Saturday, April 12, 2008

Common negotiation errors and pitfalls

This article discusses some of the most common negotiation pitfalls and errors that the author has encountered based on his own experience. In the author's opinion, avoiding these pitfalls are essential to achieving a good negotiation outcome. These pitfalls apply in any negotiation scenario, including business negotiations, job negotiations, salary negotiations, fee negotiations, contract negotiations, team negotiations, or even your day-to-day price negotiations with your corner grocery store owner!

Negotiation error #1

Negotiating without preparation

This is the worst pitfall that a negotiator can face. If not prepared, you should refuse to negotiate until you are ready. Negotiation without preparation can have serious consequences besides losing the negotiation. For example, commencing a fee negotiation without knowing the market rate may result in over-asking, which will not reflect well on you, and may also insult your negotiation counterpart, resulting in loss of goodwill.

It is also necessary to practice for negotiations, especially if you are a novice negotiator. A first-time presentation of any case will rarely make a good attempt. Practicing with a friend may throw up unanticipated issues and challenges that you may not have considered. There are sufficient challenges during the negotiation itself without the additional stress of a first-time presentation.

For tips on how to prepare, see the article on the steps to negotiation here.

Negotiation error #2

Negotiating with the wrong person

It is easy to avoid this situation if good preparation has been done. You should ask yourself if the other person is in a position to give you what he wants. For example, I have seen cases of lengthy price negotiations by salespersons with purchasers who with insufficient authority to grant the contract size requested by the salesperson. There are also cases of negotiations by purchasers with salesperson with insufficient authority to grant the discounts requested. Imagine the frustration of having to re-negotiate the whole deal with another person.

Negotiation error #3

Failure to keep the big picture in mind

It is essential to keep in mind the big picture. What is your final objective? A failure to do so may result in you achieving certain minor victories at the expense of major losses. For example, if you are negotiating prices with an important customer, your most important objective should be to preserve the relationship. If you can obtain a higher price at the expense of the relationship, it may not be worth it.

Similarly, a failure to keep the big picture in mind may cause a novice negotiator to focus on winning a sub-component of the negotiation at the expense of the ultimate objective. In attempting to prove a point and be right on the immediate issue at hand, it is too easy to let slip comments that may jeopardize the ultimate objective. This is sometimes due to ego, which we will come to in the next point.

Negotiation error #4

Allowing the ego to dominate

Negotiation is basically communication, and ego is a big factor in any communication. Ego is a double-edged sword. We may be able to use ego to our advantage if the negotiation counterpart has a strong ego. In that case, one technique to pull the negotiation in your favor may be to pander to his/her ego. On the other hand, you should also be able to hold your own ego in check and not let it be used against you in the negotiation.

A failure to hold the ego in check can result in the ego being used against you if you are up against a good negotiator. I have also seen cases where strong egos caused negotiations to degenerate into pointless screaming contests.

Negotiation error #5

Possessing an adversary mindset

There is a popular phrase that says “Thinking makes it so”. This is especially applicable to negotiations. If you think in a certain way, it will almost certainly show up in your bodily expressions, your tone of voice, the way you act, and the way you respond to the other party. If it shows up, you can be almost certain that your negotiation counterpart will sense it and respond in kind. The negotiation will become more defensive, which enhances the chances of a deadlock.

A negotiation need not be adversarial in nature. A “win-win” mindset will be more beneficial to the negotiation. The negotiation should be viewed as a means to solve a problem that involves both yourself and your negotiation counterpart. This will allow more room for creative ideas to develop which can satisfy the needs of all parties concerned.

One way to develop creative ideas to satisfy the needs of all parties is to use a conflict map, which is briefly explained here.

Negotiation error #6

Not taking notes

This is one of the most common mistakes. There are many benefits to taking notes. Negotiations are rarely completed in one meeting, and keeping notes will help you to prepare for future negotiation meetings. These notes should not be limited to just the content of the negotiation but should also include information regarding your negotiation counterpart, his negotiation style and tactics, etc. This will give you valuable information to work with when preparing for the next time you have to negotiate with him/her again.

Negotiation error #7

Negotiating under pressure

Never negotiate under any kind of pressure. If you must do so, be prepared for a less desirable outcome.

Many kinds of pressure exist. The most common is time pressure. The other is what I call choice pressure, which means that you have no choices available and you must work with your negotiation counterpart. In such cases, you are unable to walk away and you can be almost certain that your negotiation counterpart will exploit this to his/her full advantage.

Negotiation error #8

Giving freebies

A negotiation is an exchange. For every concession you give, make sure you obtain a concession in return. For example, if you are a buyer in a price negotiation, you should only lower your bid if your counterpart increases his asking price by an equal or higher amount.

Giving free concessions is charity, not negotiation.

Negotiation error #9

Excessive focus on yourself

Novice negotiators are usually anxious and constantly worry about what they will say next, or whether they will achieve a good outcome. When they do this, they fail to pay attention to what is going on around them, which may offer clues on how to obtain a better negotiation outcome. Most importantly, they fail to actively listen to their negotiation counterpart, which is a big mistake because the negotiation counterpart has a lot of information to offer which they need to know in order to obtain the best negotiation outcome.

Another error that novice negotiators make as a result of their excessive focus on themselves is to keep on thinking about how they could have improved on what they have said. They may regret on what they have just said, or they may regret failing to say something earlier, or they may regret not saying it in another way that could have brought better negotiation benefits.

As a negotiator is reacting in real time, it is always possible to have reacted better in retrospect. However, that is over, and novice negotiators, through their regret, fail to focus on the ever-changing situation and risk missing information and opportunities for a better negotiation outcome.

Negotiation error #10

Being intimidated
Some negotiators specialize in intimidation. They may intimidate through their forceful personalities, high positions, or simply loud voices. Some negotiators arrange the position of the negotiating room so that they are in a position to intimidate (e.g. one tactic is to allow themselves to sit on a higher chair so that they can look down on their negotiation counterpart, to make the latter feel small).

Do not be intimidated. It helps if you are aware of these tactics (which you do now), and even more so if you are well-prepared.