musings about entrepreneurship & life…
Article originally published in The Next Woman.
Growing up in Latin America (LATAM), I was raised within the framework that negotiating always involved adversarialism. Still today, when we talk about “negotiating a good deal” in LATAM, we think of a winner and a loser.
Recently, while attending the Boulder, CO conference Startup Phenomenon, I had the great opportunity to expand my current perspective of what it means to successfully negotiate. During her talk, Stanford University professor Margaret A. Neale invited us to deepen the view of what it means to reach a good agreement. In her mind, negotiation is really a process of persuasion & influence. It is a value creation process. The best outcome in a negotiation happens when one thinks of it as a collaboration process where strategies & tactics are discussed.
According the Professor Neale when negotiating:
1. Always view the negotiating table as a problem solving activity where winning is a relative term. Winning is not about reaching an agreement. Success is really walking away not worse off than prior to entering the negotiation.
2. Ask yourself some critical questions: what do I want more of? Is it control? Is it influence? Is it course of action?
3. Know that expectations drive behavior. If you change your expectations you change your outcomes.
4. Do your research and find out your market value. If you don’t know what you want, you can’t negotiate for it.
5. Always keep in mind that the biggest source of power in a negotiation is the ability to walk away.
6. Change the negative attribution of negotiation. Stop seeing it as greedy, not very nice and demanding. It is critical to change the perception that if I say yes to a deal it must be a good deal. We need to be able to differentiate between a good deal & a bad deal.
In order to define a good deal, please ask yourself the following three questions:
1. What are my alternatives? What happens if this deal fails? Do your research prior to joining the negotiating table.
2. What is my reservation price? What is the point at which I am indifferent about the outcome of this negotiation? Having a reservation price is a critical discipline mechanism not to be compromised by a desire of reaching an agreement or a deal. It is the point at which, based on my previous research, I am better off walking away from the negotiating table.
3. What are my aspirations? Aspirations drive performance. It is critical to have an optimistic assessment in order to get more of what you want.
Why do we settle for less?
There are four main reasons why we typically settle for less:
1. Psychological pressure to say yes, that is, not wanting to appear greedy.
2. Viewing any “agreement” as a sign of success.
3. Escalation of commitment, that is, after spending so much time negotiating how can I possibly walk away without “agreeing?”
4. Ignoring your options.
In order to reach an appropriate agreement, it is important to make a plan for the negotiation. A well thought out plan involves four steps:
1. Assessing the Situation: Is this a situation in which I have the power to change the outcome? Can I walk away from this negotiating room being better off than before I entered it? In business terms, one would call this thought process a cost/benefit analysis. Will the benefits outweigh the costs?
2. Preparing: In this phase, there are really two aspects to bear in mind. First, I need to understand my interests. What do I expect out of this negotiation? Second, I need to deeply understand the interests of my counterpart. Preparation is critical for persuasion. For example, if the negotiation involves money, it is important to be able to couple a number with a competitive assessment: I am worth X because executives in charge of similar accounts at company Y have salaries in the range A-B. It is important to frame the “asking” in terms of how the “asking” relates to the overall business goal of the organization.
3. Asking: At a negotiating table there are always asymmetries of information. Because I know elements that you don’t and vice versa, there is opportunity for value creation. Asking should be viewed as an opportunity to engage rather than to argue.
4. Packaging. Negotiating one issue at a time is a really poor strategy. An issue-based negotiation turns every issue into an opportunity for adversarialism. Packaging the issues brings the opportunity to trade between them. In a sense, this is the time to use computer commands such as if, then, else. If I give you A, then you give me B, else I can do C.
I find interesting the etymology of the Latin word “negotium” = “not leisure”
Professor Neale’s view is contributing to a change in meaning overtime.