"Most of us think we negotiate well. Research says we don't."
In business schools all over the world researchers have found that less than 25% of negotiations reach the best possible solution for both parties. In nearly another quarter, both negotiators achieve less than their best possible result, and for the middle 50% one party does well but the other party makes concessions they just don’t need to make. People even agree deals when they would be better off walking out of the room leaving the other party high and dry. How does this happen, and what can we do about it?
Pies are bad for you
The biggest mistake is what’s called the fixed-pie assumption. We assume that if you win I lose. Rather than assuming we might all be able to build a bigger pie and then divide it up. (The jargon here is “creating value” for building a bigger pie and “claiming value” for winning as big a slice as we can. Your negotiation skills should cover both).
The next mistake is that we build an inaccurate picture of what the other party really wants.
When we get into the you-win-I-lose mindset it stops us listening and stops us thinking. It closes down our options. When we should be thinking creatively we’re shoring up our defenses. We don’t even notice what might be best for both of us.
The final mistake we make is making too big concessions too soon.
How can we make sure we don’t make these mistakes?
The win-win mindset
First, approach every negotiation with a win-win mindset. There may be options not yet on the table that would be good for both of you. Be open to possibilities but clear about where your interests lie.
Listen carefully, and ask about what the other party really wants. Understanding what the other party really wants is an essential part of influencing the outcome - as you discover in our top tip development exercise "How to influence stakeholders". What people say they want at the moment (their “position” in the jargon) may be part of a bigger picture (their “interests”). By sharing information you may reveal preferences that could be met in another way.
Flatmates Sue and Ted both want the last orange in the bowl. Deadlock. They talk (and listen to each other!) Sue wants a glass of orange juice. Ted wants the peel for a cake. Win-win.
Preparation is key
Second, prepare for the negotiation. Set a high but realistic target for what you want and keep it in mind throughout the negotiation.
Think about where you will be left if the negotiations break down (your “BATNA” – best alternative to negotiated agreement). You will be better walking away if the deal on the table is worse than your BATNA.
Think about the other party’s BATNA. It will give you an idea of the balance of power between you.
If you are going to offer concessions, keep them small at first. This sets expectations about how much you will move.
Keep it constructive
Finally, negotiate constructively and rationally. Emotional outbursts reduce the chances of good results – for now, and the next time you meet.