4 factors for successful negotiations in business

Successful negotiation means preparation and if, in fact, one succeeds in negotiation having had no prior plan, then that is an accidental result. That which cannot be duplicated with ease.

What is negotiation?

Negotiation is a discussion aimed at reaching an agreement.

It can be looked at as a process through which parties move from their initially divergent positions to a point where agreement may be reached

In the context of procurement and supply, negotiation can be viewed as a process of planning, reviewing and analyzing used by a buyer and a seller when trying to reach acceptable agreement or compromises which include all aspects of the business transaction, not just prices.

Most people think that negotiation is simply about price, delivery or even service levels. Thinking this way makes one to focus on negotiation content and yet successful negotiation is much broader than that. It calls for paying attention to the process as well, things like how the negotiation will be structured, conducted and how one prepares for it.

Negotiation may be defined more broadly as: a process whereby two parties come together to confer, in a situation in which there is some divergence or conflict of interests between them, with a view to concluding a jointly acceptable agreement.

Successful negotiation in business comes at a cost

One should not negotiate just for the sake of negotiating, in fact you only get into negotiation if the alternative, that is not negotiating, will mean that you are worse off. In short negotiation is not free, because in addition to spending time on it you also can end up investing other resources in it.

In any negotiation you need to understand what your targets are; is it price related or other factors that make up the total cost of acquisition, is it quality related etc. You also need to know what you are going to do if your intended targets are not achieved which is where the “walk away position” comes in, or your best alternative to the negotiated agreement (BATNA)

Factors that determine your success

THE NEGOTIATION APPROACH YOU USE

There are two basic orientations to negotiations, according to whether the parties are:

1. Seeking (or prepared to settle for) a ‘win-lose’ outcome, in order to achieve their task-related objectives from the negotiation (being ‘right’, getting their way or competing successfully for bigger of value from the deal)
2. Committed or willing to pursue a ‘win-win’ outcome, in order to achieve their relationship-related objectives from the negotiation: preserving the relationship, and the synergy and added value to be reaped from continued constructive collaboration.

So you end up with:

• Collaborative (win-win, integrative) approach to negotiation
• Competitive (win-lose, approaches) to negotiation

THE PEOPLE OR PARTIES IN THE NEGOTIATION

When negotiating, one has to remember that the outcome doesn’t just depend on the party you are on the table with. There are other stakeholders at play that you do not necessarily get to see. Stakeholders are parties who can affect or be affected by the outcome of the negotiation and you need to know how to manage stakeholders on your end.

Here are quick tips regarding that:

1. Identification of stakeholders whose needs and expectations can change the organization’s policies and priorities
2. Knowing the sorts of stakeholders whose interests will be most affected by actions taken by the organisations and consequences of such
3. Identifying stakeholders that need constant involvement
4. Help prioritize stakeholder’s interests to allow for efficient utilization of resources or leverage for maximum advantage                                   

THE NEGOTIATION OBJECTIVES

As pointed out earlier negotiation comes at a cost and truth is one only negotiates if the alternative to negotiation will cost them more.

The objectives one sets and how they intend to achieve such determine the success or failure of the negotiation.

The MIL (Must,Intend,Like) approach to setting targets

The approach here is to distinguish between objectives we must achieve, objectives we intend to achieve (or which are important to us to achieve) and objectives we would like to achieve.

• Must achieve – these are potential deal-breakers. If we can’t achieve these, the negotiation will fail, or an alternative to the negotiated deal will be a more attractive option
• Intend to achieve – represent a target of negotiation, but failure to achieve one or more of them will not necessarily be disastrous
• Like-to-achieve objectives are just ‘icing on the cake’

It is essential that before entering negotiations, you have an agreed position with stakeholders or budget holders regarding your targets and what you can trade with

POWER AND RELATIONSHIPS

Successful negotiation in business and in other aspects of life depend to a large degree on your ability to influence which is what power is and why it is important.

Professional negotiators understand the power concept and will not walk into any negotiation without leverage. An example of this is by ensuring they have a walk away position or best alternative to the negotiated agreement basically BATNA.

Having a plan B or back up plan (the BATNA), as an acceptable alternative to negotiated agreement:

• Enables you to be more assertive during the negotiation, because you can use availability of a good BATNA as leverage (especially if the other party is anxious to close the deal)
• Protects you from feeling that you ‘have to’ accept terms that are too unfavorable (below your minimum acceptable position)
• Provides a decision rule, if negotiations reach a point where the other party is saying ‘take it or leave it’ by identifying exactly what the alternative is if you decide to ‘leave it’

Good negotiators realize that it is not the actual existence of a strong BATNA that gives you leverage in a negotiation, but the other party’s perception or belief that you have a strong BATNA

Establishing your BATNA involves:

1. Listing everything you could do if you do not reach an agreement
2. Exploring the best of your options and trying to improve on them. The better your BATNA the stronger you will be in negotiation
3. Finally choosing your best option. This is your BATNA