Management Development Insights

Actionable articles and insights for busy executives



Negotiation Techniques – Essential Principles

There is a large body of information that one can study to research the art and science of negotiation in one’s personal life or at work.  To become a smart negotiator requires knowledge, preparation and experience, just like in any other field.  But this article will get you started with first, essential principles….

BATNA

BATNA is the acronym for Best Alternative To a Negotiated Agreement. It is one’s course of action in the absence of a deal, if the negotiation does not succeed.  Knowing your BATNA means knowing what you will do or what will happen if you fail to reach agreement in the negotiation. For example:
Your organization is in discussion with a vendor about provision of security guards for a 3-month project. You are not clear yet what price you will be able to negotiate.  You also know that another available alternative is that you hire the guards yourself. You have calculated this will cost you Rs.60,000 all-inclusive over 3 months.

This is a BATNA. Now you have some idea of what to expect, and what sort of ball-park figures to negotiate. Always know your BATNA before entering into any negotiation. Otherwise, you won’t know whether a deal makes sense or when to walk away. In general, remember that the more alternatives you have, the stronger is your negotiating position. When you have no alternatives, you let the other side dictate terms.

Reservation Price

The reservation price (also referred to as the walk-away) is the least favorable point at which one will accept a deal. If you are a seller, then this is the price below which you will not sell. For example, in you are selling your car, you may decide that your Reservation Price is Rs.350,000. This means that you will just not accept any offer that is below this level. If you are a buyer, you may decide that you will just not buy the car if it is more than Rs.500,000. This is the buyer’s Reservation Price. It is good practice to know your Reservation Price before the negotiation.

Zone of Potential Agreement (ZOPA)

The ZOPA is a third key concept to remember. ZOPA is the area or range in which a deal that satisfies both parties can take place. Put another way, it is the set of agreements that potentially satisfy both parties.

Going back to the car example:

Seller Reservation Price    Rs.350,000
Buyer Reservation Price    Rs.500,000

Therefore ZOPA is 350,000-500,000

If you can somehow find out about the Reservation Price of your counterpart, this gives you a big edge. If you don’t know, but have done some guesstimation, this is still better than not thinking about this issue at all.

It is important to remember that negotiation is not just about price. Here are some common sense principles that can make you a smarter negotiator irrespective of type of negotiation:

Have the Alternatives to Walk Away

Never negotiate without options. Remember, the one who sets the price and terms is the one who can walk away

Get the other side to commit first

Their first offer may be much better than you expected. It gives you information about them before you have to tell them anything.

Act like you are not that Smart

When you are negotiating, you’re better off acting as if you know less than everybody else does, not more. You should not overdo this of course as that can reduce your credibility. A good question to use here is “I don’t know, what do you think?”. The smart negotiator who understands the importance of acting dumb retains these options:

“I need more time to think about this”
“I’ll check with my managers and finance people and come back to you”

Be Assertive

Successful negotiators are assertive and challenge everything. They know that everything is negotiable. You cannot negotiate unless you are willing to challenge the opposing position. Being assertive means asking for what you want. Note that there is a difference between being assertive and being aggressive. You are assertive when you take care of your own interests while maintaining respect for the interests of others.

Listen Well

Negotiators are probers. They ask probing questions and then shut up. The other negotiator will tell you everything you need to know – all you have to do is listen. Many conflicts can be resolved easily if we learn how to listen. The catch is that we are so fond of making sure that people hear what we have to say.

The 10-second strategy – silence makes most of us uncomfortable. Try this test: the next time you are negotiating with the other party, and they say something like “well, that’s my offer,” don’t utter a word for 10 seconds. It’s very likely they will jump in with another offer or more information, anything to break the silence. When you get comfortable with 10 seconds, raise it up to 20 seconds.

Aim High

People who aim higher do better. Don’t set limitations for yourself – that’s the job of the other party. If you expect more, you’ll get more. Successful negotiators are optimists. A proven strategy for achieving higher results is opening with an extreme position. Sellers should ask for more than they expect to receive, and buyers should offer less than they are prepared to pay.

Don’t Accept the First Offer

If you do, the other negotiator will think they could have done better. (It was too easy.) They will be more satisfied if you reject the first offer — because when you eventually say “yes,” they will conclude that they have pushed you to your limit.

Don’t Make Unilateral Concessions

Whenever you give something away, get something in return. Always tie a string: “I’ll do this if you do that.” Otherwise you are inviting the other negotiator to ask you for

2 Comments

  1. Aamir you’re right – it’s hard to remember all of these points – in my opinion, the key ones are BATNA, Reservation Price, Have the Alternatives to Walk Away, Get the Other side to Commit First

  2. very good. it might be difficult to practice all of them during a session. but its good to keep them in back of your mind and try practicing them one by one.
    i personally think there is no use of a negotiation unless you know at least your BATNA & ZOPA.

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