Every day that you interact with other
people, you are involved in some type
of negotiation. You negotiate with other employees, with clients, customers
and/or suppliers. If you are a buyer, you
must negotiate with a seller. If you are a
seller, you negotiate with a potential buyer.
Are you a good negotiator? Are you doing
the best job of negotiating for yourself or
your company? How might you improve
your negotiation skills?
“Great negotiators are not born,” says
Elizabeth Umphress, an assistant professor
of management and Mays Research Fellow
at Texas A&M University, “they become
great through a combination of training
and practice. They prepare and they know
‘the best deal’ and work to get it.”
Smart Business talked with Umphress
for more insight on business negotiations.
What are the key points of negotiation?
Take time to prepare. Determine what
you have and what you want. Do some serious thinking about it before you start negotiating. Determine your best alternative to
a negotiated agreement (BATNA), which is
your fallback option if the negotiation is
not successful. Decide on your target or
goal in the negotiation. Make sure you are
dealing with the right person, one who has
the power to negotiate with you and can
Tell us more about BATNA.
You need to know what your alternatives
are to the negotiated agreement in order to
help determine your target. You should
have a fallback if you can’t come to an
agreement. After you look at all the alternatives, pick the best one, keeping it in
mind at all times. The better BATNA you
have, the better the potential outcome.
How do I set my target?
This will take a combination of knowledge and research. The target should be specific, difficult and realistic. It shouldn’t
be easily attained. If you are selling, you
want the price as high as possible without
it being unrealistic or beyond the market.
Too many people set their sights too low,
try to make the sale too easy, and don’t gain
nearly as much from the sale as they might
Besides too low a target, what are some
other potential pitfalls in negotiation?
Negotiation should not be viewed as a
sparring match. Your job is not to belittle or
demean the other person. The best negotiated deal is going to satisfy some or all of
the needs of both parties. Good business
relationships become long-term relationships. If you only think of yourself and not
the other person, they are not going to feel
good about dealing with you in the future
and you will have missed the opportunity
for repeat business.
Don’t have a ‘satisfying’ target. If you
have a mid-point and a higher target, you’re
more likely to focus on the mid-point and
miss out on the real target.
Do not allow the other party to change
your BATNA or your target. If you have done your research, you know that your
target is reasonable.
Never start negotiating with your target;
leave room to negotiate.
Don’t negotiate with yourself. Once you
have placed an offer on the table wait in
patience and silence to allow the other person to counter or accept. You can clarify
why your offer is fair, but if you counter
your own offer, you make the other person’s job too easy.
What are some terms that should be avoided
‘Take it or leave it’ or ‘That’s my final
offer’ unless you unequivocally mean it.
If you say that and then accept something
less, you lose your credibility.
Be wary to accept or offer to ‘split it
down the middle.’ Your target and their
offer may be too far apart and splitting it
down the middle would not be fair to one
of the parties.
What is the best way to negotiate?
Face-to-face is always the best. You can
tell a lot about a person and how things are
progressing by observing his or her body
language. If things appear to be going in the
wrong direction, you can make clarifications. Telephone is the next best option.
While you can’t see the body language, you
can receive signals by voice inflections.
E-mail negotiations should be avoided
unless the parties know each other well
and have an unwavering trust built in.
Preparation is the key. You’ll win or lose
based on how well you are prepared. You
are prepared when you know what you
want, have a good idea of what the other
party wants, and do your best to negotiate
an outcome that comes closest to satisfying both parties.
ELIZABETH UMPHRESS is an assistant professor of management and Mays Research Fellow for Texas A&M University’s
Mays Business School in College Station. Reach her at (979)
845-4801 or [email protected].