Negotiation is defined as the process where two or more parties come together in an exchange in order to produce an agreement. Negotiations take place in every aspect of business and in order for you to succeeded you will have to spend some serious time practicing your negotiation skills. Here are some tips you should keep in mind when stepping up to the table.
First, before entering any negotiation you should determine your BATNA - or your Best Alternative To a Negotiated Agreement. This is basically your best option should no agreement be reached. Your BATNA will increase your personal negotiation power, it will ensure that you understand all your alternatives, and it will enable you to make a more complete decision.
Second you should define your reservation price, or the minimum price you would accept if an agreement were to be reached. Your minimum price can be defined in terms of monetary or non-monetary benefits.
Third, in terms of the actual negotiation, you have two styles of approach that you can choose from. Distributive Negotiation or Integrative Negotiation can be used.
Distributive negotiation would be used in a situation like buying a car. For example, you go to used car dealer, you have a fixed amount of money that you want to spend, the dealer shows you the cars that he can sell you within the amount of money that you are willing to pay. You and the dealer agree on a price and the car is sold. You will most likely not need to buy another car from this dealer again for a very long time, possibly even ever again, so you are more likely to negotiate hard and not be very concerned with the dealers feelings or interests. Here no long term relationship is established.
As you can see, distributive negotiations are used in a fixed sum game where there are no opportunities for tradeoffs. Often, distributive negotiations call for a quick simple solution and each of the parties will have mutually incompatible goals.
Integrative negotiation, on the other hand, is a situation where one party can win without having the other party lose. Here the parties who are negotiating can use creative problem solving skills in order to use the resources at hand to please everyone involved. Integrative negotiations are usually used in a situation where there will be an ongoing relationship between the parties, and when there are multiple issues at hand (where a simple sum game does not describe the entire problem). It is important to note here that you should look closely at what the other party wants and see how you can help them while helping yourself at the same time.
Here are five tips you should keep in mind while using integrative negotiation:
- Develop goals that supersede the short term conflicts in order to obtain your long term goals. It’s OK to give up a small issue now in order to win a big one later.
- Focus on the other parties interests. You may find that they have multiple interests that you can work with. Also, do not focus on the parties position. Positions are based on demands that the negotiator makes. But each of these positions has an underlying interest that you can possibly use to your advantage.
- Do not allow yourself to personalize the conflict.
- Think creatively to come up with options that may not seem obvious. Understand what the other party is really looking for.
- If you can’t agree on an issue, focus on what is fair. Use objective criteria to evaluate your options.
Many situations look like they are distributive negotiations but upon further investigation it becomes clear that they should be considered as integrative negotiation. Learning to reframe negotiations from distributive to integrative is extremely important.
So we have seen three simple steps to negotiating like an allstar CEO. First define your BATNA, then define your reservation price, and finally decide whether the situation calls for distributive negotiation or integrative negotiation.
Happy negotiating.
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Written by: entreprenuts on December 28, 2007