“Winging it” is a fine approach to life’s minor decisions, but when you negotiate, it can be disastrous. Follow these three preparation steps to improve your negotiation outcomes.
Knowing When to Negotiate
You set up the contract renegotiation with a key client months ago. You had every intention of gathering a range of information to establish realistic goals and assess the client’s needs, but short-term projects got in the way. Suddenly it’s the day before the first meeting. Aside from making a few phone calls and calculations, you’ll have to wing it—but that’s OK. You’ve always worked well under pressure. Right?
We all know we’re supposed to prepare to negotiate, yet we often fail to follow through on these best intentions. That’s a problem because research overwhelmingly shows that underprepared negotiators make unnecessary concessions, overlook sources of value, and walk away from beneficial agreements.
Lack of preparation probably has cost you in past negotiations, and a greater commitment to planning could improve your outcomes significantly. The three steps outlined here question your assumptions, set the right table, and get ready to create value—will put you on a better path. In addition, the preparation worksheet offers a detailed checklist to help you gear up for your next round of talks.
1. Question your assumptions
In their book Everyday Negotiation: Navigating the Hidden Agendas in Bargaining (Jossey-Bass, 2003), Deborah M. Kolb and Judith Williams describe a number of pitfalls that turned up in their interviews with negotiators: passing up opportunities to negotiate, sacrificing our own needs for those of others, seeing only our weaknesses, and, conversely, feeling overconfident about our strengths.
These traps, which are in part psychological, inhibit preparation. After all, if you’re insecure about how your achievements stack up against those of your peers, you’re unlikely to analyze the size of the raise you should request during your next performance review. Insecurities inspire a defeatist attitude. Concessions become the path of
False perceptions about the negotiation process itself also keep us from preparing adequately. Consider that people tend to view negotiation as a competition between parties fighting over the biggest piece of a “fixed pie.” Even when negotiators prefer the same outcome, they tend to believe that the other side’s interests are opposed to their own, researchers Leigh Thompson and Reid Hastie have found. In a labor negotiation, for instance, company management and union officials may both want to increase employee computer training, though for different reasons. Yet the two sides may assume that their interests are completely opposed and fail to realize this shared goal.
“Before you can negotiate effectively with others,” write Kolb and Williams, “you may have some negotiating to do with yourself.” Psyching yourself up to negotiate—and generating the enthusiasm you need to prepare thoroughly— starts with a shift in attitude.
Begin by doing an inventory of your skills and experience. Reflect on past successful negotiations. By identifying your talents and resources, you’ll enhance your sense of control. In addition, share your concerns with colleagues, friends, and experts. Feedback from those who’ve “been there” will give you fresh perspectives. You must also start looking at negotiation as a collaborative enterprise rather than a battle of wills.
Negotiators form the most mutually advantageous agreements when, in addition to claiming value for themselves, they trade on their differences to create value. It may seem paradoxical, but by adopting a cooperative mindset, you are more likely to get what you want.
2. Set the right table
Negotiators often overlook the importance of setting up the right deal, David Lax and James Sebenius write in 3-D Negotiation. That’s in part because managerial training tends to focus on only two “dimensions” of negotiation: “one-dimensional” tactics (such as persuasion and interpersonal skills) and “two-dimensional” deal design (such as trading on differences). Though crucial, tactics and deal design won’t take you far if you’re negotiating at the wrong table over the wrong issues. “Setup moves” away from the table, according to Lax and Sebenius, add an essential third dimension to negotiation.
A different party of two.
Here’s an example.
After eight years in business, Lori wanted to expand her thriving upscale restaurant without relocating. The shoe store next door was unwilling to move, but the owner of the yoga studio on the other side claimed to be willing to negotiate a buyout of her lease. During their first sit-down, however, the studio owner blurted out a figure so high that Lori had to stifle a laugh. Lori appeared to be facing two undesirable choices: haggle with her greedy neighbor or continue to turn away diners and profits. Then she started thinking creatively. The building housed several other businesses. Their entrances were around the corner from Lori’s, but they were connected to the restaurant by a back hallway. If one of these businesses was willing to move, Lori could create a separate dining room and link it to her restaurant.
Sure enough, Lori found a new negotiating partner in Jesse, the owner of a comic-book store. A year ago, he had signed a seven-year lease on a large space. Business was slower than he’d hoped, but he didn’t want to close up shop. He did have another idea, however: “What if we built a wall down the middle of my space? I keep one half, and you take the other. You pay more rent; I pay less.”
Lori thought it was a great idea. She could cover the extra rent on the long, narrow space with just one private party a month. Their landlord approved the wall and renegotiated Lori’s and Jesse’s leases. Jesse paid for the wall, and Lori began supervising her renovation. Together, Lori and Jesse created a deal that would help one business survive and another grow. The lesson: Before you engage in a given negotiation (or whenever talks stall), consider whether a better deal might be lurking around the corner.
3. Get ready to create value
For most negotiations, you’ll need to invest considerable time in preparing to create value at the table. First and foremost, this means assessing what you and your counterpart will do if you don’t reach an agreement.
Fall in love with three.
In his book Smart Money Decisions, Max H. Bazerman describes one of the occupational hazards of being a negotiation expert: the Sunday night phone call from a friend who fell in love with a house that day at an open house and quickly submitted a bid. Now the friend is desperate for advice on closing the deal. These calls put Bazerman in the awkward position of telling friends that they’ve already violated an important rule of negotiation: “Fall in love with three, not just one.” Why devote time and energy to falling in love with three houses when you want just one? Because the knowledge that you have other appealing alternatives increases your power in the current negotiation, giving you the confidence you need to walk away rather than conceding too much.
Size up alternatives.
Finding attractive alternatives to the current negotiation will help you identify your best alternative to a negotiated agreement or BATNA. In the context of a negotiation for a particular house, your BATNA might be to stay in your current home or to make an offer on another desirable house. If you reach an impasse, you will be left with your BATNA. That’s why you should prefer any negotiated agreement that offers more value than your BATNA to an impasse.I t’s just as important to estimate your counterpart’s BATNA.
Consider that a homeowner who is relocating to another state will be more motivated to sell than one who is simply testing the real-estate market.
The market tester has a better alternative to agreement—staying put—than someone faced with the prospect of trying to sell an empty house long-distance. It stands to reason that a person who is relocating will bend further than a market tester on price and other issues.
Assess the bargaining zone.
Estimates of BATNAs will give you a sense of the bargaining zone, or zone of possible agreement (ZOPA),in your negotiation. If it seems that both parties have better options than bargaining with each other, it might make sense to call off talks for the time being.If a bargaining zone exists, however,brainstorm proposals that could inspire a mutually beneficial agreement before sitting down with your counterpart. Specifically, look for packages that greatly exceed your best alternative while also exceeding the other side’s BATNA.
This prep work should lead you toward what MIT professor Lawrence Susskind calls the “trading zone”—that space within a negotiation when parties capitalize on differences to create value. Like negotiation itself, preparation needn’t be a chore. Once you achieve the better outcomes that result from better planning, you’ll find yourself clearing space on your desk—and in your mind—to plot out the process.
After reading this, are you ready to negotiate? What else do you wish you knew?
Adapted from “Are You Really Ready to Negotiate?,” first published in the September 2007 issue of the Negotiation newsletter.
Originally published April 2014.