Women often shy away from negotiations for fear of being perceived as aggressive or of losing the offer. However, we tend to forget that the people we negotiate with are, sometimes, merely doing what they are hired to do – secure a deal at the best price possible! Indeed, at other times, the negotiator may be just be sticking to a strict budget or testing the waters.
For example, I spoke to a Ventures Capitalist who stated that he could not trust an entrepreneur who never attempts negotiating an offer because such a person would most likely attract a lot of “lemons”, i.e. deals that no one wants. As such, when a potential business partner or employer offers a seemingly ridiculous price, do not take it to heart. Instead, Pause. Breathe. Negotiate!
The goal of every negotiation process should be to negotiate effectively. Effective negotiation involves these key elements:
Before commencing on negotiating a price, it is imperative that you conduct a thorough research. For example, if you have been offered a new job, you should embark on a prevailing salary research on the said job role. This information would come in handy and serve as a backdrop during your salary negotiations.
On the other hand, if you are negotiating with a potential business partner, your pre-negotiation research might focus on determining your potential business partner’s interest and positions in relation to yours. This would greatly help create value during negotiation.
Understanding your best alternative to any negotiation
This is a great tool for preventing an undesirable outcome to a negotiation and guaranteeing financial success. For example, have you ever had those moments when just moments after agreeing to something, you blurt out, “why did I agree to that?” or “what was I thinking?”
While this may be okay when negotiating with your siblings about who should do the dishes, this (hopefully) should never be the case when negotiating with a new employer for that dream job or with that new business partner. To this end, it is critical that before any negotiation, you determine your options (i.e. substitutes to your ideal negotiation outcome).
To begin the process, first, determine your minimum threshold for the object of negotiation. For instance, if you are preparing to negotiate a new job offer and you are not willing to accept a salary below the current one, then your current salary is your minimum threshold.
Secondly, on identifying your minimum threshold, determine your alternatives in the event you are unable to negotiate this with the new employer.
Write these alternatives down in an order of preference. Your best option on the list should be one you’ll be happy with.
It is also critical that you show some flexibility during negotiation by making a sincere effort to understand the other party’s points. This is can be achieved through an active listening habit. Active Listening ≠Hearing.
John M. Grohol states that, “active listening is all about building rapport, understanding, and trust.” Active listening requires that you understand and make a genuine effort to understand the other party’s point of views. It requires:
(a) Rephrasing what you believe you heard from the other party:
This involves using phrases such as “to make sure I understand, you would like…”, “I understand you feel…” and “to make sure I capture your concern…”
(b) Seeking clarity:
During negotiations, it is also imperative that you seek clarity on fuzzy points. For example, if the other party has drawn a conclusion and you are unable to determine the logical steps to such a conclusion, seek to understand the underlying assumption.
Examples of helpful phrases include: “You concluded XYZ, please can you explain the rationale?”, “what factors did you take into consideration in reaching that decision? etc.
(c) Acknowledge the other party’s effort:
It is good practice to acknowledge the other party’s sentiments during negotiations. This can be captured by using phrases such as “I understand you feel…”, “it appears that you are…”
By implementing the different elements of active listening, you will capture the other party’s attention and help break down resistance (if any).
Growing the pie (a.k.a. problem solving or value creation)
Indeed, despite showing off superb active listening abilities, negotiations could still end up in stalemates. Even with a lot of patience, this is usually the time where people throw in the towel. But wait, not so fast! Do not give up yet, not without injecting a good dose of creativity into the process.
So what exactly does injecting a good dose of creativity mean? This means looking for creative ways to make an unattractive deal attractive. The key here is to determine other factors outside your negotiation points like factors that the other party may be willing to consider (and vice versa).
For example, assuming you own a sports drink company and currently seeking investors. On evaluation, your financial statements reveal the need to raise $60,000 and based on valuations, $60,000 equates to a 5% equity stake. Of course, you’d be confident to offer a lower equity stake for $60,000 as the minimum threshold for that percentage of the equity stake.
If during negotiations, your preferred potential investor, who owns a sports club, offers $60,000 for an 8% equity stake. This counteroffer falls below what you’d expect but you would really love to have this investor onboard.
Rather than end negotiations immediately, you could consider asking if she may also be willing to make your sports drink one of the choice drinks at the sport clubs or introduce you to other sports club owners who might be interested in serving your drink in their sports clubs.
This could create publicity and boost sales for your sports drink. Some good phrases for these starting conversations may include “what if…”, “suppose we were to…”
Once you have successfully completed negotiations, it is imperative that you put your agreement in writing. Writing an agreement is an essential step in ensuring that all parties are on the same page (indeed, this does not always work and that is why litigators are still in business!).
In summary, successful negotiations require careful preparation and strategy. Nonetheless, it is worth the time and effort.
In the next segment, we’ll discuss what not to do during negotiations. If you would like insights on a particular topic, write to us! We are listening.