372 / PREPARING TO NEGOTIATE
Being prepared
Setting the limits
You should always go to the negotiating
table with clear answers to the following
questions: why do you want to negotiate
the deal? How will this deal create value
for you? What are your “deal breakers”?
What must you have from the deal, what
would you like, and what are you willing
to give away? There may be alternative
outcomes that you would be willing to
accept—what are they?
Knowing your objectives
Set your objectives high but not
outrageously so. It is tempting to censor
your aspirations, setting them too low to
protect yourself from the prospect of
failure, but in doing so, you will almost
certainly achieve less than was possible.
If you fail to set clear objectives, there is
also a danger that you could get trapped
in an “escalation of commitment”—an
irrational urge to “win” the negotiation at
any cost.
Escalation of commitment is a real
hazard in negotiation, and happens when
you refuse to give up your pursuit of a
negative course of action when the wiser
choice would be to cut your losses and
move on. Always set a limit for how far
you are prepared to go and prepare an
exit strategy (a means of walking away
from the deal).
Your success in a negotiation depends largely on the quality of your
preparation. Start by thinking through your position and your objectives.
Having clear goals will protect you from making too many concessions
and motivate you to perform better. Objectives should be specific,
quantifiable, and measurable. Only then can they be used as valuable
benchmarks to measure your progress during the negotiation process.
DO THE RESEARCH
Information is power. Find
out as much as you can about
your counterpart before you
sit down to negotiate.
VALUE THE ISSUES
Draw up a list of potential
negotiating points, starting
with the most critical.
Give each issue a value,
and estimate the value that
your counterpart is likely
to place on it.
Tip
Tip
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BEING PREPARED / 373
Looking across the table
A negotiator was once asked if he
could formulate a proposal that took
into consideration both his and his
counterpart’s interests. He was puzzled.
“Why should I care about the other
party’s interests?” he asked. “His
interests are his problem.” Such an
attitude of blinkered self-interest
characterizes the unprepared negotiator.
In order to succeed, you not only need to
understand yourself and your interests,
but also the other negotiating party, and
the situation as a whole. Ask yourself the
questions listed above when preparing
for a negotiation.
AVOIDING ESCALATION OF COMMITMENT
It can be easy to fall into the trap of competing with the other party at all
costs, to ensure that you get that “win.” For example, in the late 1980s,
Robert Campeau, a Canadian businessman, made a hostile bid to acquire
Federated Department Stores (FDS). Macy’s, a competitor of FDS, was
also interested and a bidding war began between Campeau and Macy’s.
Determined to win, Campeau kept increasing his already high bids to a
point where he offered to pay an additional US$500 million. Campeau
won the competition, but two years later he declared bankruptcy. This is a
classic case of escalation of commitment, and a lesson for all negotiators
in keeping a sense of perspective in their negotiations.
In focus
Who will come to the table? Research their personality and their
history of negotiation. Have they been previously successful or
unsuccessful and what approaches did they use?
What can you find out about their negotiating style, life history,
hobbies, and interests?
If you have more than one counterpart, do they share the same
backgrounds and functional area, and are they likely to be united in
their desired outcome?
Are they authorized to make binding decisions? If not, who are the
“players” behind the scenes who will make the final decision?
Preliminary research
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374 / PREPARING TO NEGOTIATE
Understanding your
counterpart
It is important to understand the issues
and interests of the other party before
you start the negotiations. Negotiators
come to the table because they each need
something from one another, so you must
identify your counterpart’s key issues and
interests. How important is each one?
Which are the deal breakers and which
may they be willing to concede?
Try to assess whether it is you or your
counterpart who holds the power. What
are your counterpart’s strengths and
weaknesses? What is their level of
information and expertise? How badly do
they want to make a deal with you? Do
they have other attractive options? Are
they pressed for time? If you know that
the other side has a tight deadline that
you are able to meet, you may be able to
negotiate a better price. Similarly, if you
know that your counterpart has recently
expanded production capacity, you may
be able to gain better terms for larger
volumes of orders.
Can your counterpart walk away from
the table and exercise a Best Alternative
To a Negotiated Agreement (BATNA)?
This term is used by negotiators to
describe the course of action taken
if negotiations break down.
Thinking strategically
Much of what occurs in the negotiating
room is, in fact, determined by what
happens outside the negotiating room.
This requires you to think strategically
about your situation in relation to the
situation of your negotiating counterpart.
For example, in some negotiations, you
and the other party may be representing
others. Make sure you are very clear
about the identity of your constituency,
and that of your counterpart. What are
their expectations for the negotiators and
can you influence them?
If there are several negotiating
parties, analyze all of them and begin
to think in terms of coalitions. With
whom and how can you build a winning
coalition and how can you block a
threatening coalition?
CONSIDER THE
TIMESCALE
Shape your negotiating
strategy with respect to the
timescale. You can be more
blunt in a short, one-time
negotiation than in a long
negotiation that is part of
an ongoing relationship.
Tip
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BEING PREPARED / 375
Tailoring your strategy
Make sure that your negotiating strategy and behavior
reflects the other party’s situation and approach. For
example, in many negotiations, the other party is free to
leave or join the negotiating table as they wish. In some
cases, however, the parties are bonded together over the
long term and cannot simply walk away, and your strategy
should reflect this.
Some negotiators prefer to negotiate away from the
public eye, while others insist on keeping all stakeholders
and the public informed. Consider which mode is more
advantageous to you, taking into account the sensitivity of
the issues, the history between the parties, and the legal
and governance systems of each party.
Some negotiation counterparts observe formal
protocols in negotiations, while others are freer in what can
and cannot be said. Take particular care to do your research
when negotiating internationally to learn the formalities
expected of you.
Better understanding of what
can be accomplished.
Proposals are more likely to
be accepted.
Ability to adjust your strategy
as the situation changes.
Successful negotiations and
superior outcomes.
Better trade-offs on the issues.
Advantages of knowing
your counterpart
25%
of people in an
international
survey trust
others. 78% of the
Danish population
trust each other,
making Denmark
the most trusting
nation in the world.
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