Successful negotiators enter discussions with a clear plan to guide them towards their objectives. Here’s how to shape a winning negotiation strategy of your own.
What’s your negotiation strategy? Writing for Harvard Business Review, Jonathan Hughes and Danny Ertel argue that unless you can answer this question, you shouldn’t be entering a negotiation in the first place. Yet surprisingly few leaders begin talks armed with a strategy: “What we hear most often is, ‘It depends on what the other side does.’”
This style of negotiating is called BATNA – best alternative to a negotiated agreement. But in any complex or high stakes negotiation, a reactive strategy is a strategy that fails. Good outcomes require prior planning:
“With well-thought-out strategies, negotiators can suppress the urge to react to counterparts or to make preemptive moves that are based on fears about the other side’s intentions.”
Here’s how to design a negotiation strategy that works.
STRATEGIC PRINCIPLES
1) Rethink counterparts. Look beyond the obvious participants in the negotiation. There’s an entire “ecosystem” surrounding the negotiation containing many possible allies who might be able to help you achieve the outcomes you’re looking for. “We need an approach that encompasses all the parties that can and will help us fulfill our objectives.”
Familiarise yourself with your negotiation’s ecosystem by answering the following questions:
- What business outcomes do we seek through this negotiation?
- Who else cares about these outcomes?
- Who can do something to bring about these outcomes?
- How can we engage, directly or indirectly, with parties that share some of our interest in achieving these outcomes?
2) Analyse counterparts’ constituencies. “A corporation isn’t one uniform organisation; it’s a federation of businesses.” You’re not negotiating with “one monolithic entity”, but with the numerous constituencies that make up an organisation.
While, for example, a unit manager negotiates contracts she sees as relevant only to her unit, there will almost certainly be other stakeholders in other areas of the organisation who stand to gain or lose. Time spent identifying these other stakeholders, and understanding their needs and priorities strengthens your hand.
3) Rethink the deal’s scope. The scope of a negotiation is not set in stone. Sometimes broadening the scope of a deal can break a deadlock; sometimes narrowing the scope of a deal can achieve the same result. Take a step back, look at the bigger picture, adjust the scope of the negotiations as necessary.
4) Rethink the nature of leverage. Your attitude to a negotiation is key to its success. Focusing solely on your needs and looking to weaken your counterpart’s position only gets you so far. Your goal should be to deliver a deal the other parties stand to gain from too. Attempting to coerce other parties to accepting a deal that’s less than favourable is a poor long-term strategy. Look for win-wins.
5) Look for links across negotiations. Why limit your focus to the negotiation at hand? “A strategic approach requires considering success beyond the current deal and, in particular, how the precedents it sets will create anchors and shape dynamics in future negotiations.”
6) Consider the impact of timing and sequencing. A small tech firm was in the process of renegotiating a contract with an internet giant. The internet giant stalled in an attempt to put pressure on its smaller counterpart. The small tech firm used the time to negotiate a potential alternative deal with one of the bigger firm’s main competitors.
Slowing or accelerating negotiations is a common tactic used to pressure the other party into making concessions. But it can backfire. That small tech firm ended up increasing its leverage to the point where it was able to negotiate a deal with the internet giant which was five times larger than the original contract.
Also consider the sequence in which you choose to address different issues. “Resolving some issues may reset the stakes or reframe the remainder of the negotiation.” To help with this, answer the following questions:
- How can we use additional time to strengthen our walkaway alternatives?
- To what extent can the other side use additional time to strengthen its walkaway alternatives?
- How might deals negotiated with other parties affect the scope of the negotiation or create precedents that influence the way we resolve key issues?
- What changes in the external market might increase or decrease the value or importance of the deal for each party?
- What events or changes in the external marketplace might adversely affect the strength of our walkaway alternatives – and the other side’s – or create mutually beneficial opportunities?
7) Be creative about the process and framing. Common questions firms ask before starting a negotiation often include things like, ‘Should we issue our own proposal or ask the other side to do so?’, or, ‘Should we make an aggressive first offer to project power, or be more reasonable to keep the negotiation amicable?’ This is “binary thinking”.
There’s a better way. A healthcare firm renegotiating a contract with a major supplier decided to invite the supplier to a pre-negotiation summit. The supplier agreed, and the healthcare firm shared an analysis of its product’s evolving market position that turned the negotiation into a “joint problem-solving” exercise.
Taking a strategic rather than a reactive approach to negotiations transforms them. It helps you to make the right tactical choices, allows you uncover mutual benefits, and makes it much more likely that you’ll reach an agreement that satisfies all parties. A positive negotiating strategy gives you the confidence to enter discussions feeling calm and with a clear idea of what you hope to achieve.