Business owners’ ability to negotiate skillfully is important because typically, whether they realize it or not, they spend hours every week negotiating with subordinates, suppliers, lenders, significant others, children, parents, in-laws, car dealers, and others. Deciding how much to pay a new office manager or where to go to lunch with the client involves negotiation. The office manager may choose to accept less many if 100 percent of health benefits are paid, while a client may agree to go for Mexican food if Chinese food will be the choice on the next occasion. Even though all business owners are experienced negotiators, they may not be skilled negotiators. Being a skillful negotiator requires patience, attentiveness, flexibility, and awareness of personal negotiation style, issues, and details of the case, as well as the goals and objectives of the other party.
Negotiation can be described as nonviolent communication between two or more parties who may have conflicting and common interest in an attempt to reach an agreement that meets the goals of one or both parties. In simple terms, negotiation is a process for getting something you want. Gary Karras, author of Negotiate to Close, once said, “We don’t get what we want in this life, we get what we negotiate.”
Common Misconceptions about Negotiation
Many people are afraid to negotiate because of all the stereotypes associated with negotiation. Although business owners spend up to half their time at work negotiating, many still uncomfortable with the process. Some fear that they may come across to the other party as impolite, pushy, unfair, or even cheap.
One common misconception about negotiation is that good negotiators use tactics similar to the stereotypical deceitful, conniving used car salesman. Being a good negotiator does not mean you have to resort to being a slick, smooth talker.
Contrary to popular belief, negotiating should not be compared to a game or a war in which both parties enter the process with the goal of winning and crushing the other party’s spirit. The end result of war or a game is that one party comes out as the clear winner and the other as absolute loser. Upon completion of a successful negotiation, in contrast, both parties should feel that they have won something.
Another reason business owners feel uncomfortable negotiating is because they feel they have to make trade-offs between getting along with the other side and getting what they want. It is not uncommon in business owners to feel that they have to either give in to the other side’s demands or play hardball in order to avoid conflict, damaging their future relationship, or being taken advantage of by the other party.
Many people feel more relaxed when they find out that they will be negotiating with a woman because they assume that women are not as aggressive as their male counterparts and, therefore, cannot be as effective as negotiators. This is another common misconception. While women tend to be more concerned with preserving relationships and men with arriving at an agreement as quickly as possible, this is not always the case. Some men are patient and are more interesting in achieving a deal that meets the needs of all parties while some women prefer to enter the negotiation with a competitive drive to win. Whether you are negotiating with women or men, you should always do your homework. Learn as much as you can about the members of the other team, develop a relationship with them and, if necessary, alter your negotiation style so that it resonates with the other team’s personality.
Primary Goal of Negotiation
Negotiation is like neither a game nor a war. It is about cooperation and signing an agreement that makes both parties feel that they have been successful. The primary goal of effective negotiation should be to achieve a deal that both parties can live with and that accomplishes your goals without making the other party walk away from the deal or harming a valuable relationship. Basically, the whole point of negotiation with someone is to get something better than what you would get without negotiating.
Negotiation Style
There two main types of negotiation styles, hard and soft. Hard bargaining is also referred to as positional, aggressive, contending, or competitive bargaining; and soft bargaining is synonymous with relational or cooperative bargaining.
Prenegotiation Homework
To be a successful negotiator, it is imperative that you do your homework. Fisher and Ury suggest that you spend about half the time you spend negotiating on preparing for the negotiation.
Ideal meeting location
Evaluate your negotiation style
Establish your goals and objectives
Research the other team’s member and personalities
Make a list of assumptions
Gather facts and conduct research
Focus on the other side’s interest rather than stated positions
Consider this example:
Boss: Based on our conversations over the past few days, I would like to extend an offer to you for $ 44,000 a year plus 10 days of vacation time and 5 sick days
Employee: Well, I’m going to be honest and say that I am a bit surprised. I was expecting the offer to be closer to the $ 50,000 salary range
Boss: Why were you expecting an offer of approximately $ 50,000?
Employee: Well, since I have been freelancing for the past few years, I have grown accustomed to having more time to go on vacations. I work hard for most of the year but I am also able to take a few weeks at a time to travel abroad. I will be unable to do much traveling if I have only two weeks of vacation time a year. So if I won’t be able to travel as much, I should at least make more money
Boss: I see. How about this? I’ll throw in an extra week vacation for the next three years so you’ll have 15 days of vacation time, you will have 5 days of sick time. If you do not get sick during the year, you can use them as vacation days during the last quarter of the year. So, you could have up to 20 vacation days your first three years. I’ll increase that to 20 vacation days plus 5 sick days. And, once a quarter, you can work 10 hours either Monday through Thursday or Tuesday through Friday and take a long weekend off. I think that sounds fair. What do you think?
Employee: I think I’ll accept the offer-$ 44,000 sounds good as long as I have enough vacation time to travel.
Boss: Great, welcome aboard then!
Use objective standards
Consider this example:
Doctor: I am pleased to tell you that I met with everyone you interviewed with and would like to extend you an offer of $ 45,000 per year as your salary.
Employee: How did you arrive at that amount exactly?
Doctor: Well, we think it is a very fair salary. According to our human resources department, the average salary paid to pediatric nurse with your level of experience in this city is $ 43,789. not only do we pay slightly more than average, but we also offer additional benefits. While most doctors offer their nurses two weeks of vacation, we would give you three. You would also be able to begin contributing to your 401(k) plan immediately rather than waiting for six months as in many other offices. Additionally, the vast majority of our nurses have been with us more than 10 years. The average tenure of our office for nurses is 14.5 years. And every year for the past 5 years, we have been working with a market research firm to conduct an employee satisfaction survey. According to last years results, 92 percent of our employees are either satisfied or very satisfied with their jobs, 94 percent with the benefits, and 90 percent with their bosses. We really value our employee here and I think they recognize that.
Employee: Sounds like once nurses are hired at your office, they don’t want to work anywhere else.
Doctor: Exactly. We have one of the high retention rates in the city for nurses.
Employee: Well, now that you explained how happy your employees are, I think I would like to work here as well.
Doctor: I’m glad to hear it. I’ll notify the human resources department and have them send your paperwork by the end of the day. You should receive it by the end of the week.
Generate options that meet interests of both parties
Consider this example:
Employee: Thank you for agreeing to meet with me to discuss my raise for next year.
Boss: I want you to know that I think you are an asset to my company and I appreciate everything you do around here. I think your review went well this year, and I have decided to give you an 8 percent raise for all your hard work.
Employee: I appreciate the 8 percent but I have to say that I was hoping for 15 percent.
Boss: Please tell me why you were hoping for 15 percent
Employee: Well, I really like my job but it’s expensive to keep my kids in day care from 3.30 to 5.30 everyday. I was hoping for a 15 percent raise so that I can keep with the raising costs of day care.
Boss: I’ll tell you what I can do. What about letting you work flexible hours? Maybe you could work from 6.30 A.M to 3.00 P.M. each weekday with a 30-minute lunch. This way you can still work 40 hours a week and be home in time to take care of your kids when they come home from school. Not only would you get to spend more quality time with your kids, but you also wouldn’t have to send them to day care.
Employee: Wow, that’s a great idea. The 8 percent raise sounds fine. Thank you.
Determine your BATNA
The Negotiation Process
Put the other side at ease
Be a good listener
Alter your negotiation style if necessary
Separate people from the issue
Be confident and firm but not demanding
Be patient
Ask questions
Don’t be afraid to walk away
Source: Stralser, Steven. “MBA in a Day”, John Wiley & Sons, Inc., Canada, 2004.
Negotiation can be described as nonviolent communication between two or more parties who may have conflicting and common interest in an attempt to reach an agreement that meets the goals of one or both parties. In simple terms, negotiation is a process for getting something you want. Gary Karras, author of Negotiate to Close, once said, “We don’t get what we want in this life, we get what we negotiate.”
Common Misconceptions about Negotiation
Many people are afraid to negotiate because of all the stereotypes associated with negotiation. Although business owners spend up to half their time at work negotiating, many still uncomfortable with the process. Some fear that they may come across to the other party as impolite, pushy, unfair, or even cheap.
One common misconception about negotiation is that good negotiators use tactics similar to the stereotypical deceitful, conniving used car salesman. Being a good negotiator does not mean you have to resort to being a slick, smooth talker.
Contrary to popular belief, negotiating should not be compared to a game or a war in which both parties enter the process with the goal of winning and crushing the other party’s spirit. The end result of war or a game is that one party comes out as the clear winner and the other as absolute loser. Upon completion of a successful negotiation, in contrast, both parties should feel that they have won something.
Another reason business owners feel uncomfortable negotiating is because they feel they have to make trade-offs between getting along with the other side and getting what they want. It is not uncommon in business owners to feel that they have to either give in to the other side’s demands or play hardball in order to avoid conflict, damaging their future relationship, or being taken advantage of by the other party.
Many people feel more relaxed when they find out that they will be negotiating with a woman because they assume that women are not as aggressive as their male counterparts and, therefore, cannot be as effective as negotiators. This is another common misconception. While women tend to be more concerned with preserving relationships and men with arriving at an agreement as quickly as possible, this is not always the case. Some men are patient and are more interesting in achieving a deal that meets the needs of all parties while some women prefer to enter the negotiation with a competitive drive to win. Whether you are negotiating with women or men, you should always do your homework. Learn as much as you can about the members of the other team, develop a relationship with them and, if necessary, alter your negotiation style so that it resonates with the other team’s personality.
Primary Goal of Negotiation
Negotiation is like neither a game nor a war. It is about cooperation and signing an agreement that makes both parties feel that they have been successful. The primary goal of effective negotiation should be to achieve a deal that both parties can live with and that accomplishes your goals without making the other party walk away from the deal or harming a valuable relationship. Basically, the whole point of negotiation with someone is to get something better than what you would get without negotiating.
Negotiation Style
There two main types of negotiation styles, hard and soft. Hard bargaining is also referred to as positional, aggressive, contending, or competitive bargaining; and soft bargaining is synonymous with relational or cooperative bargaining.
Prenegotiation Homework
To be a successful negotiator, it is imperative that you do your homework. Fisher and Ury suggest that you spend about half the time you spend negotiating on preparing for the negotiation.
Ideal meeting location
Evaluate your negotiation style
Establish your goals and objectives
Research the other team’s member and personalities
Make a list of assumptions
Gather facts and conduct research
Focus on the other side’s interest rather than stated positions
Consider this example:
Boss: Based on our conversations over the past few days, I would like to extend an offer to you for $ 44,000 a year plus 10 days of vacation time and 5 sick days
Employee: Well, I’m going to be honest and say that I am a bit surprised. I was expecting the offer to be closer to the $ 50,000 salary range
Boss: Why were you expecting an offer of approximately $ 50,000?
Employee: Well, since I have been freelancing for the past few years, I have grown accustomed to having more time to go on vacations. I work hard for most of the year but I am also able to take a few weeks at a time to travel abroad. I will be unable to do much traveling if I have only two weeks of vacation time a year. So if I won’t be able to travel as much, I should at least make more money
Boss: I see. How about this? I’ll throw in an extra week vacation for the next three years so you’ll have 15 days of vacation time, you will have 5 days of sick time. If you do not get sick during the year, you can use them as vacation days during the last quarter of the year. So, you could have up to 20 vacation days your first three years. I’ll increase that to 20 vacation days plus 5 sick days. And, once a quarter, you can work 10 hours either Monday through Thursday or Tuesday through Friday and take a long weekend off. I think that sounds fair. What do you think?
Employee: I think I’ll accept the offer-$ 44,000 sounds good as long as I have enough vacation time to travel.
Boss: Great, welcome aboard then!
Use objective standards
Consider this example:
Doctor: I am pleased to tell you that I met with everyone you interviewed with and would like to extend you an offer of $ 45,000 per year as your salary.
Employee: How did you arrive at that amount exactly?
Doctor: Well, we think it is a very fair salary. According to our human resources department, the average salary paid to pediatric nurse with your level of experience in this city is $ 43,789. not only do we pay slightly more than average, but we also offer additional benefits. While most doctors offer their nurses two weeks of vacation, we would give you three. You would also be able to begin contributing to your 401(k) plan immediately rather than waiting for six months as in many other offices. Additionally, the vast majority of our nurses have been with us more than 10 years. The average tenure of our office for nurses is 14.5 years. And every year for the past 5 years, we have been working with a market research firm to conduct an employee satisfaction survey. According to last years results, 92 percent of our employees are either satisfied or very satisfied with their jobs, 94 percent with the benefits, and 90 percent with their bosses. We really value our employee here and I think they recognize that.
Employee: Sounds like once nurses are hired at your office, they don’t want to work anywhere else.
Doctor: Exactly. We have one of the high retention rates in the city for nurses.
Employee: Well, now that you explained how happy your employees are, I think I would like to work here as well.
Doctor: I’m glad to hear it. I’ll notify the human resources department and have them send your paperwork by the end of the day. You should receive it by the end of the week.
Generate options that meet interests of both parties
Consider this example:
Employee: Thank you for agreeing to meet with me to discuss my raise for next year.
Boss: I want you to know that I think you are an asset to my company and I appreciate everything you do around here. I think your review went well this year, and I have decided to give you an 8 percent raise for all your hard work.
Employee: I appreciate the 8 percent but I have to say that I was hoping for 15 percent.
Boss: Please tell me why you were hoping for 15 percent
Employee: Well, I really like my job but it’s expensive to keep my kids in day care from 3.30 to 5.30 everyday. I was hoping for a 15 percent raise so that I can keep with the raising costs of day care.
Boss: I’ll tell you what I can do. What about letting you work flexible hours? Maybe you could work from 6.30 A.M to 3.00 P.M. each weekday with a 30-minute lunch. This way you can still work 40 hours a week and be home in time to take care of your kids when they come home from school. Not only would you get to spend more quality time with your kids, but you also wouldn’t have to send them to day care.
Employee: Wow, that’s a great idea. The 8 percent raise sounds fine. Thank you.
Determine your BATNA
The Negotiation Process
Put the other side at ease
Be a good listener
Alter your negotiation style if necessary
Separate people from the issue
Be confident and firm but not demanding
Be patient
Ask questions
Don’t be afraid to walk away
Source: Stralser, Steven. “MBA in a Day”, John Wiley & Sons, Inc., Canada, 2004.
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