A little while ago I started a thread covering general negotiation tips, tricks, and techniques. Just for the sake of consistency let me repeat the caveat I mentioned before: negotiation is a complex skill if not art. If negotiations are not particular your cup of tea you may consider involving professionals, in particular those who have experience negotiating offshore contracts. At least you owe it to yourself to go through some serious reading on the topic prior to diving into the deal making. Many of these books cover the main forces of negotiation (Time, Information and Power) in great details so I will take a very superficial approach in covering them. In addition I touch upon two more forces which are at least as important yet are not typically covered – Skills & Experience.
The topic of negotiations is complex and comprehensive; each of the bullets below probably deserves at least a few page long post by itself. So by any means do not expect that reading this post will make you a professional negotiator. I do hope that it would be a good check list to keep handy for your next opportunity to negotiate.
Let start with Time:
The main rule of Time is very simple: The party under the greatest time pressure is the one at disadvantage / the one to lose the ground. Here are a few main tips on dealing with Time in consideration of the rule:
- Do your best not to put yourself under the time pressure; for example committing to your management that you will have offshore contract done by end of month would not be a good idea.
- Learn to recognize time pressures your opponent is under.
- Never reveal that you are under time pressure; that shows your weakness and gives your opponents more armor.
- Try to put your opponent under time pressure.
- Recognized when your opponent uses time pressure against you (it’s often artificial / manipulation that could be easily deflected).
- As the time flies away and the finish line approaches the time pressure grows and the party under the highest pressure start losing the ground. Typically 80% of concessions are made during last 20% of the negotiation time span, so do not leave too much to the end.
- Be aware of special timing, e.g. end of year / quarter bargaining, but do not be swayed by it, it could be nothing but artificial – just another “time pressure building” technique.
The next major force of negotiations is Information:
You can consider Information as the currency in the world of negotiations. The side that has more information pertaining to the topic of negotiations has the upper hand. Offshore negotiations offer a great illustration of that rule. Consider an example of negotiations around a blended rate. The vendor knows the rates to be paid to the team members, anticipated turnover rate, cost of overhead and all the other components that define exact/true cost of the team. The vendor also has other factors that affect the minimum number the vendor is prepared to agree upon. If the customer has access to the same information they can as easily define minimum rate and take hard stance on negotiation driving to get the bottom line price.
Another illustration is access to specific information such as pressures that would make your opponent to be more flexible. For example if you learn that the sales person who is working with you had not met his quote and could lose his job if this deal is not closed. Knowing that allows you to time negotiations close to say quarter end and let the time pressure itself drive the rates down.
Same goes in the opposite direction – for example a vendor just learned that a couple of competitors bailed out from the negotiations with you. The vendor could easily use this knowledge to get more concessions out of you.
Manipulation of information is a strategy game that requires in-depth understanding of goals and objectives of the process. Here are some of the guidelines for getting better at this game:
- Gather as much as you can information prior to entering the negotiation and continue collecting it through out the negotiation process.
- Be very careful in disclosing and distributing information, some supposedly innocuous facts can turned out to be critical ingredients in the information repository. Consider following a good old “Need to Know” principle.
- Consider disclosing information as trading of goods. For example if I disclose some information to you I would expect a similar act or a concession of different nature in return.
- At the same time you should understand that information sharing is a mandatory component of negotiations in particular when searching for a win-win solution.
- Never assume that you know all the facts or that your information is correct.
The 3rd major force of negotiations is typically called Power. At a very high level, Power is ability to influence people, make them do things that otherwise they would not do. Power by itself is just ability, application of power that what makes the difference in the behavior of people.
There are several main ingredients of Power as it pertains to the negotiations:
- Situation power, e.g. buyer vs. seller in offshore contract negotiations.
- Reward power, ability to provide rewards.
- Coercive power, ability to punish, intimidate.
- Title / position power; note high importance of it in offshore negotiations.
- Expertise power.
- Power of flexibility, often undermined yet exceptionally potent ingredient.
- Character power, charisma, consistency, integrity, command of respect.
Interestingly enough the most important is not the Power itself but its perception. You can say that Power in some sense is similar to beauty: power lies in the eye of the beholder. Another way to put it is if you are perceived in the position of Power you are.
Consider “title” power – if your opponent perceives you as a high ranking official they would interpret your statements in that way even if in reality you are not. For another example of perception of power consider asking your boss for a raise (I assume that you are top notch contributor). Things that could be going through your mind would assign your boss the coercive power – “what if as a result I get fired!?” while the boss might not have this power (firing you could be disastrous for the organization) and the only thoughts in your boss mind would be “how cheap can I get out of it” assigning you the coercive power (ability to punish by quitting).
Negotiations is a game of skill, and as a matter of fact many skills, so I prefer to include the Skill in the list of the main forces of negotiations. The list that covers skills required for running successful negotiations would be very long and complex, so I take a high road suggesting only the main areas. And even though it is greatly simplified the list might seem intimidating, yet you should consider it in its comparison to the task. Offshore negotiations are not necessary as complex or stressful as Union or hostage negotiations, so you do not have to have all the skills at top level. More so the skills may be distributed among the team members and that would make achieving the success much more realistic task.
Foundational skills or ability to –
- Learn and improve.
- Control your own emotional state.
- Maintain your own integrity.
Specific skills pertaining to negotiation process –
- Setting goals, objectives, outcomes.
- Defining and staying within boundaries, limits, constraints, conditions.
- Using negotiating techniques – recognizing, using and countering negotiating gambits.
- Finding and driving for a Win-Win outcome whenever is possible.
- Obtaining and maintaining required authority
Analytical abilities are particular important for defining game plan and assessment of opponent’s position / game plan –
- Negotiation limits / negotiation space.
- Best Alternative to Negotiated Agreement (BATNA).
- Final Exit Point (FEP) and a Reservation Point (RP).
- Offers, propositions, tactics, techniques.
Behavioral skills and abilities –
- Observation skills
- Planning and organizational skills
- Rapport building skills
Command of communication techniques –
- Presentation skills
- Active listening
- Art of silence
- Read opponent’s non-verbal language
- Communicate non-verbally
- Information recovery
And the last in the list of the main forces of negotiation is Experience. The only way most of us can become good negotiators is by consistent learning and using multiple aspects of the art in real life. As in many areas of our activities it comes down to mileage, the more you sail the better you get at controlling your boat…