negotiation - mini tutorial
I have been a trained Commercial Negotiator since the age of 25. Commercial negotation has some similarities and quite a few differences from the sort of negotiation that you might see in the movies, but (hopefully) without the added drama. During negotiation training, you are taught to take into account multiple factors that may affect the outcome of the discussions.
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Hard factors
Hard factors are things you can measure directly.
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Cold hard cash. The most frequent reason for a commercial negotiation.
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Access to facilities to improve efficiency or sales, such as prefered positioning on shop shelves or preferences in terms of social media exposure.
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Removal (or diminishment of importance) of a competitive product in a range of products.
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Resources. Can include extra manpower, extra time on a production run.
SOFT factors
​Soft factors are things that you can't quantify but which someone might appreciate being included and therefore make them more amenable to your main goal.
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Perceived importance within an organisation or in the public arena.
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Relationship building with important clients.
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Brand partnerships along shared values.
There are many more, and every negotiation is different.
negotiation steps
step 1: initial meeting
You have identified a company that has something that you want. That could be as basic as cheaper buying prices for immediate profit (the most basic of negotiations) or seeking Brand Partnerships for longer term strategic reasons. You should be organising a meeting to discuss the possibilities. This is a very loose meeting to build a relationship and find common ground. This is not the moment for negotiations. It's to explore each others businesses and see where interest lies with the other party.
Step 2: internal meeting
A meeting with all potential internal stakeholders whose remit covers anything that needs to be part of the negotiation. Include anyone that has past experience of the company or people you are dealing with.
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Don't miss anybody out.
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You can't conduct a proper negotiation if you are promising something that is going to come as a nasty surprise to a colleague.
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If you don't have all the information you can possibly get, you are missing potential tricks and angles. If you don't have the information, you can't use it.
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Brainstorm what you want.​
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Non-negotiables. These are things that will bring an end to the negotiation if they are either not achieved on your side or demanded by the other side.​
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Negotiables. What is the highest price you will accept or the lowest price you will offer? Soft factors come into play here. Are there other things you can add to a package to avoid getting into non-negotiable territory?
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Step 3: set your breakpoint
Before you enter the main negotiation with the other party, establish at what point you will walk away from a negotiation. This is called your breakpoint. If you (or the person you are negotiating with) go past a breakpoint, you have an uneven negotiation where one party feels taken advantage of. This creates problems in a relationship and can lead to problems with the agreement being fulfilled. Both parties need to feel as if they are getting a benefit.
what is a breakpoint?
The Breakpoint is the point at which the negotiation is over without a resolution. For example, you can't afford the price cut the customer is demanding and you have nothing else that they want. If you are ONLY negotiating on price, it generally means you havent' thought enough about the importance of the softer factors. Could you, for example, offer to quote for their private label products in order to make yourself more of a strategic partner? Could you offer some hours from one of your employees to help tackle an issue that they are struggling with? Soft factors can seem to be completely outside the scope of the negotiation if you look at it purely on face value. However, everyone likes things that they perceive as being free help or unexpected bonusses and it may help push forward slightly on hard factor sticking points.
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Before you enter the fourth phase of a negotiation, you MUST be clear about your breakpoint on EVERY FACTOR being leveraged in your negotiation.
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When you fully explore the factors that you can play with and understand what the combination of factors contribute to the overall discussion, a negotiation becomes more sophisticated. This makes a negotiation much more satisfying on both sides and also allows for movement. With multiple factors, an initial negotiation may not end in a final agreement. If this occurs, the parties generally reconvene with their own teams to discuss the relative benefits of some of the softer factors in combination of the preferred hard factor outcome. Negotiations, especially where stakes are high, will often go through a series of negotiation meetings before reaching an agreement or mutually agreeing to abandon.
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Step 4: the main event
​There should only be one lead negotiator per team. Prior to the meeting, you should stage a mock negotiation. This allows you to use other brains within your organisation to anticipate roadblocks. Be sure to include anyone who has had previous dealings with the people you are attempting to deal with.
The lead negotiatior needs to be someone who can stay calm in a crisis and who is unlikely to get emotional. They need to be someone who is mentally agile and able to spot traps and pitfalls. If possible, bring in a senior team member who can offer immediate confirmation as to whether or not factors are 'on the table' if unexpected requests or suggestions are raised. ALWAYS make sure there is someone to take notes/minutes.
Before you leave the negotiation, make sure there is a recap of points that have been agreed and those which are still to be resolved.​
Agree the time and date of the next meeting and reconvene.
negotiation styles​
There are a number of different styles that you can use in a negotiation. The key to a successful negotiation is that the key negotiator has all these styles in their tool kit and isn't afraid to switch between styles. You should always take the key negotiator to any meetings during which you may be discussing business operations and ways of working. It is up to the negotiator whether or not they wish to be identified in that role before the main meeting. The best role for a negotiator in the early stages is to be the note taker. In their role as negotiator, they are looking out for specific things that are said, watching body language and assessing the group dynamic. This sets them up well to avoid surprises during the actual negotiation.
Everyone has a different dominant negotiation style they generally break down into 2 main styles.
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Dominant: This is a very easy style to fall into as a default if you are a large company with a lot of influence. Most people will be approaching you to work together and it is easy to default to 'yes' and 'no'. The problem with Dominant styles is that it can lead to the feeling of being bullied. The most extreme version of this is Donald Trump, who will literally use every ounce of his considerable power to railroad anyone he meets into accepting his terms (however that makes the person feel).
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Collaborative: You value relationships and want to achieve a result where everyone feels they have won. The United Nations is an example of how collaborative negotiation is supposed to work. However, with such a huge organisation, there are just too many soft factors and too many different breakpoints, which is why discussions seem to go on and on without a resolution.
Another analogy, which I will go into in a case study about Grocery products is Heinz. Heinz can dominate terms with small convenience stores and demand specific buying prices. There isn't much an individual store can do and they accept that Heinz can bully them or use tactics like withdrawing their full range and causing customers to go elsewhere. When Heinz approaches a company like Coles, they know that they have to present more to the table than 'We're Heinz and you need us'. They would never remove the full product range from Coles as they rely on sales too much. There are multiple factors influencing each side of the table in each scenario.
step 5: refine agreements or leave​
The next step is essentially a repeat of Step 2 and Step 3. Internal meetings and reassessment of breakpoints. Is there anything else you can put on the table to achieve the desired outcome? Do you have to reconsider the importance of the other party in your business and brand plans? Do you look for another partner? Your decision is ultimately based on how important it is for you to complete a deal with this individual or business. After a second round of failed negotiations, your options are generally:
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Give up and wish each other well. You never know when things might change.
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Escalate the negotiation to your superior (if you have one).
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Find some external help to develop other ways to make it work.
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Always make sure you document everything and share internally and externally where relevant. The other party will be doing exactly the same.
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NO MATTER THE OUTCOME OF THE FIRST MEETING, AS LONG AS YOU ARE TALKING, THE NEGOTIATION IS NEVER DEAD.
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When you stop talking, it creates a 'Mexican Stand-Off', which is no good for anybody.
Mexican Stand-Offs often leads to punitive measures on one side or another until someone caves in. This happens most often when two parties see the benefit of working together but are equally powerful and each making demands that the other cannot or will not consider.
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Now you have the basics of a negotiation, you may be interested in reading the case study on Internal vs External Negotiations.
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