Negotiation - Planning For A Successful Outcome

In any kind of negotiation the planning stage is probably the most important. Too often we go in badly prepared and end up giving concessions that reduce the overall profitability of the final deal. The importance of planning is in having a very clear idea before entering into the negotiation i.e.

o What are my objectives?

o What does the other side wish to achieve?

Negotiation - Planning For A Successful Outcome

o What information will influence the final outcome of the negotiation?

o What concessions can I make?

o How am I going to achieve my objectives?

o What part will other people play in the negotiation?

Generally, the more time that is spent in planning and preparing for the negotiation,
the more beneficial will be the final outcome.

Objectives:

Before entering into the negotiation, you need to have a clear idea of your objectives
and try to work out those of the other side. Ask yourself the following questions:

o What exactly do I wish to achieve from this negotiation?

o Which of my objectives:

- Must I achieve?

- Do I intend to achieve?

- Would I like to achieve?

o What options or alternatives would be acceptable to me?

o What are the other sides. objectives?

o How does the other side see the negotiation?

Information:

It has often been said that information is power. In any negotiation, there will be four types of information that is important to the final outcome.

o What information do I have that the other side has also?

o What information do I have that the other side does not have?

o What information do I need to have before negotiating with the other side?

o What information does the other side need before it can negotiate with me?

This can be particularly important when negotiating with people who concentrate
on price issues.

o What other things are important to this person?

o What pressures does he have on him to conclude the deal?

o How well is his company doing at the moment?

o How important is it that he deals with my company? etc.

The early phases of negotiation consist of both sides finding out more information
before talking about a specific deal or set of alternatives. For example, if you find out
the other side has a time deadline that only your company can meet, it may give you
the chance to negotiate on more favourable price. If you know that the other side
has recently expanded their production capacity, you may be able to negotiate more
favourable terms in return for a commitment to buy certain volumes over an agreed
time period.

By spending time as part of your preparation in listing what you already know and
what you need to know, you will give yourself a better chance to negotiate well on
your company's behalf.

Concessions :

Negotiation is a process of bargaining by which agreement is reached between two
or more parties. It is rare in negotiation for agreement to be reached immediately or
for each side to have identical objectives. More often than not, agreements have to
be worked out where concessions are given and received and this is the area where
the profitability of the final outcome will be decided.

When preparing for negotiation, it is advisable to write down a realistic assessment
of how you perceive the final outcome. Find out the limits of your authority within
the negotiation and decide what you are willing and able to concede in order to
arrive at an agreement, which satisfies all parties.

Concessions have two elements; cost and value. It is possible during negotiations to
concede issues that have little cost to you but have great value to the other side. This
is the best type of concession to make. Avoid, however, conceding on issues that
have a high cost to you irrespective of their value to the other side.

When preparing for negotiations, ask yourself the following questions:

o What is the best deal I could realistically achieve in this negotiation?

o What is the likely outcome of the negotiation?

o What is the limit of my authority?

o At which point should I walk away?

o What concessions are available to me?

o What is the cost of each concession and what value does each have to either side?

Strategy:

Planning your strategy is important in negotiation. Once you know your objectives,
you need to work out how you are going to achieve them. It is also useful to try and
see the negotiation from the other side and try and work out what their strategy will
be.

During the negotiation there will be opportunities to use various tactics and you
need to decide which of these you feel comfortable with and at the same time recognise the tactics being used by the other side. Ask yourself the following questions:

o How am I going to achieve my objectives in this negotiation?

o What is the strategy of the other side likely to be?

o What tactics should I use within the negotiation?

o What tactics are the other side likely to use?

And Finally - Tasks :

If you go into negotiation with a colleague or colleagues, you need to decide during
the preparation phase:

o What role will each team member take in the negotiation?

o How can we work together in the most effective way?

Some teams of negotiators appoint team leaders, note takers, observers and
specialists, each with their own clearly defined authority and roles to perform.
Having a clear understanding of roles within the negotiation will make the team
approach much more effective.

Copyright © 2007 Jonathan Farrington. All rights reserved

Negotiation - Planning For A Successful Outcome
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5 Successful Negotiation Tips

Most of us negotiate on a daily basis without knowing it. Any time we enter into a discussion where we try to find common ground and agree an outcome with the other party, we are negotiating.

If we think that we have to bargain for something more than we are being offered, whether it is something that you want to achieve in your career, when you are buying something or just dealing with other people as you go about your daily business, we negotiate to get to a favourable outcome.

Negotiation

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Whilst many people say that negotiation is an art, it can bring out the best and worst in people, depending upon how important the subject of discussion is to each individual involved. Whilst it can also be fun, negotiation is not generally a game that people can play anytime, as it usually means a dispute or tension of some kind. This is why so many people view negotiation as something to be avoided.

5 Successful Negotiation Tips

Since it involves two-way communication, the outcome of every negotiation is influenced by the mind-set, abilities, and techniques used by the parties to the negotiation. However, learning the right way of negotiating will vastly improve your chances of achieving a successful outcome and the following five tips for successful negotiation will help you:

1. Time it right
The outcome of any negotiation is dependent upon getting the timing right. To achieve this you should try to organize and plan the circumstances for the negotiation beforehand. This also involves considering the possible outcomes of the negotiation so that you can understand the variables that are most important to you, such as bonuses, price, delivery times, credit terms, guarantees, etc.

2. Manage yourself
Before you enter into a negotiation, you should evaluate yourself first. Are you able to manage your own feelings? Keep in mind that when emotions run high about the topic under discussion, the outcome is less likely to be as productive as it could be if the discussion is business-like.

3. Know what you are getting into
Do you know who are you dealing with? What are the traits, attitude, and beliefs of the person you're going to negotiate with? Are they the type of person that is likely to work with you to achieve a win-win situation, i.e. one where both of you are satisfied with the outcome?

4. Be attentive. Learn to listen well!
One of the reasons why negotiations are unsuccessful or turn negative is that many people do not practice attentive listening. People are so busy stressing their points and stating their desires that they forget to listen properly to the other side of the discussion. Keep in mind that negotiating has to be a two-way communication to be effective - it will never work if the discussion is one- way traffic.

Experts say that in order to have a successful negotiation, people should learn to apply the so- called 80/20 ruling. This means that people should spend 80% of their time listening and only 20% talking. If you use this guideline you will definitely be able to understand the other side of the story, and be much more likely to achieve a successful negotiation outcome.

5. Be ready to walk away
Never be pressured to win a negotiation. Keep in mind that it may not always be a win-win situation for you. In fact, one of the greatest mistakes people commit is that they are too determined to achieve their own goals, such that they create an all or nothing scenario in their own minds.

You should always try to be open to alternative outcomes, so that you always have a choice. But, never assume when you negotiate that there is a point of no return. In your own preparation you should establish your own point for walking away if the negotiations are not going well for you and you have no chance of achieving the outcome that you are seeking.

Remember that successful negotiations always follow a logical pattern and if you use the above tips to plan your own approach you will definitely increase your chance of achieving the successful outcome that you desire.

5 Successful Negotiation Tips

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The Key To Unlocking A Successful Negotiation - Best Practice Preparation

PREPARATION: FUNDAMENTAL TO NEGOTIATIONS?

Most negotiators greatly underestimate the amount of time required to effectively prepare for and research the background to any business negotiation. The old cliché says 'failing to prepare means preparing to fail'. We should spend at least twice as much time preparing for business negotiations as we expect to be engaging in actual negotiations. E.g. if we estimate that we are going to spend 1 hour negotiating with our counterparty, we should then consider spending approximately 2 hours preparing for the engagement. The better our preparation, the greater the chances of achieving superior outcomes in our business negotiations.

Negotiation

Negotiation preparation is the most important part of business negotiation best practice and is specifically critical for complex, multi issue, multi party negotiations. Let's then analyse what is important to be considered in support of our efforts and decision making processes in business negotiations.

The Key To Unlocking A Successful Negotiation - Best Practice Preparation

1. Understanding the context.

The context of negotiation can be understood by an analysis of the environment in which businesses operate. Some of the key elements to consider in understanding the context of a business negotiation include:

What is the nature of the sale/purchase you are making in terms of risks involved, the level of expenditure and the complexity of the deal? Competitive analysis - what is the nature of the market and what alternatives do our counterparties have available. E.g. in a purchasing role it is critical to understand the supply market in order to prepare our negotiation strategy effectively. We will approach negotiations with a sole supplier differently than with a potential vendor in a fully competitive market. Identifying market characteristics for specific services and goods will allow us to understand how the market works, its competitiveness and key suppliers. Is it a one-off deal or should we consider maintaining a long-term positive relationship that creates opportunities for future business. For example, in a situation where we sell a car or a house we are normally only interested in the best price and not really interested in an ongoing relationship. A ompetitive approach with no consideration for the relationship will most likely assist us to achieve our goals and objectives if no ongoing relationship is concerned. On the contrary, most business negotiations are more complex and although price is usually an important factor, there are many other criteria that have to be satisfied on both sides as a foundation for mutually rewarding deals and relationships. Have we had any dealings with the other side in the past and what is their most likely approach to doing business? What does the power balance look like? (Legitimate power, Reward power, Coercive power, Expert power, Referent power) How skilled are the negotiators on both sides of the table? What cultures will be represented at this negotiation? (Ethnic, Corporate & Professional Cultures should be considered). Do you need to do any homework regarding the local customs? Who are all the parties & individuals involved in the negotiation and the decision making process? When selling it is critical to identify not only final decision makers, but also final users of our product or service in order to develop internal groups of support within our counterparty's organisation. A diversified approach is required as different buying roles look for different benefits and advantages when purchasing a product or service. Final decision makers (read people who release the money e.g. CEO, FD etc.) will most likely be interested in Return on Investment and increased revenues & margins as the ultimate result of purchasing your product, service or solution. The final user who looks for improved productivity and efficiency will find the financial elements almost completely irrelevant.

2. Understanding the deal objectives.

In any negotiation it is critical to understand the tangibles that all parties are trying to gain or achieve. If we fail to prepare and prioritize our deal objectives we put ourselves at risk of being exploited and/or ending with a sub-optimal agreement. Whether you are engaged in negotiation on the sales or purchasing side consider the following elements when preparing for negotiation

- Price and payment
- Key Obligations
- Delivery
- Warranties
- Intellectual property
- Risks etc.

Price and Payments: the notion that price is the only issue in negotiation is not entirely logical. The competition and the complexity of most business deals requires finding ways to create additional value and to move negotiation from positional bargaining to synergistic and creative joint problem solving. Professional buyers are not charged with buying the cheapest solution available but rather with providing their organisations with the cheapest total cost of ownership. It means that besides our company, product and salespeople attributes we can differentiate ourselves from our competition buy using the TCO - Total Cost of Ownership approach that is composed of amongst others:

Acquisition costs: includes price, freight, legal fees, warehousing costs, initial training costs etc. Maintenance costs - repair labour, loss of productivity or revenue during maintenance - The cost of use - fuel or energy costs, safety costs, performance monitoring costs. Support costs - insurance, taxes, management fees etc. Supplier performance metrics - financial stability, cost improvement ideas - Delivery costs can be imposed either on the buyer or the supplier and may include: custom taxes, fuel, loading goods etc. Quality - testing, defect management, cost of and losses associated with potential external failure. Customer Support - how many people involved, for what period of time etc. Bear in mind that happy customers will tell others of their positive experience.

It costs much more to attract a new customer than to keep an existing one.

If we are able to minimize the other side's costs involved in the whole life cycle of our product, solution or service and at the same time offer value for money we are in a better position to find common ground with our counterparties and ultimately increase our market share. Additionally it is necessary to clearly define the payment terms and conditions. If you buy make sure you know what is included in the price, when you have to pay, and what happens if you don't pay on time.

Key Obligations: what work the supplier will do and what the buyer will do in return. Make sure your product and services are clearly defined and reflect your priorities. Include all the relevant quantities and specifications. As a supplier make sure you can live with all the specifications stated by the buyer.

Delivery: when and where are the goods or services to be supplied? Is there any extra charge for delivery? How important are the delivery timelines and what happens if the delivery doesn't take place on time.

Warranties: a promise that the products or services will meet a required standard. As a supplier don't expect signing a deal with no warranties at all and make sure you know the limits on what you are offering. In order to maintain trust and credibility make sure that you can live with any promises you are making.

Intellectual property: difficulties in negotiating IP ownership can lead to delays in implementing an agreement.

Carefully negotiate IP ownership rights and consider the following factors:

What party is paying for the R&D? Could the development be used by the competitors to your loss if you don't own the IP? - How can you prevent competitors to use the same IP?

Intellectual Property can become a key differentiator in a highly competitive market place.

Risks: the best way to manage risks in negotiation is to include the elements that carry any risk in a written contract. Cultural consideration is critical. In Asian countries like China the goal of negotiation is not a signed contract. In China - unexpected circumstances, whenever they arise, are resolved through the relationship and therefore all the risk involved needs to be managed through the relationship as well. Explore the risk aversion of the other side as the value in negotiation can be created by shifting risk to the party that is more able to bear it, in exchange for greater potential returns.

Analysing the above elements are crucial in planning Concession Strategies that will assist you to leverage maximum value from trades and in planning meetings optimally. Always map out all your negotiation goals as fully as you can and for each Goal, capture your own and your counterparty's view of the Goal with the best information you have.

The Key To Unlocking A Successful Negotiation - Best Practice Preparation

Michael Zieba is the Founder of The Strategic Negotiation Institute
http://www.strategicneg.com

Gain unparalleled negotiation skills at The Strategic Negotiation Institute.

Our core competency is to help organisations save money, increase profits and maximise the value of their negotiations. Specialists in sales, procurement and executive negotiations, we design and deliver customised business negotiation solutions that go far beyond conventional negotiation wisdom and unlock unconventional value.

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