Negotiating with authority--the art of the deal
Whether you call it bartering, haggling, settling, or bargaining—negotiating is a constant part of life, especially in project management. Because it is an active process, there are steps that can be taken to better plan for and approach the negotiation. In this presentation, attendees will learn useful strategies that will guide them before, during, and after the negotiation, to help ensure a positive outcome. These include knowing your opponent's desires, developing multiple exit strategies, and what not to say.
Every day, in your business life and personal life, you negotiate. Whether the topic is as informal as setting a curfew with a child or as formal as asking for a raise, the basic concepts are the same. By anticipating possible outcomes and knowing your exit plans, you'll be in a better position to negotiate successfully. In this white paper, you'll discover strategies, tools, and techniques that will help you negotiate a solution that works for all parties involved.
Everything is a negotiation. Coming to an agreement on what to have for dinner is a negotiation. We negotiate about when to meet, or how to spend the evening. Anytime you want to make something happen that involves other people, you negotiate. Most of the time, you are not even aware of having negotiated a settlement.
Negotiation is one of the oldest problem-solving mechanisms known to humanity. All things are negotiable whenever there is a difference in the needs or wants between the parties involved. Unfortunately, in modern American culture, people separate negotiations into those that are work-related and those that are part of one's personal life. The problem isn't in knowing how to negotiate. The problem seems to lie in a reluctance of one party or both parties to ask the other to discuss the issue at all.
Every project manager needs to become a proficient negotiator. Every task assignment, every decision involving the agreement of others is a negotiation. The process can be either conscious (active) or unconscious (without a strategy). Excellent managers learn to make every negotiation a conscious, active one.
Skilled negotiators quickly learn that prices and conditions are never fixed. Everything is negotiable. All transactions are negotiations. If someone tells you otherwise, they are either bluffing or are not senior enough to make the decision.
For example, when you are shopping at a very high-end clothing store, where everything is clearly priced, are the prices fixed? The junior sales clerks probably think so. Should you ask for a discount? Of course.
Why would you ask? Because they might agree. If the clerk with whom you are dealing does not agree on the spot, what are your options? Either ask to speak to someone else, or make an offer (open the bidding). Offer to buy two complete outfits instead of one, or to bring your entire family in to shop the next day. Give the clerk a reason to negotiate.
Of course, the store may not openly negotiate until your offer is very generous. You may be required to spend $20,000 on footwear to receive a 25 percent discount on sweaters. However, once they give you a number, the bidding is formally open.
Ultimately, the best deal you can agree on may not be good enough. The point is that everything is negotiable. Some people just do not realize it.
Everything is negotiable, but every negotiation is not successful. Successful negotiation has several requirements. First, the successful negotiation moves through a process before agreement is reached. Second, success requires a carefully structured plan to identify objectives, issues, and the likely position of the other party. The plan should be based in the use of a global negotiation strategy to set the tone and guide the discussion, and should identify and employ tactics that will be used either to gain a point or to maintain a position. The plan should also identify the methods to be used to deal with the other party's plan, objectives, needs, and tactics. The remaining three requirements actually reflect the need for preparation for any active negotiation. You need to be familiar with and able to recognize different negotiating styles. The ability to effectively use active listening skills and attend to nonverbal cues, and the allowance for room to compromise and make concessions, while still protecting your bottom line objectives, is also required for negotiating success.
It is also important to note that formal negotiation generally progresses through eight recognizable stages, and that the level of emotion will fluctuate significantly throughout the process (Exhibit 1). The level of emotion is highest during the very early stage (Settling) of the process. At this stage, the negotiator must be aware of, and be ready for, outbursts or strong-arm tactics. Allow a reasonable time for settling in before getting to serious issues. Note the rise and fall of emotion at the Crisis, Close, and Summary stages.
Exhibit 1: Eight Stages of Negotiating
Stage One: Settling
- Stakeholders have arrived and are seated, and each is introduced.
- Settling-down time is allowed for attendants.
- Administrative details, such as time limits, coffee arrangements, and break-off rooms are discussed.
- If a settling stage is not allowed, people can be too tense in unfamiliar surroundings and can become defensive or aggressive.
Stage Two: Opening
- Participants have settled.
- The agenda is identified and agreed. upon
- Items, issues, and objectives are discussed.
- Are you interested in accomplishing the same things?
- Have both sides planned?
- Are all items on the table?
- Major assumptions should be clarified.
- Is there sufficient time?
- Pay particular attention to the following issues:
- What is being said?
- What are the tone and style?
- What are the links between issues?
- Anxiety is usually still high, so mistakes and tough positions are common. Wait it out. It will pass.
- Minor issues can be accepted without question at this point, and if so, move quickly to the next point.
- Do not make big concessions at this point. Wait.
Stage Three: Discussion
- The discussion stage begins when both sides have presented their positions and concerns.
- Listen carefully for the complete list of issues.
- Clarify issues when it is necessary.
- Test any assumptions that arise.
- Separate simple issues that can be resolved quickly from major issues.
- Major issues (or issues that are blown out of proportion on purpose) need to be discussed further.
- Probe, challenge, and seek room for agreement or compromise.
- Use tabling and caucus when necessary.
Stage Four: Elimination
- The elimination stage begins when all information necessary to make a decision is obtained.
- Minor issues can be agreed upon or eliminated.
- Trade off major issues; never give them away.
Stage Five: Crisis
- Crisis does not always occur, but it is common.
- Crisis can happen when the following events occur:
- Someone feels that they are losing or being pushed beyond their authority.
- Someone is not prepared.
- A major point has been held back.
- Anger or emotions begin to rise.
- Real agreement is close at hand. For this reason, it is time to start trading concessions and move to close an agreement.
- Some participant(s) may dig in their heels and withdraw.
- New and significant issues or a slate of information surfaces.
- Threats to escalate over your head, walk-out, or strike are made (although usually none of these will actually happen).
- It is time for a cool appraisal of the situation, so maintain self-control.
Stage Six: Agreement or Closing
- Trades and concessions are offered in order to reach an agreement.
- This is not the end.
Stage Seven: Summary
- The negotiator should verbally summarize, or recap, the agreement to ensure that all parties agree.
- Don't fall prey to the “nibbler” who waits until agreement is reached before asking for little extras.
- Informal negotiations may end here, but formal negotiations do not.
- Be sure both sides are okay and can support the agreement, and if they are not, discuss the issues further.
Stage Eight: Minute Drafting
- Prepare a written summary of the agreement, and identify any action required by either party.
Negotiations do not need to be battles. In fact, they should not be battles. The vast majority of negotiations are between you and someone with whom you are working and will therefore be negotiating with again in the future. It does not make sense to treat negotiations as a win-lose proposition.
The art of negotiation involves coming to an agreement that constitutes a good result for both sides. Both sides need to come out ahead. Having one side appear as the loser only creates animosity and vengeance motives for the next negotiation. Whether or not one side leaves a negotiation feeling like they've lost depends entirely on the way in which negotiations take place. It has almost nothing to do with the terms of agreement. If you think you were cheated, you were. Successful negotiations result in both sides being satisfied with the agreement.
Skilled negotiators prepare in advance for the negotiation. While preparation can involve as little as a few minutes making notes and thinking about strategy, some kind of preparation is always necessary. Preparation time is never wasted.
You cannot be overprepared. The more significant the negotiation, the less likely you are to be fully prepared. The key to preparation is to learn as much as possible about what the other side wants and needs. It is also vital to know what you want from the negotiation. Compare what you want with what the other side wants and look for crossover. Enter the negotiations with compromises in mind.
Put yourself in the shoes of those with whom you are negotiating. Instead of saying, “This is good for me…” refer to the same point but start with “The reason this is perfect for you is….” Sell your offers by phrasing them from the other side's perspective.
Psychological issues should not be overlooked. Money is not as important to some people as is the appearance of having won. Ego, self-esteem, and image matter a great deal to some people. Find out how much they matter to either side and include them as variables in the negotiations.
If you know what the other person wants and needs, you can dictate the terms. The more you know about the other's position, the less ground you will be forced to give. Negotiation would be unnecessary if everyone's position were clear. We negotiate because the other side's position is unknown. Negotiating reveals the other side's position. The more you know at the outset, the less revelation is necessary. Knowing what the other party wants and needs is very helpful in coming up with bargaining points that allow both sides to win. If the other party really wants something that matters little to you, plan to give it to them. In exchange, you can expect something that truly is important to you and of minor importance to the other party. Both sides win.
Deep into a negotiation it is easy to forget what you thought was a good deal before negotiations began. Decide in advance what you would accept (minimum), what you would be content with (target), and what would be a great deal (best case). Keep reminding yourself of these during the negotiations. Never go below your original minimum and do not try for the moon. Do not change your objectives because it becomes possible to squeeze more out of the other side. Allow the other side to win as well.
Remember that everything is negotiable. Do not be constrained by rules and policies as barriers. Say, for example, that you are in the middle of negotiations with a big customer. The basic purchase price has been established, and you are discussing details. In response to your statement about shipping cost, the purchasing manager says, “I wish we could cover that, but the president of the company has made it very clear that we are not to pay shipping charges on capital goods.” Is a statement like this any reason to give up on the issue? Not a chance. It may be true, or it could be completely fictitious. But even if it is true, the issue remains open. Smiling pleasantly, you might respond with, “Well, okay, if that is that way it has to be. You can take delivery of the machinery at our plant if you want to; doesn't make sense to me, but it is up to you.” If the person you are dealing with truly believes that rules (price tags and policies) are inviolate, you need to be negotiating with someone else.
A negotiation that is important to you may not be important to the other party. Set the parameters early. Get their attention. Let them know what the worst-case or best-case scenarios are. Do not assume that they know.
A sales person will haggle for days with a purchasing agent over the price of paperclips. If the CEO gets on the phone, the same salesperson immediately caves in. That is the effect of clout, the size of someone's shadow. The bigger your image, the more readily others will defer to you.
Someone's presence can be real or imagined. Certainly most are exaggerated. The more expertise you have on your side, the better. Most people will claim to have a great deal of expertise, regardless of whether or not it is true. The shadow of one's position can be extended by taking the moral high ground, having fairness on your side (or claiming to). You can also invoke company policy, tradition, and cultural norms as being on your side. These will all make your arguments loom larger.
Say that a salesperson comes into your office as she is ending a call on her cell phone. “I am certainly going to try. Yes. Yes. If we can. We are pretty backed up…okay…Can I call you back, I'm in a meeting…Thanks, bye.” She rushes into your office, all smiles. “Sorry about that. The orders are starting to get backed up. What a pain. That's why I called: I want to get yours scheduled in as soon as possible.”
What is the obvious implication of the salesperson's opening claim? That her business is brisk and your company needs to place an order right away or take a chance on late delivery. Should you believe it? No. It would have been easy for the salesperson to avoid that scene; she is already negotiating.
Develop multiple exit options. Having only one option can make a negotiator desperate. If there is only one outcome (one set of conditions) that you desire from a negotiation, it will quickly become obvious to the other side and it will cost you.
If there is something that you “must have,” then you had better be prepared to give up much in return. Suppose, for example, that you very, very much want to schedule vacation for the first two weeks of July. Unfortunately, your boss claims that everyone else want to do this, too. Before meeting to negotiate the schedule, come up with workable alternatives. Would three weeks in August be almost as good? Would one week in early July and one in late July be good enough? The more exits you create, the better your bargaining position. Never let it be known that you are desperate. Never let yourself become desperate.
Getting to Agreement
An opening bid should be packaged with the intention of meeting everyone's needs. Phrase your opening bit as a compromise and include benefits to both parties. Explain how the offer works for everyone. Make it accommodating.
Your first bid should be high: the best-case scenario. Opening high leaves room for you to give concessions while still meeting your target. Brinkmanship is a dangerous game. “Take it or leave it” statements announce the end of negotiations. Say it only if you mean it.
The opening bid establishes positions on both sides. Next comes the process of narrowing the gap between the two positions. The key is discussion. The more honest and plentiful the discussion, the better. Keep the other side talking and listen for clues as to what they actually want. It is best to start the discussion by going over points on which there is agreement. This can make the two positions seem less far apart. It will also make the effort to complete the negotiations seem less daunting.
The discussion should be focused on generating scenarios that might work. Both sides should make suggestions. Be creative. Help each other to narrow the distance between your positions. Look for areas of agreement and build on them. Do not be the first to give ground. Let the other side make the first concession. When you do dive in, concede ground slowly.
Pay attention to the nonverbal cues. Watch the other person's body language, since it will reveal what interests him or her and whether the person is impatient. Occasionally, summarize points on which both sides agree. Take the time to remind everyone of how far all of you have come. Also, be willing to use silence. It can be disconcerting. Let the other side fill the void; often it will be with a concession. Be patient.
When you have reached an agreement, or think you have, paraphrase it to make sure that there are no misunderstandings. Then put it in writing—the sooner, the better. Thank the other side and apologize if voices were raised or harsh words exchanged. Never gloat. It will always come back to haunt you. The more humble you remain after a win, the more likely you are to win the next time. Many people are going after the appearance of winning (image) and will concede substance (money) if they are treated like the winner.
You cannot be overprepared when you are entering into negotiations. Find out everything you can about the other side. What do they want and what do they know?
Set high goals. Use the goals as your opening bid. Be sure to have established your minimum and target levels. Do not become greedy if things are going your way. Allow everyone to win.
Try not to fixate on a single issue. Develop a wide range of negotiating points and issues on which you are willing to give and take. Try to imagine points on which you can give concessions. It is possible that little or no negotiating will be necessary.
Do not make enemies. Develop solutions that serve everyone. Treat the negotiations as a problem solving exercise. How can everyone win?
© 2009, Samuel T. Brown, III
Published as a part of 2009 PMI Global Congress Proceedings – Orlando, Florida