Negotiating and making the pie bigger

There are many books written on negotiating, some of which are very good. This article is not going to attempt to summarize all the key components to negotiating. The main area this article will be addressing is to seek a Pareto Efficient Outcome. To do that means knowing what you and your negotiating partner want.

Have you come across the negotiation illustration of two sisters fighting over an orange? The mother comes along with what she thinks is a win-win solution of cutting the orange in half, so each sister gets an equal sized piece.

The only problem is, one sister wanted a glass of orange juice, and the other wanted the peel to make an orange cake. Neither got what they wanted.

Negotiators have often been defined as either soft negotiators - who give in too easily, or hard negotiators - who manage to get the best deal but can do so at the expense of damaging future deals. Win - win is not always as it seems either, just as the sisters discovered.

Occasionally you will deal with straightforward distributive (one issue) negotiations. However even integrative (multi issue) negotiations can come down to a single point, but not as many as we think, and it may not always be just the money. More often than not, there is a greater underlying need that sits behind what is being asked for.

Negotiating requires both EQ and technical knowledge. Great minds in the past have done the hard work of helping us to know the technical aspects of negotiating - how to establish our BATNA (Best Alternative To a Negotiated Agreement), or ZOPA (Zone of Possible Agreement), how to find possible MESO’s (Multiple Equivalent Simultaneous Offers) and how to seek a Pareto Optimal Solution.

By understanding what the sisters actually wanted, it could have been established that the Pareto Optimal Solution was for one sister to get all the juice and one sister to get the rind.

One of the most successful negotiating partnerships I was ever involved in, was when my negotiating partner and I established at the outcome that both of us wanted both of our respective entities to thrive for at least another 50 years. We established a good listening partnership where we were able to seek the best outcome by knowing what each party wanted. Often there were very large sums of money involved, and conversations could get tense when we got bogged down in just the dollar amounts, but when we went away to gather more data or understand the ultimate need we were trying to achieve better, we could reach a more fulfilling outcome.

You need good technical skills to know what you can afford, which includes good accounting skills (or accountants) to carry out good cost benefit analysis to understand your Future Price well. Too many get caught up in seeking the best price only to realise they have jeopardized future earnings or savings. Unfortunately, I have seen too many negotiation breakdowns because people have been blinded by the dollars and not understood the full cost of what they have given up. There may be more value in a lower price but more volume, or even marketing opportunities.

Good negotiations require homework. Even those who can instinctively carry the data in their head and know what to put on the table and when, should do their homework and know their BATNA, ZOPA and even prepare a weighted scoresheet so they understand the most important issues at stake.

A critical EQ component is also to go into a meeting fresh, don’t do yourself, your negotiating partner or respective organizations that you are representing the disservice of going into a meeting distracted, unwell, or in a bad mood. These are never compatible with good listening.

If you know what you want AND, if you also know what your negotiating partner wants, you can potentially increase joint gains by making the pie bigger before you cut it. So, avoid cutting the pie until you have done all you can to enlarge it. That means don’t rush in to discuss the dollar amounts.

For those interested, I recommend a very helpful Ted Talk by my lecturer from a couple of years ago, Dr Ruchi Sinha, called ‘3 steps to getting what you want in a negotiation’.

The key to good negotiations is communication and homework.

· Know your terms - to remind you of the facts you need to consider.

· Don’t be blindsided by the numbers - prepare a weighted scoresheet.

· Be on your game with physical and mental preparedness.

· Listen to the needs of your negotiating partner

In other words, maximise the potential and seek to make the pie bigger before you start carving it up.