This article was first published in the February 2018 China edition of Accounting and Business magazine.

Negotiation is defined as the basis by which two parties discuss the terms under which they may do business. In some sectors, negotiating is a rite of passage. It’s a complex business requiring a high degree of skill. And, expertly executed, the return on time invested can be well worth the effort.

Successful negotiators play a game of two halves, the first half dedicated to preparation and planning, and the second to face-to-face negotiation.

Most professional negotiators spend time preparing for their encounters. Gathering information in advance is a surefire way to increase confidence. There are four important areas to cover: 

  1. Negotiable issues. These are the variables over which you can negotiate a deal. They typically include price, contract length, payment terms, volume and more. The more issues you have, the more flexibility you afford yourself in the negotiation. Once you’ve identified all the issues, rank them in order of importance.
  2. Your positions. These are your opening, target and exit positions. Your opening should be high but realistic for a specific issue. Your target is what you hope you can achieve. Your exit, also known as your ‘walk-away’, is the figure you will not move past. This can be a great source of power.
  3. Think buyer. This means putting yourself in your customer’s shoes and completing steps 1 and 2 from their perspective. This helps to identify where common ground exists, where you have ‘levers’ (something that the customer values but is of little consequence to you) and which negotiable issues are likely to be more contentious.
  4. Cost your concessions. For every movement you make in a negotiation, you need to know what it will cost you and how you might recoup that cost. All too often, less skilful negotiators will ‘split the difference’ or concede on an issue, giving away value without understanding the cost. 

Successful negotiators (as identified by consultant Neil Rackham) went further than these four steps. They also examined just how they were going to use that information they gathered in the negotiation. For example, a skilled negotiator will never settle on a single issue. Instead, s/he connects issues together. For example: ‘For a price of $4.97, we’d be looking at a two-year contract with 30 days payment terms’. 

The research also highlighted some behavioural distinctions between successful and average negotiators. In particular, effective negotiators lead with questions and make proposals conditional. They also label their behaviours and express their feelings.

Asking questions helps to reveal information that can give you more power. Questions are also useful to increase clarity and as an alternative to disagreeing. 

When the other party makes a proposal, a less skilful response is to counter it with an alternative suggestion. Rather than countering, skilled negotiators suggest a term that is conditional on other issues being met. 

A behaviour label announces what behaviour is coming next. ‘If I could just ask a question’ labels that you are about to ask a question. Labelling helps to get people’s attention and helps to control the airtime.

Although expressing feelings differs across cultures, in many instances expressing how you are feeling in relation to the negotiation can be very powerful. For example: ‘I’m disappointed with that offer’. 

When thinking ‘negotiation’ it’s important to consider both your preparation (information you gather) and your planning (how you’ll use the information gathered). 

Ally Yates is the author of Utter Confidence: How what you say and do influences your effectiveness in business