Becoming an Expert Negotiator: How to prepare for a negotiation?

How do you become an expert negotiator? - I always wondered about it, when watching movies or web series, where some negotiator comes into the scene and uses their tact and wit to defuse a situation.

We have all read it in the papers, and sometimes in books too - where expert negotiators are hired by two parties trying hard to come up with an agreement, and these people work their charm, and you get an agreement that's a win-win for both the parties.

So when Coursera recommended me a course on Successful Negotiation: Essential Strategies and Skills by the University of Michigan, I signed up. In fact, I signed up for two more courses on the same topic by Yale University, and the University of Pennsylvania, and an entire specialization on the topic by ESSEC Business School. What to say, I can be invested like that.

Plus, Negotiation is a skill that I believe everyone should master. This was a topic I was keen to learn in my 150 days of learning from various MOOCs.

Here are my notes from the first two weeks of the course, taught beautifully by Professor George Siedel . I normally believe in doing a large summary, as I covered in my earlier article on the Foundations of Project Management course by Google, but there is simply too much important material covered here and I would not want to miss anything.

The four steps for a successful Negotiation

According to Professor Siedel, any successful negotiation comprises 4 steps:

• Prepare - This is where you do all the groundwork and plan your negotiation strategy
• Negotiate - Technically the most important step, where you go into a negotiation and use tactics in your arsenal to succeed.
• Close - In this phase, both parties come to an agreement and all you are left to do is create a contract.
• Perform and evaluate - The end game, which is all about how you perform the contract.

Note: Before I continue further, let me add that a good reference for this course is the book titled Negotiating for Success: Essential Strategies and Skills by Professor Siedel which is available on Amazon, and the course is hugely based on the book or vice versa. Anyways, if you prefer books to courses, I would recommend ordering the book.

How do you prepare for a Negotiation?

Now, a lot of people believe that negotiating is all that matters. But that's not true. The groundwork is equally important. Before going into a negotiation, you need to ask yourself these 7 questions. I briefly explained each of them, and go into detail where needed.

Should I negotiate?

That's the first and most preliminary question you ought to ask yourself before going into a negotiation - Should you negotiate?

Unless you're doing it as part of your career, you have to consider your feeling about negotiating in general. You have to calculate the risks and rewards associated and do a cost-benefit analysis. If negotiating gets you in a better position than you are right now, and you feel good about it you ought to negotiate.

Is this a position-based negotiation or interest-based negotiation?

Once you have decided to enter the negotiation, the next thing you ought to figure out is - Is the negotiation based on a position or an interest?

One way simple way to describe positional bargaining is both parties choose a position and try to build their strategy so that they come across as winners. If you are a vendor who wants a high price, and the manufacturer demands a lower price, you both have chosen your positions(high price vs lower price) and negotiate till you reach an agreement. This could result in a win-lose situation for either party.

Whereas in Interest-based negotiation, both parties try to find mutual interests and try to come up with a solution where both parties emerge as winners.

I found this great source that lists the difference between position-based and interest-based negotiation.

At the end of the day, it's always wise to try and find the underlying interests of both parties and even then be ready for positional bargaining. Because no matter how much you enlarge the pie, at the end of the day, there will be an argument over who gets the bigger share, and that's when this negotiation will become position-based.

Am I trying to resolve a dispute or make a deal?

Once you enter the negotiation, the next question you need to ask yourself is: Am I trying to resolve a dispute or make a deal?

The key difference between both is, while the former tends to be adversarial and position-based, the latter involves problem-solving and tends to be interest-based. However, in both cases, you ought to think of coming up with opportunities and try to make it interest-based.

If we go into dispute resolution a bit in detail, other than negotiation, it also involves 5 main processes, which can be viewed in the screenshot below.

Let's take a quick look at each of them:

• Avoidance - One party choose to avoid the trouble and settle for what is being offered
• Negotiation - The tool used in both dispute resolution and deal making where both parties negotiate to come up with an agreement.
• Mediation - It is a negotiation, assisted by a third party
• Arbitration - You bring in a third party, but the third party has the right to decide the dispute.
• Litigation - Similar to arbitration but you can think of arbitration as private, whereas in litigation, a judge is involved.
• Power - One party exerts force over the other party in some manner until they come to a conclusion.

When it comes to dispute resolution, it can be looked at through a variety of lenses, and here are three frameworks that are most used in the industry.

Alternative dispute resolution:

A few decades ago, people in business?began to become concerned about the high cost of litigation.?And they started to ask - ?Why is it that when we are involved in a business dispute,?we outsource the dispute to lawyers and to the legal system??We have the business skills to resolve disputes.?Why aren't we using those skills??And so they started to develop alternatives to litigation.

Resultantly, Alternate dispute resolution framework was formed, which was an alternate to litigation.

The processes used in this framework include Arbitration, Mediation and Negotiation.

Third Party Processes: When you read about a business/commercial dispute, you often know that there is a third party involved to resolve the dispute. In this case, the processes involved are as follows:

Power Rights Interest - This is a framework loved by academics. While the power part is obvious, the rights part helps determine who is right and who is wrong. The interest part helps find underlying interest of both parties and build something that will benefit both parties.

The screenshot above shows the processes for each decision(based on coloring) and is a practical tool that gives you options when you are involved in a dispute.

While all of these processes can be used for resolving disputes, some of them like mediation and arbitration can be used for deal making too.

How should I analyze a negotiation?

When it comes to analyzing a negotiation, it can be broken into 3 different parts:

1. What questions should I ask to complete an analysis?
2. What is my BATNA in a dispute resolution negotiation?
3. How can I use decision trees to complete BATNA analysis?

Let's answer the first question: the questions that you need to ask to complete an analysis:

1. What is your overall goal in this negotiation?
2. What issues are most important to you in reaching this goal? Why are these issues important?
3. What is your Best alternative to a Negotiated Agreement(BATNA)?
4. What is your reservation price(the lowest you can expect(for seller) or highest you can give (in case of buyer))?
5. What is your most likely price?
6. What is your stretch goal(the highest you expect(for buyer) and the lowest you can give(for seller))?

Ideally, a transaction or a deal takes place in the Zone of Potential agreement(ZOPA) which lies in between reservation price of both parties. This is based on psychology as both parties feel they are ending with a good deal. Plus, it should be noted that while a huge stretch goal comes with its own set of risks and can cost you your credibility, so it's always better to choose your stretch goal wisely.

Your BATNA in a dispute resolution can often be litigation or arbitration(which is private litigation). We will not go into detail here, but in a global economy, where companies from different countries are involved, the rules can be different and should be studied well before going ahead.

The decision trees on the other hand is a great tool that can help make useful decisions and help complete your BATNA analysis. For a quick intro to decision trees, do watch this video.

Is this a cross-cultural negotiation?

For a negotiation involving entities from two different countries, culture can play a huge role and impact the success of the negotiation.

It is important that both parties are sensitive to each other's culture, but it should alos be noted that there can be some variance on culture depending on the party.

This article can help you understand the impact of culture in your negotiation. You can read it here - Ivy Business Journal article .

It is also beneficial to do a gap analysis to understand the difference between culture of both the parties and do a role reversal to better understand the other party's stance. This will help you develop a deeper understanding of other side.

Side Note: Try to use silence as a tool in your negotiation arsenal. The more you keenly listen and the silent you are, it would unravel the other sides' possibility of revealing more than they should.

How should I handle ethical issues?

A negotiation has the ability to test your ethical standards in a way nothing else in business could. How you handle the ethical issues depends a lot on the law, and you as a person.

Ethical standards can be divided into two clusters:

• Law based ethical standards and
• General ethical standards

Law based standards comprise of principles like:

• Never commit Fraud
• Adherence to fiduciary duty: Ex: Any employee owes a fiduciary duty to the organization s/he works for.
• Unconscionability: One should not violate principle of good conscience. This is a very loose term, but one good way to describe is if one party has unequal bargaining power over other party, and the terms of contract come across as unreasonable, then a court might overturn the terms based on principle of unconscionability.

General Ethical standards include:

• Organizational standards: The standards that are apart of an organization's mission and values
• Mentor Test: Comparing what would a person you admire would do when faced with such a situation
• Gut test - How does your negotiating strategy feel in your guts?
• Family and Newspaper Test: Ask yourself if you would be embarrassed when revealing your course of action to your family members or it making on the front page of the local newspaper.
• Golden rule standard - This is based on the proverb "Do unto others, as you would have them do unto you". No one wants to come out of a negotiation treated unfairly. This standard reminds us to set fairness as a goal.

Before entering into any negotiation, it is recommended to select one or more of the general ethical standards to use for guidance when ethical issues arise.

Should I use an agent to negotiate for me?

The last question, albeit the most important, should you choose an agent to do the negotiation for you?

In huge corporations or negotiations involving countries like trade deals, there are dedicated agents assigned to carry the negotiation. However, if you have to choose whether or not you should hire an agent, here are the questions you should consider asking:

1. Is the agent a better negotiator?
2. Does the agent have more experience in negotiating the issues that one is posed with(Ex: a sports agent)?
3. Does the negotiation involve technical matter that would require the expertise of an agent(like a lawyer)?
4. How much time do I have to invest in a negotiation?
5. What is my relationship with other side, especially if this is a dispute resolution negotiation? In such cases, it is better to hire an agent who has some distance from the details of the dispute.

Based on these questions, one can determine whether or not to hire an agent.

However, the reality in today's business is that almost all negotiations are conducted through agents. So when you enter into a negotiation, what is the first question you should ask?

Authority.

Does the agent have there authority from the principal to do the deal?

You see, there are three types of authority:

1. Express - Authority to negotiate the deal
2. Implied - People hired in a certain position that could negotiate only certain deals
3. Apparent: When the agent looks like he has authority, but he has none.

And who do you ask the above question? To the agent? No.

You ask the principal, if the agent has the authority to make a deal.

That sums up all the 7 questions one should ask while preparing for a negotiation. We will talk about the next stages of negotiation in our later articles. Stay tuned and hit follow button to get latest updates.