Negotiation

NEGOTIATION

Negotiation is the skill and process of coming to an agreement between two or more parties.

TRAITS FOR NEGOTIATION

The Harvard Business School website lists the following 5 traits as important in negotiation:

  1. Assertiveness: sticking to your core requirements, not caving in to bullying or high-pressure sales tactics
  2. Empathy: understanding the needs of the other party
  3. Flexibility: being able to give-and-take, and come up with other solutions to impasses
  4. Social skills, or intuition: communicating clearly,
  5. Ethics: coming to a result that is legal and ethical

1. DO YOUR RESEARCH

What are you after? What’s available? Who can provide it?

Long before you start negotiations, you need to do some research.

Talking to potential vendors should be part of your research. But don’t trust only them. Google. Talk to other people who’ve done this before you. Get advice.

Find out what the costs are, what features are available, and what the pitfalls are.

Also find out if there’s any relevant legal requirements or standards you need to meet.

And talk to your people. What do they need? What would make their life easier? What’s the budget limit.

Finally, think about what you can offer to the other party – see Look for the Win-Win below for more detail.

Use this research to compile a list of your requirements.

 

2. RANK YOUR PRIORITIES

Take your list of requirements, and rank their importance.

I’m a big fan of “MOSCOW” prioritisation: Must Have, Should Have, Could Have, and Won’t Have (i.e. definitely don’t want).

Think also about why you want them. Sometimes this is obvious, like a price limit being set by your available budget. But sometimes knowing your underlying need can help lead to alternatives.

This is about creating some flexibility. You know which requirements you can change or trade away, and which ones are core.

I find it helps to create a table for this, cross-referencing categories like Pricing, Features and Support against the Priorities.

MUST HAVE SHOULD HAVE COULD HAVE WON’T HAVE
PRICING $3,000 $2,500 $2,000
FEATURES
  • A4 and A3 printing
  • Colour printing
  • Takes recycled paper
  • Scanning
  • Easy user interface
  • Bulk paper tray
Faxing
SUPPORT Next business day repairs Same day repairs Hot swappable spare On-site technician

 

3. KNOW WHEN TO WALK AWAY

You need to know at which point you call the whole deal off.

Again, decide this before you get to the table. Usually this is your Must Haves from Step 1. If the other party can’t provide all your Must Haves, then there’s no point in negotiating further.

It’s easier to walk away from the table if you have a Plan B. So, write that down too. What will you do if the other party can’t meet your Must Have requirements? How else can you meet those needs?

 

4. LOOK FOR THE WIN-WIN

You know what you want from the other party. What can you offer them?

Money is one thing. What else can you offer? A recommendation? A testing ground for new products? References to other parties looking for a similar service?

This is where the back-and-forth part of negotiations happen.

There’s more tips on win-win negotiation on the Harvard Business School website.

 

5. INCLUDE A PENALTY CLAUSE

What happens if either party doesn’t live up to their obligations?

Well, that’s one of the things your should discuss during negotiations. Service level agreements are worth nothing if there’s no penalty for the other party not meeting them.

Usually, you want a three-tier penalty clause:

  1. a warning on first failure
  2. a financial penalty for subsequent failures
  3. a way to end the contract if the supplier can’t rectify problems

 

6. GET IT IN WRITING

Get your agreements in writing. Signed and dated.

Look, I’m sure you trust the other party. But details get lost, people misunderstand, and staff change. If there’s a dispute, you can point to the relevant section in your agreement.

My friend David Gerard has an aphorism for this: He who has the most paperwork wins.

Document everything. If you have a face-to-face meeting, send an email afterwards summarising what was discussed. If you place a service request over the phone, follow it up with a quick email, even if it’s only to yourself.

This creates a paper trail you can refer back to. And by “refer back to”, I mean whip the other party when they don’t live up to their obligations.

I’ve had suppliers who were dragging their heels about fixing problems suddenly jump and resolve my problem after I sent them a detailed list of all my requests to fix said problem and their failure to do so.


TIPS AND TACTICS

The Absent Approver

This is a tactic to short-circuit bullying, high-pressure sales, and also bribery. Basically, you negotiate the deal with the supplier, but your boss has to sign off on it. And they’re not at the negotiation table.

This means the deal has to work on paper, rather than just be something the supplier has pressured or charmed you into agreeing to. And it gives you a psychological advantage: instead of the negotiations being you versus the supplier, it’s now you and the supplier versus the boss. “Help me sell this to my boss,” you can ask.

 

Think Laterally

Don’t assume that the list of requirements you drew up in Steps 1 and 2 are the only solutions to your problems. Are there new technologies? Is there a way to redesign your processes? Focus on the underlying need, rather than the gizmo you think will meet it.

But also: don’t get to swept away by the shiny new toys. New technology often has problems. New processes require training. Weigh the pros and cons. And use those cons in your negotiations: maybe your organisation can be a showcase for a new technology in exchange for the supplier keeping a support person on-site to fix any problems?