Here’s what we’ll be looking at;
- The up side of negotiating
- Play nice and work with the best, or else…
- Types of negotiations
- Getting the upper hand AND keeping the relationship
- Wrapping up – prepare for pressure and be ready to walk.
It had been the end of a series of long negotiations– about 8 years by some accountswhen both parties signed their names in 1867 on the documents that would transfer the entire territory of Alaska from Russia to the United States.
The US had come to realise that they could improve in international reckoning and possibly discourage the advancement of the British once they closed this deal. For $7.2million, the land mass of Alaska – all 1,717,856 km2 was secured.
Interestingly, many would come to deride the deal as a waste (for various political and economic reasons) and would never come to appreciate what it took to make it happen. Such is the story the world sometimes; analysis of outcomes without an in depth look into the prevailing circumstances to discover the hidden lessons.
The up side of negotiating
Negotiations are known to save as much as 60% on the purchase price of items.Research by Accenture shows that corporations and Governments are known to centralise their procurement functions to better negotiate deals usually in the multi-billion dollar range.
It is often said that you don’t get what you are worth, you get what you negotiate – hence the increased interest in the subject.
Still, the general advice is to negotiate from strength and why this certainly has its merits, care must be taken that the business relationship is not damaged in the process.
Moderating explicit demands for an outcome is advisable in the interest of building a long term relationship.
Play nice and work with the best, or else…
This is because there are long term effects where one side believes they’ve been left holding the short end of the stick. Asides souring the relationship (and those so connected) there is the risk of rework, invoking clauses, leading to protracted legal battles known to last for decades.
This is also why significant investments are made in signing on the best negotiators seeing that they have perfected the art of combining sound character, technical knowledge of the subject matter as well an understanding of the industry andmanagement of relationships.
When wealth is lost, nothing is lost; when health is lost, something is lost; when character is lost, all is lost. Billy Graham
Negotiation according to Merriam Webster’s dictionary is defined as “a formal discussion between people who are trying to reach an agreement: an act of negotiating”. That is, the gulf between what is wanted and what is available makes negotiations necessary.
Negotiations are said to be the bridge between available inputs and desired outcomes – a connector of sorts; and in the process, a relationship building exercise.
Starting well, looking ahead
Negotiations usually start out with a target, a desired outcome and so the objective either to maximise limited resources to get the best possible quality of an item without having to pay so much.
It might be the need to present ourselves as being competent or the expectation that things can bet obtained at a better price.
Negotiations are done for a couple of reasons, some of which include; Resources might be insufficient to achieve desired goals as it is pertinent to keep an eye on running costs so that the firm remains a going concern.
In some instances, the parties involved might share varying levels of distrust and negotiate for further assurances. There is also that possibility of getting more value for money even as economies rise and fall.
Types of negotiations
Negotiation techniques include the heavy hand, the win-win/long view, each with their unique advantages and drawbacks. In the heavy hand, the basic idea is to maximise a position gibing little or no concession to the other side of the table.
In the win-win being the most popular per management text ensures that both parties go back after negotiations with key demands met. This is usually with doses of compromise by both/all sides of the deal.
There is debate as to whether this is the most effective form of negotiations in that all parties sacrifice enough to question whether the deal was worthwhile.
Close to this is the BATNA (Best Alternative to a Negotiated Agreement) is used where the idea is to get a kind of one size fits all, with the objective of keeping all parties on the table happy.
This makes the way for strong relationships and is ideal for long term business relationships. The downside is that critical demands might not be met.
Getting the upper hand AND keeping the relationship
Getting the upper hand is a worthy goal in many scenarios but must be used with care, again to keep the existing relationship intact. Firms with large budgets usually have the upper hand where the commodity/service in question is commonplace or not too differentiated from the pack.
Hence, to reverse this, a product or service must be unique.
Where the service type or product is unique, the balance completely reverses and those with the big budgets are compelled to make adjustments in favour of the service or product provider.
Players in the tech sector understand this concept and pay significant amounts – in some cases more than the perceived value of the target acquisition.
What this means is that the higher the perceived value of an item, the more likely it is to have a favourable starting position in a negotiation.
Wrapping up – prepare for pressure and be ready to walk.
Preparing for a negotiation means there are definite targets, non-negotiable negotiations and conditions for compromise – a must for both parties for the negotiations to be beneficial to all parties concerned.
It helps a great deal where there is as little pressure as possible when negotiating and a good way to achieving this is being able to walk away from the table at any time, with no hard feelings.
Where compromises cannot be made, it may be advisable that both parties separate amicably.