Mastering the subtle art of negotiation

Negotiating, especially on price, is one of the most important skills a manager needs yet it is an area many professionals feel uncomfortable about. For some it is associated with notions of grubby horse-trading. Many managers like to achieve a consensus position without the effort or drama of a power play. Yet, being willing and able to negotiate is one of the most obvious areas that can make a massive difference to results. It's also part of the hard-edge nature of business and should not be avoided, according to veteran negotiator and author Derek Arden.

Arden's Pauline conversion to strategic negotiation came when he was asked to leave a meeting with one of the world's largest retailer after 30 seconds when he refused to budge on the price a £1 million contract. As he tells it, that night he bought his first book on negotiating and went on to study everything he could find on the subject. That journey included going to Harvard Business School to study under Prof Bill Ury, an expert on negotiation and author of Getting to Yes: Negotiating an Agreement without Giving In.

A lifetime of negotiating can pay off handsomely. Arden calculates he has saved about £250,000 over a 25-year period in after-tax income. People he says divide into two types – those who negotiate and those who don’t. Accordingly, there are also two prices in the world.

Negotiating takes effort and sometimes produces conflict. The way you approach that conflict – ideally in a soft and non-threatening way – will directly affect the outcome. It follows that your mind-set or your own psychology has a huge impact on your success as a negotiator.

When negotiating, you should look for a win/win scenario, where possible. However, you need to be careful if you detect that the other party does not care what happens to you as long as they win.

Power plays a huge hand in negotiating. Some buyers deliberately leave salespeople in waiting rooms or make out-of-hours phone calls to ask questions about products to weaken the other side. The advice here is to stay focused on the goal and not let dirty tricks affect your focus. Arden also suggests using mirroring techniques, such as language and voice tonality while avoiding confrontation.

One of the keys to success here is to have options during a negotiation and generally you have at least three. These are likely to be: best position, the one you want in an ideal world; target position, a more realistically achievable option; and walk away position, where you are prepared to leave.

You should brainstorm each of these positions and consider the options the other person has. Do not always accept the best possible offer, especially when under a lot of pressure to win a competitive tender. You need to consider the longer-term consequences as well as the shorter-term ones, of accepting a low price.

Negotiable variables

Negotiating, by its nature, involves concessions but sometimes these are relatively easy for one side to bargain with. Arden divides these into three categories: inexpensive valuable concessions; bargaining opportunities that are tradable; and negotiables. Having your negotiable variables in mind is a prerequisite of your preparation. Examples include payment terms, delivery dates and service levels.

The author advises being wise to personal agendas. Examples include a need by the other party to be seen to have won a price concession or to come across to colleagues as a tough businessperson at a meeting. The flip side of this is that an executive might be planning a career move and might be motivated to curry favour with you in the short-term for their own personal advantage. Then there are those who simply don’t like negotiating. Their agenda might be to secure one small concession so the process ends quickly and painlessly.

The book presents an 11-step guide to negotiating, as well as a negotiating calculator and access to online tools. Arden advocates leaving some meat on the bone for the other side, observes that no matter how thin you slice it, there are two sides to everything and that failing to prepare is preparing for failure. His book is interesting and mixes psychology with practical negotiating techniques.