Misusing Leverage: The High Cost of a Short-Term Negotiation “Win”

/in , , /by

Do repeat business assumptions count in your business plan? If so, the way you conduct your negotiations takes on much greater importance.

Some view negotiation as a series of devious games and ego contests conducted to gain advantage by keeping the other side continuously off balance, intimidated or flustered. We find this approach to negotiation quite short-sighted if your “win” leaves the other side angry, resentful and questioning your credibility. Who wants to do more business with someone who makes them feel as if they have been bullied or tricked? The logical response will be to aggressively seek an alternative the next time around, whether you are a buyer, seller or “business partner.” That doesn’t sound like much of a win to us. Read more

The Best Way to Manage Mistakes at the Business Negotiation Table

/in /by

Imagine that you are in a sales negotiation. As part of your services, you will create a solution for an inventory problem that your customer is having. In the middle of the negotiation, a member of your team tells you that this solution can only be implemented manually, which will drive up the cost $250,000. What do you do?

  1. Omit the solution in the next agreement draft and hope the other side forgets the whole thing.
  2. Tell the other side that you’ve made a mistake, but you will absorb the cost of the additional $250,000 since it was your mistake.
  3. Immediately notify the other side, apologize for this mistake, and tell them that if the solution is still of value to them, $250,000 will have to be added to the price.
  4. Say nothing and eat the additional $250,000.
  5. Keep silent. Add the $250,000 to the price and address the issue at the very end, and only if the customer brings it up.

Read more

Negotiator Training: Principled Concessions

/in /by

 

A critical aspect of successful negotiation is the art of principled concessions – the ability to induce changes in position from the other side using a persuasive, value-based rationale. Not only does this preserve credibility, but the other side feels good about exchanges made in this manner. We cover this principle in some depth during our negotiation seminars, walking attendees through the step-by-step practice of principled concessions.

But what exactly is a principled concession, as opposed to an unprincipled one?

The definition of a principled concession is: “A change in an offer made with a credible business rationale for that change.”

Read more

Negotiation Examples: Building a Value Case

/in , , /by

 

All negotiators should build a value case for the positions they would like the other side to accept.

As a buyer, you would like the seller to understand the value of doing business with you because, for example, you are a flagship account and a reliable customer who pays on time.

As a seller, if you don’t build a value case for the product or service you’re selling, the buyer may not see that value. Even if they see the value, they may see it very differently than you do or they may not acknowledge it, since acknowledgement of value gives you leverage.

In addition, failing to articulate value may affect your credibility. The buyer may feel you are not listening to what matters to them – and, as a result, you lose credibility. Alternatively, in acknowledging the value impact to a customer, you gain credibility by showing them you understand what they consider important.

Articulation of value requires you to know something about the other side. The more you know, the better – especially in a negotiation. Knowledge is power. You have to know the gaps the customer has to fill – and then fill them. When you use value properly, you’re usually successful. Read more

The Dynamics of Credibility and Leverage

/in , , /by

This is the third in a series of blog posts The Principles of International Negotiation: Finding Universal Value in a Complex World.

“You lied to us.”

That was what we heard from across the table on the opening of our fifth consecutive negotiation meeting during a Japanese engagement. The actual issue was minor, having only to do with the meeting’s start time. But tensions were high. Days one through four had started at eight a.m., usually stretching until two or three a.m. the following morning. The man making the accusation was a key Japanese negotiator from the customer’s procurement organization. He had been difficult, not because he was hard to work with, but because he was detail-oriented – and often right. In the preceding days he had used good logic and persuasion to push costs of the deal onto our side. Read more

Negotiation Leverage to Win Deals

/in , /by

negotiation leverage
To Keep Leverage and Win Deals, Know the "Physics": The K&R Leverage Slope™

The concept of leverage originally comes from physics, referring to levers in a pulley system; the more you have, the more easily you can move objects of heavier mass. In negotiation, it’s the ability to move people closer to your way of thinking – your value arguments are your levers. The more credible value arguments you have, the more easily you can move people closer to your point of view.




Watch as Mladen Kresic discusses negotiation leverage and uniqueness in this short video.

What exactly is leverage? At K&R Negotiations, we’ve developed the concept of the Leverage Slope, defining the relationship between the buyer – who wants an optimal solution at the lowest possible price – and the seller, whose goal is the best price for their product. Read more

It’s Not What You Know…

/in /by

An old adage, frequently re-shaped in various ways, says, “It’s not what you know, it’s who you know.” In three steps, we’re going to link this to negotiations, to your credibility when negotiating, and to the news.

Step 1: One of K&R’s key negotiation tools is the Leverage Cycle™. This cycle starts with patience and listening, and proceeds through information gathering, the use of that information in context and establishing personal credibility as a required step in negotiations. The downside if you skip these steps is that your client won’t pay any attention to you, and any argument you make as to the value of what you are offering is likely to be discarded. Read more

M.O.R.E. – Negotiations and the Australian & International Pilots Association

/in , , , /by

An August article in Aviation Online Magazine caught our eye with this headline – “Qantas Airline Pilots Negotiate Job Security Not Pay Increase”.  It concerns bargaining between the Australian and International Pilots Association (AIPA) and Australia’s largest airline.  Included in the article is a quote from the AIPA negotiations spokesperson that states that the pilots’ leading issues are “job protection, career progression, and off-shoring of jobs”.  Not money.

First, it is an interesting matter that the AIPA negotiator took these issues public.  That can work for them or against them.  On one hand, the list makes clear what the AIPA wants, which is a plus.  On the other hand, this list implicitly makes some concessions.  Read more

Leverage: R.I.M. and the (various) Governments

/in /by

A scan of most worldwide, business-oriented news sources will quickly find a set of stories about various national governments and Research in Motion (R.I.M.).  The government list will include (at least) Saudi Arabia, United Arab Emirates, India, and Dubai, with references to the United States and China.  The core issue is this: Will R.I.M., which encrypts user email communications pretty robustly (to the point where R.I.M. says that even they cannot read users’ emails), give in to requests from the various governments to have access to said emails unencrypted, or will they risk having government-directed shutdowns of service?

As negotiators, our interest is not in the final outcome, but in the analysis of the leverage at play, and how it changes with time.  Think of leverage in negotiations as the power to move the other side closer to your position. Read more

Time Stamps in Negotiations

/in , , /by

Negotiation and the News is brought to you this week from Cape Town South Africa, where rail travel has ceased. Google (or Bing) “South Africa Rail Strike”, and check out the news. In general two groups of rail employees have struck. First those transporting goods, followed by those transporting passengers. The normal management / union disagreements apply – a mismatch in positions and demands for wages and benefits. Your Negotiation and the News correspondent, being in Cape Town ready to travel (by rail) to Johannesburg, reported live on May 15th. The strike is a classic example of negotiation “time stamps” in action. Read more