Breaking the deadlock: Five ways to become an effective negotiator
How good a negotiator are you really? Research shows that few people are truly effective negotiators: the figure could be as low as 5%. This has huge implications for business.
The 2014 postal strike (representing a negotiation failure) cost the South African Postal Service over R350 million. Before that, the platinum strike that ground on for four long months, cost the platinum industry an estimated R24 billion in lost production. The real figure is probably much larger if one were to take into account secondary costs such as damaged relationships and lost opportunities.
Poor negotiation skills also lead to a different type of value destruction in the form of value being left on the table: even if a deal is reached, it’s in most instances not the best deal the parties were capable of putting together. According to a recent study from YouGov and the Centre for Economics and Business Research (CEBR), UK businesses would increase turnover in the private sector by around £17 billion if they practiced more effective negotiation tactics. This amounts to around £9m per day.
The study also estimated that with better negotiation, the average UK firm would have enjoyed increased profits of about 7%. The research shows that the tendency for negotiators to claim value instead of first trying to maximise it, lies at the root of the problem.
But how can you maximise value in negotiation? According to Barney Jordaan, a past professor of law who teaches negotiation skills and strategy in South Africa and Europe, this is achieved through setting clear goals, learning behaviours that are conducive to value-creation, developing flexible strategies while simultaneously building sustainable relationships with the other side.
“Negotiating effectively is a skill that can be learnt. And with nearly every aspect of business involving negotiation, those who know how to make the most out of these opportunities will come out on top,” he says.
Jordaan, who convenes the Maximising Value in Negotiation course at the University of Cape Town Graduate School of Business (UCT GSB), lists five top tips for effective negotiation that can improve a business’s bottom line.
Build sustainable relationships
Most business negotiations aren’t just once-off deals but also involve ongoing relationships or commitments. Building a good working relationship with your counterpart has several benefits: it makes the negotiation process less tense, promotes information exchange and it helps to ensure the sustainability of the deal in the longer term. Experienced negotiators know that this is probably the most difficult aspect of all. “When you negotiate, there’s always a level of conflict present.”
“There are different needs, expressions, viewpoints and desires that come into play. You must manage that conflict in a wise way to ensure that it doesn’t spiral out of your control,” Jordaan says.
Effective negotiators work hard to reach deals that meet their own core concerns, but are also sensitive to the needs of the other party and the need to create sustainable business relationships.
“Otherwise, you will end up making a deal that isn’t good for anyone. You’ll either lose value, lose the relationship, or lose both.”
“Learning how to become an ‘unconsciously competent’ negotiator is vital for successful business. This requires a solid knowledge of how to manage the people, problem and process aspects of negotiation and lots of practice,” he says.
“Winning in negotiation means different things to different people. For some it means beating the other side, irrespective of how good the deal is for themselves. This approach leaves behind victims, and victims eventually turn into aggressors,” says Jordaan.
He says some negotiators believe in ‘wimp-win’: as long as they maintain a relationship of some sort with the other party they feel satisfied. These negotiators look and feel weak and they get taken advantage of. Eventually dissatisfaction will set in.
Effective negotiators know that it’s about maximising the value on the table and then claiming as much of that as they are fairly entitled to. This requires ‘reflective behaviours’; behaviours that speak to the other party’s reward system while avoiding triggers that could ignite their fear response.
“When I train negotiators I often hear some say: ‘If only I could leave my emotions out of it’. The bad news is that you can’t. What you can do is learn how to channel your own emotional energy into something more constructive and how to ensure that your behaviours do not trigger emotions in the other party that you cannot control. The image that comes to mind is of someone riding atop an African elephant: while it seems - the rider - is in control, we know that we are at the mercy of the animal - our emotions. In negotiation you want to minimise the risk of either your or the other party’s ‘elephant’ taking charge,” Jordaan says.
Focus on interests – even if they are hidden
Imagine an entrepreneur selling her very successful business. She’s spent a lot of time investing in the business, building the brand and its value. At the negotiation table, she may demand a price that is way above what the other party thinks is fair. Average negotiators might immediately think her arrogant and unrealistic and respond with an equally ‘insulting’ counter-proposal.
“In business negotiations it’s always about money but never only about money. Behind her seemingly outrageous demand lies legitimate concerns or interests that she wants satisfied before she’ll say yes. Effective negotiators will look behind her demand to uncover these concerns and then come up with alternatives that could be of high value to her yet low costs to themselves. In this example, she might be prepared to accept a small shareholding in the new business, a seat on the board or a consulting arrangement for an agreed period, or for her name to remain associated with the business," he says.
Listen to others
It is so important to balance a firm approach in pursuit of your objectives with an openness to listening to the viewpoints and needs of others. In fact, research from Cornell and Georgetown Universities suggests that the advantage goes to negotiators with a reputation for collaboration rather than competition. Listening is not about being polite or “nice”.
“First of all, it’s about getting information from the other party so that you can make more informed decisions yourself. Second, by listening to others you earn ‘communication credits’: the principle of reciprocity ensures that by listening to them, you have every right to demand the same treatment,” Jordaan says.
He says the inability to listen affects business in other ways too: “When key decision-makers don’t allow for different points of view to be expressed, they may think they’re behaving decisively, but they are actually exposing their companies to increased financial and corporate risk as decisions are made based on limited and often biased information.”
Open discussions can help businesses build better negotiation strategies, but it can also reduce risk and improve a company’s success from within.
“You get much more out of people if they trust you and feel that their contributions are valued. They will work harder and work together, which will have long-term benefits for the company as a whole,” Jordaan says.
According to Jordaan, by far the most time should be spent on preparation. However, it seems very few professionals follow that rule. Research from the International Association for Contract and Commercial Management (IACCM) shows that 74% of companies have no formal negotiation planning process
“The research is clear on this point: those who prepare best, do best. Or, as someone once said: ‘Fail to prepare and prepare to fail’. But preparation is more than simply filling in a template - it is about setting clear goals and aspirations, selecting an appropriate going-in strategy, developing walk-away alternatives, thinking about what leverage you have and how you can gain more, and reminding yourself of the kinds of tactics and behaviours you need to display in support of your objective,” he says.
Remember your reputation
“The first ‘person’ to arrive at the table is your reputation. If it’s a bad one, the other party is probably ready to treat you as if you were a sabre tooth tiger coming to devour them. But if your reputation is of someone who is firm, yet trustworthy and fair, chances are you’ll be respected as a negotiator and so be able to gain much more. Business leaders are representatives of their brands. How they behave in negotiations impacts not only the outcome of the deal, but how other parties view their companies at large. If key leaders display aggressive, unfair or unethical negotiation tactics, that behaviour will be remembered and likely affect the possibility of future business interaction.
Overcoming this involves understanding how your behaviour affects other parties, Jordaan says, and using that to steer the direction of negotiations in a positive and effective way.
“Know what impact your behaviour has on the other parties. Getting them to react with anger and push back is easy to achieve, but to influence people in a positive way– to get them to move in your direction – requires skill,” he says.