A negotiation is any discussion aimed at resolving an issue in a way that all parties accept. Since everyone approaches the bargaining table with their own motives and objectives, most negotiations don’t end with all parties getting their ideal outcome. To be a good negotiator, you must simultaneously create and claim value to get what you want while ensuring your counterpart also feels satisfied.
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DOWNLOAD NOWYou likely regularly engage in negotiations of varying degrees of formality. In business, negotiation can take the form of:
- Discussing costs and conditions with suppliers and vendors
- Closing a sale
- Determining a contract’s terms
- Asking for a promotion or salary increase
- Requesting budget allocation for a project
While there’s only so much preparation you can do, entering a negotiation without considering your strategy is likely to end in disappointment. To help prepare you for future negotiations, here’s an overview of the negotiation process and four strategies to consider for success.
4 Steps of Negotiation in Business
The negotiation process comprises four steps:
1. Preparation
Before the negotiation, define your:
- Zone of possible agreement (ZOPA): The range in which you and other parties can find common ground.
- Best alternative to a negotiated agreement (BATNA): Your ideal course of action if an agreement isn’t possible.
- Walkaway: The line where ending the negotiation is better than making a bad deal.
- Stretch goal: The best-case scenario for the negotiation’s outcome.
Once you’ve defined these, consider your counterpart’s perspective. What might their walkway or BATNA be? By doing so, you can set yourself up to strategize appropriately and make emotionally intelligent choices.
Additionally, determine your approach based on your and your counterpart’s expected motivations and goals. The strategies you choose should shift with the situation, but it’s important to consider them in advance.
2. Bargaining
The bargaining stage, or the discussion, is what typically comes to mind when you think of negotiation. It’s about creating value for both you and other parties despite your differences. It requires finding the ZOPA and working within it to claim the value needed to make the negotiation worthwhile.
3. Closing
Closing a negotiation can mean coming to an agreement or ending without reaching one. How a negotiation closes depends on each person’s motivations, requirements, and goals, as well as your relationship throughout the discussion.
4. Learning from Your Experience
Finally, reflect on the experience. Notice what went well, what didn’t, and what you’d try differently next time. This final step can help identify your strengths and weaknesses as a negotiator so you can sharpen and strengthen your skills.
To learn more about the skills needed to negotiate successfully, check out the video below and subscribe to our YouTube channel for more explainer content!
4 Examples of Business Negotiation Strategies
1. Define the Interaction by Showing Your Cards
Whether you strategize for it or not, how you approach a negotiation defines its nature and can set you up for success or failure.
In the online course Negotiation Mastery, Harvard Business School Professor Michael Wheeler explains that you “negotiate how to negotiate”—defining the interaction’s “who,” “what,” and “how” simultaneously.
“It’s about identity, roles, and relationships,” Wheeler says in Negotiation Mastery. “Social psychologists and neuroscientists have demonstrated that we form judgments of other people ultra-fast, just as they do of us. On a visceral level, we label someone as a friend or foe.”
Planning for how you want the interaction—and yourself—to be perceived is critical. One strategy is presenting the negotiation as a chance to solve a problem together. Related to this strategy is showing your cards—revealing your motivations and goals to your counterpart to an appropriate extent.
While many hide their cards to avoid being in vulnerable positions, Wheeler suggests in the course to share your goals in a way that prompts your counterpart to reveal theirs, too. This can build trust and yield a shared goal of creating value.
2. Make the First Offer, and Aim High
Deciding whether to make the first offer is vital before a negotiation. Contrary to popular belief, making the first offer isn’t a sign of weakness—it sets the stage for the rest of the conversation and gives you the power to define the range of possibilities.
The downside is that your counterpart may have been planning to make an even higher offer—in which case you’d limit yourself. Or, they may be so taken aback by your request that they end the negotiation before it’s even begun.
As outlined in Negotiation Mastery, the higher your aspirations, the more value you’re likely to get—but it’s also more probable you’ll walk away empty-handed. When making an opening offer, aim high to set the stage for bargaining, but not so high that your counterpart ends the discussion. Consider their goals, and ensure your initial offer provides value for them, too.
3. Don’t Raise Demands
Another strategy to consider is whether to raise your demands during the negotiation. By starting with small requests your counterpart will likely agree to, you enable them to make concessions until you drop your largest request.
The downsides of this approach are that, from then on, your counterpart won’t trust that your requests are final. They may not agree to even the smallest requests, knowing that you’ve raised demands in the past. It sets them up to believe you’re working to create a valuable solution for both of you but then going back on that plan with a demand for more.
4. End the Discussion Genuinely
If you aim to build a relationship with your counterpart, end the negotiation on a genuine note. Some negotiators reach an agreement and then double back—for instance, saying they need to ask their manager for approval, then giving an ultimatum demanding more.
While this bait-and-switch approach may earn you more value, it can also cause your counterpart to walk away if they can’t meet the added demand. Furthermore, if you want to build trust and foresee needing to negotiate or work with them in the future, being deceitful will erode your rapport.
Closing genuinely can also lead to more fruitful bargaining. If you know you won’t end negotiations until you feel comfortable with their outcomes, you’re more likely to have conversations that result in successful deals.
Sharpening Your Negotiation Skills
The strategies you employ depend on your scenario’s specifics. If the other party is someone you’re likely to negotiate with again, choose tactics that support trust to maintain a working relationship. If your negotiation is a one-off occurrence, perhaps go with a bolder, riskier strategy.
Thoughtful preparation and the ability to improvise are critical to negotiating successfully. To gain the skills needed to select strategies and navigate unpredictability, consider taking an online negotiation course.
With practice, strategies, and tools under your belt, you can approach the bargaining table with confidence and successfully close deals.
Are you ready to improve your negotiation skills and advance your career? Explore Negotiation Mastery—one of our online leadership and management courses—and download our free leadership e-book.
