negotiationNegotiation Skills

4 Building Blocks of Negotiation

4 Building Blocks of Negotiation

 

Anything complicated, whether it is a spacecraft, biology, art, music, mathematics, science, chemistry, physics or even a relationship, can be broken down into simple fundamentals.  Once you understand these fundamentals, it is easy to build upon them.

In negotiation, there are four building blocks that make up the fundamental levels of a negotiation.  Master the nuances of these elements, and you will become a master negotiator yourself.  The 4 building blocks of a negotiation are: Information, Time, People, and Power.

Information

As with any decision in life, the more information that is gained, the better the decision.  Police officers, for example, when investigating a crime, interview witnesses, suspects, gather evidence, take fingerprints, etc., all in an effort to gather information.  If they simply arrested and charged the first person that they thought committed the crime, without gathering any other information, they would likely be wrong, since they made that assumption without much of the available evidence.

Information is power

A negotiation is no different. If you find out everything that you can about your adversary: his or her motives, walk-away position, needs, desires, pressures, etc., you will put yourself in a superior situation over simply negotiating “in a vacuum” without crucial information.

Time

One of the most powerful elements of any negotiation is just knowing how time pressure and “deadlines” work.  Most people overestimate the price and terms of a negotiation, but underestimate the amount of time that it will take to arrive at those prices and terms.  Don’t be one of them.  Respect the role that time plays in a negotiation.  Time is the ultimate foe if you do not understand its importance. 

The inverse time-pressure relationship:

Less time equals more pressure

More time equals less pressure

For example, if you are moving to a new city, buying a house, and you have all of your belongings in a moving truck, if your counter-party (the seller of the house) knows this, she has the ability to use it against you.  Do you think that you would get a better deal if your counterparty did not know this information? Almost certainly.  Your counterparty could hold firm on her price knowing that you need a place to live and will probably fold near your “presumed deadline.”

People

People, and their human dynamics are key to any negotiation.  Like my father always said, “it takes all kinds of people to make up a world” and he was right.  In a negotiation, there are patient and impatient people.  People who like to establish rapport, and those who like to cut to the chase.  There are people who will nickel-and-dime negotiate and there are those who like the big picture.  There are those who like to hammer their counterparty into the ground, and there are those who strive for a win-win.

When a football team prepares for its next game, it watches lots of film of the opposing team.  The team studies the players on the other team and how they handle themselves in various situations.  That affords them the ability to become better prepared in the upcoming game.

You must do the same when you are negotiating.  If you know that you are up against an impatient opponent, then just find a way to be more patient.  If you know that your counterparty doesn’t need the deal, that is information that makes the negotiation more challenging for you.  Yet, by simply knowing this or other factors about the people in the negotiation, you have a chance to prepare.

 

Never want something too badly

Power

Simply put, power is the ability to influence.  In negotiating, there are several types of power and several ways that you can utilize and understand power.  Just to better understand power, imagine that you are going into a negotiation for an increase in your salary.  Would you behave differently if you approached the CEO of the company (assuming that she is not your boss) or your direct manager, whom you have met after work for drinks several times in the last couple of weeks?  Most people would rather deal with the friendly manager.  But, why?  Because, people usually perceive that the CEO has more power.  If you say the wrong thing, then you could get fired.  Maybe you get fired for having the ‘gall’ to ask for a raise in the first place.

Understand that power plays a role in every negotiation.  Learn its nuances, start to recognize it everywhere you go, and you will become better at negotiation.

Why Bother?

So, why bother negotiating?  Why look for the dent on the refrigerator, or seek out the display model, just to get a better price?  Retailers price these items fairly, right? 

A few weeks ago, I purchased a set of speakers.  The price on the speaker’s box was $349.00 a pair.  But, I noticed that the box had been opened and then resealed with tape.  I asked the salesman if I could open the box before I bought the item, just to be safe.  Alas, I noticed that the brand name that is usually affixed to the front of the speaker grille had broken off one of the speakers.  Since this was the last box of speakers of this type, I asked the salesman using a technique called the crunch (covered later in the book) if he would be willing to sell the speakers to me for less than the retail price.  I simply said, “with the opened box and the defect, you’ll   have to do better than that.”

At first he gave me a funny look like “you gotta be kiddin’ me.”  But then as he thought about it, and saw that he might lose me as a customer, and knew that he would have to ship the box back to the manufacturer – at his cost.   So, he made a calculation.  “How’s $249.00 sound,” he said. 

Suspecting that these retail stores usually purchased items for about half of the retail price, I said that I thought that $199 might be better.  “Let’s split the difference at $225,” he begged.  Knowing that he needed to make a commission on the sale and that the store needed to sell these speakers, I agreed.

What happened here?  A win-win negotiation.  I won: I bought a good set of $350 speakers for about 35% off (they weren’t perfect).  I only had to super glue the label on the grille.  The salesman won: he received a commission, probably a credit to his quota, and a sale.  The store won too: they saved the hassle of shipping the speakers back, and made, what I believe to be, about a 28% mark-up on a “defective” pair of speakers.

Ah, I hear the questions that you are asking: do I feel bad about it?  Did I take advantage of the salesman?  Well, actually no.  If the salesman was not happy about the deal, he could have simply said “no” and taken his chances that another buyer would walk into the store and buy those exact speakers for full price.  So, again a win-win.

Price vs. Terms

So often, people focus on the price elements of the negotiation.  But there is much more to negotiation than just price.  There are numerous other variables that are involved in determining the outcome of a negotiation.  Some of these other variables are known as terms.  Terms can be things like service after the sale, delivery, who pays for the legal fees, who pays for the negotiator, who will draw up the paperwork, how long the guarantee is, engineering expenses, financing terms and conditions, and so on.

It is in the discussion of terms that you can utilize creativity in a negotiation.  For example, when negotiating for a car, sure you can set the price, but then you can also negotiate financing terms, the warranty, free oil changes, a free tank of gas, and certain add-ons like pin-striping, rust-proofing, and floor mats for example.  So, when entering a negotiation, be sure to keep your mind open not only to the price, but the terms, because it will allow you to be much more creative.

Summary

Here we learned that negotiation is a mindset.  Understanding that every negotiation has a solution is a good negotiator’s first key to achieving a great outcome.  Knowing that there are fundamental qualities of any negotiation allows you to be more in control than those who “wing it.”

Recognizing that everything in our lives is negotiable, everyone is different, and that negotiation is predictable provide an excellent platform to start your negotiation.  Further, once you understand the difference between haggling and negotiating, you can begin to seek creative alternatives.

Finally, we discussed the 4 building blocks of negotiation:

  • Time
  • Information
  • People and
  • Power