It’s an essential skill for business leaders, but many find negotiation tricky to master. Natalie Reynolds, who advises global companies and the UN on effective ways to reach agreement, offers a five-step guide to getting that deal
Negotiation is the most important skill in business to secure sustainable agreements, cement reputation or boost profit margins. In 2013, research by YouGov found that the UK loses £17bn a year through poor negotiating – the equivalent of £9m per working hour.
We negotiate every day, in many different ways and with many different people. It is a fundamental requirement in reaching agreement, resolving disputes and succeeding in business.
We might negotiate on salaries, contract terms, HR matters, equity and investment, restructures or acquisitions.
And yet so many people get it wrong. Or simply don’t really know how to do it well. Even experienced and seasoned businesspeople will often feel nervous at the prospect of negotiating.
As a result, my team meet lots of ‘avoiders’, people who will go to great lengths to limit the time they spend negotiating, sometimes refusing to do it altogether.
In addition, there are several common mistakes that exist in negotiation, many of which will affect the quality and sustainability of agreements reached.
Yet negotiation doesn’t have to be overly complex or intimidating. It isn’t all about poring over heavy academic theory. It isn’t just a skill for those with decades of business experience. It doesn’t require you to always adopt a combative approach.
Negotiation is a skill that can be mastered by anyone in business and our view is that it can, and should, be demystified and made accessible to everyone.
In order to do this, we have devised new ways to help people to understand the process and psychology of sealing the deal.
The following ‘DEALS’ approach (Discover, Establish, Ask, Lead, Seal) is designed to highlight the key steps you should be taking every time you negotiate…
Before you get anywhere near the negotiation table you need to discover as much as you can about the issue up for discussion. Do your research, know the facts, understand the market or look at what has been agreed previously.
A common mistake is we often go in unprepared and without the insight we need. Do you know who will be involved? Do you know the timescales? Are there industry baselines you can look at? What are the salaries in similar companies?
Also discover what type of negotiation it is – will it be value claim (short term, transactional in nature or win/lose) or value create (longer term, more complex or win/win)? Understanding all this will help you develop your potential behavioural strategy and what your tactics might be.
Next up is to establish some boundaries and priorities. Establish what your key priorities are… as well as what theirs might be.
To create a win/win outcome you need to understand what success looks like for them also. Reciprocity means that if they feel they have won, they are more likely to help you win too.
You also need to establish your breakpoint or walkaway point. This is the worst-case outcome for you. Once you’ve established it – you must stick to it! In the heat of a negotiation we often agree to things we wouldn’t if we were more calm or confident.
Next is to then establish what their breakpoint might be. The aim of the exercise will be to finish as close to their breakpoint as possible as that way you are maximising the available negotiation zone.
This is about ensuring that you set out your proposals in the most effective way. When you launch a proposal, always make sure that you open ambitiously but credibly. Ask for slightly more than you need, to give yourself wriggle room to explore what the other party might be willing to give you.
If you can, try to make the first move in the negotiation. Anchoring is a phenomenon from the world of psychology that means we are often overly influenced by the first number put on the table and you are then likely to finish closer to that figure.
Don’t worry if you can’t manage to go first though; just remember to not reinforce their proposal by going on and on about it. Instead recognise that the best way to beat their opening proposal is to make one of your own.
Put simply, the more you talk about what you really want, and why, the more likely you are to get from your negotiations.
This refers to taking the lead in the negotiation. Take a deep breath and speak calmly and professionally. Don’t allow your emotions to control you.
A tip to help with this is to remember that even the most confident people will often feel awkward and nervous when negotiating; they are probably just better at hiding it!
Taking the lead also means that if you are negotiating as part of a team there is discipline within that team. Assign roles, be clear on who does what and when.
Last but not least is to seal the deal in the right way. Get it in writing as soon as you can. Be gracious rather than over the top if you get a great outcome and make your counterparty feel satisfied with their result. Agreements are stronger if each side feels like they are winning.
Negotiation expert Natalie Reynolds is founder and CEO of advantageSPRING.
Natalie Reynolds’ book We Have a Deal: How to negotiate with intelligence, flexibility and power is published by Icon Books
Watch Natalie Reynolds discuss her new book on negotiation