The Seven Steps To Become A World Class Negotiator
“Sow the seeds of understanding and reap the harvest of knowledge and opportunity” - Richard Dodd
So you want to be a world class negotiator. You want to both create and claim value with maximum effectiveness. Who wouldn’t?
How do you get there? Where do you start?
The previous article in the Zen Series on Selling as a Trusted Advisor, titled “Business Negotiation – The Pyramid of Power,” explored the correlation between account positioning and negotiating power. The four levels defined in the Pyramid were vendor, problem solver, business resource and trusted advisor. Vendors had minimal negotiating power and often entered into win/lose business arrangements. Problem solvers moved up the Pyramid and entered into win/win agreements. Business resources entered into expanded win/win agreements. Trusted advisors entered into value creation win/win agreements that maximized the gains for both sides in the business deal.
Of course your ultimate goal is to position yourself as a trusted advisor whose advice and counsel are valued by senior executives. This represents negotiation currency that forges long term, profitable business relationships.
The Seven Steps to Become a World Class Negotiator will help business professionals operating at the top of the Pyramid, trusted advisors, to protect and grow their accounts.
But what if you haven’t achieved this level of account positioning? What if you are viewed as business resource, a problem solver or god-forbid a vendor? This article is perhaps most valuable for these three roles. If fact if you are being treated as a vendor, this article may provide critical concepts and insights that help you to not only survive but thrive in advancing account relationships and negotiating better deals.
You may be wondering if you have what it takes to become an excellent negotiator.
Don’t worry, world class negotiators aren’t born that way. Anyone can become a world class negotiator if they are willing to pay the price. The price of admission isn’t so much about learning new skills . . . but in unlearning old ones. Whatever got you to where you are today is probably not sufficient to keep you there.
We can’t wish for our way to achieving better negotiation outcomes. We all know that hope is not a strategy. As Ben Franklin aptly said, “The definition of insanity is doing the same thing over and over and expecting different results."
Are you ready to step outside of your old behaviors and patterns? Be careful if you do. You may actually become that rare business professional: a world class negotiator.
Effective negotiators know how to intelligently create value in order to build their power base as world class negotiators. The saying “He who has the gold makes the rules”, can be modified to “He who has the highest deal IQ rules the negotiation.” Power and information knowledge go hand-in-hand. Winning negotiators treat negotiations as a process, not an ad hoc event. They analyze, fine tune, and advance the negotiation with engineering precision. Instead of treating negotiation as the final step of a deal, they turn back the negotiation clock to the beginning of the selling process. It begins at the inception of an account plan and the formulation of strategies and tactics.
This paper advances the position that negotiation can be treated as an analytical process rather than a random event. As a process it has a series of steps, that when implemented effectively, produce desired results. Results that can be repeated over and over again.
This paper identifies seven proven steps - that once mastered - create the fraemwork to become world class ntgotiators.
The Seven Steps to Become a World Class Negotiator are:
Step 1. Goal Setting - Establish the correct negotiation goal. Instead of stating “I want to win this deal for $300,000 by the end of the quarter, expand your perspective. Think more strategically. Try “I want to maximize the total value of the deal for both sides.” Challenge yourself to answer the following question: “If we were to reach agreement, what deal elements would make this a great deal for both sides?” When we do this we move from a 180 degree “me focused” negotiator to a 360 degree “value focused” negotiator. The role of a Trusted Advisor aligns with this holistic approach, not the one sided approach.
Step 2. Due Diligence - Knowledge is power. Do your homework. Get the facts. We need to actively research public and private sources of information to learn everything there is to know about our targeted account. In fact we need as close to perfect information as possible. At a minimum you need to know the corporate directions, key players, corporate goals, strategies to achieve those goals, challenges/barriers that stand in the way of success, competitors, and trends (macro and micro). A critical component of our research is to have a compass, in the form of an inside supporter within the account, who shares key information with us and validates our findings. With the insights we gain from this research . . . we need to perform a business fit analysis. Do we have a business fit? If the answer is yes, where can our products and services deliver maximum value at this account? Formulating a tailored value proposition is a key to success. With this knowledge in hand we can begin building our negotiation strategy and tactics. We also need to determine if the targeted account has a formalized negotiation strategy. Do they adhere to a win/win philosophy or a positional zero sum game approach to negotiation? In negotiation you must know the cards you hold and the target accounts perception of what cards they think you hold. The next critical task is to learn everything you can about the cards your opponent is holding. Specifically you need to know your targeted client’s wants, needs, and alternatives. You need to know this information with almost uncanny accuracy and precision. This requires that you see their business and options through their eyes. This customer centric acumen will differentiate you from your competition. It is also the foundation for creating and claiming value.
Step 3. Create Value – Look for ways to increase the value of the deal. It stands to reason that if the pie is bigger; both sides will be able to increase their gains. We should actively look for ways to create value . . . which has a direct impact on when we begin to negotiate. It is never too early to begin the process of creating our negotiation questions. The answers to these questions will form our basis of knowledge of where value resides for both sides. What interests does this account have that map into your companies portfolio of products and services? How would you rank them based on priority and timing?
Step 4. Diagnosis of No Agreement (DNA) ramifications – Diagnose the consequences of not reaching agreement for both sides of the deal. What are your consequences in losing the deal? You will lose revenues, commissions, recurring revenues, a reference account, embolden the competition etc. What are the other party’s consequences of not reaching agreement with you? Out of the three common alternatives (do nothing, do it themselves, or go to a competitor) which one is most likely? Why? Can you model the quantitative and qualitative benefits and costs of their taking the most likely alternative to your offering? What do you know (learnings)? What do you need to know (gaps)? How can you get the necessary information to fill the gaps?
Step 5. Swaps/Trading - (Quid Pro Quo) – Never give up something of value without getting something in return. Otherwise, we set a dangerous precedent that we will do almost anything to win the award. We can only do this when we know the cards that we hold and have an educated assessment of the cards held by the other side. In fact we need to know this with almost prescient clarity. The saying “hold your friends close and your enemy’s closer” can be adapted to becoming a world class negotiator. The negotiation version of this dictum is: “Hold your knowledge of the cards you hold close, and your estimation of the cards the other side is holding even closer.” What items are likely to be included if an agreement is reached? Of course price will be an issue. What other issues are important? Products, service, customization, consulting, cycle-time to deliver, training, etc. may be in play. How important are they to the prospect? How important are they to you. Can you rank them for both sides of the deal? Can you validate your assumptions?
Step 6. Anchoring - All agreements are anchored around points such as price, volume, delivery, duration of the agreement, etc. Beware of anchoring too early and on the wrong points. Typically anchors are set on price by smart buyers. They’ve used this tactic in the past and it works over and over again. Initial offer anchors have more impact on a deal than all other negotiation counter offers combined. “I can get this 10% cheaper from your competitor,” claims the buyer. Or, “I only have $50,000.00 in my budget. You need to sharpen your pencil.” These anchors skew the deal and take away from the concept of value creation. We need to build value early in the game and avoid recognizing premature anchors or making counter offers to them. Otherwise we will be giving away value in a dangerous game of escalating concessions.
Step 7. Trusted Advisor Final Negotiation Approach – Present your negotiation offer not in a one dimensional term sheet but as a series of value-based options. Ideally you should present three scenarios that all represent positive business outcomes for both sides of the deal. Never negotiate one item by itself such as price. Instead negotiate using scenarios that represent different future states of a successful business relationship. Some people call these baskets of items. Be prepared to trade actively to enlarge the size of the agreement zone for the deal. This creates the preferred business dynamic of increasing the size of the pie that will be divided up by both sides. When we do this we often enter into longer term business relationships and in the process make the competition irrelevant.
When we internalize and implement these seven steps, we position ourselves to become world class negotiators. The stakes are high to achieve world class negotiation success. The stakes are higher if we don’t.
All rights reserved – Richard Dodd 2006 – Managing Director - Chasm Cross Consulting
Note: The foundation points for this paper were derived from personal experience and published work in the field of business negotiation. Readers of this article may want to read the following: Getting To Yes (Roger Fisher and William Ury – 1981) based on the Harvard Project on Negotiation; Negotiating Rationally (Max Bazerman and Margaret Neale – 1993); and Strategic Negotiation (Brian Dietmeyer and Rob Kaplan – 2004). In addition cutting edge research in the field of business negotiation can be found in the Negotiation Newsletter – Harvard Law School Project on Negotiation.