The dilemmas continue in Part 2: Do we make the first proposal or respond? Do we bluff or not? And how do we define a good deal?
Propose or Respond
This is a source of much debate among negotiators. There is a view that those who hesitate longest, win. Making the first proposal is seen as a sign of weakness. While this may be true in some isolated situations, there is a general view supported by academic research that making the first proposal provides a number of distinct advantages. Making the first proposal allows you to set the agenda for the negotiation. It also allows you to effectively anchor the negotiation at your most favored price point within the bargaining arena. So forget the image of the Mississippi riverboat gamblers waiting for the other party to break first and seize the initiative in the negotiation by making the first proposal.
Bluff or Facts
All negotiations take place in the context of a relationship. In one-off transactions, there is little investment in the relationship and therefore your guide is, the law and your personal ethical framework. Typical transactions in this category are the sale of a motor vehicle and real estate. However, the majority of negotiations take place in the context of a wider relationship. In such relationships trust is important. It is essential to make relationships work. Anything you can do to build trust is good.
It is therefore important to resist the temptation to be loose with the truth in order to gain a short-term advantage. The best advice is to be honest but not naive. The test about whether to disclose information or not is whether such disclosure will move the other party towards your position or away from it.
Good versus Gold
It was Voltaire who first identified that the "excellent was the enemy of the good." Effective negotiators have a clear understanding of their objectives in a negotiation. They know when they have achieved an outcome that meets those objectives and where it is appropriate to agree. This does not mean that they immediately drop to their minimum acceptable position and are satisfied with that.
What it does mean is that in the prevailing market conditions they have done the best deal consistent with the other party being happy to implement that deal. They have not attempted to gain every last advantage at the expense of the implementation and the relationship. The law of diminishing returns applies here with additional time spent negotiating returning fewer benefits and potentially damaging the relationship. A common example is using aggressive negotiating to get a builder to agree to the cheapest possible price to build a house and then arguing constantly about quality and variations to the contract.
If you can successfully resolve these five dilemmas your negotiations should be more time efficient. More effective and their outcomes and provide the basis for deals that work and relationships that endure.
Keith Stacey
Click here if you missed the first blog.