Give a little, take a little Featured

8:00pm EDT April 25, 2007
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 make decisions.

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 have.

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 in negotiation?

‘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 eumphress@mays.tamu.edu.