Negotiating Your Way To Better Profits

You may not think of yourself as a negotiator but Harvard Business School professor Michael Watkins says you are.

“Whatever your business, much of your time is spent negotiating,” he says. “There is no skill more essential to success for a business owner or manager than the ability to carry out a successful negotiation.”

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Whether you’re dealing with suppliers, customers, employees, financial sources or prospects, you are involved in the complex process we call negotiation. Although there are many books and courses on improving negotiating skills, Watkins, a nationally recognized expert on business negotiations, believes that most are of little help in dealing with real-life negotiating situations. In his book, “Breakthrough Business Negotiations,” Watkins teaches his students to break the process down into four fundamental steps.

“While every negotiating situation will have its own unique characteristics and cast of players,” he says, “learning and using the ‘breakthrough’ approach will help you to accomplish your objectives in every form of negotiations, personal as well as business,” he says.

Here’s how to make the “breakthrough” approach work for you.

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Diagnose The Situation

“The first step in preparing to negotiate from a position of strength is to diagnose the particulars of the situation thoroughly,” says Watkins. In particular, you need to learn:

Who are the players? Who will, or could, participate? The key parties to a negotiation may seem obvious, and sometimes they are, but not always. There may be players in the background who can influence the outcome, or new players may enter the discussions and unexpectedly influence the talks.

You should also look for existing and potential coalitions, in support of your position or opposed to it.
If you’re negotiating with an organization, you need to know if the person or persons you’re dealing with have the authority to make a deal. It also helps to know how the people at the table will be measured for their efforts and how they will be rewarded.

What are the rules of the game? “The rules of business negotiations,” says Watkins, “are quite different from those of personal injury lawsuit talks or international trade negotiations.”

Watkins suggests that you take time to consider the following questions before you enter into negotiations:
• What laws and regulations might apply here?
• What social conventions will shape the parties’ behavior?
• Are there professional codes of conduct that apply?
• What other rules of the game may influence the other party’s behavior?

A clear understanding of these “rules” will help to start you off from a position of strength.

What are the issues that will be, or could be, negotiated? “It’s easy but dangerous to treat the agenda as fixed,” says Watkins. To do so risks failing to take action to shape the course of events in ways favorable to your objectives.

“The agenda – the set of issues the parties will decide to negotiate – is itself subject to negotiation,” says Watkins. “No matter how simple and obvious the basic issues to be negotiated appear to be, it is worthwhile to probe beneath the surface.”

Defining your BATNA. The next step is to define your walk-away position. What is the least you are willing to accept to enter into an agreement? Establishing this value as a benchmark and keeping it clearly in your mind will help you avoid getting so caught up in the heat of negotiations that you turn down an alternative deal that was better than your walk-away position.

Negotiating experts Roger Fisher and William Ury call the walk-away position your Best Alternative To A Negotiated Agreement. (BATNA)

In other words, a BATNA is a planned course of action you can take in case you are unable to reach an agreement. Depending on what’s at issue, it could be to go to court, refuse to renew your lease or change suppliers.

Shaping The Structure

According to Professor Watkins, it’s possible to shape the structure of negotiations because they are to a degree socially constructed. This means that key elements, such as the participants and the issues agenda, are not fixed in advance but are influenced by the negotiators and their perceptions.

“The biggest mistake is to approach the ‘game’ as fixed,” he says. “Like most negotiators, people in business focus too much on what will happen at the table and not enough on influencing the context in which deliberations take place. You should pay more attention to who is, or could be, involved as well as what’s at issue and how the situation should be framed.”

Watkins calls this step “design work.” Here are the key things he feels you should address before negotiations begin:

Self Assessment
In past negotiations, have you tended to accept the situations and structures as the other party presented them? If so, you should determine not to fall victim to that pitfall again.

One simple way to shape the game is to invite other players into the negotiation. For example, in negotiating with your landlord for a new lease, you might invite your lawyer or your accountant to join in.
You must also take great pains in building, maintaining and improving your BATNA. Knowledge of your walk-away position will add hidden power to your position.

Setting The Agenda
Virtually all negotiating professionals agree that influencing the makeup of the agenda is a crucial step in successful negotiations. By helping to define the issues to be discussed and setting their priorities, you put yourself in a position of strength when the discussions begin.

“Good negotiators don’t just play the game,” says Watkins, “they shape the game.”

Controlling Information
Information is power. Arguably, there is no other activity where this old axiom is truer than in negotiations. Exerting control over who gets access to what information is another way to gain a position of strength in discussions.

Managing The Process

Among the important steps in this phase are sensitivity to early interactions, tipping points and emotions.
“How a negotiation begins,” says Watkins, “tinges everything thereafter. Initial impressions, based on limited information, persist and are resistant to change.”

Watkins stresses that mutual respect at the beginning of the process increases the likelihood of eventual agreement, but bad blood at the beginning of the discussions can poison all that follows.
In what he calls “irreversibilities,” Watkins observes that negotiators often walk through doors that lock behind them. In particular, he cautions against trying to take back a concession once you have made it. Any action that undermines trust is likely to provoke an irreversible change in the attitude of the other participants.

You should also keep yourself aware of thresholds in negotiation that Watkins calls “tipping points.” These are the sensitive points in the talks where even tiny concessions or refusals can lead to major shifts in positions. “You should always be aware of your own emotional thresholds and coping mechanisms to avoid being pushed over the edge. Be very careful when raising issues that are hot buttons for the other side,” he says.

Emotions, either real or feigned, play a part in most negotiations. “A timely display of anger, for example, can demonstrate resolve so long as it is employed infrequently,” says Watkins.

However, you must keep any display of anger under careful control. Emotional outbursts of any sort can easily escalate, generating emotional conflicts that make rational judgments all but impossible. “Once strong emotions are triggered,” says Watkins, “they dissipate slowly. The psychological and hormonal effects of anger can’t simply be turned off; the result may be temporary inability to think rationally.”
In their book, “Getting to Yes,” Roger Fisher and William Ury note, “The ideal stance is to separate the people from the problem.”

However you do it, keeping your own emotions under tight control during negotiations will give you an important advantage. As one negotiator puts it, “When you lose your temper, you lose.”

Assessing The Results

While it is natural to step back periodically to evaluate how well you are doing between negotiating sessions, you should also take score in the heat of battle.

Ury calls this “going to the balcony” – the ability to look at your situation from a distance.

“Appraising an ongoing negotiation is partly about whether you are meeting the goals you set for yourself,” says Watkins. “Clearly identifying your goals while preparing to negotiate is only half the battle; you have to keep those objectives firmly in mind as you go forward.” Among the questions you should ask yourself at this stage are:

Do you have a clear view of the situation? A clear understanding of the negotiating situation is essential to bargaining success. If your view is incomplete or flawed, you are unlikely to meet your objectives.
Are you building your BATNA? A strong BATNA builds bargaining power. Ask yourself whether there are alternatives to a negotiated agreement that you haven’t thoroughly explored.

Are you channeling the flow? Channeling the flow of a negotiation is like directing the course of a river,” says Professor Watkins. “You can dam it or you can reroute it.”

Inevitably, one of the parties to a negotiation will do more than the other to control the agenda of issues and their priorities. According to Professor Watkins, the biggest mistake you can make is to approach the “game” as fixed. “Don’t allow the other party to channel the flow by default,” he says. “Make certain that you are an active participant in this important part of the negotiation process.”
Are you learning, both individually and organizationally?

Every negotiation is an opportunity for you to learn, thus becoming better prepared for your next negotiating experience. However, learning does not come automatically simply because you went though a negotiation. “Learning takes place only when you take the time to reflect on your experience,” says Watkins. When negotiations are over, you must ask yourself, “What went well? What could I have done better? What did the other side do well and what did I learn from them?”

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