Gates Steve - The Negotiation Book

volume threshold

This term is used to determine a level at which benefits such as pricing, discounts, delivery, or other services become applicable.

So, effective negotiation provides the opportunity to build or dissolve value – but what does value really mean? It can be too easy and is too often a focus on price. The question of “how much?” is one, transparent, measurable issue and, because of this, is also the most contentious issue in the majority of negotiations.

Yet price is but one variableyou can negotiate over. It is possible to get a great price and feel as though you have won and yet get a very poor deal at the same time. For example, because the item did not arrive on time, or it fell apart after being used twice, or it had no flexibility about it, and so on. (Ever heard the saying “you get what you pay for”?)

variable

This can be a price or any term of condition that needs to be agreed.

In negotiation, your ego and your competitiveness might fuel the need to “win,” especially where you allow a sense of competition to become involved. However, negotiating agreements is not about competing or winning; it is about securing the best value. This means understanding:

• what the other person or party wants, needs or believes;

• what they do; and

• how that affects the possibilities.

As a Complete Skilled Negotiator your focus needs to be on what is important to the other party: their interests, priorities, options, if any, their deadlines, and their pressure points. Try to see the deal as they see it. If you set out to understand them and their motivations, you may be able to use these insights to your advantage and, ultimately, increase the value of the deal for yourself. Being driven to beat the other party will distract you from your main objective, which is usually to maximize value from the agreement.

pressure points

Pressure points are things, times or circumstances which influence the other party’s position of power.

Proactivity and control

Your first task is to be proactive – to take control of the way you negotiate. To map out the issues, formulate an agenda which helps you to negotiate agreement in a way that will serve your objectives. Try to be honest with yourself when deciding or agreeing on what these are. Remember, price is only one element of the deal and winning on price may not result in your attracting the best deal. You may need cooperation to the point where the other party not only agrees to go ahead but is also prepared to honor their commitment. There is absolutely no place for your ego in your negotiations. The single thing that matters is the total value over the life time of the agreement .

Becoming comfortable with being uncomfortable

The person on the other side of the negotiating table may well take up a tough position, which could make you feel challenged or even competitive. Becoming more comfortable with being uncomfortable in situations like this, where you are also likely to experience pressure and tension is one of the most important prerequisites of a skilled negotiator. Without this, our ability to think and perform can become compromised. So you need to recognize that, by negotiating, you are involved in a process and the people you negotiate with need time to adjust as part of engaging in this process. Typically this is when:

• any new risks, obligations, conditions, or consequences are presented; and

• any new proposals that you make, which materially change the value of the agreement.

EMPOWERED, INEXPERIENCED NEGOTIATORS REPRESENT A REAL RISK

The adoption of cloud-based technology solutions into organizations has created a fast-changing, complex environment where it’s important not only to have technology specialists on your side, but a negotiator who can make sense of the variables featured in contracts.

PIC, a Paris-based consultancy business, were keen to invest in a new HR management system to help manage the challenges around managing their ever growing team. During their research they identified a solution which also offered an integrated Learning Management Systems (LMS). This is a platform for managing staff development and also houses content for training purposes that staff can access.

People Technologies, the potential supplier, made a compelling pitch to PIC on the basis that their LMS system might also be used as a platform for servicing PIC’s own clients. This meant that PIC would acquire not only a system that serviced its own business but a solution which could extend their service offering to their own clients.

The newly appointed technology manager sold the idea to the board of PIC who were impressed with his creative thinking. The annual license fee was twice the budget allocation but the client-facing provision was sold as a real opportunity to “provide a monetized technology solution to its clients,” won the board over.

The board bought the idea and signed a 3-year contract. However, it soon became apparent that the venture was a first for People Technologies. Although a large business, it had never provided its service to a client as a resale facility. There were issues that had not been thought through, such as chargeable licensing and the fact that PIC would be liable for every one of its client users. Issues around integration and maintenance had not been fully understood or negotiated by the technology manager. The board had assumed his understanding of the interdependencies. Within weeks, the CFO having faced questions from the operations team investigated the implications of the contract and realized that the opportunity lacked coherence. It subsequently cost the company half the cost of the 3-year contract to exit and the technology manager his job.

So, even though the board had committed to a solution for twice the cost of their budget on the basis of it serving other client-based services, the ill suited solution had to be abandoned within months.

In business meetings, people can become frustrated, emotional, and upset if they feel that you are simply being irrational or unfair with your proposals. Some will even walk away before considering the consequences.

For this reason, the more experienced the negotiator you are working with, the less chance you will have of a deadlocked conversation. They are more likely to understand that they are involved in a process and that nothing is agreed until everything is agreed and sometimes the process can be frustrating. In fact, their experience can result in you attracting a better deal than when you negotiate with an untrained negotiator. Many of my clients insist that their suppliers attend the same training in negotiation as they do, as part of ensuring that both parties work towards maximizing total value rather than becoming distracted by short-term gains and/or trying to “win”.

Everyone likes to secure a bargain; to buy something at a better price than was available before. You only have to visit department stores on December 27 to witness the effect that securing a bargain can have on people’s behavior. Such can be the frenzy that it is not unknown for violence to be used where one person feels another has pushed ahead of them in the queue. Many people just can’t help themselves when there’s a good bargain to be had. In extreme cases people will buy things they don’t want or even need if the price is right.

In business, though, what is the right price? The answer depends on a whole range of other issues, which, of course, need to be negotiated. So how do you manage the other party’s need for satisfaction? That is, their natural need to feel as though they got a better deal than was originally available.