Effective Negotiation Skills: Part 1

March 16, 2022 ...

In this part of the Effective Negotiation Skills blog series, we discuss the different types of negotiations, Harvard principles of negotiation and its processes. In the second part, we will focus on the must-know negotiation skills and techniques in order to bring out the best outcome from any negotiation.

What is Negotiation?

Negotiation is a constructive process through which two or more parties with opposing interests arrive at an agreement that can be respected by all the parties involved. Negotiation, which is applicable to almost every aspect of life from trading, business deals, purchasing vegetables, and even in hostage situations are just a few examples.

Types of Negotiation: 

There are 5 ways of dealing with every negotiation:

  1. Win-Lose
  2. Lose-Win
  3. Compromise
  4. Lose-Lose
  5. Win-Win

Win-Lose:

What if the party you’re negotiating with is among the ones you dislike the most? You don’t like them, and you don’t have plans to do business with them in the future. Hence, your goal would be to make the most out of the negotiation, regardless of what happens to them. Such a scenario where one negotiator gains at the cost of another negotiator are known as a win-lose scenario.

Example: A common example of a win-lose negotiation scenario would be the negotiation between a buyer and a seller of a commodity. The seller would seek to negotiate a higher price for the product, which would result in his win and the buyer’s loss.

Lose-Win:

You may, on the other hand, sympathize with the opposing party with whom you are negotiating. In this scenario, you might want to provide them with advantages you generally wouldn’t provide to other parties, despite having to incur the cost yourself.

Example: Entering into a business deal with your relative’s new small business, despite having better alternatives can be an example of a lose-win negotiation. In such a scenario, instead of negotiating the best deal for yourself, you may seek to provide advantages to the other party.

Compromise:

In this process of negotiation, the parties involved agree to a deal in which each of them gives up something from their end for their greater good or in order to achieve something they want more.

Example: An example of a compromise negotiation scenario would be when two competing businesses agree to produce less in order to keep the price of the product high, which is ultimately beneficial for both of them. Here, both parties have an incentive to produce more in order to earn higher revenue. However, doing so would also lead the other party to produce more, which will bring prices down. Hence, agreeing to a compromise will bring the best outcome for both the businesses.

Lose-Lose:

A negotiation scenario that is disadvantageous for all the parties involved is a lose-lose negotiation. It can be best understood with an example.

Example: Negotiating a budget cut in order to cut the costs would be a lose-lose scenario. Here, all the parties involved would be worse off than they were before the deal.

Win-Win:

A win-win negotiation is the best negotiation scenario, where the outcome of the negotiation is advantageous for all the parties involved. All the parties involved are better off than they previously were at the end of a win-win negotiation.

Example: Bangladesh is one the largest RMG manufacturers in the world and the USA is one the largest producers of computers. An example of a win-win negotiation would be a trade deal between Bangladesh and USA, where Bangladesh agrees to buy computers from the USA in return for being able to sell their RMG products in the US market. Since this negotiation would be advantageous for both the countries, it is a win-win scenario.

Fundamental Principles of Negotiation
Fundamental Principles of Negotiation

Harvard Principles of Negotiation:

In order to expect the best outcome from a negotiation, you should always see the other party as a partner, not an enemy. Researchers at the Harvard university established 4 principles to follow while entering any negotiation:

Number 1: Separate the person from the issue:

Consider a scenario where you enter a conference room for a business deal and the first person you see is your business rival greeting you, who also happens to be someone you despise. As a human being, this may infuriate you and you may want to negotiate aggressively, but at the end of the day, will it be any good for your business?

Instead, the best tactic for you would be to not focus on the person and try to understand what’s best for your business. To get the best results, your attention should be devoted to the problem and your goals to resolve it, not the person.

Number 2: Focus on your interest instead of the position

While entering a negotiation, you should always bear in mind that every demand has an underlying motivation. Your objective should be to try and learn more about the other party’s motivation and not to give away too much about your own.

For example, let us consider a scenario where you ask for 10 million dollars and some additional day credit in a business agreement, and the other party only wants to offer 6 million dollars and no extra day credit. All future bargaining and negotiations between the two parties will be based on this stance.

Since the other party’s offer is substantially different from what you want, the outcome of this negotiation could be determined through bargaining, where both the parties reach a middle ground through an argument. In such a scenario, there is a possibility that both the parties involved may feel that the final outcome is not what they desired.

However, an alternative scenario could be where you explain to the other party why you require ten million dollars, and the other party explains why they are only willing to pay six million dollars. This is how both parties will be able to comprehend both scenarios and choose the best outcome for them. In the end, it may end up becoming a win-win situation.

Thus, if you focus more on your interest instead of your initial stance, the possibility of reaching a better outcome is a lot higher.

Number 3: Try to invent options instead of sticking to the basics

In order to reach an agreement, you should ask the other parties what they want and appreciate.

Consider the following scenario where you and I are planning a dinner with our families and we are both in charge of finding a suitable restaurant for the night. Since this involves the opinion of the family members as well, you and I may end up spending hours, going through many different restaurants and still not being able to choose one.

But what if we asked our families what type of restaurants they preferred? Perhaps one might say that a short menu is preferable, while another would suggest that they prefer warm lighting, or that a full buffet is ideal.

Finally, based on these criteria, you and I will be able to find a restaurant that matches everyone’s preferences.

Hence, in order to reach an agreement, all the parties involved should state their requirements and try to be inventive about finding options that satisfy these requirements.

Number 4: You should have different options to choose from

As previously mentioned, in order to reach a satisfactory outcome from a negotiation, you should consider the opposing party as a friend. And an important strategy is to present multiple options, instead of just one that suits you the most.

Thus, whenever you’re in a negotiation, try to present a variety of options so the other side feels comfortable making a final decision.

Presenting only one option can put the other parties under pressure, but if the parties perceive that there are more options to choose from, they can consider the consequences of those options and choose the one that would cost them less and provide them with more benefits. This is a method of negotiation where you collaborate with the other parties, rather than compete.

Steps of negotiation
Steps of negotiation (Source: Shutterstock)

Process of Negotiation:

This is how most negotiations are conducted.

Preparation:

This is the first thing that we should look out for, before doing anything significant. Hence, before engaging in any type of negotiation, you should make every effort to be as prepared as possible.

Discussion:

Before each negotiation, both parties should have a brief open conversation in a meeting. This is also often the longest part of the negotiation process.

Clarify all targets and objectives:

After a discussion, both parties should clearly describe their demands, motivations, and benefits so that the opposite party does not miss out on any points.

Negotiation:

Now, taking into consideration everyone’s goals, both parties should agree on a point where they are both comfortable and benefited.

Agreements:

Then all the parties involved should present their final agreement, which should be completely transparent.

Formulating a plan:

Based on the final agreement, the parties involved should establish a concrete plan to execute the tasks. It is ideal for them to develop the timeline, goals, and budget for the project, after carefully considering all the limitations.

References:

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