's bargaining strength. One significant factor is the number of
available suppliers. If there are few suppliers offering a particular
product or service, they have more control over the market and can
charge higher prices. This is especially true when the product or
service is unique or specialized. Another factor is the availability of
substitute products or services. If there are few substitutes available,
buyers have fewer options and are more likely to accept the supplier's
terms. Furthermore, the size and importance of the supplier's
customers also influence supplier's bargaining strength. Suppliers who
have a large and diverse customer base are less dependent on any
single customer and can therefore exert more influence in negotiations.
Finally, the ability for the supplier to vertically integrate forward,
meaning they could sell directly to the customer, increases bargaining
power. For example, a company that produces a patented
pharmaceutical drug has strong bargaining power because it is the sole
supplier of that drug. They also can open their own stores to sell the
product directly to consumers.
