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Three Sources Of Power In A Negotiation

Getting what you want out of a negotiation is all about making sure that you have power
Image Credit: Mark Probst

When you walk into a negotiation, you know what you want to use your negotiation styles and negotiating techniques to get out of the negotiation. However, just exactly how you are going to make that happen may still be a bit of a mystery. However, in order to get what you want, you need to make sure that you have the power that you need in order to influence the other side to give you what you are looking for. As a negotiator, this means that you are going to have to identify your sources of power and understand how to go about using them.

BATNA

In every negotiation, you need to realize that the other side may say “no” to you. You could put the best proposal in the world on the table in front of them and for whatever reason, they might take a look at it and say “no”. There isn’t a thing in the world that you can do about this. Except come to the negotiation prepared.

Your best alternative to a negotiated agreement, or BATNA, is often your best source of bargaining power. What this does for you is to allow you to spend some time thinking about what you would do if the other side told you “no”. What options would you have if this occurred? If they say “no”, you’re not going to be stuck. Instead, you are going to have to take another set of actions and your BATNA is what’s going to show you the way. By having a strong outside alternative, you gain the power you need to walk away from an unappealing deal.

It’s All About The Role

Who are you and what are you doing involved in this negotiation? For that matter, who is sitting across from you at the negotiating table and why are they there? Just because someone is involved in a negotiation does not necessarily mean that they really should be there. This is where roles come into play.

Your power as a negotiator can come from a strong role, title, or position, such as a high rank in your organization. Likewise, the person sitting across from you may have a similar role, title, or position. How these sets of roles line up says a lot about who has the power in the negotiations. If you have the greater role, then you are in a stronger position and you can use your increased power to more easily get what you want.

The Power Of Psychology

What’s sorta amazing about power in a negotiation is that it’s not real. What this means is that you can’t touch it, you can’t see it, and your certainly can’t measure it. This means that you really don’t know how much power you have when you are sitting at a negotiating table. You also don’t know how much power the other side has.

The good news here is that you have as much power as you want to have. As a negotiator, you can bring a sense of psychological power to the table—the feeling that you’re powerful, whether or not that’s really the case. This means that anytime you are preparing to enter into a negotiation, you can first take a moment to build up your feeling of power. You can imagine yourself as being all powerful and able to achieve anything that you want prior to the negotiations starting.

What All Of This Means For You

The goal of every principled negotiation is to get what you want from the other side. In order to convince them to go along with what you are asking them to do, you need to have the power to make them see things your way. As negotiators, we’d all like to have more power, but it’s not always clear where the power that we need in a negotiation comes from.

When a negotiation starts, we need to be aware of just exactly we would do if we were not able to reach an agreement with the other side of the table. In the world of negotiating, this understanding is called a best alternative to a negotiated agreement, or BATNA. Everyone who participates in a negotiation is there for a reason. Their company or organization believed that they could use their role in order to convince the other side to accept the proposal that they’ve made. This is why it is very important to be aware of everyone’s role so that you can see who has more power. In a negotiation, power is a strange thing. It can’t be seen or touched. This means that if you imagine that you have a lot of power before you go into a negotiation then it turns out that you will have it.

To get what we want in a negotiation requires us to have power. In order to have power, we need to understand where power comes from and how we can get more of it. If we carefully identify our sources of power and then take the time to cultivate and harvest as much power as we can, then we will have improved our chances of being successful in our next negotiation.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: What can you do to reduce the amount of power that the other side has in a negotiation?

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What We’ll Be Talking About Next Time

Mutually beneficial agreements are something that is often talked about, but does anyone really understand what is meant by them? Different negotiators view them in different ways. Some believe that a mutually beneficial agreement simply means that both sides have used their negotiation styles and negotiating techniques to jump into the negotiation and attempted to get as much of the limited resources being negotiated as they possibly could. It turns out that this thinking is wrong. There is a lot more to mutually beneficial agreements than you might think…

What’s The Best Way To Deal With A Crisis Negotiation?

When a crisis happens, a negotiator needs to know what to do
Image Credit: Shelter Scotland

So just exactly what is a crisis? Let us agree that at every firm the definition of what a crisis is can differ. I think that most of us could agree that a crisis is probably an unexpected event that everyone agrees represents a high-priority issue that needs to be solved. When a crisis occurs, most companies can shift swiftly and efficiently from day-to-day operations into crisis-management mode. In the world of negotiations, a crisis can involve a tumble in the company’s stock price, a building evacuation, or even a product recall. How can a negotiator use his or her negotiation styles and negotiating techniques to help his or her company get though a crisis effectively?

Get Ready

The one thing that you don’t want to have happen is to be surprised when a crisis is suddenly upon you. Instead, your company can benefit from putting crisis-management plans in place before anything happens. As an example, during talks with a new business partner, discuss the possibility of a dispute arising during the life of your contract and how you might handle it.

For example, you might insert a clause requiring that you meet regularly to discuss problems that have come up and how to address them. You might also include contract provisions for dispute resolution, such as requiring the parties to engage in mediation before filing a lawsuit. Taking steps like this can help to ensure that if a crisis does show up, you’ll see it coming and you’ll be ready for it.

Come Up With Some Ground Rules

Sure, you’ll try your hardest to avoid getting your company into a crisis but somethings that just isn’t possible. Bang – there you are. If you do find yourself in the midst of a crisis negotiation, take time before you begin substantive talks to establish the ground rules. For example, you might suggest that you make an explicit commitment to being honest and to following up your promises with actions.

The people who deal with hostage situations tell us that hostage negotiators earn hostage takers’ trust by being honest with them. Ground rules establish a foundation for trust, and they also give you room to say no to extreme demands that the other side may try to impose on you. Hostage negotiators find that hostage takers become more willing to accept a denial of their requests when they believe they are being treated ethically. Use this information in your next crisis negotiation.

Deal With Emotions

Any sort of crisis situation will tend to bring out the emotions in everyone who is involved. Once again, we can turn to the hostage negotiators in order to get guidance on how best to deal with our own emotions. Hostage negotiators have developed effective strategies for managing those emotions. These negotiators stress the importance of listening carefully to a hostage taker’s demands with the goal of identifying his primary underlying problem or motivation.

Common hostage negotiation tactics include managing the hostage taker’s anxieties through active-listening techniques, such as self-disclosure, paraphrasing, and supportive remarks. Similarly, business negotiators dealing with a crisis need to remember that time spent exploring the emotions behind a counterpart’s stated positions is never time wasted. We need to keep in mind that what the other side is saying may not really be what they mean.

Take Your Time

Due to the excitement that often surrounds a crisis negotiation, we can very quickly start to feel rushed. We may start to believe that we need to get this negotiation wrapped up as quickly as possible. Somewhat surprisingly, hostage negotiators advise us to slow down the negotiation process.

Their thinking is that because hostage takers’ strong emotions have a tendency to de-escalate over time, negotiators suggest patience. A hostage negotiator’s thinking is that time is on their side and so they can go ahead and take all of the time that they feel that they need. Working methodically through a charged situation is usually the best approach for a negotiator.

It’s All About Relationships

Your relationship with the other side of the table is going to end up playing a big role in how the negotiations turn out. As an example, when a police negotiator tells a hostage taker, “We’re in this together,” he’s not just saying that to calm the other side down.

Rather, the negotiator is trying to create the kind of bond that will allow the parties to find a solution to the crisis together. Similarly, in the business world, the other side’s problem is your problem also, so you need to focus on collaborating on an agreement that satisfies you both.

What All Of This Means For You

Every principled negotiation can be a challenge. However, at times your company or you may find yourselves facing a full-on crisis. If this happens, then all of a sudden the old rules for how you deal with a negotiation can go out the window and we need to come up with a different plan for how we’re going to reach a deal with the other side.

There’s no reason that you need to be surprised by a crisis. Instead, take the time to talk with partners and business associates and make sure that you have contingency plans in place in case the unexpected happens. Every negotiation needs to have some ground rules and a crisis negotiation is no different. Use your ground rules to set up trust between both sides. Emotions will play a big role in any high-stakes crisis negotiation. Make sure that you manage your emotions and those of the other side. Don’t feel rushed, it turns out that even in a crisis negotiation you really have all of the time in the world. Finally, realize that the way that you’re going to be able to reach a deal with the other side is by creating relationship with them. Take your time and do this correctly.

No, a crisis negotiation is not fun. It’s an even higher level of stress than you are used to in your normal negotiations. However, the good news is that the people who deal with these types of negotiations all the time have some great suggestions for how we can go about getting to the deal that we need. Take your time and treat your next crisis negotiation just like you’d treat any negotiation and you just might be surprised at how well it turns out.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: In a crisis negotiation, do you think that it is better to go it alone or should you have a team with you?

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What Role Do Emotional Triggers Play In Our Negotiations?

We may not understand just how much emotional triggers influence us
Image Credit: Luis Fernando Chavier

I want you to spend a moment thinking about the last time that you walked into a room in order to start a negotiation. Where was your head at? Did you look across the table and see reasonable people who were there trying to find a way to reach a deal with you? Or were you so focused on the fact that the EggMcMuffin that you had ordered this morning had somehow come with no egg and that you had then proceeded to spill coffee on yourself? We often think that we can separate being upset and all of the emotional triggers that come along with that from the negotiating task at hand, but can we?

The Impact Of Emotional Triggers

As a negotiator, we need to understand that the decisions that we make are always based to some extent on our feelings. What we need to do is to take the time to understand where our emotions are coming from and how they may impact our negotiation styles and negotiating techniques. If it is possible for us to identify the source of one of our emotional triggers, then we will be able to ensure that it becomes less likely to influence our negotiating decisions. If we can acknowledge the source of what is making us unhappy, then we’ll be able to defuse its impact on our decision making ability.

How To Defuse Emotional Triggers Before A Negotiation

Before a negotiation starts, you are going to want to find the time that you’ll need in order to take an inventory of how you are feeling. What you will be trying to do is to recognize and defuse your own incidental emotions. The best way to go about starting this process is by identifying your emotional triggers.

You need to understand that whatever your emotion triggers are, there is the very real possibility that they may be influencing the negotiations. It’s this influence that makes it so important to identify them. Awareness of this possibility will improve your odds of recognizing the effects of such triggers in the heat of the moment.

Defusing The Other Side’s Emotional Triggers

Just as we may show up for a negotiation with a set of emotional triggers, so too may the other side. As a negotiator we need to understand that just as our own emotional triggers may stand in the way of our being able to reach a deal with the other side, so too may their emotional triggers stand in the way of their ability to reach a deal with us. The first thing that you need to be aware of is that the emotion that the other side is feeling may have nothing to do with you.

The next thing that you are going to want to do is to take the time to detect that the other side is bringing their feelings to the negotiation. Once you’ve been able to establish this, you are going to want to help them to draw a connection to the source of these feelings. One way that you can go about doing this is by asking open-ended questions such as “Terrible weather outside, isn’t it?” or “How was the drive to get here?” Doing this can go a long way toward minimizing the influence of negative emotions on judgments and choices on the negotiation from their point of view.

What All Of This Means For You

When we show up for a principled negotiation, we are not arriving alone. All too often we have a tendency to bring our own set of emotional triggers along with us. What this ends up meaning is that we may not be able to reach an agreement with the other side of the table simply because we’ve got issues. We need to learn how to deal with our emotional triggers in a way that won’t impact our negotiation.

The first step in dealing with emotional triggers is to understand the impact that they can have on a negotiation. If we can take the time to understand where our triggers are coming from, then we’ll be better positioned to deal with them. Our goal should be to defuse emotional triggers before a negotiation starts. To do this we need to identify them and then be able to recognize them during a negotiation. If the other side shows up with their own emotional trigger issues then we need to provide them with help to defuse them if we want to have any hope of being able to reach a deal with them.

As negotiators we need to understand that we are complex creatures. We can bring outside influences into a negotiation and these can hinder our ability to reach a deal with the other side. Being aware that this is a potential problem for both side of the table and then taking steps to deal with it is how we’re going to be able to reach the agreements that we want in our next negotiation.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: Do you think that working with someone else would be the best way to discover what your emotional triggers are?

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Tips From A Negotiator For When You Want To Buy A Car

Negotiating is how you get the best deal when you want to buy a new car
Image Credit: Laura Cummings

Even the best negotiator in the world probably does not look forward to the process of buying a new car. They know what they are in for: a lengthy process in which they have to go back and forth with a salesperson, using all manner of negotiation styles and negotiating techniques, haggling over details and, of course, the price. Since there is so much information available on the Internet, for anyone to walk into a car dealership without having done some online research would be a big mistake. Given that nobody likes the process and you can collect a lot of information before you start, what is the best way to negotiate to buy a car?

Pick Your Negotiation Process

Since we now find ourselves living in the 21st Century, this means that we have a number of car buying options that have not been available to us in the past. What this means for you is that you now have the option to enter a dealership and negotiate with a salesperson just like we have always done. However, you also have the option to put out a request for bids on the Web. You are going to have to decide which approach is going to best meet your needs.

One key factor in deciding which way to go is to determine how well you know what you want. If you’ve taken the time to pick out a car that you want down to the very last option, then by all means let the Internet do the negotiating for you. You are going to have to be careful here. The internet dealer who tells you that he or she has the best deal for you may try to renegotiate once you show up in person. If your final decision will depend on cost, then negotiating face-to-face at a dealership is probably your better choice.

Keep In Mind That You Can Just Walk Away

One of the things that too many car buyers seem to forget is that they are the ones who really hold the upper hand in this negotiation. Experienced negotiators like to use exclusivity as a bargaining chip as a part of any negotiation that they are involved in.

This is a tactic that you can use when buying a car. What you need to do is to think about how the salesperson that you are dealing with sees the world. If you walk out the door without signing on the dotted line, the deal is probably dead and they won’t be making any money. This means that you can exercise your option to walk away in order to extract further concessions from your salesperson.

Remember Your BATNA

As you go shopping for a new car, there is one very important point that you need to keep in mind. This is the simple fact that although you may want a car, you don’t need a car. Yes, yes, the car that you have been using may have died and you are worried about how you are going to get to work tomorrow, but in the age of Uber you always have alternatives.

If you still feel stressed about car buying, consider the big picture: you have lots of what negotiators like to call a “best alternatives to a negotiated agreement” (BATNA). This is truly powerful. It becomes even more powerful when you realize that the salesperson’s alternative to a deal with you is forgo making any money. And while you have access to substantial information about his position, he can estimate only how much you are willing to pay. When it comes to buying a car, you are truly the one who is in the driver’s seat.

What All Of This Means For You

If you talk to just about anyone, they are going to tell you the same thing. Nobody looks forward to the process of buying a new car. The effort level involved, the endless principled negotiations, and the feeling that you are paying too much all contribute to a desire to avoid the whole thing. That’s why you need a negotiator to tell you how to be a successful new car buyer.

When buying a new car, your first decision has to be which process you want to take in order to get the car. You can go online and run an auction for your money or you can visit dealers and negotiate face-to-face. When you are negotiating to buy a new car, it can be easy to forget who is really in charge. As the buyer you have all of the power – you could always choose to walk away from the deal. During the negotiations to buy the car you need to keep your best alternatives to a negotiated agreement (BATNA) in mind. You may want the new car, but you don’t really NEED the new car. Use your alternatives to make sure that you get the best deal possible.

Buying a new car does not have to be a trying experience. When it comes time for you to get a new car, make sure that you’ve done your homework and know exactly what you want. When you get involved in the buying negotiations, take the time to remember that you are really the person with all of the power in this negotiation. You can control how the whole car buying process turns out.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: If you decide to walk out on a car purchase negotiation, should you come back if the other side makes a better offer?

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What’s The Best Way For A Negotiator To Resolve A Dispute?

Negotiators need to know how to resolve disputes
Image Credit:
Anant Nath Sharma

Would it not be a wonderful world if during each of our negotiations, we were able to get along nicely with the other side of the table? Sure, there are always going to be things that we disagree on, but we’d always be able to work through them and eventually once again see each other eye-to-eye. That would be a great world to live in; however, unfortunately that is not the world that we find ourselves living in. Instead, during a negotiation there is a very good chance that no matter what negotiation styles or negotiating techniques we’ve been using we’re going to run into a dispute that we’re not going to be able to easily resolve. What then?

Using Mediation

We know that we’re facing a real dispute when all our attempts to negotiate a resolution to a dispute have failed. When this happens, it’s probably time for us to go get some outside help. Our first option when we find ourselves in this type of situation is to find a way to mediate the dispute. The goal of any mediation is for us to find a neutral third party who can help both us and the other side come to a consensus on our own.

What your need to realize as a negotiator is that a mediator is not in charge of the negotiation. The best that they can do is to make suggestions. The mediator works with both sides of the negotiation to explore the interests underlying their positions. What using a mediator allows you to do is to vent your feelings and fully explore both sides’ grievances. The three things that a mediator can do are by working with both sides, mediators try to help them hammer out a resolution that is sustainable, voluntary, and nonbinding.

Using Arbitration

As powerful as mediation can be, it’s not always the best way to go about resolving a dispute. Sometimes both sides realize that if we are left to our own devices, we are never going to be able to reach an agreement. However, since we both still want to get a deal out of this negotiation, we are willing to once again bring in a neutral third party to help us out.

Things will be different this time. The neutral third party will serve as a judge who is responsible for resolving our dispute. The arbitrator will listen as each side argues its case and presents relevant evidence. Once this is done, the arbitrator then renders a binding decision that both sides have agreed to abide by in advance. Arbitrators hand down decisions that are usually confidential and that cannot be appealed.

Using Litigation

Finally, when all else has failed, we can always turn to using litigation. We’ll find ourselves turning to litigation when all else has failed and when one or both sides is feeling as though they have been wronged in some way. When we elect to use litigation to resolve a negotiating dispute, this will generally require a defendant to face off against a plaintiff before either a judge or a judge and jury.

Making use of the litigation option can be a very expensive option to select. As negotiators we need to understand that we are going to have to turn the decision making over to the judge or the jury who will be responsible for weighing the evidence and making a ruling. Information conveyed in hearings and trials usually enters the public record. Keep in mind that after the judge / jury has made their ruling in order to resolve your dispute you may still have additional negotiating to do.

What All Of This Means For You

As skilled as we may be as negotiators, during a principled negotiation there is always the possibility that a negotiation is going to come screeching to a halt because we have run into a dispute that we just don’t seem to be able to resolve. If this happens, it does not mean that the negotiations have failed. We still have three different ways that we can go about resolving the dispute.

The first of these techniques is to seek to use mediation. This requires us to bring in a mediator who will listen to both sides and the offer suggestions for how the dispute can be resolved. If that does not work out for us, we can move on to the next stage: arbitration. This requires us to bring in an arbitrator to listen to both sides and then make a ruling that both sides have already agreed to live with. Our final option is litigation. This is where we go to court and allow a judge or a jury to decide how best to resolve our dispute.

As negotiators our ultimate goal is to be able to reach an agreement with the other side. When a dispute arises, it can stand in the way of our ability to successfully wrap up a negotiation. We have three different ways that disputes can be resolved: mediation, arbitration, or litigation. Each technique offers us a different route to get to where we want to be – proud owners of a successful negotiating outcome!

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: What do you think is the best way to pick between using arbitration or litigation to resolve a negotiating dispute?

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How To Deal With Threats During A Negotiation

A negotiator needs to know how to deal with threats when they show up
Image Credit: Backdoor Survival

In the world of negotiating no matter what negotiation styles or negotiating techniques are being used, there is one thing that we can all count on eventually encountering: threats. The threats that we’re going to run into can take on many different forms. The other side of the table may threaten to walk away, file a lawsuit, or damage your reputation. When this happens, we need to be ready for it. What action should you take as a negotiator in order to keep your negotiation on track?

Understand The Threat

When the other side threatens you, often your first instinct is to threaten them back. However, it is generally not a good idea. The reason is because your threats may not be as powerful or credible as the other side of the table’s. If you threaten them, then they could launch an uncontrollable spiral of conflict. As an alternative you might be tempted to immediately concede to your opponent’s demands, but that would only reinforce his domineering tactics. A much better approach is to take the time to understand where this threat is coming from.

The first thing that you are going to want to do is to remove yourself from the situation. You can do this by mentally taking a break or by calling for a pause in the negotiations. Next you’ll want to spend time trying to understand what is motivating the threat against you. The other side may be threating you because they feel as though they are a victim and simply want to be heard and acknowledged. Alternatively, they may be simply telling you about the real constraints that they are facing and what other alternatives they have. Finally, they may be making the threat up. In this case the threat is a just a ruse.

Show That You Understand What Is Being Said

When the other side decides to threaten you, you’ve got a number of decisions that you are going to have to make. One of the first ones is how you want to react to the threat that has just been presented to you. One of your most powerful ways to react to this threat is to use this as an opportunity to listen to the other side. Clearly there must be a reason why they decided that they wanted to present you with a threat, now is the time for you to find out why they thought that this was necessary.

It goes without saying that something has caused the other side to decide that in order to get what they want out of the negotiations, they are going to have to threaten you. What you are going to want to do now is to listen to their grievances, acknowledge their feelings, and apologize for their troubles. The reason that this can be such a powerful thing to do is that studies have shown that when individuals in conflict express their emotions and tell their side of the story, they’re more satisfied with outcomes – even when these outcomes aren’t necessarily in their favor. As negotiators we need to realize that expressing understanding can defuse tensions and reduce the risk of additional threats. At the same time you are going to have to be careful to not to reward tirades with concessions.

Ask Questions About The Threat

Once you have been threatened, this is when things can start to get tricky. What you are going to have to do is to discover the implicit advice in the other side’s threat. By asking questions, you can unearth novel remedies to their concerns and avoid caving in to surface demands. When you are asking the other side questions, your goal should be to determine the power or the constraints behind the other side’s threat. The threat that they have made may simply be an expression of their intention to resort to a strong BATNA (Best Alternative to a Negotiated Agreement), in the absence of a satisfactory offer from you.

By taking the time to ask about their needs and alternatives, you can determine if a zone of possible agreement exists between you. If so, acknowledge their BATNA, but suggest ways you might both better meet your needs at the table. By asking questions, you can assess whether you’re willing to let the other side pursue their threat, work within the constraints of their underlying concerns, or offer a settlement that takes into account their objective power.

Create A Label For The Threat

When the other side has presented you with a threat, it’s going to be up to you to let them know if you believe that it is a real threat or just posturing on their part. When you believe that a threat is nothing more than intimidation, your approach should be quite different than if you think that it is a real threat. If you sense that the other side’s bark is louder than their bite, let them know you’re onto their game. You might tell them that “I don’t consider threats very productive. Let’s put our heads together and come up with some viable solutions.”

When you take a look at the threat that has been handed to you and then assign a label to it (“you are bluffing”), it neutralizes the threat’s negative intent and boosts your sense of control in the negotiation. In fact, process labeling – taking the time to call attention to what’s happening – is the most effective way to get your negotiation back on track. Labeling the situation gives the other side the same detachment that you were able to achieve through threat diagnosis.

What All Of This Means For You

Every principled negotiation that we involve ourselves in can very easily become an emotional test of wills. If this happens, then it’s entirely possible that at some point in time the other side may become frustrated with the way that things are going and could decide to threaten us. How you choose to respond to that threat may determine the outcome of the negotiation.

As you well know, being threatened during a negotiation is a big deal. When this happens our gut reaction is often to lash out and start to threaten the other side. This would be a mistake. Instead, step away from the negotiations and spend some time thinking about where this threat is coming from. Why did the other side feel the need to threaten you? Your next step needs to be to show the other side that you understand where they are coming from. Simply by doing this you may be able to defuse the situation. Once you understand why they are threating you, you need to start to ask questions about the threat. Find out how real the threat is. Finally, so that both of you can discuss the threat you need to apply a label to it so that it can be discussed.

Threats generally mean that the other side feels as though they have run out of options. They are using a threat as a way to get your attention and to try to steer the negotiation in a direction that they’d like to go. Your job, when threatened, is to deal with the situation professionally. You need to find out more about the threat and then attempt to work with the other side in order to find a way to defuse it.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: Under what conditions do you think that you should issue a counter threat when the other side has threatened you?

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How To Use The Right of First Refusal To Create Better Deals

Including a right of first refusal can enhance your negotiating skills
Image Credit: danaspencer

There are some negotiating situations that we can find ourselves in that are trickier than other. For example, if you were negotiating the lease of a warehouse for yourself but you though that someone else might come along in the future and offer to pay more than you to the landlord, you wouldn’t want to get asked to move at a time that was inconvenient for you. In order to prevent this, you could have a right of first refusal baked into your contract that would allow you to match any higher offer that your landlord was offered so that you didn’t have to move. Just exactly how does this right of first refusal thing work?

It’s All About The Details

The good news about a right of first refusal is that it can be a win-win tool that can enhance your business negotiation skills, but to ensure that they are mutually beneficial, they need to be negotiated with care. One area that needs special attention from you has to do with the details of the deal. A good example of the details that you are going to have to work out includes situations in which things are overly vague about what will happen when a right holder exercises that right. The big question that you are going to want to make sure that you have an answer to includes what will happen if you choose to match a competing bid. When you match a competitor’s bid, will this end the competition or launch a bidding war?

Another detail that you have to worry about has to do with time. When someone else makes an offer to the other side, you are going to have to decide whether to match that offer. Where you can run into problems is if the duration of the right of first refusal that you’ve set up is ambiguous. In this case, a third party could short-circuit your right by making an offer with a short fuse. What could happen is that time pressure could keep you from being able to successfully match an offer. What this means for you is that you need to negotiate ample time in your right of first refusal for you to respond to a competing offer.

What Type Of First Refusal Do You Want?

It turns out that there are a number of different types of first refusal agreements that you can set up. In most cases, the holder of the right of first refusal only has to match the high bid that that seller receives without engaging in the auction. When we are setting a right of first refusal, this is pretty much what we want.

However, there is another type of right of first refusal that’s common in certain entertainment and real-estate markets. Under the terms of this type the right holder must accept or reject the seller’s specified price before other potential buyers are offered the same deal. If the right holder refuses the price, you will forfeit the chance to match other offers. This can can turn the apparent blessing of a right of first refusal into a curse. Not every right of first refusal is created equal. When negotiating one, you need to be careful that the specific terms won’t backfire on you later.

A Bit Of Advice

When dealing with a right of first refusal, you need to carefully plan out your actions. What if you’re thinking about making an offer that would trigger a right of first refusal between the other two parties? You face a dilemma. If your would-be competitor exercises its right of first refusal, you might waste time conducting due diligence and negotiating. But if the company doesn’t exercise its right of first refusal, you likely have overpaid. Why? Because the company probably has better information about the true value of the purchase than you do. For this reason, many negotiators avoid deals that trigger a right of first refusal.

This all seems to be cut and dried, but when negotiating business deals, some circumstances eliminate those concerns. First, the right holder might not be able to match your offer due to a lack of cash. Second, you may have just as much or better information about the value of the asset as the right holder. Third, you might bring some special value to the table that the right holder lacks. If any of these justifications apply, you should feel comfortable making a bid.

What All Of This Means For You

As negotiators it is important that we know and understand what options are available to us in addition to our negotiation styles and negotiating techniques when we sit down to a principled negotiation. An important tool that we can use in a negotiation is the right of first refusal. Adding this condition to a deal means that if the other side gets a better offer, we can keep our deal in play by matching the other offer. However, there are things about this tool that we need to be aware of.

One of the keys to using a right of first refusal correctly is to make sure that you work out all of the details early on. You need to fully understand what would happen if you chose to make a competing bid and how much time you would have to make that bid. You also have to work out when you would have to accept or reject the other side’s specified price – do they actually have another bidder? Finally, once you have a right of first refusal in place, you are going to have to very carefully decide if this is going to be something that you want to trigger. Make sure that you understand all of the circumstances.

The right of first refusal is a powerful tool that negotiators can use to ensure that the deal that they have been able to reach with the other side will remain in effect. However, as is always the case with powerful tools, you need to be very careful how you go about using it. Take your time when setting up a right of first refusal in order to ensure that the deal that you put in place will behave the way that you are going to want it to.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: How can you make sure that the other side really has another bidder when they tell you that you have to make a counter bid?

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In A Negotiation, How You Frame Things Is Important

Framing your proposal can determine if the other side accepts it
Image Credit: John Piercy

The goal of any negotiation that we participate in is to use our negotiation styles and negotiating techniques tofind a way to get the other side to agree to our proposal. There are a lot of different ways that we can go about trying to make this happen. We can beg, we can threaten, we can bribe, we can entice. However, it turns out that one of the most important things that we can do is to present our proposal in a way that will make the other side want to go along with it. This is called framing and it’s a critical part of any negotiation.

What Is Framing?

So just exactly what is this negotiating tactic that we call framing? As a negotiator, what you need to realize is that you may have just placed the best offer in the world on the table in front of the other side of the table. However, they may not be able to see it for how great it is. The reason for this is because it matters how you go about framing your offer when you present it. How you frame your offer will affect how the other side views it.

As an example of this, in a negotiation people generally attempt to resist a compromise when they are framed as a loss instead of a gain. Offering a job candidate an increase over what they were expecting is always better than offering them a decrease from what they were expecting. Taking the time to stress what the other party would gain rather than lose is an important form of framing in a negotiation.

You Must Offer Manageable Choices

Just exactly how many choices for a solution does the other side want you to present them with? As a negotiator, all too often we believe that it is our responsibility to provide the other side with a wide range of options so that they can select the one that best matches what they are trying to accomplish. It turns out that we are probably wrong.

A number of different studies have been done and they have all shown the same thing. In a negotiation, people actually welcome fewer rather than more choices. What this means for us is that the other side can become so overwhelmed by available options that deciding not to make any decision at all can be a relief to them. This means that when you are framing how you want to present your proposal, you need to keep in mind that the other side may say they want as many choices as possible, but may feel overwhelmed if you present them with too many.

It’s Important To Make Multiple Offers

If we can agree that presenting the other side with too many options may cause them to freeze up, what then is the correct number of options to present? Once again, studies have shown that the correct number of options to present is three. People that you are negotiating with will respond well to this number of options.

During a negotiation, when you present multiple equivalent simultaneous offers, also known as “MESOs”, you are showing other parties the issues that are the most important to you. Their reactions to your proposals will tell you about their priorities. Working together, you can craft an agreement that accounts for everyone’s most important interests. The use of MESOs give negotiators the choice they desire without the risk of decision paralysis.

Rejection Is Part Of The Game

How do you feel about having your offer rejected during a negotiation? Perhaps you need to get over that! In negotiating, there is a concept called the “contrast effect”. What this means is that if you have made a proposal to the other side that they rejected, you can then follow up with a more reasonable proposal that they may end up accepting.

When we are using framing in a negotiation, the contrast effect suggests a strategic move: Ask for more than you realistically expect, accept the rejection when it comes, and then shade your next offer downward. The other side is likely to find a reasonable offer even more appealing after rejecting an offer that was out of the question.

What All Of This Means For You

During a principled negotiation, it turns out that the offer that you make to the other side may not determine if they accept or reject it. Instead, how you make that offer to them may hold the key to your success. How you present your proposal is called framing and if done correctly you can get the other side to accept it.

Framing has to do with the how the other side views your proposal. During a negotiation we need to keep in mind that the other side can become overwhelmed if we present them with too many choices. We need to limit the number of options that we present them with to around three. Presenting multiple equivalent simultaneous offers shows them what is important to you. Their reaction will show you what is important to them. You need to be able to use the contrast effect to allow your first proposal to be rejected so that your follow on proposal will be seen as more acceptable.

We know that the proposal that we are going to be placing before the other side during a negotiation is a good proposal. That’s why we want them to accept it. However, if we’re not careful how we present it may cause them to reject it. Taking the time to carefully frame your proposal will allow you to get the other side to see it your way and accept it.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: When you are going to make multiple offers to the other side, should you make them all at once or spread them out over time?

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The Art Of Dealing With A Sole Supplier

Your options are limited when you are dealing with a sole supplier
Image Credit: Brendan Riley

If you view starting a negotiation as going into battle, then you’d like to be able to start things off being balanced. Neither side should have too much of an advantage, both should show up ready to do battle on a level playing field using their own set of negotiation styles and negotiating techniques. However, as always seems to be the case in life, things don’t always work out this way. In the world of negotiations you can find yourself at a distinct disadvantage right off the bat if you are negotiating with someone who is your sole supplier for a given product or service. What’s a negotiator to do now?

Setting Up A Sole Supplier Negotiation

So right off the bat we need to understand what we are dealing with when we find ourselves negotiating with someone who is one of our sole suppliers. We will have a poor BATNA (best alternative to a negotiated agreement) and this is going to end up putting us in a position of weakness. This means that even before the negotiations start, we’ve got work to do. Since we don’t have a lot of alternatives, we’re going to have to control what alternatives the other side has.

You are going to want to set the negotiation up to favor you. This is going to involve making sure that you involve the parties that will be impacted by the negotiations, that you make sure that during the negotiations the right sets of issues are going to be discussed, and you are going have to make sure that the right outside alternatives are known. If you can accomplish this, then you will have increased the odds that the sole supplier that you’ll be negotiating with will view the agreement that you put on the table as being more attractive than any alternatives that they may have.

Focusing On Interests

One of the first things that you are going to want to accomplish once the negotiations have started is to identify who you are really negotiating with. This means that you need to ask questions of the other side in order to determine who the parties within the other side’s organization are who may be affected by any agreement that they reach with you. It’s going to be their interests that will be driving the other side.

You can get the answers to these questions by doing some probing of the other side. How will their sales team be rewarded and even promoted? Who is going to be responsible for approving the negotiation agreement on the other side? How are the approvers going to be rewarded? One of the most powerful things that you’ll need to determine is if there is any way for you to create a coalition of parts of the other side that would be in a position to support any agreement that you can reach.

Evaluate The Other Side’s Alternatives

When you are negotiating with a sole supplier, you really don’t have all that many alternatives available to you. However, the other side does. What you are going to have to as a part of your negotiation strategy is to take the time to evaluate the other side’s alternatives.

What you are going to want to determine is how things could play out based on the results of this negotiation. There is no guarantee that the two of you are going to be able to reach an agreement even though they may be one of your sole suppliers. What is this going to mean for the other side? You need to understand how the other side would be affected if they were not able to get your business. Losing you as a customer would defiantly impact their bottom line. You need to determine if the loss of you could somehow be replaced by other customers.

Round One

It’s going to be important that you take the long view as you enter into this negotiation. What that means for you is that this particular negotiation is only round one in a much longer game. This means that there are a number of questions that you are going to have to find the answers to.

The questions include determining how much less you would pay the supplier if in the future they had competition. What would the present value of those payments be? Keeping the long term in mind, how much would it cost you to bring in another supplier or reengineer for a substitute product? You are going to have to determine if the benefits of having a better alternative exceed the cost of getting it. If this is the case, then it makes sense for your firm to invest now in order to create competition before the next negotiation.

What All Of This Means For You

No negotiator wants to find themselves in a situation where they are facing off against someone who is one of their sole suppliers. It’s all too easy for a negotiator to feel as though they are powerless in a situation like this. The good news is that we are not powerless, we just need to understand what we need to do.

If you want to be successful in this type of principled negotiation, then you are going to have to set things up for success from the beginning. You need to make sure that the right people are there and that the right issues are going to be discussed. Once the negotiations start, you need to find out who on the other side is really going to be calling the shots. Who will this negotiation impact? Although you may not have many alternatives when you are negotiating with a sole supplier, you need to take the time to find out what their alternatives are. Finally, you need to view this negotiation as being round one of a much longer set of negotiations. Determine how you are going to be successful in the long run.

The good news about negotiating with a sole supplier is that you do have options. You need to do your homework and make sure that you use the negotiation to get answers to the questions that you need to know. Taking the time to structure a sole source negotiation correctly can get you the results that you thought were unobtainable.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: Once you know who will really be making the decisions for the other side, should you insist that they take a place at the table?

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Why Is Sincerity Important In A Negotiation?

Do negotiators have to mean what they say?
Image Credit: Ryan Milani

Just exactly how important is honesty when it comes to negotiating? Sure we’d like to always be able to tell the truth, but sometimes it sure seems like it would make life just a little bit easier if we either didn’t say something or if we bent the truth just a bit. Likewise, can we really trust what the other side of the table is telling us? During a negotiation, in order to be successful no matter what negotiation styles or negotiating techniques are being usedyou want to avoid deception and find ways to build trust with the other side.

What Does It Mean To Be Unethical?

When we think about people being unethical, we normally believe that this is a decision that they’ve made. However, there is the possibility that the other side does not realize that their behavior is unethical. Even if they do realize that it is unethical, they may justify what they are doing in this specific case. This is exactly how deception works its way into a negotiation.

When an ethical dilemma shows up, it can be more obvious to someone who is outside of the negotiation rather than to those who are involved in the negotiations. The people who study such things have found that there is a process that they call “ethical fading”. This happens when “… the ethical colors of a moral decision fade into bleached hues…void of moral implications.” Ethical fading can start to show up when one side of a negotiation starts to practice self-deceit. In order to view themselves as a moral person, this person is going to start to hide moral aspects of decisions that they are making from themselves. This can lead to a long slow slide into unethical behavior where numbers start to get fudged a little bit and then a lot.

The troubling news here is that negotiators who realize that they are facing an ethical dilemma may still not make the right decision. What can happen in a situation like this is that we may end up turning our moral self-sanctions off and this will allow us to behave immorally. The way that we’ll permit ourselves to do this is by displacing responsibility (“It’s really their fault”) or minimizing the consequences (“It’s not a big deal”). You may even end up blaming the other side by saying that they were asking for it.

How To Be Sincere During A Negotiation

If you want to become known as being a sincere and ethical negotiator, then you are going to have to find a way to battle the forces that are behind deception in a negotiation. This means that you are going to have to be able to identify ethical dilemmas, see unethical behavior clearly, and find a way to do battle with the forces of deception. The first thing that you are going to have to do is to set a personal ethical standard for yourself. By doing this you will be able determine in advance what behaviors you view as being off-limits. This should help you to recognize when you are facing an ethical dilemma and make decisions that will meet your ethical standards.

Your perceptions are what are going to guide your behavior. This means that you need to take the time to question what your perceptions are. One of the most important things that you need to realize is that the more that you are going to be tempted to lie during a negotiation, the more you are going to believe that the other side is lying to you. This is not necessarily the case. What you are going to have to realize as a negotiator is that your perception of the other side’s ethics may be wrong. The reason that you are viewing them this way is because you are tempted to act in an unethical manner.

One of the reasons that we may be tempted to behave in an unethical manner during a negotiation is because we believe that we are powerless. In order to make sure that you don’t act this way, you should find ways to increase your negotiating power. In order to boost your negotiating power, you need to take the time to explore your outside alternatives. The good news is that there are a number of different sources that you can draw negotiating power from: your knowledge of what is being negotiated, your negotiating skills, the relationship that you have with the other side of the table, and, if you can create it, a clever solution to what is being negotiated. Keep in mind that if you can think creatively about what your sources of power are, then this can help keep you from taking unethical actions.

What All Of This Means For You

If you could determine the characteristics of the person that you were going to be negotiating with next, what would they be? If you are like most of us, sincerity and honesty would be up towards the top of your list. Since they would probably want the same thing in you, we need to figure out how to avoid being deceptive during a negotiation and find ways to build trust with the other side.

When somebody acts unethically during a principled negotiation, they may not realize that they are acting that way. They find ways to justify their actions. When one side of a negotiation starts to make poor ethical decisions, this is called “ethical fading”. When a negotiator realizes that they are making bad ethical decisions, they may decide to turn off their moral self-sanctions. In order to become known as a sincere negotiator, you are going to have to set a personal ethical standard for yourself. To understand how you make ethical decisions, you need to take the time to question what your perceptions are. We always need to remember that we are not powerless and we can’t allow that to cause us to make poor ethical decisions.

Your reputation as a negotiator is one of your most valuable assets. If you want the other side to deal with you honestly, then you are going to have to prove to them that you are sincere and trustworthy. This means that you’ll need to be able to detect when an ethical decision has to be made and then you’ll have to be strong enough to make the right decision. If you can avoid the temptation to make poor ethical decisions, then you’ll be able to be a very successful negotiator.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: When faced with an ethical decision, so you think that you should stop the negotiation so that you have enough time to make the right decision?

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