|To determine which tactics to use, first determine which type of negotiation—competitive or collaborative—you are getting yourself into.|
A conflict of interest must be present between two or more parties with an expectation of give and take to conduct successful business negotiations, according to Dr. Frank Morgan, president of Morgan Associates and former global director of executive development and leadership for Dow Chemical Company. Dr. Morgan presented the recent SEMA webinar entitled, “Successful Negotiations: Understanding Competitive and Collaborative Tactics,” and in it, he said that tangibles, including price, delivery and contract terms, are at stake, but the intangibles, which include saving face, winning and maintaining precedence, are more important and often get in the way of a successful negotiation.
There are two types of negotiations. The competitive (win-lose) negotiation is characterized by a one-time interaction. There is no desire or expectation to form a long-term relationship and the goal is to maximize your benefit by paying the lowest price. The other type is a collaborative (win-win) negotiation and is characterized by a long-term partnership, where the goal is to maximize joint gains. There is an expectation of ongoing interactions, and trust is critical.
“Negotiations often fail because we mix the competitive and collaborative, so it is critical to decide beforehand which type of negotiation you are getting into because this determines the tactics you will use,” Morgan said.
The primary tactic for the seller in competitive negotiations is to maximize the price, and for the buyer, it is to pay the least. There is usually an opening bid from either side, more often the seller. Both sides have a target price in mind, and the zone of potential agreement is in between. Somewhere in there is the zone of likely agreement. The walk-away point is the point in which the seller will not sell if the price is too low or the buyer won’t buy if the price is too high.
Make the first move because you set the opening bid. If you are the seller, make it as high as possible, but within reason. If making the opening bid is not possible, counter by going as far away from the opening bid as possible, but again, within reason. Understand what your walk-away point is, and stick to it. Try to find out what the other person’s target is.
The collaborative negotiation cannot work without trust. A key element includes focusing on the commonality between yourself and your partner rather than the differences, or the needs and interests of both parties involved.
“There are five elements to creating trust: truth telling, promise keeping, mutual respect, doing no conscious harm and fairness,” Morgan said. “It takes time to earn trust, but it can be destroyed in a millisecond by telling one lie, breaking one promise, disrespecting somebody once, doing them conscious harm or by treating them unfairly.”
The number-one collaborative tactic is to identify the problem, which should be mutually agreed upon. Step two is to generate alternative solutions. The third step is to select the alternative and consider the contingency. Check your partner’s perceptions by asking open-ended questions, using active listening skills, providing the rationale behind the proposal, allowing the other side to offer input, avoiding an immediate counter proposal, maintaining flexibility, not using defensive language, expressing your honest feelings, showing concern for the other person’s point of view and making the agreement operational to ensure it’s going to work.
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