How to Win More and Win Faster in Any Kind of Negotiation

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Harry Nichols
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STRATEGIC WHITE PAPER CHALLENGES Negotiation mistakes due to lack of preparation Inconsistent negotiating results from lack of discipline The Six Principles that Deliver Winning Negotiations

1 STRATEGIC WHITE PAPER CHALLENGES Negotiation mistakes due to lack of preparation Inconsistent negotiating results from lack of discipline The Six Principles that Deliver Winning Negotiations TAKEAWAYS Learn how to generate winning conditions, regardless of what is being negotiated, or with whom Discover the techniques that can create and maintain credibility and leverage Know six universal and underlying principles of negotiation How to Win More and Win Faster in Any Kind of Negotiation Advanced negotiation capabilities that can help your company win in critical situations to gain savings and efficiency.

2 What s in this Paper? Overview page 2 K&R s Six Principles page 3 Principle 1: M.O.R.E. preparation is key to a winning negotiation. page 3 Principle 2: Protect your weaknesses, utilize theirs. page 5 Principle 3: A team divided is a costly team. page 6 Principle 4: Concessions easily given appear of little value. page 6 Principle 5: Negotiation is a continuous process. page 7 Principle 6: Terms cost money; someone pays the tab. page 7 Conclusion page 7 Overview Whether we re negotiating a compensation package with a new employer, trying to close a large purchase with a client, or even negotiating as a potential client, the critical process of negotiation touches all of our lives. The possibility of a win depends on our ability to create and maintain credibility and leverage. Credibility is the power to inspire belief. Leverage is the ability to persuade people to move closer to your position. Credibly articulating shared positions of value creates leverage. Without these foundational attributes, the likelihood of reaching a positive outcome for your side is slim. Six universal and underlying principles of negotiation serve as a guide for creating winning conditions, regardless of what is being negotiated for, or with whom. This whitepaper outlines these Six Principles and why they re important for creating positive outcomes so both parties can leave the table with their major objectives met and satisfied with the value they have received. Page 2

3 K&R s Six Principles 1. M.O.R.E. preparation is key to a winning negotiation. 2. Protect your weaknesses; utilize theirs. 3. A team divided is a costly team. 4. Concessions easily given appear of little value. 5. Negotiation is a continuous process. 6. Terms cost money; someone pays the tab. Principle 1: M.O.R.E. preparation is key to a winning negotiation. The M.O.R.E. acronym outlines four elements necessary in preparing for successful negotiations. M: Motivations O: Objectives R: Requirements E: Edge Motivations Thorough preparation requires that we probe and gather information to gain a more complete understanding of motivations, either customer or seller. Why are they acting as they do? Experienced negotiators host planning sessions to gather needed information beforehand. This information is used to build a solid foundation of knowledge that reduces the possibilities of surprise as to what factors will influence the future behavior of the people with whom you are negotiating. For vendors in particular, factors and circumstances that affect a buyer s willingness to accept your proposal include position in the market, service levels, personnel efficiencies, productivity and confidence in their current suppliers, among many others. For buyers, factors like the vendor's track record and market position will have a similar influence on their behavior. A winning proposal is expressed in terms that are relevant to the customer based on their motivations. Page 3

4 Early time spent understanding possible motivations can save substantial time in closing the deal at the end of the process. In the end, motivations drive actions in negotiations. Objectives These are your opposite party s true goals. What is the outcome they seek? Revenue and profit are two common business objectives. Determining the true objective of the other party what the problem really is is critical to developing the proper requirements. Fundamental questions at this step of the process will explore what both parties are seeking to achieve and what they want to get as a result of the relationship or the contract. Credible value statements are more powerful if they link to the measureable objectives of the other side. Requirements Miscalculating or cutting corners on the objectives will usually produce some inaccuracy in the requirements, or how both parties are going to achieve their goals. Most proposals focus on requirements. Either I am telling you how I will achieve your objectives, or you are telling me. Without an understanding of Motivations and Objectives, the Requirements phase often misses the mark. Edge Gaining the E in M.O.R.E. is getting the edge yielded by putting due diligence into the M, O, and R. It is imperative that internal planning and fact-finding activities for either side be comprehensive, leaving as little to chance as possible. A business entering negotiations with a potential customer will plan early and often, engaging a competent, cross-functional team to explore as many questions as possible about the motivations and objectives of both parties. A buyer will understand the motivations and measurements of the seller in order to understand what the seller needs to make the sale successful for them. Page 4

5 The M.O.R.E. Process Principle 2: Protect your weaknesses, utilize theirs. Employing this principle begins with a clear-eyed assessment of the negotiation team s weaknesses, which often include tight deadlines, lack of patience, insufficient alternatives, lack of understanding of the customer, poor cash flow, or product credibility issues. Poor teamwork which is addressed in its own principle later on is another weakness, making a team susceptible to divide-and-conquer tactics by the other side. When assessing a negotiation team s strengths, the three most important should be: The lead negotiator and his/her skills The negotiation team and its capabilities The team s preparation Difficult negotiation conditions can arise when one side doesn t or won t reveal their criteria for making decisions, thus depriving a negotiating team of the ability to articulate value and build on their strengths. They could then be caught in a position of having to battle their weaknesses at the negotiation table. This trap can be overcome by aggressive research of each side s business weaknesses, and contacting as many people as possible who may yield some intelligence as to what the other side values. If the other side values your strengths then you can have confidence that the weaknesses can be overcome. A team can also construct an educated guess about the criteria, putting their proposal on the table and explaining what assumptions were made and why. This transparent approach can lead to a fruitful discussion about the true negotiation outcomes needed. Page 5

Principle 3: A team divided is a costly team. As many have learned, cracking the united front of a negotiation team, consciously or otherwise, can yield prized concessions.

6 Principle 3: A team divided is a costly team. As many have learned, cracking the united front of a negotiation team, consciously or otherwise, can yield prized concessions. Parallel conversations that bypass the point person and attacks on the credibility of a single team member are common tactics that divide teams and result in concessions. A divided team can also affect your credibility. Individuals that allow their team to be divided gradually erode their collective position insofar as they fail to support one another and present a united front. Teams can and should encourage internal debate, but a unified position must always be presented to the other party. Principle 4: Concessions easily given appear of little value. When someone asks for and easily gets a concession, it immediately reduces the perceived value of that concession. Why would the requester not then press for even deeper discounts or additional concessions at no extra cost? Not only does the concession appear of little value, but it also encourages additional negotiating any agreement will be slower to come. When concessions are granted during a negotiation, they should be Principled Concessions a concession made with a credible business rationale. When a concession is granted rationally, it will not be perceived by the other side as a giveaway. Principled Concessions help earn trust and respect when negotiators take the further step of proving the value of the concession. Principled Concession Formula Credible offers are prerequisites to a Principled Concession. A credible offer is a firm offer based on rationale related to value. A credible offer does not change arbitrarily. It changes if the value assumptions are validly disputed. Those changes are Principled Concessions. When a Principled Concession not only has a business rationale, but also is tied to a business value change, it becomes a more powerful motivator. Page 6

7 Principle 5: Negotiation is a continuous process. If negotiations are a building block for successful relationships, then they must be seen as interval training, not a single sprint. Since negotiation work can result in a long-term future (or no future), success establishes business relationships that make doing business easier and more efficient for all parties. Negotiations do not end with the contract signing. In fact, some of the most difficult negotiations may begin after the initial contract is signed. This is particularly true in the technology industry, where many contracts are drawn up before implementation takes place and before all requirements are known. These types of contracts stipulate yet more negotiation. By their nature, these types of deals involve continuing discussions about products, services, delivery, implementation, statements of work, etc. Discussions between customers and suppliers should never end, especially if the relationship is good. Principle 6: Terms cost money; someone pays the tab. Every term in a contract or a negotiation should be of some value and have an associated cost. It is the negotiator s responsibility to know the rationale for a term and be able it articulate its value and identify its cost. The value of the total deal is the aggregate impact of all the terms. Not understanding the rationale of each can negatively impact credibility and leverage. There is no free lunch. A concession for which value cannot be articulated usually comes down to a price. Price is tied to value in function and finance, however, value is always two-sided; each team s perception of what is being given or gained to make the deal. If one side perceives that they are giving up something of value, they are more likely to treat concessions as something of value to them. Conclusion Preservation of credibility and leverage are the critical factors to negotiating a favorable deal and building relationships that are profitable over time. The Six Principles outlined in this whitepaper, practiced collectively and diligently, move the credibility and leverage points in the practitioner s favor not based on intimidation, but methodical practice of the principles that create the perception of unique value. Page 7

8 Good negotiation, rather than being an antagonistic or adversarial process, should aim to create a relationship that lasts. The deal delivers something of value to both sides that they wouldn t have had otherwise. While there are many more complex facets to the negotiation process, being conscious of the Six Principles provides a good basis for practice and increases the likelihood of a win for everyone more often and faster. About K&R Negotiation K&R Negotiation Associates, LLC, is a consulting firm specializing in structuring and negotiating business transactions around the world. Our consulting, negotiating, and training firm is comprised of professional negotiators, sales executives, and business lawyers. Our professionals have an average of 20 plus years of professional negotiation experience. Applying our methodology changes your negotiation behaviors and improves your negotiating success. K&R provides your team with skills they can immediately apply to build positive and profitable long term relationships with their clients. K&R s clients include Fortune 200 companies such as IBM, EMC and Xerox, as well as smaller companies such as Bristol Technology, Priceline, SEI and others K&R Negotiation Associates LLC For more information, please visit or call Ethan Allen Highway Ridgefield, CT Page 8

COM R. Anderson, J. Disbrow

COM R. Anderson, J. Disbrow R. Anderson, J. Disbrow Research Note 1 May 2003 Commentary SMBs: Tips for Dealing With Large ERP Vendors Enterprise resource planning vendors are beginning to look at small and midsize businesses for