Secrets of Power Negotiating
Roger Dawson, Founder, Roger Dawson's Power Negotiating Institute
Whenever you deal with another person, you use exactly the same techniques that international negotiators use to reach agreements on world problems.
Learning to improve your negotiating skills is the highest and best use of your time. Consider this: if you make $200,000 a year, that’s about $100 per hour. When you’re negotiating the purchase or sale of something, you’re not making $100 an hour – you’re making $100 a minute, maybe $100 a second. You can’t make money faster than when you’re negotiating.
Negotiating isn't just for getting hostages released and resolving world crises – you’re negotiating all the time. In fact, you’re using exactly the same techniques that international negotiators use to reach agreement on world problems. State Department negotiators would say that the best way to secure a hostage’s release is to devalue the importance of the bargaining chip. You'd say that you should never let the other person know that you‘re eager to buy. You would like to buy but unless the price is right, you can easily do without or buy from someone else.
When do you negotiate?
- Everyday with family members, employees, and business partners
- Whenever you buy or sell something
- Handling customer complaints
- Whenever you borrow money from a bank
- And any other time you need to reach an agreement with another person
International negotiators would say that if you reach an impasse in negotiations, such as the one side refusing to come to a peace conference, sidestep the major issue of giving up land. Resolve smaller issues like the location of the meeting or the makeup of the delegations to build momentum. Let’s look at some other negotiating gambits that you can use.
Never Jump at the First Offer
Be careful you're not saying yes too quickly because this automatically triggers two thoughts in the other person’s mind: 1) we could have done better (and next time we will); and 2) something must be wrong here. If they are willing to go with a proposal right away, we’d better check them out further before we go ahead.
There's a real danger to think the negotiation is going to be much tougher than it really turns out. You may be negotiating with a contractor on the price of your office construction. You feel that they are the only ones that can do the job right, but they’re so busy you think you’ll be lucky to get them to take on your project. They may bid the job at $16,000. Just to see what will happen, you tell them that you can only afford $12,000, thinking that you’ll be lucky if they come back at $15,000. When they come back at $14,000, it surprises and pleases you so much that you make the mistake of saying yes too quickly.
So always go through the process of negotiating, even if the first offer or counter-offer is perfectly acceptable because you always want the other side to feel that they won in the negotiations. In fact, I’d almost give you that as a definition of a good negotiator. Two people might be negotiating a purchase with the same supplier. Both come away with the same dollar figure, but the Power Negotiator comes away with the supplier feeling they won and the poor negotiator comes away with the supplier feeling they lost.
You can get things later in the negotiations that you can't get earlier. You may be negotiating a raise in your retainer fees with a client. Besides more money, you’re asking them to approve additional travel expenses for your team. They say, “You know how tight things are right now. You’ll have to live with your current budget for another year.” Don’t panic. You can get people to do things later in the negotiation that you can’t get them to do earlier. After you’ve reached agreement on your fee increase, give it another shot. Say, “Could we take another look at the travel expenses for our team? It will only add $550 a month to the budget, and it’s really important that we have the flexibility to travel as needed to accomplish the task.” You have a good chance of the client saying, “Well all right, if you think it's that important, sure, let’s go ahead.” Always go back at the end and make a second effort on something that you couldn't get them to go along with earlier.
However, look out for people nibbling on you because there's a point in the negotiations when you're very vulnerable, and that point is when you think the negotiations are all over. You may be selling used equipment from your factory, and you’ve finally found the buyer. You're feeling good that the negotiation went so well, and you got such a good price. The buyer is sitting there writing out the check, and at the last minute looks up and says, “That does include your supply of plastic materials, doesn’t it?” You're at your most vulnerable point in the negotiation for two reasons. First, you're feeling good, because you just made a sale. When you feel good you tend to give things away that you otherwise wouldn't. Secondly you're thinking, "Oh no, I thought we'd resolved everything. I don't want to have to go back to the start of this thing, renegotiate it, and stand a chance of having them back out. Maybe I'm better off just to give in on this point."
Look out for people nibbling on you. The counter gambit to the nibble, when they do it to you, is gently to make the other person feel cheap. With a big grin in your voice, you say, "Oh come on! You got a super buy on the equipment. Don’t make me give you the plastics along with it. Fair enough?"
It's critical that you learn to react visually, whenever the other side makes a proposal. Assume they don't think you're going to agree to their proposal, and that they’re only throwing it out on the negotiating table to see what your reaction will be.
When the salesman asks you to give him a deposit with the order, he may not think for a moment that you'll go along with that. It's just something he threw out on the negotiating table to see what your reaction would be. And if you don't appear too shocked or surprised, suddenly he’s thinking, "Well, that didn't seem to shock them too much, maybe I will get them to give me a deposit. I’m going to hang in and be a tough negotiator."
When a complaining customer asks you to give them all their money back, they may not think for a moment that you will do that. It's just something they're throwing out to see what your reaction will be. If it doesn’t shock you too much, they immediately start thinking they have a chance of getting you to go with it.
So prepare to flinch at the other side's proposal. Slap your cheek, gasp, and say, "You want us to do what?" And you don’t have to be negotiating in person to make this work – phone flinches can be very effective as well.
It’s fascinating to watch a negotiation when you know what both sides are thinking. When I do all day seminars, I break the audience into teams, and we actually do some negotiating together. I’ll watch one side make a proposal to the other side, which they think is absolutely outrageous. They think they’re going to get laughed out of the room the minute they present it. But to their surprise, the other side doesn’t seem too shocked. Suddenly the negotiation changes. What a moment ago was an outrageous proposal to these people, now becomes do-able. Now they’re thinking, “Well, maybe we do stand a chance of getting this. Let’s hang in, be tough negotiators, and see what happens.”
When to have Someone Else Negotiate for You
Don’t get emotionally involved in the negotiation. If you want it too much and don’t want to risk losing the opportunity, you are vulnerable. That’s why actors and writers hire an agent to represent them in contract talks. If I really, really want to book a particular speaking opportunity, I’m better off to have my agent – International Speakers Bureau in Dallas – do the negotiating for me.
Whenever the other side asks you for a small concession, get in the habit of asking for something in return. Let’s say that a customer has special ordered some equipment, and you’ve just found out there is a delay at the factory. Just as you’re about to call the customer and give them the bad news, the phone rings and it’s the customer calling to see if you could delay the shipment. You have a tendency to say, “Sure that would work out fine. No problem.” Don’t do that! Always ask for something in return. Say, “Well I don’t know. I’ll check with my people and see, but let me ask you this: ‘If we can do that for you, what can you do for me?’”
Three things might happen: 1) You might just get something, such as them giving you an additional deposit. 2) You've now elevated the value of the concession. Why just give something away? You may need it for another trade off later. Later you can say, "You know how much trouble we had to go through over that delayed delivery? We did that for you, so don't hassle me over the final payment check, fair enough?" 3) It stops the grinding away process. This is the most important reason and why you should always do this. If they know that every time they ask you for something, you'll ask for something in return, it stops them constantly coming back for more.
Position for Easy Acceptance
If you're dealing with someone who prides themselves on their ability to negotiate, there's a danger the negotiations will deadlock at the last moment. The problem is that the ego of the other person as a negotiator got in the way. You're talking to a contractor about a change to your building plans, and you’re $1,000 apart on the price. You can't believe that it's all falling apart when you're within $1,000. It doesn't make sense. What's gone wrong is that the ego of the other person, as a negotiator, is getting in the way. The contractor’s representative may have said to his boss, "You just watch me negotiate with this person. I won't have any trouble getting them up in price." Now he’s not doing as well as he hoped he would, and he simply doesn't want to feel that he lost to you as a negotiator.
So you have to make him feel good about giving into you. Do it with a small concession made just at the last moment. The size of the concession doesn't matter, because it can be ridiculously small and still be effective. It's the timing that's critical.
So you say, "Look, we can't budge on the price, but go along with that and I'll guarantee that you get paid on the day you complete the work." Perhaps you were planning to do that anyway, but now you've been courteous enough to position him to feel good about giving in to you. Now he can say, "Well, all right, if you'll do that for me, we'll go along with the price." And he doesn't feel he lost to you, he feels he traded something off.
Learning to improve your negotiating skills is the highest and best use of your time. You can't make money faster than you can when you're negotiating well. When you're negotiating to buy or sell something, you could be making thousands of dollars per minute.
One Minute Negotiating Primer
- Devalue the importance of the bargaining chip - don't let them know how important it is to you.
- If you reach an impasse, set aside the key issue, and create momentum by reaching agreement on little points.
- Never jump at the first offer, however good it looks.
- At the end, nibble for something extra, or something they wouldn't agree to earlier. However, look out for people nibbling on you.
- You're most vulnerable when you think the negotiations are all over.
- Flinch at the other side's proposal. They may not think for a moment that you'll agree to it, and flinching will get you a concession.
- When asked for a small concession, ask for something in return - it stops the grinding away process.
- Position the other side for easy acceptance with a small concession made just at the last moment.
Editor’s Note: This article is excerpted in part from Roger Dawson’s Secrets of Power Negotiating, published by Career Press.
© 2006 Roger Dawson. All rights reserved.