Negotiating with Power

Power is a central factor in determining the outcomes of the negotiation process. Effective negotiators understand that power is not static and thus engage in continuously assessing and enhancing it. However, it is equally vital to know how to negotiate when you do not have power.

Understanding power sources

Power can come from a number of different sources:

• Information Being well informed enables you to support your arguments and challenge the other party’s arguments.

• BATNA Having an attractive alternative to a negotiated agreement gives you the power to say “no” to a bad deal and walk away from it.

• Resources The party that has more resources—financial, technological, or human—has more power.

• Needing the deal The less badly you need the deal, the more power you have not to settle for it.

• Time The fewer deadlines you are pressed with, the more power you have to wait and explore opportunities for better deals.

• Sunk costs The more willing you are to let go of your sunk costs (such as financial and emotional expenses), the more power you have.

• Skills The more skilled you are in the art of negotiation, the more power you have to produce better joint outcomes.

Negotiating from a weak position

If your position is weak, never share this information with the other party. New information or opportunities may arise at any point, which may strengthen your BATNA and your negotiating position. Even if your position is weak overall, try to identify any areas of strength you have and use them as leverage. Even the most powerful party will have some weaknesses, so try to discover these and target them.

Never make “all or nothing” deals from a weak position—you may miss out on opportunities that would have arisen as the value of what you are bringing to the table increases during the negotiation process. Instead, make deals sequentially and in small chunks, to ensure that the other party will be more likely to recognize the added value that you bring to the table.

Creating power

When Thomas Stemberg, the founder of office products retailer Staples, needed a new round of capital to expand his business, he went back to the venture capitalists who had already financed the company. This time, however, they closed ranks and demanded a higher equity share than Stemberg was willing to provide. Determined to break the venture capitalists’ cartel, Stemberg sought alternative sources of funding—the pension funds, the insurance companies, and high net worth individuals—with which he could negotiate from a more powerful position.