February 19, 2019 | 02:37 AM


31.01.2012Three Negotiation Skills That Can Jumpstart The Economy

In a commercial environment laden with these challenges, negotiation skills are a key skill set to getting the economy back on track.

Keld Jensen, Forbes.com

We live in an era characterized by jarring market volatility, single-digit profit margins, vaporizing trust, and unstable resource allocation. In a commercial environment laden with these challenges, negotiation skills are a key skill set to getting the economy back on track.

Negotiation skills are the life-blood of business.  From the decisions made by executives at the top, to middle-management project leadership, to front-line employees meeting customer needs, right down to cafeteria workers buying vegetables off the farm truck; everyone uses negotiation skills on a daily basis. People who are aware they are negotiating and that they can get more of what they want by understanding the process are able to have a greater impact in the economy than those who are unfocused and directionless.

With this in mind, here are three powerful negotiation techniques, which business leaders can utilize to contribute positively to breaking through the recessionary malaise.

1. Break Down the Barriers

Today’s business leaders should view their counterpart as a potential partner – someone to cooperate with in order to achieve mutual gains. A negotiator operates from a much stronger power position when he or she freely shares information, demonstrates trust in the bargaining process, and broadens the scope of the discussion by exploring alternative approaches.

In the last year, we witnessed high-profile negotiations over the budget that allows the country to operate, the debt ceiling, and the NBA and NFL seasons. Over and over again, we saw progress stifled until both sides broke down the barriers and opened up the communication. How much time and money will be lost before people realize that they will get more value out of the transaction if they shift to a position of openness, honesty and transparency?

The new paradigm for getting business done with the loyal opposition is to take a chance and boldly reveal some of the cards in your hand in order to create a positive negotiation climate built on cooperation and trust. Openness begets more openness and provides the gateway to the added value that is otherwise hidden in the transaction.

In the case of the NFL lockout, billions of dollars were at stake. With the clock ticking on the start of the season, and no solution in sight, NFL Commissioner Roger Goodell initiated talks that would include principals only—just players and owners face-to-face at the table with no attorneys present. This removed a major obstacle and allowed the issues to get identified and resolved.

When parties begin to work cooperatively, new solutions become evident and alternative ways of solving problems reveal themselves that enable both sides to leave the negotiation table with more than they expected.

2. Find the Added Value then Share It

The focus needs to be on accessing the added value that is buried in the deal so that both parties to the negotiation can benefit from the “bigger pie.” In an independent research project, my firm, MarketWatch Centre for Negotiation, found that parties typically leave up to 42 percent of the value of a transaction untapped because they fail to examine all the possibilities. If this unexploited value is aggregated across the thousands of commercial transactions that are conducted every day, it amounts to billions of dollars that could be infused into the global economy.

Frequently, companies follow routines without questioning whether changing the conditions could create added value. Negotiating terms of payment is a perfect example. Most business suppliers are willing to extend the length of their terms of payment, but they never fully explore other alternatives relating to how the supplier gets paid. Any attempt to go down another path is quickly shut down when the culture of the negotiation is zero-sum and win-lose. Here’s a typical conversation:

Supplier: Would you be willing to consider an advance against the purchase price?

Buyer: No, that’s out of the question.

This is a knee-jerk reaction. Before gathering any other information the buyer has slammed the door shut. The approach needs to be towards more exchange of information, more openness to explore creative solutions, and more give and take in the interpersonal dynamic.

The buyer should proactively search for added value by asking questions such as how big an advance the supplier is looking for, why does she want to be paid upfront, and what is she willing to give in return. The supplier should ask questions about the buyer’s resistance to paying the advance and what the cost of doing so would be. It is only with this additional information that both parties can create a win-win deal.

In this example, let’s say the supplier finds out that it would cost the buyer $10,000 for a $100,000 advance. With this information, the supplier can now make offers of comparable value in exchange for the advance such as early delivery of the shipment, half off the installation of the equipment, or free service for a year. Since both parties have different expectations and mindsets over which aspects of the deal have the most value, it creates the potential for a “bigger pie” which can then be shared between the parties.

Leaders who abandon the combative negotiation tactics and focus on creating a climate of openness and transparency will find that they leave the table with a better result and a greater sense of satisfaction with the process. Generally, they also come away with a stronger relationship with their counterpart which will pay dividends later.

3. Focus on Partnerships

It has been proven over and over that the most successful negotiation results are achieved by building partnerships based on optimal levels of trust, cooperation, and shared information. I call these SMARTnerships™. With this approach the parties work together in such a way that the whole is greater than the sum of the parts and both parties retain their autonomy and the discretion to pursue their individual self-interest. By creating SMARTnerships, companies can come out of the recession with greater resilience and long-standing working relationships.

Take a look at Apple’s textbook partner McGraw Hill. These two parties could have viewed each other as competitors; with digital publishing the clear wave of the future the entire publishing industry has been turned on its head. However, McGraw Hill has been a long-term partner of Apple and with its newest app – iBooks 2 for the iPad – it doesn’t look like this partnership will dwindle anytime soon.

The iBooks 2 app allows complete textbooks to be downloaded on the iPad. These innovative books feature interactive video, games, music and many features that enhance the learning experience at a better price point for the student. So far there are only seven textbooks available on the iPad app five of which are from McGraw Hill. There were over 350,000 downloads of these books in just the first three days they were available. By partnering together, these two companies were able to create new opportunities and unlock the hidden potential in collaboration.

Approaching nearly a decade of stagnant economic conditions, it has become clear that there will be no quick fix through bailouts or spending incentives. There needs to be a cultural shift towards openness and transparency in the way business is done.

By breaking down barriers, finding and sharing added value, and focusing on creating partnerships, there is the opportunity to infuse the economy with billions of dollars—funds that are currently hidden beneath recession-minded thinking and stifled communication. The added value is there for the taking! Leaders just need to use these powerful negotiation techniques and seize the opportunity to help reinvigorate the economy.  We are moving from the orthodox economic system to the behavioral economic system. Adam Smith was wrong!

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