To most people, negotiation is a battle of words. They are all about reaching an agreement. They get blinded by the myth fueled by their biases that they are there to claim their client’s most significant percentage of the pie. That mindset prompts them to approach negotiation adversarially and aggressively. However, this value extraction approach hardly produces a wise agreement, and every negotiator should avoid it.
A negotiation genius does not strive to settle. Instead, to reach a wise agreement (if an agreement is possible). One that is efficient and improves or does not damage the existing relationships. According to Fishers and Ury, a wish agreement meets the legitimate interest of each side to the extent possible. It resolves conflict fairly, is durable, and considers the community’s interest.
To reach a wise agreement, one must move away from a win-lose mindset and embrace a win-win approach. Remember, negotiation is an interdependent process-where; you can only get what you want if the other side says yes and vice versa. Moreover, it is not about getting the other side to say yes. It is about working with the other side to get to yes without leaving any value on the table. You can be sure of leaving no value on the table if you work together with your counterpart to create value (value creation).
Value creation means expanding the pie before dividing it. It requires creativity and an open mind. An open mind allows you to reconcile common interests and values, i.e., subjective and objective values. Objective values are those that are not influenced by personal viewpoints. It is often used to describe observations, decisions, or reports based on unbiased analysis. On the other hand, subjective value means those relating to an object as it exists in mind, as opposed to it in reality (the thing in itself).
II. VALUE CREATION STAGES AND STRATEGIES
You can create value in three stages. The first is a pre-negotiation stage, the second is the engagement stage (during negotiation), and the last is post negotiation stage.
A) Pre-negotiation Stage.
Success in negotiation largely depends on the substantial work done before engagement. The more work you put into preparing before negotiation, the higher your chance of reaching a wise agreement. The need for adequate preparation can not be stretched enough. Fishers and Ury refer to it as 3ps, i.e., prepare, prepare, and prepare. There is no limit to how much work and time you must put into preparing for negotiation. It can be days, hours, minutes, or seconds before negotiation. You continue preparing during and even after the negotiation.
Adequate preparation is advantageous in many ways. It protects you from being taken advantage of because you will be informed of the market price for the product and other similar products in a particular market. It also gives you authority and credibility, which are critical to earning your counterpart’s interest in taking you seriously. It also makes your counterpart interested in continuing conversing with you because they will be convinced you know what you are discussing. The more informed you are, the more they will respect and take your proposition seriously. Remember, perception is everything in negotiation. Your first impressions can shape the entire course of your negotiation.
The first thing you should do when preparing is extensive research. Learn as much as you can about the subject matter of negotiation, its quality, the prevailing market price, and the available alternative. Ensure your source of information is reliable and credible. For example, the blue book is the most credible material to consult if the subject is a car.
Then move on to learning about people. Start with yourself. Evaluate where you are emotionally, physically, and mentally ( ensure you are in the right space) because they affect the negotiation. Spirituality is another one. Spiritual intelligence gives you a sense of purpose that may influence how you see or relate to your counterpart. Another dimension relates to social behavior. Ask yourself how you are going to engage. Will you be coercive or social? To be social, you must check your ego constantly and show compassion and empathy. The last dimension relates to appearance (physical). How are you going to show off in the negotiation? Are you clean? Are you well dressed?
After researching yourself, do the same for your counterpart. Learn about their culture, negotiation style, and anything else. The more you know about your counterpart, the easier it is to connect with them.
Here are questions that should guide your preparation. What do you want from the negotiation? How will you get that which you want? Why do you want it? If you can not get what you want, what is your alternative?
Role-play. Learning about things is different from doing them. To fully grapes it, you should put yourself in character by acting them out. Putting yourself in character enables you to create and test the hypothesis of what you hope to get from the negotiation. Play your role as well as your counterpart’s. Playing both sides helps you visualize strategies from both angles and prepare you not to be surprised during negotiation if something happens contrary to your plan because you would have already gone through it. Remember Mike Tyson’s words-“everybody has a plan until they get punched in the face.” do not get punched in the face by preparing wise and well.
The last piece of preparation is to write down the agenda for the engagement. If you have all that you want to talk about written down, you do not have to remember. That frees your mental capacity, allowing you to actively listen to your counterpart without worrying about remembering what you want to discuss next.
B) Engagement Stage:
Here, you are at the negotiation table. Your value creation chances depend on how well you work with your counterpart, which depends on their perception of you. You should, at the onset, show interest in knowing and connecting with them to create a positive perception. You can effectively do it before negotiation in an informal setting by talking about things of common interest. It could be family, vacation, food, and art.
Remember, your counterpart is human with feelings and emotions and can easily be turned off by arrogance, egocentrism, or being artificial or false (fake or not genuine). Make them want to work with and trust you—by words of mouth (verbally) or action (nonverbally), e.g., smiling. When you see a smile, your brain releases oxytocin, which increases when you interact cooperatively and perceive someone as trustworthy. An authentic and genuine smile releases oxytocin in the brain, which calms the fight or flight response in the amygdala.
After you have built a relationship with your counterpart, engage in fact-finding without making your counterpart feel like they are being interrogated. To interest your counterpart to share their underlying interest with you, you must make them feel safe. Make them also trust you and your credibility. An effective way of earning your counterpart’s trust is by showing empathy and humility (personal and intellectual).
There is much information you do not know, and you need to know them to create value. You will discover all you need to know if you correctly approach negotiation with compassion and a curious mindset. However, that depends on your question, how you ask it, and the environment you have created. To get the proper response, ask open-ended questions (those that do not provide participants with a predetermined set of answer choices but instead allow them to respond in their own words, direction, and length.). Examples of ended questions include what, how and tell me more. Although the “why” questions are okay, they should not be your first question because they may likely make your counterpart defensive.
When your counterpart is speaking, you must actively and attentively listen to them. Listen to commonalities and differences. Listen with your ear for what has been said. Listen with your eyes for those that have not been said, i.e., nonverbal cues. Most people ignore it, yet nonverbal communication constitutes 93% of communication. Encourage your counterpart to continue speaking by signaling that you are interested in what they say. Verbally by mirroring emotions and paraphrasing what they have said. Nonverbally by your posture, pacing or smiling.
Observing and signaling nonverbal cues improves your communication, and it is an excellent way of building a perception of trustworthiness, which leads to trust building. According to Dr. Maroño, trustworthiness judgments are unconsciously made within 33 milliseconds. As such, you should have situational awareness to see when your counterpart shows skeptical behaviors. If you see it, stop and address it immediately by acknowledging and asking open-ended questions that allow your counterpart to vent. Because the moment you see these skeptical behaviors, you know your counterpart is no longer listening to you. Instead, they are thinking of what to say next and will most likely not gain their trust. Once they judge that you are untrustworthy, they will collect information to justify it rather than look for correct information. Signs of skeptic behaviors that you should look at include face touching, crossing arms, leaning backward, or touching hands together after interacting with you.
Furthermore, make sure the information your counterpart gives you is correct. You can be assured of the correctness of the information by creating a calm environment conducive to making your counterpart feel safe. Do not be accusatory or aggressive with your questioning because aggression builds resistance and creates stress and anxiety, which leads the body to release cortisol hormones that block memory retrieval, limiting your chance of getting authentic information from your counterpart.
Add more issues and brainstorm solutions. It requires creativity, open-mindedness, and collaboration. Invent as much as possible by brainstorming with your counterpart. When brainstorming, do not evaluate. Wait until all options are already on the table, then you start evaluating. When evaluating, rank those invented options per their priorities. To do so, you must master the ability to communicate openly, share information about real needs and priorities, and collaborate with your counterpart. Also, differentiate between facts and influence or opinions. You should also be able to differentiate between needs and wants.
Contingency is another way to create value tactically. A contingency contract allows you to avoid arguing about the likelihood of some future event and instead wait to see what happens. It also protects you from dishonest negotiators. Through contingency, you create value by stopping arguing about differences in beliefs, and instead, you leverage those differences through a bet that both sides expect to win. (It creates expected values). It also motivates the performance of the contract.
However, before you agree on a contingency contract, make sure you understand the effect of a contingency contract and what incentives it has for the other party. Also, know who the other party is and how well-versed they are in a contingency contract. Agreeing to continency may be dangerous if your counterpart is more knowledgeable than you. Moreover, it is only useful if uncertainty is resolved in ways that can be measured objectively.
C) Post Negotiation Stage
Most people stop after settling. As such, they cut themselves short of all values they could have created after reaching an agreement. Do not be one of those people. When you reach an agreement, immediately debrief yourself. Write down what worked and what did not work. Also, write how to use what worked in your next negotiation and those you will leave.
Then review the term of your negotiated agreement. Ask yourself how you can make it better. Questioning how to improve it allows you to visualize how to improve Pareto on the initial deal. Contact your counterpart if you have seen a point or potential for improving the deal. Ask your counterpart whether anything else could improve the agreement (from their side). This process is called Post settlement settlement (‘PSS’). Be clear on the purpose of seeking Pareto improvement, i.e., limited to only improving but not altering the agreed-upon terms. Then work with your counterpart to make that Pareto improvement after the deal.