Whether it’s News International buying the rest of BskyB, British Airways negotiating with Unite, or growing businesses striving to negotiate funding deals with reluctant lenders, deal-making and negotiations are rarely out of the news.
Yet negotiation skills are seldom taught or practised. This can mean people either lack confidence when they negotiate, or act on gut instinct, not really knowing why it has worked when a deal goes well, or what went wrong when it doesn’t. This can leave you and your business at risk of being left behind. Effective negotiation, in fact, requires the development of considerable skill and practice.
Most negotiations follow a set pattern, with several distinct stages. If you know what stage you are at and how to handle it, you’ll have an advantage over the other side.
Good negotiators take the time to map out their approach in advance. Who is on the other side? What do we know about them? What’s our experience of dealing with them? They also consider what their ‘megawin’ position is (their ideal outcome, which will comprise their opening bid), together with their ‘bottom line’ position (the point at which they will walk away). The distance between these two positions gives them the space in which they can negotiate. Team negotiations require even more preparation than one-to-one deals, since all members of the team need to be in total agreement.
I know one major hardware company that, in its negotiations with a search engine company, created a fake negotiating room and employed two people full time to pretend to
be their opponents for six months – all in the name of preparing effectively. Done well, good preparation boosts your side’s confidence and gives you a winning attitude.
What’s going to be the atmosphere in which the negotiation takes place? Effective negotiators consider whether they want the climate to be ‘warm’ (with a friendly atmosphere), ‘hostile’ (very pressurised and fast-moving), ‘cool’ (very objective and data-driven) or ‘wacky’ (fun and off-the-wall). Different climates suit different kinds of negotiation. One of the most successful record executives of all time always used to negotiate wearing an array of silly hats. This was not done just for fun. This wacky climate was very disarming to his opponents.
Different climates also suit different kinds of negotiator. I’ve found, for example, that acting for the Royal Opera House when negotiating with singers’ agents requires a very different atmosphere than acting for MySpace in a discussion with a music company. So make a conscious choice about the atmosphere you want, and watch out for clashing climates that create a storm. If that happens, suggest a break so you can re-set the climate appropriately.
Wants and needs
Good negotiators know they can’t expect to engineer a win/win outcome if exploring wants and needs is skipped in the rush to get to the haggle. It’s important each party understands what the other side wants. Wants are organisational requirements like price, quantity and delivery dates. It’s even more important to understand what the other side needs. These are the underlying emotional requirements each side has from the deal. They underpin the whole negotiation, and yet often go unspoken, so are not easy to spot without a trained eye. Does the other side have a security or reassurance need? Are they desperate? Do they need to achieve something unique as a result of the deal? Do they need respect or esteem? Great negotiators are adept at working this out and using it positively.
Once you know both sides’ needs, you can come up with coinage to meet them – a concession that has a low value to the giver, but a high value to the receiver, as it meets one of their personal needs. Coinage is useful when in the bargaining phase of the negotiation. Indeed, it’s the currency that gets deals done. When Christopher Wren was building St Paul’s cathedral, the Mayor of London feared the dome would fall down unless supported by extra pillars. Wren needed the Mayor’s approval and recognised this reassurance need. He agreed to build two extra pillars and got the go-ahead. It was only later that it was noticed these pillars didn’t reach the top of the dome – they weren’t supporting anything. So Wren used coinage to get what he wanted.
If the parties can get through these stages and bargain their way to a potential resolution, they will arrive at the final stage of any negotiation: closure. Skilled negotiators know how fluid this moment is. It must be bottled immediately before either party changes its mind, or key factors change – company structure, economic situation or personnel. When Robbie Williams left Take That, I represented BMG, the record company he sued, in the following settlement negotiations. The litigation was resolved 40 minutes before proceedings in court were due to start. Had we waited longer than that, I doubt the deal would have been done.
As well as understanding the negotiating process, two other attributes are key to a successful negotiator. First, you need to appreciate bargaining power. When they asked the sales reps of Coca-Cola and the buyers of Sainsbury’s who held the aces in the negotiation to get Coke stocked by the supermarket chain, the Coke reps scored it 4-0 to Sainsbury’s and the buyers scored it 4-0 to Coke. Untrained negotiators often underestimate the bargaining power they have on their side by focusing on the market power of their opponents. Yet there are many other sources of bargaining power, such as expertise, information, weight of numbers and access to influential networks. Marshal your bargaining power and you’ll feel positive about any negotiation.
During negotiations, different behaviours will suit different stages and different opponents. Choosing the right behaviour for the right occasion is key. Sometimes ‘push’ behaviour is called for, focusing on your own agenda. This is when it’s important to state your expectations, use incentives and pressures, and make proposals backed up by sound reasons. It’s particularly effective at the bidding or bargaining phase. It’s also useful if you are dealing with people who are piling on the negotiation pressure, by using threats, aggression, deadlines, or playing ‘good cop/bad cop’. These people need to be pushed back by making it clear you know what they are up to. Sometimes ‘pull’ behaviour is required, focusing on the needs of the other side, listening, exploring and looking for common ground. This is useful in the early climate-setting and exploring stages.
However, it’s not just a question of matching your behaviour to the occasion, but also about modelling that behaviour effectively. Research shows that 93% of the effect of what we say consists not of the words we use, but the way we use our voice and body. Effective negotiators know the importance of managing process and behaviour to give themselves a winning attitude. Such negotiators are not born, they are made by conscious learning, coaching and developing their skills. They get the best deals for their companies, and are the people you’re most likely to be reading about in future editions of Growing Business
Clive Rich is an entertainment and digital media lawyer, and one of the UK’s foremost professional deal-makers.