At K&R, we urge our clients to utilize Six Principles of Negotiation™. One of the most important principles is: “Concessions Easily Given Appear of Little Value.”™ This is why we constantly advocate making principled concessions and this is also why we recommend that, prior to the start of the negotiation, you plan for future potential concessions. So how exactly is value expressed to the other party in a negotiation? Here are five important ways of expressing value:
Money. Very little explanation is necessary when the value is expressed as currency. For example, a statement such as “You will receive $2,500” is a simple money-based value statement. Money is a universally accepted denominator so its value is instantly understood by both parties to the negotiation.
Property. Whether you are talking about hard goods such as machinery and real estate, or soft goods such as trademarks and intellectual property (IP), the value of possessing property is generally understood. However, you will need to include a description of the property, and whenever possible, express its value in monetary terms. “You will receive the gadget” and “You will receive the gadget that has a $100 retail price and can perform $300 worth of work for you” are both property-based value statements but the second statement benefits from more specificity.
Actions. Of course we understand that performing an action usually has some value, but you will need to supply a clear description of the action, as well as its significance. Just as with property, the value of the action may also be expressed in monetary terms (e.g. cost avoidance). You might say “I will do this, so you will not have to pay someone else to do it.” The benefits are not always tangible; and action-based value can also be expressed in terms of intangible benefits.
Rights. The right to do something, or the rights conveyed by the agreement have value, but the rights may not be recognized as having value unless identified. It is important that the boundaries and significance of the rights be clearly understood and documented. Examples of rights-based value statements include:
- “You may use the gadget without restrictions.”
- “You have the right to cancel this agreement at any time without penalty,”
- “You may order more of this product at the same price for the remainder of this calendar year.”
There can be legal implications in rights-based value statements (e.g. “without restrictions”) so your organization’s legal counsel should be consulted.
Risks. Naturally, value articulated in terms of risk is best understood by those who happen to be risk averse. “If you are not satisfied, you will only owe us for our out-of-pocket expenses,” “We will indemnify you in case of litigation regarding our product,” and “If the project fails, we will pay the expenses” are examples of risk-based value statements. Keep in mind that there can be serious legal implications in risk-based value statements. Therefore, just as with rights-based value statements, it is a good idea to involve your legal counsel.