Why skilled negotiators don’t look to ‘win’ a negotiation but are driven by ‘profit maximisation’

Negotiating is a fundamental part of how business gets done and takes place millions of times a day around the world. But that doesn’t stop many business owners from avoiding it.

If you can take control of yourself, your values and prejudices, your need for fairness, and your ego, you can start achieving the best possible outcomes in your negotiations. However, the first challenge to overcome is changing the way you think about negotiations and yourself.

Learning about the art of negotiation is an exercise in self-awareness because understanding yourself and what effect a negotiation can have on you, enables you to accommodate the pressures, dilemmas, and stresses that go with it.

Self-awareness helps us to recognize why we do the things we do and the effect this has on the results of our negotiations. It also helps us adapt our approach and our behavior to suit each negotiation rather than trying to make one approach fit every situation, simply because it suits our personal style.

Why bother negotiating?

Just because everything is negotiable doesn’t mean that everything has to be negotiated. The value of your time versus the potential benefit that can be achieved by negotiating is always a consideration.

Why spend ten minutes negotiating over the price of a £5 notebook when you normally earn £30 an hour? You might save £1 but could have earned 5 times that if you’d worked for that time. However, if you are buying a new vehicle for your business, a 5% saving could equate to £1000, so it is probably worth investing the time.

There will be situations involving more important decisions where you are mutually dependent and yet hold different views. When an agreement needs working through, effective negotiation can help provide not only a solution but potentially a solution that both of you are motivated to carry through.

There is no other skill set that can have such an immediate and measurable level of impact on your bottom line than negotiation. A small adjustment to the payment terms, the specification, the volume threshold, or even the delivery date will all impact on the value or profitability of the agreement.

Negotiating and the skill of profit maximisation

Understanding the effects of these moves, and the values they represent to you from the outset, is why planning is fundamental to effective negotiation. The skill in building enhanced agreements through trading off against different interests, values, and priorities is negotiation. In the business context it is known as the skill of profit maximisation.

So, effective negotiation provides the opportunity to build or dissolve value – but what does value really mean? It can be too easy and is too often a focus on price. The question of “how much?” is one, transparent, measurable issue and, because of this, is also the most contentious issue in the majority of negotiations.

Yet price is but one variable you can negotiate over. It is possible to get a great price and feel as though you have won and yet get a very poor deal at the same time. For example, because the item did not arrive on time, or it fell apart after being used twice, or it had no flexibility about it, and so on. (Ever heard the saying “you get what you pay for”?)
Guide to Successful Negotiation
In negotiation, your ego and your competitiveness might fuel the need to “win,” especially where you allow a sense of competition to become involved. However, negotiating agreements is not about competing or winning; it is about securing the best value. This means understanding:

  • What the other person or party wants, needs or believes;
  • What they do; and
  • How that affects the possibilities.

As a skilled negotiator your focus needs to be on what is important to the other party: their interests, priorities, options, if any, their deadlines, and their pressure points .

Try to see the deal as they see it. If you set out to understand them and their motivations, you may be able to use these insights to your advantage and, ultimately, increase the value of the deal for yourself. Being driven to beat the other party will distract you from your main objective, which is usually to maximize value from the agreement.

Be proactive and take control of how you negotiate

Your first task is to be proactive – to take control of the way you negotiate. To map out the issues, formulate an agenda which helps you to negotiate agreement in a way that will serve your objectives. Try to be honest with yourself when deciding or agreeing on what these are. Remember, price is only one element of the deal and winning on price may not result in your attracting the best deal.

You may need cooperation to the point where the other party not only agrees to go ahead but is also prepared to honour their commitment. There is absolutely no place for your ego in your negotiations. The single thing that matters is the total value over the lifetime of the agreement .

Becoming comfortable with being uncomfortable

The person on the other side of the negotiating table may well take up a tough position, which could make you feel challenged or even competitive. Becoming more comfortable with being uncomfortable in situations like this, where you are also likely to experience pressure and tension is one of the most important prerequisites of a skilled negotiator.

Without this, our ability to think and perform can become compromised. So you need to recognize that, by negotiating, you are involved in a process and the people you negotiate with need time to adjust as part of engaging in this process.

For more insight on becoming a better negotiator, read;

About the author

This is an edited extract from: The Negotiation Book: Your Definitive Guide to Successful Negotiating, 2nd Edition, by Steve Gates, published by Capstone, November 2015, £12.99. Steve Gates is a world expert in negotiation and founder of the Gap Partnership, the world’s leading negotiation consultancy.

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