Business & Corporate Articles


Preparing for Negotiation: A Novel Concept?
By Linda Barkacs and Craig Barkacs

Most people succeed or fail in a negotiation based on how well-prepared they are (or are not!). We adhere to the 80/20 rule – 80% of negotiation is preparation and 20% is the actual negotiation with the other party. The reality is that most people are woefully unprepared when they enter a negotiation. Many business executives describe their negotiations as win-win, only to discover they have left thousands of dollars on the table. Research indicates that fewer than 4% of managers reach win-win outcomes and the incidence of outright lose-lose outcomes is 20%. Even when negotiators are in perfect agreement, they fail to realize it half the time.1

Our experience in both classrooms and corporations is the same – it is the rare individual who truly prepares as thoroughly as they should. You may ask how that can be. Are there not great deals being negotiated every day? The answer is yes, however, a great outcome may result from luck, a great alternative (thus a lot of leverage and power), good timing, ability to react on your feet, or a number of other possibilities. The reality in the business world is that the ability to get a deal that is barely above mediocre often passes for success. People are so eager to finish the deal and move to the next project that they do not take the time to analyze what they have done to see if a better outcome would have been possible. This phenomenon is known as satisficing, which is the poor cousin to optimizing. We get some of what we want, as does the other party, and everyone labels it a win. This may occur due to lack of creativity, poor preparation, and even laziness.  So how can we avoid satisficing? How can we optimize the outcomes of our deals?

The SOS Method

Based on years of research, university teaching, and training in some of America’s most prominent corporations, we have developed a method of preparation we call SOS. By using this approach, you can avoid making common mistakes, therefore improving your outcomes substantially. Moreover, with time and practice, you can develop the skills of preparation so that they become second nature. Changing behavior is not easy. For example, we all know that if we want to feel better and stay fit, there are two things we can do that greatly increase the likelihood of success (and they both start with an “e”) – eat right and exercise. While that is no secret, we all do things these daily, right? Of course not! This is the common human failure expressed as the “knowing/doing” distinction. We “know” what we should be doing but we fail to transform our knowledge into “doing.” Our many years of teaching students and training business executives has established that when people do practice the SOS method until it becomes second nature, the results are spectacular. So let’s get started.

SOS consists of three steps: (1) Self-assessment; (2) Other party assessment; and (3) Situation assessment. Most people have no problem in engaging in some modest amount of self-assessment. They ask themselves “what do I want from this deal?” Unfortunately, most people begin and end here. So how should you engage in self-assessment?

Self-Assessment

The initial step of self-assessment is the hardest part for most negotiators. As emphasized by Harvard professors Roger Fisher, William Ury, and Bruce Patton in “Getting to Yes,” you must first determine your BATNA2 (Best Alternative to a Negotiated Agreement). Begin by listing all the possible alternatives to getting a deal in your upcoming negotiation. These are your “ATNAs” (Alternatives To a Negotiated Agreement). Then pick the “best” alternative out of the bunch – this is your BATNA. Experience and research indicate that most people are hesitant to recognize their true BATNA, particularly if the best alternative to getting an agreement is less than optimal.

Once you know what you will do if you do not get a deal (i.e., your BATNA), you should then determine your reservation point3 (some research also refers to this as a resistance point). A reservation point is both your “bottom line” and a quantification of your BATNA. It may be the same as your BATNA, but it does not have to be. Why? Your reservation point is subjective – it is based on your preferences and priorities, whereas a BATNA is objective – it is a real-word credible alternative that is readily doable.

Once your reservation point has been determined, you need to set your target (some of the literature refers to this as your aspiration point). Your target is your goal. If everything in the negotiation goes your way, what is your best objectively possible deal? It is surprising how many negotiators fail to determine a goal and simply “wing it” when negotiating. A target is helpful in several ways. First, you should focus on your target as it lets you know where to begin the negotiation. Second, it helps you determine the amount of your first offer (known as an “anchor”). Research indicates that negotiators on both sides of the deal feel better about the deal when each sides makes some concessions. Third, a target allows you to make sure your anchor is high enough to build in room for concessions.

Other Party Assessment

Ask yourself who the other party is. Do you negotiate the same with your spouse as you do with a used car salesman? If so, your life is probably pretty miserable! We negotiate differently with family and friends (often worse because we value the relationship over money). We negotiate differently when the deal is one time only (rare!) than we do when we need to preserve the relationship (clients and customers). One word of caution here -- even if you think the deal is one-time only, all of us, via ever-increasing technological advances, live in a very connected world these days. Inevitably there are fewer degrees of separation then ever – just think of the common friends, business colleagues, professional networks and more that are linked via social media. Proceed cautiously.

You are now ready to begin a more detailed other-party assessment. First, what is the other party’s BATNA? In other words, if they do not get a deal with you, what will they do? Most negotiators are so focused on their own interests and needs that they fail to even consider what the other party will do if there is no deal. In fact, the other party may need the deal you are discussing as much, or even more, than you do. So how do you discover the other party’s likely BATNA? The answer is . . . research. We live in a world with an astounding amount of publically-available information. Get on the internet and check out company websites and blogs. Look at consumer information websites. Telephone or meet with people in your networks (professional and friendship) and ask questions. Check out professional organizations. It is amazing what you will discover. In the best case scenario, you may learn that the other party really needs what you have to offer, giving you confidence as you enter the negotiation. In the worst case scenario (e.g., everyone has what you are offering), you can go in prepared to better differentiate what you have to offer and establish why the other party should deal with you rather than someone else. Either way, you are fully prepared. No surprises equals a much better outcome.

Situation Assessment

Thorough analysis of the context in which the negotiation is taking place is critical. Is this negotiation private or public? Will a deal made with this party set a precedent for future deals with this or other parties? Is the negotiation confidential? These factors will and should influence how you approach the negotiation.

In every negotiation, both reputation and relationship come into play. Negotiation is a fabulous tool for promoting and preserving relationships. (As former trial lawyers, the co-authors of this article can personally attest to the value of negotiation over litigation.) Moreover, negotiation allows for more creative outcomes – possibilities that simply cannot be ordered through the process of litigation. Suppose a party harmed in the workplace wants an apology.  A judge cannot order one party to apologize to another (or at least not in a meaningful way). A negotiation can lead to a sincere and meaningful apology as part of the agreement if all the parties are willing – in fact, in some cases an apology may be required in order to make a negotiated settlement possible.

Reputation is also critical in a negotiation. Given most negotiations are not of the one-time only variety, the ability to get an optimal deal may very well depend on whether the other party finds you trustworthy. Every day we build (or harm) our reputation through our words and actions. Your best opportunity for optimizing – not simply satisficing - comes from being someone that others know they can trust.

Conclusion

Don’t go into your next negotiation unprepared. Based on the research and our years of experience, we believe that those who prepare well and follow the SOS Method greatly increase their likelihood of success.

-- Linda Barkacs and Craig Barkacs of The Barkacs Group were featured speakers at "Negotiation Skills for Lawyers," a program presented by the SDCBA Business & Corporate Law Section on May 13, 2015.


1 The Mind and Heart of the Negotiator (6th ed.), L. Thompson (2014), Upper Saddle River, NJ: Prentice Hall. Author and researcher Leigh Thompson is the J. Jay Gerber Professor of Dispute Resolution & Organizations at the Kellogg School of Management.

2 The concept of BATNA was developed by Harvard and discussed in the well-known and highly respected  Getting to Yes (2nd ed.), Fisher, Roger and Ury, William (1991).

3 The Mind and Heart of the Negotiator

 

This article is for information purposes and does not contain or convey legal advice. The information herein should not be relied upon in regard to any particular facts or circumstances without first consulting with a lawyer.