The next time that you start a negotiation, what will be running through your mind? If you are like most of us, you are excited to get started and you have a fairly clear idea what negotiation styles and negotiating techniques you’ll be using to get what you want out of this negotiation. However, have you really done your homework? If you want your next negotiation to be successful, then what you do before the negotiation starts may determine how it turns out.
Understanding What You Want
So what’s the wrong way to start a negotiation? The answer is to go into the negotiation unprepared – “winging it”. The right thing to do is to take the time to prepare for the negotiation before the negotiation starts. While you are preparing, you are going to want to make sure that you know what you want, understand what your bargaining position is going to be, and why the other side is willing to negotiate with you.
The experts tell us to take some time and do a self-assessment before your next negotiation starts. As a part of this self-assessment, you are going to want to make sure that you ask yourself two critical questions: what do you want to get out of this negotiation and if you can’t reach an agreement with the other side, what is your best alternative? The first one of these questions is going to require you to set a target. It will be an ambitious target, but at the same time it should be a realistic target. However, when we are setting this target, we are going to have to become aware that there are three potential traps that we could fall into.
The first of these traps requires us to be aware that we could turn into an under-aspiring negotiator who could end up setting a target for this negotiation that was too low. This sets us up to experience what is called “the winner’s curse”. When we make an offer to the other side and they immediately accept it, we are left feeling disappointed. We feel that we probably made an offer that was too low and that we left money on the table. Clearly this is a case in which we should have spent more time preparing for our negotiation. The flip side of this problem leads to the second trap: the over-aspiring negotiator. If we end up aiming too high in a negotiation and if we refuse to make any significant concessions then in the end we will not be able to reach a deal with the other side. Finally, the third trap can occur when you don’t prepare for a negotiation and so you really don’t know what you want to get out of the negotiation. When you are in this situation, any good faith proposals that the other side makes to you will be seen with disappointment or suspicion because you simply can’t interpret what they are offering you.
Understanding What The Alternatives Are
Part of the preparation for your next negotiation needs to be creating a target for the negotiation. Once you’ve created a target that is both ambitious and realistic, you are now going to have to move on to the next step. You’ll need to determine what your best alternative to a negotiated agreement, or BATNA, is. The reason that this is so important is because by knowing your BATNA, during the negotiation you’ll know if the time comes for you to simply walk away. Determining what your BATNA is requires you to perform three steps:
- Identify all of the plausible alternatives you might pursue if you can’t reach a deal with the current party.
- Estimate the value associated with each alternative.
- Select the best alternative, which will become your BATNA.
After you have determined what your BATNA is, your next step is going to be to calculate what is called your reservation value (aka your “reservation price”). The reservation price is the least favourable point at which you will accept a negotiated agreement. Your knowledge of your reservation value will help you avoid two mistakes: (1) accepting a deal that’s worse than your BATNA or (2) rejecting a deal that’s better than your BATNA.
The final step in preparing for your next negotiation is to assess the other side’s BATNA. As negotiators we need to understand that it’s not enough for us to only understand what we need and want to get out of the negotiation. One of the big questions that you’d like to have an answer to before the negotiation starts is just exactly how much the other side would be willing to give to you. In order to be able to answer this question, you are going to have to take the time to determine what their BATNA is. One way to go about determining what the other side’s BATNA is simply by asking yourself “What would the other side do if this negotiation was to end in a deadlock?” Creating an answer for this question will allow you to determine what the other side’s reservation value might be. We need to understand that negotiation preparation needs to be conducted with a clear-eyed view of the upcoming negotiation. The more rational and methodical your negotiation preparation process is, the better the deal that you’ll be able to reach is going to be.
What All Of This Means For You
When we start a principled negotiation, we are filled with hope about what we are going to be able to achieve. However, if we have not taken the time to fully prepare for the negotiation then the odds will be stacked against us and our chances of getting the deal that we want will be slim. Not only do we have to prepare for each negotiation, but we also have to know the right way to go about preparing for negotiations.
When we start a negotiation, we don’t want to go in unprepared. We want to make sure that before the negotiation starts we know what our bargaining position is going to be. A good idea is to do a self-assessment before the negotiation starts and ask yourself what you want to get out of the negotiation and what you would do if a deal could not be reached. When we set a target for a negotiation, we run the risk of falling into one of three traps. Understanding what the traps are is the key to avoiding them. After you have created a target for your negotiation, you need to make sure that you understand what your BATNA is. Once you know your BATNA, you’ll have to determine your reservation value which is your minimum value that you would accept. Once this is done, the last thing that you have to do is to try to determine what the other side’s BATNA is.
The goal of any negotiation that we participate in is to be able to reach a deal with the other side that we can live with. We are not going to be able to do this if we go into a negotiation unprepared. Taking the time to prepare for a negotiation is the key to getting the deal that we want. However, in order to prepare correctly we need to make sure that we know what we want and what the limitations on both sides are. Do your homework before your next negotiation and you’ll have a better chance of reaching the deal that you seek.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™
Question For You: If you determine that the other side’s BATNA is better than what you are willing to offer, should you still negotiate?
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What We’ll Be Talking About Next Time
When we enter into a negotiation, we’d like to think that our minds are clear and that we are gong to be able to think systematically throughout the negotiations as we use our negotiation styles and negotiating techniques. However, all too often it turns out that we are being affected by bias that can change how we think. Most of us believe that we have the ability to determine the difference between a situation in which we can rely on our intuition and those that require us to take a step back and give things some more thought. However, studies have shown that in most cases we are wrong.