This week, I attended an intense four-day negotiation skills training course. As commercial negotiations are not a part of my job, I have not developed the related skills. I thought I would share some reflections here, as I found it quite insightful.
At my company, we put 56 of our senior leaders through this program this year. Curious to understand more about the program, its content, and how to help the participants apply the learning on the job, I accepted an invitation from the company that runs the program for us, to attend an open session in Manila, held for prospective customers.
Here are some things I learned about negotiation this week, and how I see this applying to me life – even though I don’t do commercial negotiations as part of my job.
The first realization: not all negotiations are the same. This might seem obvious, but people tend to adopt behaviors that are appropriate for only certain types of negotiations. Because of this, they are not as successful in other types of negotiations, because they are using the wrong behaviors.
The different types of negotiations are defined by two factors: the complexity of the deal and the dependence of the relationship between the parties. In a simple deal between two parties who will likely never see each other again (bargaining at Chatuchak Weekend Market in Bangkok, for example), you can haggle over the price. In a complex deal between two parties whose fortunes are intertwined (what helps you will also help me and vice-versa), a more diplomatic approach is necessary – one where trust is high.
The implication for me: recognizing that I’m generally better at negotiations that are more on the diplomatic end of things, where trust-building is necessary. Because of this, I need to treat negotiations that are more on the haggler end with a more appropriate set of behaviors: I need to speak less, listen more. I need to state my position or offer unambiguously and then stay quiet. I need to make more extreme opening positions and then have a stepped plan to move into a more acceptable range of prices. And I need to flinch when a counter-offer is made.
The second realization is the idea of creating more value. When people see a negotiation as only a give-take scenario (“who gets the largest slice of the pie”), it limits the possibilities. As you move towards more diplomatic negotiations, you have an opportunity to increase the overall value of the deal.
The analogy the instructor used was of poker chips. Imagine there is a stack of blue chips on the table. They represent the price of what is being negotiated. That is a major variable and we will negotiate over who gets how big a share of those chips. But there are other chips, too.
In your hand, you have green chips. And your counter-party has red chips. Chose chips represent variables that have low marginal value for the person holding them, but which could provide high additional value for the other party. The negotiation can proceed as a series of “if you, then we” statements:
- If you could increase the payment terms by 30 days, we could increase our total order by 1,000 units.
- If you could reduce the price by 10%, we could run a special promotion featuring your products on our website home page and give you a featured location next to the cash register.
- If you could help me fold the laundry, I could walk the dog after dinner.
These conditional trades allow much more value to be added to the deal, so that everyone has a greater satisfaction with the outcome. It takes understanding what variables are important to you and some research and assumptions about what variables will be important for the other party. And it takes a lot of trust-building behaviors.
The implication for me: spend more time thinking about what is important to other parties and consider how I can create more value by adding things to the deal in exchange for other things that are valuable for me. As the instructor put it, “if you give something, you get something”.
The week was a busy one and it was personally fulfilling. I have a lot more to learn about negotiation and the best way is to practice. So if you have any negotiations you are preparing for, I would be happy to talk through them with you and help you plan your strategy.