There are skills we all wish we'd had at the start of our careers, skills that would have been invaluable. For me, one of these is the understanding of the art and science of negotiation - what it is, and how it is done.
Negotiation training is often ignored by businesses, business schools and universities. And yet, it is perhaps unique in terms of the disproportionately enormous impact some basic understanding can have for individuals involved in business, particularly entrepreneurial business.
In negotiating, two or more parties with different preferences across a range of outcomes make a joint decision. Or fail to make a joint decision if the negotiation fails to complete. The routes that negotiators follow are ones of tactical information exchange - asking questions, listening to the answers, integrating that new information into their thinking, and then doing it all again in a new iteration. It is not unlike a tennis match with each party directing a shot and then maneuvering to find a desirable outcome.
There are 2 broad types of negotiations. Distributive negotiations aim to split up the ‘apple pie’, shall we say, of desirable outcomes. In this distributive scenario, (also sometimes called win/lose or zero sum bargaining) every extra slice of pie you get, the other party loses, because the size of the apple pie is fixed, hence win/lose. Integrative negotiations, by contrast, seek to find a way to make the apple pie bigger for both parties - in this integrative, or win/win, scenario the pie size is not fixed and the parties work together to seek extra pie as well as how to divide it.
These 2 types require differing strategies and many negotiations contain elements of each type. Recognising which type of negotiation you are in and to what extent they are distributive or integrative can be a critical success factor. I once worked for a company that had previously signed a 5 year contract to purchase a critical component and then found out they were paying 100% more than the subsequent market rate. Hundreds of thousands of pounds spent on lawyers had not found a way out of the contract. They had incorrectly thought they were in an integrative exchange when actually it was distributive. What’s what’s interesting is that the director who had signed the contract thought they were getting a great deal for the company and had eagerly agreed to the 5 year term.
This last point is a good example of cognitive bias. We don’t know what we don’t know and we tend to be over confident in our ability to assess and manage uncertainty. This underlines the importance of preparation: 70% of the success of a negotiation is in the preparation. It's worth putting yourself in the shoes of the other parties and work out whose interests are at stake and what those interests are. A good preparation plan will also assess which party has the most information and who should make the first offer.
In delivering negotiations courses over the years, I’ve noticed three interesting things that often surprise people:
These are all types of negotiations. We have all become adept at certain types of negotiations in our personal and work lives but we are unlikely to have become adept at all the different types.
Good negotiation training will highlight the variety of practice, and offer role playing exercises to allow the individual to understand their own strengths and weaknesses. Often a profiling tool will be useful to help them understand their natural attitudes and preferences when dealing with conflict and disagreement. Ultimately it should allow them to prepare for an effective negotiation, and work out whether they should negotiate themselves or help them understand when to find someone else to do it for them.
Incorporating negotiation training into more programmes for businesses would generate better outcomes all round, either leaving less behind on the negotiating table or helping find ways to make that apple pie bigger for all.
This blog was written by David Falzani MBE CEng, a serial entrepreneur, director and business consultant, Honorary Professor at Nottingham University Business School, and President of the Sainsbury Management Fellowship - which has given away over £8 million in scholarships to young engineers to broaden their commercial skills. He has delivered negotiation training workshops to over 300 entrepreneurs and businesses. He negotiated 20% off the price of his last car.