Negotiation
"Like many things, experience is no guarantee of good results if you haven't learnt the right way to do it.
There is a big difference between negotiation experience and negotiation expertise."
Russell Wheeler
Negotiation skills – how to avoid leaving money on the table
I couldn't count the number of times that business clients have asked me to draft a contract after they had negotiated a deal when it was obvious that they had left money on the table, sometimes a lot of money. And they didn't even know it.
In every case it happened for the same reason - they thought they were OK at negotiation but they didn't know what they didn't know. That is because they never learnt to negotiate. Some may have done a seminar or a short course on negotiation, but none of these courses deal with the most important part of negotiation - the principles of negotiation psychology.
Without knowing the underlying psychology as to why a particular negotiation technique works, it is very difficult to convert the experience from one situation into expertise that can be applied to unrelated situations. Since no two negotiations are ever the same, results suffer.
Negotiation - the right starting point
Research shows that the outcome of a negotiation depends more on the opening positions of the parties than on the way the negotiation is subsequently conducted. Therefore, a lot of care should be taken in choosing the right opening. The wrong starting position will invariably end up with a poor result and will sometimes cause a negotiation to fall over.
People are often taught in a seminar to start high or low to enable the Request/Reject/Retreat technique to be used. For the average negotiation this is correct, but people who teach negotiation often don't explain (or perhaps don't know) that if you start too high or too low the psychology which makes this technique work (the Reciprocity Rule) is negated. In fact I am not aware of any negotiation seminars which even deal with the principles of psychology which you need to use to get the best result from a negotiation.
One thing which is critical in choosing the right starting point is to make an accurate assessment of the other side's expectations.
Managing expectations regarding the outcome of a negotiation
If the other side's expectation of the outcome of a negotiation differs much from an outcome which is acceptable to you, it will be very difficult to get the result you want. Therefore you need to manage their expectations.
This process should begin as early as possible, and certainly before the formal negotiation begins. This is because, by this time, they may already have made a decision about what outcome they want from the negotiation. Once this happens the degree of attachment to the decision increases significantly which makes it harder to get the result you want.
Psychological traps in negotiation
Even experienced negotiators are prone to various psychological traps which cause mistakes to be made. For example, it's a bio-chemical fact that our judgement is adversely affected when we are personally involved, even if the involvement is only because you are on the payroll of a company you are handling the negotiation for. There are several ways to minimise the adverse effect but only one sure way to eliminate it - get an opinion from an outsider who is totally objective, preferably someone who has a lot of negotiation knowledge and experience.
Better commercial results from a negotiation
It is quite common for a business negotiation to be influenced by legal issues as well as commercial considerations. Therefore, if the outcome of the negotiation is important to you, it is wise to get advice to see if there are any relevant legal issues that need to be taken into account. This must be done before the negotiation starts. In fact, problems often occur if you negotiate the deal without knowing all the legal issues at the time and new issues are later raised by your lawyer. The need to introduce new terms into a negotiation after the parties thought that agreement had been reached can have an adverse (sometimes fatal) effect on the outcome. The problem is compounded by lawyers who include new terms in a draft agreement or in a lawyer to lawyer letter as if they are a done deal, even though they have not been raised or agreed to previously. I have seen deals fall over as a result.
If the lawyer you use is also skilled in negotiation you can kill two birds with one stone ... he or she will be able to help you with your intended negotiation strategy, if only by providing an objective opinion, and may even help with commercial issues if he or she is an experienced commercial lawyer.
Better legal results
It doesn't matter how good your lawyer's legal knowledge is, if he/she is not able to convince the other side's lawyer, you won't get the best result. In other words, your lawyer's negotiation skills will affect the legal outcome.
A good start is to ensure that a lawyer understands the principles of negotiation psychology and when to use them. For example, does he/she know the rules about the level at which you pitch the first offer, or whether you should put the other side in a position where they have to make the first move? Ask your lawyer this question.
Conflict Resolution
If you want to resolve a dispute without the extraordinarily high cost of litigation, you need a lawyer who understands the psychology of conflict resolution (see Litigation) and you need to get advice on this as early as possible.
Complimentary Negotiation Paper
More information about the issues on this page, and a lot of other issues which affect the outcome of a negotiation, are covered in An introduction to the principles and pitfalls of business negotiation. The full article can be obtained by completing the Contact us page.