Negotiating and the “Art of the Deal” are not new. We do this every day in multiple ways, from arranging services for our homes to rea business lease.
Recently, this subject has increased in popular attention. One example is the new television
show “Market Warriors” where four experts are given money to purchase items at antique markets, presumably for a steal, and then try to resell them for a profit. Another is that there are an increasing number of experts lending their voices to this hot topic.
Last week I attended the International Franchise Association’s Executive Leadership Conference and had the pleasure of hearing Dr. Victoria Medvec, a Professor at the Kellogg School and a prominent lecturer. She has developed a 10 step process that covers familiar ground but with added new tactics I found especially interesting.
Negotiation is a two-phase process beginning with Preparation and proceeding to Execution. Dr .Medvec repeatedly emphasized the importance of work done in advance of the actual face-to-face exchange. It’s vital to have clear ideas about both your position and that of the person you are negotiating with. You may be familiar with the process of making detailed lists of the desires you have and concessions you are willing to make, and then weighting them by what’s most and least important to both parties. Do your homework.
In all cases, there are several issues that should be considered for both parties. It’s helpful to develop scenarios and then rank them. This involves understanding the extremes – most wanted and least acceptable. Find the BATNA for each side. BATNA refers to the “best alternative to a negotiated agreement.” The other end of the continuum, Reservation Point, is at what point in the discussion you are willing to “walk away”– meaning it’s not worthwhile to continue as there are no longer any benefits to you. At the end of this phase you should have at least four benchmarks, BATNAs and Reservation Points for both parties.
Now it is on to execution. There are several strategies to help you attain a favorable deal.
The first tip is to include several items in a package to improve the possibility for trade-offs and a more complete, acceptable deal. Having more options in the mix enhances the chance for a deal because you have more potential for contingencies and space to negotiate.
A second tip is called the Anchoring Move. There are mixed opinions about this strategy but I tend to agree with Dr. Medvec. This involves which side goes first to make their initial offer or proposal. Some argue that this is a weak play because it divulges your position too early and you might be forced to make further concessions. To the contrary, you should present a position built upon a thoroughly explained and detailed rationale. This method creates a centering “anchor” for the entire discussion, rather than a starting point and a downward spiral. Indeed, “he or she who makes the first offer wins.”
A third tactic is called Concession Room. It builds on the previous two points. When you develop a package proposal, it is advantageous to include items that vary in importance. Some will be essential to the discussion, while others could be “throw-ins.” As a result, your “package” presents you with more opportunities to be flexible and enhance your outcome. For example, in negotiations it is common to request more than you really expect to get—your BATNA. Some situations lend themselves to making outrageous demands with your Concession Room, or BATNA, as your fall back. Concessions are regarded favorably and encourage others to feel as though they are winning.
So what’s really the “art of the deal?” The answer, quite simply, is that it is a process that has two important phases. To avoid haggling or a stalemate, do your homework and follow the tips on execution. You’ll find yourself more often than not in the winner’s circle to the key issues that matter to you.
By, Debra Koenig, President of B2A Consulting | 30 years of experience as a business executive with leadership and consulting skills in Fortune 500 and private equity portfolio companies.