LEADERSHIP LAB

Secrets of successful negotiation

The art of negotiation is often likened to the art of persuasion. Many people think it’s a selling technique. However, contrary to popular belief, this is not the best approach.

In any kind of negotiation, information is power. The person at the table with the most information is likely going to come out ahead. This person is also the one who is speaking less and listening more.

Let’s review a recent negotiation between a retailer and two different software vendors as an example.

Software vendor A knew her product was the lowest priced in the industry and believed price was a key influence because the retailer was experiencing financial difficulty. She prepared for her meeting by developing a spreadsheet that compared her software to the competitor’s, feature for feature. She responded to the retailer’s questions by comparing the pricing structure of different software programs. She was able to convince the retailer she had the lowest price and, in the end, was confident her company would receive the contract.

Software vendor B prepared for his meeting by creating a list of questions about the retailer’s operations. When he met with the retailer, he did not refer to his software’s features, assuming the retailer had already been on the company’s website. Instead, he asked questions. Even some questions his team did not think were relevant. But by asking questions, he got the retailer talking and learned that company was experiencing continuous staff turnover and was spending too much time on training new staff rather than closing sales.

Vendor B included training in his sales pitch, which would reduce the retailer’s training costs but also increase his own profit margin. In the end, although vendor B offered a more expensive product than vendor A, he received the contract.

This is a classic example of why negotiations take a wrong turn. Despite vendor A’s preparation, she did not fully understand the retailer’s needs and lost the sale before she even started.

How do you avoid a similar pitfall? It’s simple.

1. Avoid preparing a persuasive argument

Most people prepare for negotiations by developing persuasive arguments to support their position and sway the agreement in their favour. However, when negotiations are based on each party trying to convince the other party to adopt their view, little information is exchanged.

Instead of preparing to persuade the other party, determine the information gaps and develop a set of questions that will help you learn more about your counterpart.

2. Speak less and listen more

Negotiators who rely on persuasive tactics generally talk more than 50 per cent of the time during a meeting; however, it puts them at a huge disadvantage. As we saw in the example above, vendor B was able to make the sale because he probed for information and tailored his pitch to the needs of the retailer. If a negotiator is relying solely on the information they know about the other person, they’re leaving valuable information on the table.

The person with the most information is likely to come out ahead in a negotiation. Allow the other person to do most of the talking, and probe for more information by using your prepared questions.

3. Don’t try to find a compromise

Many negotiators try to close negotiations by splitting the difference or finding a compromise. However, this rarely leaves both parties happy. Having half of something isn’t very satisfying.

Instead of finding a compromise, explore how you can expand the agreement so it benefits both parties. As in the example above, by understanding what the other party is looking for, you may be able to create an entirely different offering that will seal the deal.

The next time you find yourself at the negotiating table, remember to identify what you don’t know about the other party, speak less and listen more, and explore how you can expand the agreement rather than rush to a compromise.