Negotiating permeates almost every aspect of our lives, yet few of us ever master the challenge. This well-crafted book, which merges ideas and insights from the study of economics and psychology, is about how to negotiate successfully and how to maximise the value that you get from each negotiation.
Negotiating takes time and you need to think, gather information and strategise. You shouldn’t negotiate when the cost of negotiating exceeds the potential benefits. If you are selling your car, for example, and are in no particular hurry, you might prefer to set your price and wait for a buyer rather than wasting time haggling with people who might never get to that level. You also need to know when to walk away.
Confirmation bias is a huge problem in the negotiating process and prevents many people from practicing it at all. Many people are also reluctant to negotiate at all, associating it with conflict.
Various pieces of research presented here show marked gender differences, with women far more reluctant to negotiate. One study of US MBA graduates, for example, which showed women achieving starting salaries of over 7 per cent less than their male counterparts, revealed that only 7 per cent of women had negotiated their salaries while 57 per cent of men had. The authors calculate that if those differentials were maintained over the length of a 35-year career, the person starting on the lower salary would have to put in an additional eight years to acquire the same degree of earnings as the person on the higher salary.
Expectations drive behaviours so the advice is to set high expectations for your negotiations as this will result in better performance. While you may not reach the standard that you set, the primary function of negotiation is to achieve the best possible deal, rather than merely reaching your own benchmark.
Before beginning negotiations, you should determine your tipping point for walking away from a deal. Having alternatives is crucial and provides power in the negotiating process, so the first thing you need to consider is what your alternatives are if no deal is done. The counterpart in the negotiations will also have alternatives and, in general, whoever has the better alternatives will claim more of the value in the negotiation.
In a negotiation, a party’s reserve price is arguably the most important piece of information and is one the authors strongly advise you not to reveal. If a buyer states that this is the final offer and they will not increase it by a cent, most sellers will assume that that is not the case and that further concessions are available. The assumption will be that a faux reservation price has been given. What seems like a more direct strategy for efficient value claiming is more likely to result in an impasse.
Package proposals
In a complex set of negotiations, the advice is to package proposals rather than negotiating issue by issue. For example, a deal might involve negotiation of elements other than merely price. Delivery could be an issue. This provides an opportunity to link the two elements. In this instance, early delivery could be traded for an increase in the price. Package offers such as this are a good way of soliciting counteroffers which provide a good means of moving towards a value-creating deal.
Breaking issues up and attempting to solve the easy issues first – in an effort to get deal momentum – is not recommended. For one thing, it hinders the ability to take an integrative approach as described above. For another, it leaves the hard issues to the end, leaving you nothing to trade. The sides become polarised, with one likely winner and one loser. This is not a good formula for an ongoing relationship.
Situations of resource scarcity and social conflict are especially good opportunities for negotiation and provide fertile environments for getting good deals. In all situations, however, the key is discipline. Negotiation is a skill that can be learnt, and applying a systematic approach rather than improvising leads to better outcomes.
