When we know that we are going to be entering a negotiation, we need to get prepared. What this means is that we need to make sure that we allocate the time that will be required in order to allow us to make sure that we study all of the things that we believe will be going into this negotiation. The final outcome of the negotiation may be based on how good of a job we do preparing for it. This means that knowing how to prepare for a negotiation is a key skill that every negotiator has to master.
How To Prepare For A Negotiation
When you have an important negotiation looming, “winging it” is never the best way to prepare. The top negotiators engage in a thorough negotiation preparation process. That means taking that they take plenty of time to analyze what they want, their bargaining position, and the other side’s likely wants and alternatives. Negotiators should engage in a careful self-assessment prior to negotiating. In particular, they should be asking two questions as part of their negotiation preparation:
- What do I want?
- What is my alternative to reaching agreement?
Question #1: What Do I Want?
The first question requires us to set an ambitious but realistic target. When setting a target, there are three traps that we need to watch out for. First, you need to avoid being an under-aspiring negotiator who sets a target that’s too low. If you do this, you may end up feeling like the victim of the “winner’s curse,” which describes the disappointment a negotiator feels when the other party immediately accepts their first offer in a negotiation. The fact that the other party is eager to accept your first offer suggests that you may have aimed too low and failed to engage in adequate negotiation preparation. On the other hand, you probably don’t want to be an over-aspiring negotiator, either. When you aim too high and refuse to make significant concessions during a negotiation, you will be left without a deal. A third problem arises when you engage in so little negotiation preparation that you really don’t know what you want. In this case, negotiators often view the other side’s good-faith proposals with suspicion or even disappointment.
Question #2: What Is My Alternative to Reaching Agreement?
To improve your odds of meeting your realistic but ambitious target, you will need to determine your best alternative to a negotiated agreement (BATNA). Determining your BATNA will help you know when it’s time for you to walk away and pursue your best alternative. BATNA assessment involves the following 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 is your BATNA.
A good example of knowing your alternative would be a job seeker who is engaged in negotiation preparation for applying for a particular job. In this case the first step would involve identifying other possible job opportunities as well as other alternatives. These could include staying at their current job or applying to go to graduate school. The second step would involve assessing both the monetary and non-monetary value of each alternative. This would include likely salary, benefits, responsibilities, engagement with one’s work, quality of life, and so on. This type of analysis should be able to lead the job seeker to identify the alternative that they prefer.
Take Time To Calculate Your Reservation Value
Once your negotiation preparation process has helped you identify your BATNA, you are now in a good position to calculate your reservation value, or reservation price. This is your walk-away point in the upcoming negotiation. In a price negotiation, this could be a particular number. In an integrative negotiation where multiple issues are at stake, you might express your reservation value as a package, such as the lowest salary, benefits, and responsibilities you’d accept to take a certain job. Your knowledge of what your reservation value is 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.
Make Sure You Assess The Other Side’s BATNA
When engaging in negotiation preparation, negotiators need to understand that it’s not sufficient to only look at your own needs and wants. To improve the odds of reaching a mutually beneficial deal, you also need to figure out how much the other party Is going to be willing to give. To do this, you need to analyze their BATNA.
During a negotiation you need to ask yourself, “What will they do if our negotiation ends in impasse?” Doing this will lead you to contemplate the other side’s reservation value. An example of this is when a job seeker might conclude that the hiring organization is likely to have other qualified candidates waiting to take the job for a relatively low salary. If this happened, the job seeker might recognize that they won’t be able to push the hiring manager very far in a salary negotiation. Conversely, a job seeker might be aware that they are one of the only appealing candidates for the open position—in which case, they may be able to drive a tough bargain. Your negotiation preparation needs to be conducted with a clear-eyed view of the playing field. The more rational and methodical your negotiation preparation process is, the better you can expect your negotiation results to be.
What All Of This Means For You
You would never want to go into a negotiation being unprepared. What this means is that when you know that a negotiation is coming up, you are going to have to take the time prepare for it. Just spending time getting ready, is not going to be enough. You need to know how to get ready. If you can master the skills that you’ll need, then you can be ready to get the deal that you are looking for.
Preparing for a negotiation takes time. You need to be willing to do a self-analysis. You need the answers to two critical questions: what do I want and what is my alternative to reaching agreement? Knowing what you want out of the negotiation allows you to set a target. Knowing what your BATNA is prevents you from accepting a bad deal. Prior to entering a negotiation you need to know your reservation price. You also have to take the time to calculate what you think the other side’s BATNA is.
Making sure that you correctly prepare for your next negotiation will allow you to maximize what you can get out of the negotiation. Having a good understanding of what you want and what the other side can give you will allow you to avoid any impasses that could prevent a deal from being reached. Take the time to prepare correctly for your next negotiation and then watch as you are able to get the deal that you want.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™
Question For You: What’s the best way to calculate the other side’s BATNA?
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What We’ll Be Talking About Next Time
Not all of our negotiations are sales negotiations, but it sure seems like a lot of them are. When we find ourselves in one of these negotiations it sure would be nice if we were able to draw on the experiences of negotiators who had come before us. We’d like to be able to learn from them – what negotiation styles or negotiating techniques work best in a negotiation like this? It turns out that this information is available to us and we can put it to good use in our next sales negotiation.