Basic Negotiation Strategies

By Rob Witthauer and Rod Williams

Since our previous article focused on contracts, it seems fitting that we now discuss a few ideas for more effective negotiations. It has been said that “everything in life is a negotiation”. Thus, improving our negotiation skills is helpful not only in negotiating contracts for the Jaycees, but also in our business negotiations and in all facets of our personal and professional lives.

Know the Facts and Alternatives
The first step in any good negotiation is doing your “homework”. This involves asking yourself and others to think about the terms of the deal and alternatives available. What is the fair market price for the goods or services you are seeking? Are there other sources for those goods or services if you don’t reach an agreement with the current person you are dealing with? Getting a broad view of the deal will help tremendously.

Even if you know the answer to these basic questions already, take the time to think about the negotiation and consult with other people when appropriate. Your Chapter might be able to buy the product you need cheaper somewhere else, but will you be able to close the deal in time to use the product in the upcoming project that your Chapter has planned? Does someone in your company’s engineering department know of a new technology that you should explore? Involving people with other viewpoints can be very enlightening, and will help you understand how strong (or weak) your bargaining power really is.

Keep Your Eyes on the Prize
Once you have done your homework, be sure to keep the big picture in view and try to avoid getting de-railed with less important aspects of the deal. Try to avoid taking too hard of a position, especially early in the negotiations, because taking a rigid position can make it difficult for either side to compromise. Keeping your ultimate goal in mind is very important.

As an example, if your Chapter wants to buy orange “widgets” at $1.00 each, you might be tempted to say “we will only buy orange widgets and we will not pay more than a dollar a piece, end of negotiation”. However, what if you could buy blue widgets from the seller at 75 cents each and have them painted orange for 15 cents each – you would still meet or exceed your ultimate goal. Further, what if the seller wants to sell orange widgets at $1.05 each, but will provide free shipping and/or will accept payment over time rather than in advance (either of which could save your Chapter more than the extra five cents). Keep focused on your ultimate goal (here, orange widgets at the lowest overall cost) and assess whether there are options that might help make the deal work.

Address the Needs of Both Parties
Though people often see the negotiation process as adversarial, taking that approach to negotiations can kill a deal, and in any event does not lead to successful long-term relationships. Therefore, it is important to always consider the other side’s needs, both during the homework” phase and throughout the course of your negotiations. The reason for this is simple: if the other side’s needs are not met, you are not going to be doing business together.

Instead of taking a narrow “more for us, less for them” view of the process, consider whether there are things that you can offer that could be of value to the other side and also acceptable to your side. The free shipping and seller financing mentioned in the widget example are just a couple of the ways that it could be possible to “sweeten the deal”. Other examples include: offering to expedite production if a customer has a very time-sensitive need, or agreeing to a longer contract term of years (possibly in exchange for a lower price). These deal sweeteners can help smooth over other areas of contention, and can lead to a mutually satisfying relationship.

Don’t Get Too Emotional
Last, but possibly most important, keep your emotions in check during the negotiation process. Negotiations can and do get quite heated sometimes, so it is important to keep your focus on the goals that each side is trying to achieve. Understanding where each side is coming from, and focusing on moving the deal forward, can help you stay objective and get the deal done. For example, is the other side being aggressive because they are up against a deadline? If so, as mentioned above an expedited delivery schedule might be worth a lot to them. In a contract negotiation, it could also be possible that the other side is being inflexible because the people you are talking with do not have the authority to agree to changes – in which case you might ask if there are other people who need to be involved in the negotiation process.

In addition to those examples, when you are dealing with multiple people in a company there may be different or conflicting motivations within that company. Would the purchasing director of the other company rather see you get angry in a meeting so that he can tell his boss that your competitor (who took him golfing last week) seems much nicer to deal with? Did someone in the other company want to do the project internally, rather than outsourcing to your company? In those types of scenarios, losing control over your emotions only plays into the hands of those seeking to kill the deal.

Therefore, it is much better to take a deep breath (or a short break) and re-focus on your ultimate goal.
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Sources: Two of the leading books on negotiation strategy are Getting to Yes, by Roger Fisher and William Ury, and Getting Past No, by William Ury, and many of the ideas in this article are drawn from those books. Anyone who is interested in learning more about negotiations should consider reading those two brief, but very informative, books.

This article is intended for informational purposes only and does not constitute legal advice. There is no attorney-client relationship between the author(s) of this article and its readers. Readers should not act upon the information contained in this article without consulting with their own legal counsel.
©2005 by Roderick B. Williams and Robert T. Witthauer