Sunday, May 10, 2009

Laundry Day

This week, I am going to offer a laundry list of thoughts regarding negotiation. This list is meant to add to your perspective if you have viewed negotiation as a skill that you are born with, and not one you really learn.

Negotiation is a communication skill and is learned in the same way as the other communication skills. First we develop an understanding of it at a theoretical level, which allows us to use theory to make predictions regarding likely outcomes of actions. Second, we practice. As we practice, we see how outcomes vary from our predictions and refine our methods so that our actions produce predictable results. This is covered in class, when we cover HOW to practice a skill in order to optimize the mastery of it.

Negotiation is skill that can and has been analyzed and modeled to show that certain considerations and strategies fundamentally affect the outcome of the negotiation. This has been very well documented in a simple reference book named “Negotiating Outcomes” published by the Harvard Business School Press. As I said this week I am offering a laundry list of such considerations and strategies. Think about these. This material has never been included in any of my classes, but will be in my next series of classes to be held his summer. More on that later.

The key to negotiating well is planning. That is part of the model that just doesn’t change. You are far more likely to get the outcome you want if you start the process after having considered and formulated perspectives on some crucial variables. Below is a partial list.

Considerations that influence the development of your walk-away price.
- What is the real value TO YOU of the deal being presented?
- How does that compare to your best alternative (BATNA)?
- Are there other (non-dollar) values to be considered (relationships, time constraints)?
- What is the lowest amount you would consider (dollar and non-dollar)?

Considerations that influence your alternatives.
- Make a list of your alternatives to getting what you want if this negotiation fails to produce an agreement.
- What conditions weaken your alternatives?
- Can you make arrangements with other parties (suppliers, peers, customers, etc.) to improve them?
- Of all the alternatives, which is the most favorable?

Considerations that influence your understanding of the OTHER side’s alternatives.
- Have you asked questions within the industry (their suppliers or customers) that may help you determine how valuable the deal is to them?
- Do they value what they are offering you, or is it about to be a liability to them?
- Do they value what you are offering them more highly than you do?
- Have you looked at credible documents describing the state of their business (annual reports, business journals, etc.)?
- Have you put yourself in their position to try and really understand what their perspective is? Did it make sense?
- Is there anything you can do to weaken their alternatives?
- How much does the other side know about YOUR interest in the outcome?

Considerations that influence the tone and depth of the negotiation.
- How long can you spend on preparing for the negotiation? How long can you actually spend negotiating?
- What do you think represents a fair deal and how did you arrive at that?
- Would the other side accept that definition?
- What is the extent of your authority in the negotiation?
- Are you presenting a non-negotiable position?
- On what points can you be flexible?
- Can you negotiate as long as you meet a specific objective?
- Will a negotiated deal need approval before it can be finalized?
- Can you negotiate financial parameters? Non-financial parameters?
- How much are you permitted to share about your company’s current or future business?
- What terms are you authorized to change and by how much?
- Who is authorized to make changes outside of the scope of your authority?
- What authority does the OTHER party have?

This list is a good list with which you start planning how to BEGIN. Think for a minute about the impact of not considering ANY ONE of the above, and being surprised by it later.

Next week we’ll talk about some tactics.

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