Where does your power in negotiation lie? Walking away may not be the best outcome
Friday, September 22, 2017/
Ensuring the best possible outcome during a negotiation may not come easily, even at the best of times, however there are tactics that entrepreneurs can employ to ensure they give themselves every chance of doing so.
While some may view walking away from a negotiation as the ultimate display of power, and potentially a means of gaining leverage, there may be other methods better structured to gaining what you want.
Writing for the Harvard Business Review, attorney and consultant Jay A. Hewlin explains that relative power in a negotiation is derived from a “capacity to use resources to influence another’s circumstances”.
“Professional negotiators and researchers alike hail the BATNA (Best Alternative to a Negotiated Agreement, or ‘walk away’ outcome) as a negotiator’s primary source of relative power,” Hewlin writes.
“But relying on even the best of alternatives as leverage can be tricky business.”
Hewlin stresses the importance of collaboration in negotiations, recommending a number of steps that negotiators can take in working towards an agreeable outcome.
Mutual dependence deserves focus
Ascertaining how much a counterparty in a negotiation needs what you are offering may be a typical starting point, however negotiators may do well to assess their relationship at a deeper level.
Hewlin notes that need is central to relative power, however, power can also derive from mutual dependence.
“The connection between mutual dependence and power is direct, and it exists in every negotiation,” he writes.
“Focusing on mutual dependence draws your attention toward inquiry and exploration, advancing the conversation from: ‘How much can I get out of this deal above my best alternative?’, to, ‘In how many ways can I demonstrate my company’s value to this person based on their need(s)?’”
Different perspectives of power — don’t be driven by feelings
Business operators should avoid allowing feelings of relative power to affect negotiations.
Hewlin notes that having such a mentality can lead to opportunistic behaviour, leaving a counterparty feeling as if their interests are not being considered.
“Power in a negotiation is NOT based on your subjective and limited view of what you have to offer, but rather the objective reality of what you have to offer in relation to the need of the other party,” he writes. “Feelings of power are irrelevant.”
Instead, mutual dependence may again be a viable way forward, says Hewlin.
For instance, when in a relatively powerless position, what can you offer a counterparty that will deliver value for both sides?
Learning will provide greater insight
Learning can provide the inside running when it comes to negotiations, providing potentially valuable information to work with.
Hewlin recommends learning as much as possible about the person and/or entity you are dealing with, and ascertaining as much as possible about their circumstances.
“You should structure your early questions as generalities,” he writes.
“You don’t want to come across too aggressively, especially with negotiators who are less inclined to answer too many questions. As the negotiation proceeds, you can transition to more specific questions.
“Remember, we know the other party needs your product or service, but why? How can you satisfy this party’s need and make him more financially or otherwise dependent upon you or your product?”