The resolution of conflict by mutual compromise: The 10 Rules of Negotiation

(Date published: 05 March 2004)

by Alan McCarthy
Associate Consultant, Catalyst

In today's increasingly competitive sales environment, an absence of negotiation - or negotiation skills - is perhaps the single largest contributor to the lack of success many sales people experience. The changing nature of the buyer/supplier relationship in this increasingly challenging marketplace has begun to necessitate the need for sales teams to become ultra sophisticated negotiators. Of course good negotiation isn't about you winning and someone else losing. A satisfactory outcome leaves both sides feeling that they haven't compromised too much, given way when they didn't want to, felt threatened or unnecessarily pressurised, or made sacrifices that they didn't want to. It is about reaching a win-win situation. People now expect to negotiate and see the process as a positive builder of relationships rather than a potential threat. It has become recognised that 'principled negotiation' can achieve a solution that is acceptable to all parties involved. And of course, this then encourages repeat business in the future. The 'Ten 10 Rules of Negotiation', identify the techniques available to control and direct events to your own advantage, and to achieve better quality of business, with fewer expensive concessions. But of course good negotiation skills are not just an asset in the traditional sales person/customer situation, in all areas of life, with colleagues, employers, even your own family, being able to negotiate well will allow you to get what you want without damaging your relationships.

Ten Rules of Negotiation:

1. Don't, unless you need to. Always evaluate your needs honestly and never negotiate as it always requires compromise - at a cost.

2. Never negotiate with yourself. We often 'round down' our offer, to below the psychological offer, so make sure that you are clear with yourself about your bottom line before beginning the negotiation process. Decide in advance what matters to you and what doesn't; realise where you will compromise and where you will stick to your guns. Don't forget that they will be thinking 'I'm not going to accept the first offer, whatever they may say.'

3. Likewise, never accept their first offer. There is almost always a different (better) offer behind this one. Be aware, however, that you can annoy the other party by doing this; they will think they should have asked for more resulting in a perception of a lose/win conclusion (they lose, you win).

4. Try to avoid making the first offer (if you can help it!) It leaks your bottom line straight away. It might be a good offer but they will probably be taking rule 3 into account. It puts all of the 'value' pressure on you every time

5. Listen more and talk less. Good negotiators lead by listening, not talking. Let them ramble and this provides you with the opportunity to pick off the leaked messages. Whilst you are listening you can't leak your own position!

6. No free gifts. No one values a free gift for long - a free gift today becomes a starting point tomorrow.

7. Don't be the repentant rookie. Don't forget the differences between cost, price and value, and work with these. Aim for the super win-win (falling a bit short won't hurt).

8. Watch out for the 'salami' effect (i.e. itemising every element of the deal and pricing it). Start with a complete valueorientated price. Only salami when, and as far as you are requested to. Never 'band' your expectations - it leaks your bottom line. Try not to 'salami' the other party - behaviour breeds behaviour.

9. Never make a quick deal. Say 'maybe' and check your understanding of their offer; it may be that the other party think that they have seen an advantage (or mistake) you have missed, so buy yourself time to check your proposition thoroughly.

10. Never disclose your bottom line. Not before you start, not during the discussions and never after a successful win-win conclusion.

In most negotiations, both sides move from their original positions. Each compromises by making some concessions to reach an agreement. There are twelve major do’s and don’ts of negotiating for a compromise or a concession. We’ll review three of them here:

1) Never fear to negotiate. Resist your embarrassment or fear of trying. Remember, as we always say- you get in life and business what you negotiate. We don’t approach negotiation as a battle or a competition- so there is nothing to be anxious about or afraid of.

2) Leave some room to compromise. It can be tempting to drive a hard bargain, but this often leaves you too little room to reach an agreement. If you want to retain the business or personal relationship after the negotiation completes, be sure to consider whether the other party has also attained enough of their goals in the negotiation process. Keeping an eye out to the health of the future relationship is a good idea, whether the negotiation is business or personal.

3) Get something in return whenever you make a concession. Activate the mindset of “I give you this, you give me that.” There is great danger in giving too many large concessions too early; it is very difficult to recover from this and your results are likely to be poor.

Too many people fear negotiation in the first place and then move too quickly to a compromise when they do negotiate.Next time you are in the process of negotiating for something, try slowing down. Make it a game.See how much you can get, and how much you can give, and, who knows- you might even find negotiation is really fun.

I recently had dinner with a friend of mine, a physician-turned-businessperson-turned-founder. We were discussing the virtues of transferable skills, and I asked him what management tools he brings to entrepreneurship from his earlier career in medicine. He pondered a bit before confessing that radiology skills don’t, in fact, translate so easily. Instead he referred me to what he called “one of the most valuable books” he’s ever read.

Turns out he was referring to one of the original publications to come out of the famedHarvard Negotiation Project

, a seminal workshop that was started in 1979 with a mission to improve dispute and conflict resolution. Harvard’s researchers focused on negotiation for all kinds of conflicts, from the interpersonal to the international geopolitical. But since conflict negotiation is something businesspeople do daily, it’s not surprising that the fruits of their work were also published as a business book just two years later in the now classic best-seller, “Getting to YES: Negotiating Agreement Without Giving In,” by Roger Fisher, Bill Ury and Bruce Patton.

I picked it up. As my friend suggested, it’s as relevant as it always was, a common sense approach to effective negotiation rooted in five basic ideas. And if you can manage to absorb and apply these five rules, you’ll be much better off going into your next deal.

1. Don’t Bargain Over Positions
Most of us begin negotiation by identifying a position and arguing for it, such as: “I want to retain the CEO title.” But such positional bargaining can limit your ability to arrive at a “wise agreement” that benefits both parties — the proverbial middle ground and the whole purpose of negotiation. Instead of thinking of a “position,” identify the goal. You want remuneration for the sweat you put into your company. You want, for example, status (to remain CEO). But a specific position is binary — you either get it or you don’t. A goal can be attained in many ways, giving you many more options for arriving at a solution.

2. Separate the People From the Problem
Most negotiation is emotional. You want something, after all. And emotion clouds our objectivity. But you can limit the emotional content of your negotiation by thinking of the person you’re talking to as your partner and the problem you’re trying to solve as an object. Take, for example, the question of how much a company’s equity is worth. In this case, you’re not negotiating against the investor over a position, you’re engaged with that person to arrive at the right answer to the question. Some will urge you to make your negotiation opponent a partner, but this can lead to Stockholm Syndrome. Instead just think of engaging the other person, using their input to arrive at the right answer. Maintain your independence.

3. Focus on Interests
We all have interests. The pursuit to fulfill our interests leads up to adopt positions. But bargaining for stated positions, such as titles, will not necessarily produce a wise agreement that takes care of the interests that led you to adopt the positions in the first place. Think instead: I want to remain engaged in the business. There are many ways to achieve goals without having specific positions.

4. Invent Options for Mutual Gain
This is the creative part. You must examine each other’s interests to come up with options in which both parties gain. Your investors have an interest in a pro-CEO who can sell into large corporations (you’ve never done that). You need funding, but also want to remain engaged. Both parties can draft a list of options for your new role that satisfy everyone’s needs: COO, president, chief innovation officer, etc. Negotiate from this list.

5. Insist on Using Objective Criteria
We all have personal standards. CEO conveys more status than chairman, etc. The key is to let go of personal standards in favor of objective ones upon which both parties can agree. (Think of the Kelley Blue Book, a set of agreed-upon standards for those looking to buy or sell a car). But here you have to do some real homework and investigate the objective standards that apply to your negotiation ahead of time. Some to consider: market value; legal or business precedent; scientific judgments (patents); efficiency; and reciprocity.

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