whats the best way to ask to begin in negotiations?

Thought in Brief

The Problem

Some of the costliest mistakes in negotiations take place before anyone sits down at the bargaining tabular array. That's because bargain makers tend to focus too much on substance—offers, counteroffers, concessions—and not enough on process.

The Solution

Iv strategies tin can assistance gear up the phase for a successful negotiation.

• Negotiators need to address matters of procedure at the outset.
• They must set realistic expectations.
• They need to clearly identify all players that will influence or be influenced by the deal.
• And they must set the psychological frame through which the deal will be viewed.

Endless books and manufactures offer advice that can help deal makers avoid missteps at the bargaining table. But some of the costliest mistakes take place before negotiators even sit downwardly to hash out the substance of the bargain. That'south because people fall prey to a seemingly reasonable—just ultimately faulty—assumption about bargain making. Negotiators oft take information technology for granted that if they bring a lot of value to the table and have sufficient leverage, they'll be able to strike a corking deal. While those things are certainly important, many other factors influence where each party ends upward.

In this commodity I draw on my experience advising scores of companies on deals worth millions or billions of dollars to nowadays four factors that tin have a tremendous impact on negotiation outcomes. In each case, I provide guidance on what negotiators should do before either side starts making offers or counteroffers.

1. Negotiate Procedure Earlier Substance

A couple of years ago, two cofounders of a tech venture walked into a meeting with the CEO of a Fortune 100 company who had agreed to invest $x million with them. A week before, the parties had hammered out the investment amount and valuation, and then the coming together was supposed to be celebratory more than than annihilation else. When the cofounders entered the room, they were surprised to see a team of lawyers and bankers. The CEO was also there, merely information technology presently became clear that he was not going to actively participate.

As soon every bit the cofounders sat downward, the bankers on the other side started to renegotiate the deal. The $10 million investment was still on the table, but now they demanded a much lower valuation; in other words, the cofounders would have to give upwards significantly more disinterestedness. Their attempts to explain that an agreement had already been reached were to no avail.

What was going on? Had the cofounders misunderstood the level of commitment in the previous meeting? Had they overlooked steps involved in finalizing the bargain? Had the CEO intended to renege all along—or had his team convinced him that the deal could exist sweetened?

Upset and confused, the cofounders quickly assessed their options. Accepting the new bargain would hurt financially (and psychologically), but they'd get the $x million in needed funds. On the other hand, doing so would significantly undervalue what they brought to the table. They decided to walk out without a deal. Before they left, they emphasized their strong desire to do a bargain on the initial terms and explained that this was a affair of principle as well as economics. Within hours, they were on a plane, not knowing what would happen. A few days subsequently, the CEO called and accustomed the original deal.

The gutsy move worked out for the cofounders, but it would have been ameliorate not to let things get wrong in the first place. Their mistake was a common one: focusing too much on the substance of the deal and not enough on the procedure. Substance is the terms that make upwards the final agreement. Process is how you will get from where you are today to that understanding. My communication to deal makers: Negotiate process before substance.

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Consider another scenario. You've been negotiating with someone for months. You take a few final concessions that you've been property back—they're costly but worth making if it will close the deal. With the finish line in sight, yous make the concessions, and the other side responds: "This is great. I appreciate your flexibility on these bug. Permit me share this with my boss to see what she thinks." Unfortunately for you, you had no thought your counterpart even had a boss—y'all thought he was the final decision maker. The negotiations are conspicuously not over, and you take zilch left to give.

The more clarity and commitment you accept regarding the process, the less likely you are to make mistakes on substance. Negotiating process entails discussing and influencing a range of factors that will affect the outcome of the deal. Enquire the other party: How much fourth dimension does your company need to close the deal? Who must be on board? What factors might slow down or speed up the process? Are there fundamental milestones or dates we should exist aware of? Recall to find out elementary things such as, Who volition be in the coming together tomorrow? What will the agenda exist? Since we are not going to discuss the issues of importance to usa in the next meeting, when will we address them?

Of class, you lot tin't always get clear answers to every question at the outset—and sometimes it is premature to ask sure questions. But y'all should seek to clarify and reach agreement on as many process elements as possible—and as early every bit is advisable—to avoid stumbling on substance afterwards.

2. Normalize the Procedure

A businessman who owns multiple manufacturing facilities in Asia once told me that he no longer does business organization with companies from the Westward unless their top managers are willing to beginning fly into his city to run into with him. My initial thoughts were: Is this about ego? Is it about edifice relationships? Is it a cultural norm or ritual of some sort? Actually, none of those had annihilation to practise with his precondition to signing a contract.

Hither's how he explained it to me: "Until they have flown into my city and so driven to our manufacturing plants—which are located 20 kilometers from the airport but have nigh three hours to achieve—until they accept experienced that, they just don't empathize how things work around hither. And if they don't sympathise, nosotros run into serious problems. Because the first time at that place is a filibuster or disruption, or if we need to renegotiate something, they volition immediately assume we are either incompetent or stealing from them. Once they've seen how things actually piece of work, we tin have a more productive relationship."

Unless business partners sympathize what is "normal" in a given context or culture, they are likely to misunderstand or overreact to agin events. The same is true in negotiations of all kinds: It is important to normalize the process. If y'all've ever been involved in an ugly disharmonize that went into arbitration, yous may have seen this in action. When a practiced mediator sits down with parties who are in a bitter dispute, she might say something like, "Yous think you hate each other today? I tin clinch y'all, about three days into this process, yous're going to detest each other even more. And when that happens, I want you to recall something: That'south normal."

Tell counterparts what to expect then they don't overreact to bumps in the road.

If the mediator does non requite this warning, the parties are much more likely to abandon the procedure when emotions raise and things seem to exist falling apart. But if she explains at the get-go that it's normal for things to get worse earlier they get better, the parties are more than likely to continue at information technology. Past normalizing the process, she finer manages their expectations.

The same principle applies to any negotiation where there'southward a risk that things will non go perfectly smoothly. If you anticipate delays or disruptions on your side, tell your counterparts. This allows yous to shape how they volition interpret a negative issue should one occur and to ensure that they practise not overweight its significance. You lot'll have a much harder time trying to influence their perceptions or win back their trust afterwards something goes wrong that they did not expect.

Normalizing the process entails discussing, in accelerate, whatever factors that might crusade the other side to question your intentions or ability or to dubiety the likelihood of a successful outcome. You lot might explain typical barriers that need to be overcome, moments during the process when it's mutual for parties to feel anxious or pessimistic, events that might delay progress, and the difference between disruptions that are commonplace and easy to resolve and ones that are more serious.

Encourage the other side to do the same for you. People often hesitate to discuss "what might go wrong," because they're focused on presenting themselves and the merits of the deal in the best possible lite. This is especially true in certain cultures and in contexts where contest is tearing. Your counterpart might exist thinking, "Why should I talk about problems if my rivals are pretending things volition be not bad?"

That's understandable. If other parties remember that mentioning a potential disruption could toll them the business, or that y'all'll apply it as a lever to extract greater concessions, they're unlikely to be truthful. To encourage people to be open about issues, get in safe for them. Explain that you are experienced enough to know that every bargain and human relationship is likely to encounter difficulties and disruptions, and that y'all want to larn more almost the specific gamble factors that might play a office in this example. And if you lot tin can bespeak (or commit to) having no intention of belongings those factors confronting them, yous have a amend adventure of reaching an understanding that works for both sides.

3. Map Out the Negotiation Space

Some years ago, a client of mine was preparing to sell his stake in a visitor that was jointly endemic by four entities. The owners had been squabbling for many years; it was clear that the asset would need to be consolidated under 1 party (or perhaps two who could get along). It was also clear that no one wanted to sell. Still, there was little choice in the affair, because one of the owners—Company X—was a much larger company with the power and the clout to push button people out. It announced that information technology would buy out the other three.

My client wanted to wait until Company Ten had bought out the other 2 owners before negotiating the auction of his shares. He figured that by beingness "the last piece of the puzzle," he would be able to concur out for more money.

When we met to discuss his strategy, I asked him to footstep dorsum and "map out the negotiation infinite." This consists of every party that can touch on the negotiation, along with any political party that will be afflicted by the negotiation. In my experience, a strategy that makes perfect sense when yous're thinking bilaterally—that is, about the human relationship between any two parties in the negotiation—can suddenly become ineffective or fifty-fifty disastrous when you have a multilateral perspective. I encouraged my client to evaluate the interests, constraints, alternatives, and perspective of all the relevant parties. 1 of the things we looked at was how much equity each party had and how much of the lath each one controlled:

We then focused on the interests of each company: What exactly are their interests in this deal? How would yous rank their priorities? The four parties had known one another a long time, and my client did not have any trouble identifying what mattered most to each. Company 10, for example, was concerned well-nigh iii things, and its priorities were as follows: (1) Reputation: Information technology did not want ties with any organization that could hurt its reputation. (2) Control: It wanted buying only in businesses where it had a majority of board seats, and (3) Money: It would desire to pay as little as possible, simply this was non as large a concern as reputation and control.

Later delving into the perspectives of all parties, we unearthed one more important bit of information: Company A was the to the lowest degree interested in selling and was already putting upward a fight that could elevate things out.

When we put all these details together, it became clear that the "last piece of the puzzle" strategy would be unwise. Why?

For Company 10, control was a higher priority than money. To get control, it needed to buy either my client or Company A—as soon as it made either purchase, it would command more 50% of the board seats and hence the visitor (for most decisions). Therefore, if my customer were the last to sell, he would be negotiating with Company X after it had control. At that time, my customer would be able to go paid just for his one/6 share of the house'due south disinterestedness. But if he were to sell first, at a fourth dimension when Visitor A was refusing to sell and was making things difficult for Company X, he could monetize 2 assets: his shares and his board seat. In other words, the last party to negotiate would have the least leverage and express opportunities to monetize its avails.

Make sure to consider the perspective of every party that tin affect the bargain.

In the real globe, you'll never take as complete a motion picture equally you'd like, but you put yourself at further disadvantage if you focus too narrowly on the party on the other side of the table. You have to assess the perspective of all the parties that tin can influence or are influenced past the bargain: Who has the ability to influence the person on the other side of the table? How might the strategy or actions of other parties change your alternatives, for better or worse? How does the deal affect the interests of those who are not at the table? How volition this negotiation impact your leverage with hereafter negotiation partners? If multiple parties are involved in the deal, does information technology brand sense to negotiate with them simultaneously or in sequence, together or separately?

Your assay might propose a change of strategy—that you should negotiate with a dissimilar party first, filibuster the bargain or speed information technology upward, bring others into the room, expand or contract the scope of the deal, then on.

4. Control the Frame

The outcome of a negotiation depends a great deal on each side'southward leverage—the improve your outside options are and the more ways you have to reward or coerce the other side, the more likely you are to attain your objectives. But the psychology of the bargain can be only as important.

In my experience, the frame, or psychological lens, through which the parties view the negotiation has a significant result on where they stop up. Are the parties treating the interaction as a problem-solving exercise or as a battle to be won? Are they looking at it as a meeting of equals, or do they perceive a deviation in status? Are they focused on the long term or the short term? Are concessions expected, or are they seen as signs of weakness?

Constructive negotiators will seek to command or adjust the frame early in the process—ideally, earlier the substance of the bargain is even discussed. Hither are iii elements of framing that negotiators would be wise to consider.

Value versus price.

I've worked with many engineering companies whose innovative products provide tremendous value for customers but are priced significantly higher than what their competitors are charging—or what customers are paying for their legacy systems. While the high price is justified by the value suggestion, salespeople ofttimes face immediate resistance when a potential customer learns that the price will be 5 or 10 times the amount he is currently paying. Too often, the salesperson volition hear something like: "Y'all are charging v times what others accuse. No one pays that much for this kind of matter!"

From the kickoff, command the lens through which parties view the negotiation.

One of the about common mistakes salespeople make in those situations—without fifty-fifty realizing information technology—is to apologize for having a loftier price. They do this when they say "I empathise it's pricey, but…" or when they hastily bespeak a willingness to adapt the price. My advice: E'er justify your offering, but never apologize for information technology. When you repent, you lot signal that even you lot don't think the price is advisable, and you give the other side license to haggle. The entire frame of the negotiation becomes about price, when what you really want to hash out is value.

A better response would exist, "What you lot seem to be asking is, How is it that despite a college cost, we still have a long and growing listing of customers? We both know that no one will pay more for something than it'south worth, so let's discuss the value we bring so that you can decide what's best for you."

In negotiations of all kinds, the sooner you tin shift the discussion away from the price to your counterpart and focus on the value you bring to the tabular array, the more likely it is that you will be able to monetize that value.

Your alternatives versus theirs.

Research and experience propose that people who walk into a negotiation consumed by the question "what volition happen to me if at that place is no deal?" get worse outcomes than those who focus on what would happen to the other side if in that location's no deal. When you are overly concerned with your own alternatives, and especially when your outside options are weak, you remember in terms of "what volition it take (at a minimum) to become them to say yep?" When you make the negotiation about what happens to them if there is no deal, yous shift the frame to the unique value y'all offer, and information technology becomes easier to justify why you deserve a skilful bargain.

Equality versus dominance.

Not so long agone I was consulting on a strategic deal in which our side was a small, early-stage company and the other was a large multinational. One of the about important things we did throughout the process—and specially at the commencement—was make sure the departure in company size did not frame the negotiation. I told our squad, "These folks negotiate with 2 kinds of companies—those they consider their equals and those they think should feel lucky but to exist at the table with them. And they treat the two kinds very differently, regardless of what they bring to the table." Over the years, I've seen many big organizations impose demands on their perceived inferiors that they'd never require from those they considered equals. In this negotiation, I wanted to make certain our counterpart treated united states of america like equals.

To keep the dominance frame from taking hold, nosotros started shaping expectations and perceptions at the very beginning, before we fifty-fifty considered the economics of the deal. For example, any time our counterpart made a procedural demand—still modest—that we felt they would not have made of an equal, we respectfully pushed back on it. Any fourth dimension they included a provision in the term sail that seemed i-sided, even if information technology would not have been a plush concession, we redrafted it to be symmetrical. And throughout the negotiation, we made sure they understood that although our house was much smaller, nosotros were equals in this negotiation considering of the tremendous value we offered. While I am not an advocate of nitpicking on minor issues, in this case nosotros did and so intentionally to help set up the right frame.

Negotiators can shape the frame in countless other ways and on many other dimensions. At the very least, yous desire to ensure that the psychological lens that takes hold respects the value you lot bring to the table.

In The Art Of State of war, Sun Tzu posits that every war is won or lost before it even begins. There is truth to this sentiment in most strategic interactions. While it would exist unwise for negotiators to minimize the importance of carefully managing the substance of a deal, they should make every try to avoid the mistakes that can occur before anyone has even formulated an offer. By paying attention to the 4 factors discussed here, you lot increase your chances of creating more-productive interactions and achieving more-profitable outcomes.

A version of this commodity appeared in the December 2015 issue (pp.66–72) of Harvard Business Review.

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Source: https://hbr.org/2015/12/control-the-negotiation-before-it-begins

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