‘Negotiation’ is a word that appears in every newspaper and bulletin at the moment. Don’t worry, I’m not going to go into the ‘ins and the outs’ of the government’s Brexit deal! What we cannot deny, however, is that the outcomes of negotiation can have lasting consequences on our lives. Therefore, possessing good negotiation skills is crucial in business and in life generally.
Having been involved in various negotiations during my working life, I am conscious of how challenging and exacting the process can be, especially when trying to balance the interests of the relevant parties. This article offers a broad introduction and some practical steps on how to negotiate effectively.
Negotiation is the process that people go through to reach agreement or compromise. It can be used to determine the terms of a business arrangement or contract or to resolve conflict or disagreement. It can take place formally or informally (or a mixture of the two). It may be relatively quick or can be protracted.
Negotiation takes place at all levels; it can ensue between children trading football stickers in the playground or nation states setting the terms of trade deals or treaties. It can involve employers trying to reach agreement with trade unions, or businesses trying to agree the terms of a contract with a new client or contractor. No matter what level of negotiation we are talking about, there are certain common themes and principles that you can discern and follow when involved in negotiation.
At the outset, you should identify the mutually agreed facts of the situation, the interested parties and the terms or rules of the negotiation (including an appropriate venue). Where possible, the timeframe for the negotiations should be agreed. It is good practice, in more formal negotiations, for minutes to be taken by an independent third party. It is also vital to determine whether the representatives of the other party have the authority to enter into binding agreements. If the decision needs to be approved by their superiors, this may present problems and may mean you are wasting time and effort.
Before entering negotiations, you should have analysed the problem, determined your objectives and your strengths and weaknesses. You should also learn all you can about the other party. If you understand their negotiating style and their wants and needs, the stronger your position will be.
Ultimately, in a negotiation, you need to represent your interests and/or the interests of your organisation. You are very unlikely to get better than you ask for so first offers should be bold and assertive. This will also provide greater flexibility in the negotiation, giving you more scope to make compromises on price, terms or conditions etc. at a later stage. Of course, the initial offer should not be unreasonable as this may cause offence and damage or end the negotiation.
Depending on personality, culture or context, your negotiating style may vary. Some people are ‘soft’ negotiators. Soft negotiators, particularly when dealing with friends or people they know, will try to reach agreements without confrontation. They strive to maintain trust and good relationships. This is a good method if you are trying to ‘keep the peace’ but there is a danger that this approach can be too passive and under-assertive, leading to decisions that are not in your best interest.
At the other extreme is the ‘hard’ negotiator, who is very assertive, forceful or even aggressive in negotiations. If you take this approach, you may be unconcerned with the emotions of the other parties and have little regard for the impact the approach will have on the relationship. Hard negotiators will strive for the best outcome for their own interest, irrespective of the consequences on the other party.
Being too heavy-handed by pursuing a ‘win-lose’ outcome can be beneficial in some circumstances, (e.g. when trying to agree a price on a second-hand car in a one-off transaction) but if it is likely that you will need to maintain a relationship with the other party and deal with them again, chances are that you will sour future relations if you pursue a hard-line approach.
Unless you are determined to pursue a win-lose outcome, it is wise to seek consensus. Shared objectives should be defined. Even if it initially appears that you and the other party are poles apart, there may be more common ground than expected. Empathise with the other party and explore their position. Asking effective questions will help achieve this. Ideally, a mutually beneficial solution should be sought. The aim is to find an outcome which benefits both parties in some way.
Offers and counter-offers should be specific and outline all parts of the proposed agreement, in detail. For example, it may include the price of an offer (if a purchase or sale is being made), a description of the action to be taken and any relevant terms and conditions. In formal negotiation, the offer should be made in writing.
Eventually, a decision needs to be made on whether to accept or reject the agreement. In some cases, negotiations will fail, with no agreement. In these cases, it may be possible to call another meeting and re-open discussions. Suspending negotiations can be effective if you believe the other party is too inflexible. If you show you are prepared to walk away from the negotiation (and provided the other party is committed to achieving something out of the negotiation) they may be pressurised into re-opening the negotiation with a compromise. This can be a useful technique, but it also risks permanently ending the negotiations without an agreement.
Once a negotiation is successfully completed and you have reached an agreement, it needs to be implemented. The decision should be clear to all the parties concerned. Ideally, the decision and its terms and conditions should be recorded.
It is wise for negotiation to be carried out ethically, engendering trust and good faith. Always seek to ensure that the other party is treated with respect and courtesy. Everyone should have a fair hearing and all parties should listen to each other’s viewpoints, asking questions to clarify any areas of uncertainty or misunderstanding. Wherever possible, a ‘win-win’ outcome is the best outcome.