I’ve recently read two well-known negotiating books, “Getting to Yes” by Fisher and Ury, and “Negotiating Rationally” by Bazerman and Neale. Both were good at picking out key elements of negotiating but I’ll warn you ahead of time, they’re largely missing a clear structure for preparing and executing a negotiation.
That said, I think it’s worth discussing two key elements of negotiation: preparation and execution, and in the context of sales teams, ensuring that in particular, you and your salespeople take the time to prepare for a deal negotiation. Some of our opportunities are seven-figure deals, and you’ll be extraordinarily lucky if you find a customer who fails to prepare. Many of these negotiations see either procurement or special groups (software or hardware contract teams) that understand our business well and are trained in this fine art.
In preparation for any negotiation, there are several pieces of information that should be known:
- Who are the physical participants on both sides and what are their roles?
- What can you know about the objectives and the outcomes for each party?
- Do you have a response framework agreed on with our party?
- In multi-party negotiations, can you anticipate any alliances from aligned interests and what impact those alliances may have on your negotiating plan?
- What are your worst (reservation), better, and best (aspirational) outcomes?
- What are the best alternatives to a negotiated agreement (BATNA) for each party?
- What is your anchoring data for the known issues?
Selection of the negotiating team is important. Are they experienced negotiators? Are they domain experts? Are they decision-makers? Which do we want at the table and which do we want to keep behind the scenes? Is it necessary to have them at the negotiating table or does it present a greater risk? Put your best negotiators at the table, not necessarily your most senior people.
Understanding your objectives clearly and having consensus from your decision team before beginning is essential to opening a negotiation. These objectives may change during the negotiation, and part of the response framework should be a process for considering changes to objectives as new information may present itself. Sales is not the only stakeholder in a negotiation – there are many other parties in your company that may need to be involved. The result of not including other stakeholders interests could be an embarrassing return to the negotiating table with a weakened position to obtain additional concessions.
Many salespeople fail to put a response framework in place. How would you discuss the tabled options and who would respond on behalf of your team? Without this simple step, they may appear disorganized and unaligned during the negotiation process. Nothing is more frustrating than having two or more people making commitments in the process. I’m sure you’ve had a boss or two do this in the midst of a negotiation. Make sure you both agree on who makes the commitments. Pick one.
In multi-party negotiations, anticipating alliances ahead of time can save tremendous time and provide great advantage. Are you a vendor with a reseller involved? Are your interests aligned? Where are they not aligned? Are there other vendors incumbent in the customer that can benefit from your solution? Have you contacted them for help and support? Will your competitors align better with incumbent vendors or the customer’s own internal stakeholders? How will you adapt and counter this threat?
Defining a reservation (worst) price/position below which you are prepared to walk away from the opportunity is crucial. This is something that I’ve used in the past, as well as having an aspirational (best) and a mid-range (better) target. I find that the addition of at least one mid-range target slows the descent to worst-case scenario, as the inclination after moving from the aspirational target is to then focus on the next target – the bottom. You have to know at what point good business will become bad business and get consensus on this within your organization.
The BATNA (best alternative to a negotiated agreement) ties back to your reservation position. What will allow you to walk away from the deal? The power to walk away from a deal provides tremendous strength to your position. No less important is an understanding of the other party’s BATNA: what is keeping them at the table? How do your BATNA’s compare in their value? Is your BATNA better than theirs and therefore you have a stronger negotiating position?
Anchoring data is data supporting your position – evidence to show why what you are asking for is reasonable to the other side. Are there precedents for your positions? Research data? Independent or third-party data is always best.
After preparing for and during an engagement, there are a number of considerations that I would include in a list:
- A reminder to avoid positions and focus on interests
- Understand whether the negotiation is likely to be distributive or integrative and how to move towards an integrative outcome. Create value by enlarging ‘the pool of resources’
- Monitor my own non-verbal communications as well as those of the other party
- Seek to eliminate time constraints wherever possible and beware of timing negotiations where externally imposed time constraints interfere with my BATNA
- Rather than choose different postures which may send signals of confusion and inconsistency and impact trust levels, focus on rational negotiation
We often make the mistake of extracting our negotiating positions from our objectives, e.g., “I want X, Y and Z.” and then focusing on those positions. The downside to positional negotiations is you get a very transactional distributive negotiation where each side is looking for concessions rather than focusing on an integrative solution that best fits both sides’ needs. The book, “Getting to Yes” does a good job of discussing this issue. In technology sales, best practices have us understand the customer’s business and objectives before proposing a solution. This same approach could work well in framing the negotiation, e.g., “What are the objectives for your business this year?” Understanding the bigger picture for the other party will help uncover integrative opportunities that benefit both sides as opposed to distributive positions that benefit only one side.
Integrative opportunities not only expand the pie, but will also differentiate from competitors who may not seek the same. In any case, a larger pie provides more room for negotiation and can offer greater benefits for all. In my past negotiations I can see where I’ve adopted a reactive stance to negotiations that otherwise may have sought out a bigger-picture opportunity for both sides.
I saw during recent negotiations that non-verbal communications could be “cold” and distant. Beware of reverting to a more formal and cold style when you get into negotiations. This can cause the other party to mimic that style to your disadvantage. Tactics like cold, blunt ball-breaker negotiations are ego-driven and will not create long-term value nor succeed as often.
Time is often a contributing factor to failures in negotiations. Pay particular attention to removing time constraints or expanding the available time windows. This is not to say that more time be made available for negotiations, but rather the time constraints imposed by the business such as fiscal periods and contract dates that would affect your BATNA. For example, where deal timing would not allow enough time to find a replacement deal that meets your annual revenue targets that then limits the strength of your BATNA.
Changing adopted postures such as expressing empathy and alternatively playing ‘hardball’ can be confusing and may lead another party to distrust you based on perceived tactical gamesmanship. Rational negotiation discussed in the Bazerman-Neale book would avoid that risk and provides for a consistent approach capable of adapting to a wide range of scenarios that the other party may present.
This checklist by no means is a comprehensive list of all things that must be considered when preparing for and executing a negotiation. However, they are the key elements that I would look to emphasize with your salespeople and brush up on yourself.