Importance of Negotiation in Business

In order to be effective in business, you must be able to engage in effective negotiation. Negotiation skills help you to ensure that you are getting the best for yourself in your workplace, and they also help you when working with clients, depending on your chosen field.

Strong negotiation skills are preferable and will likely set you up for success in your company. However, even if you don’t consider yourself a master negotiator, it is very important that you understand at least the negotiation basics. This guide will provide an overview of business negotiation, from what business negotiation is to how to increase your abilities as a negotiator in your business. Read on to learn how to take your negotiation skills to the next level.

What is Business Negotiation?

Definition: Negotiation in business is essentially the process by which two parties come to an understanding or agreement and find common ground on a matter.

As each side will have their own wants and needs, negotiation is about a balance of giving and taking on both sides until a common ground is found and – hopefully – both parties leave the negotiation process satisfied with what they have received.

It’s important to understand that the better you become at business negotiations, the more comfortable you will feel. In truth, business negotiations can become heated, get personal or even come to a complete standstill. However, the more you develop yourself as a negotiator the more you will come to see that many – if not all – of the potential negotiation pitfalls can be avoided.

Often negotiations aren’t a one-and-done experience. Depending on the scope of what is being discussed, negotiations can go on for quite a long time, with many meetings and counteroffers before a final agreement is struck. This process requires endurance, patience and a whole lot of resilience.

Negotiation Styles

There’s more than one way to approach negotiations. None of these styles are absolutely better than the others, but it will become clear which styles are more effective. Choosing your approach mindfully will help keep you on track as the negotiation process progresses.

It is great to learn how to flow between styles depending on what is needed, but at least identify your personal negotiation style in order to give yourself a solid foundation upon which to build your negotiation strategy.

Competing

Negotiators using the Competing style are generally interested in their own concerns in the matter, even if achieving their goal comes at the expense of their opposition. Focused on results over relationships, Competing negotiators are usually very assertive and dominant in the room.

Avoiding

To use the Avoiding style of negotiating is essentially to be inactive. Focused neither on relationship nor result, the most important thing to negotiators of this sort is to avoid conflict and tension at all costs. Often this results in a sort of self-sacrificing as the negotiator would rather give up their goals in favor of avoiding any sort of trouble. Unless you are facing a person who is also exercising the Avoiding style, you probably won’t get your needs met, but you will most likely avoid conflict.

Compromising

If you need to settle a disagreement or come to an agreement quickly, this is the style for you. The focus here is on efficiency, meaning that you are willing to end up with an agreement that is only moderately satisfying for both parties in favor of a speedy resolution.

Collaborating

This is the most creative style to use. The focus here is on both parties reaching a state of optimal satisfaction with the outcome. This means that coming up with new, sometimes out of the ordinary ideas for solutions to problems is needed. High in both assertiveness and cooperativeness, collaborators are interested in maintaining a positive relationship and ending up with a highly satisfying solution.

This style of negotiating can take the longest and requires a lot of skill, but often produces the most fruitful agreements. When both parties are exercising this type of negotiation style the outcome is generally always win-win. Win-win (or, Principled Negotiation) will be discussed later in this article.

Accommodating

This is the relationship-driven style in the bunch. To use this style means you are far more interested in building or strengthening a relationship than getting your needs met. You are very cooperative, and it’s more important to you that the other party’s needs are met over your own. This can be a helpful style to use if you are in danger of losing an important client and you have more that you can sacrifice on your side.

3 Most Important “Rules” of Negotiation

While these are not hard and fast rules they are fantastic guidelines to keep in mind as you approach your negotiations.

Never Accept the First Offer

Often you will be presented with an offer that is far too low or without many of your most important considerations just to see how you’ll respond. Present a counteroffer and continue the negotiations. You are there to get the best deal you can, not any deal you can.

Listen

The more you listen the more your mind will be triggered into coming up with interesting solutions. Sometimes the smallest details in what your opponent is saying can give you the key to resolving a present conflict.

Stay Cool

Nothing will get done if you lose your cool. Even if things get a little heated in the room, breathe, and remember to behave with respect and integrity. As the saying goes: It’s not personal, it’s just business.

5 Steps of Effective Negotiation

Understand and follow these negotiation steps, and you will be able to enter into talks with confidence and clarity. This will place you in a better position to reach your desired outcome.

Prepare

Without proper preparation, you will not be able to enter negotiations from a strong position. You must know what you want, what you’re willing to give up and as much about who you will be negotiating with and what they want as possible. Do your research and come to the table ready to engage. Make sure you have analyzed any necessary data and come prepared with facts to support your desires. When in doubt, overprepare.

Exchange of Information

In this phase, you engage with the other side and express your wants, needs, and interests. It is an opportunity for both sides to come to the table with transparency so as not to be misunderstood or mistaken later in the Bargaining phase.

Bargaining

This is the phase most people think of when they think of negotiating. In this phase a give-and-take occurs in which both parties engage with each other, asking for concessions while looking to create value. Depending on the type of negotiator you are facing, this process can be fruitful for both parties or full of contention. It is important to bring out your best communication skills and remain patient, calm and respectful throughout this phase.

Conclusion

In this phase, an agreement has been reached that satisfies both parties. It is then the time to put down in writing what has been agreed upon to ensure that both sides follow through.

Execution

At this stage, the agreement is put into action. Always follow through with your end of the agreement so as to uphold your integrity and any relationships that have been formed throughout the negotiation process. If you have done due diligence and have put down your agreement in writing, you are entitled to hold the other party to their end of the agreement as well.

5 Negotiation Mistakes to Avoid 

Tried and true, these bits of advice have been learned by many through trial and error. Rather than lose a potential deal by unknowingly falling into one of these negotiation traps, take these rules to heart now.

Failing to Prepare

“If you fail to prepare, you prepare to fail.” It’s a well-known and often-used statement, and it is very, very true. You can’t know everything that’s going to happen in the room once negotiations start, but you can know exactly where you stand, where you’re willing to concede and how you intend to approach the negotiations. If you haven’t done your homework, it will show and leave you in a weak position from the get-go.

Not Building Relationships

If all you’re after is fulfilling your agenda and receiving whatever it is you desire at any cost, you can bet that you will burn bridges along the way. When negotiating in business it is very often the case that your relationship with the other party will continue long after the negotiations have taken place. Play the long game and develop the relationship between you and whoever you are negotiating with. Perhaps you don’t get everything you want this time, but your respect and empathy with the other party will go a long way the next time you are in negotiations with them.

Not Listening

It’s not always enough just to hear the words of the other person. To truly listen means to perceive meaning, and that requires deep attention to the present moment. Take in their body language, their facial expressions and what is hidden between the lines” so as to best be able to respond with profitable solutions for whatever is on the table.

Assuming Something is Non-Negotiable

Pretty much everything is negotiable. Don’t assume otherwise, even if the other party says it is. You may find that along the way their position about something being non-negotiable changes. At the least, don’t withhold an ask for yourself because you believe that the other party won’t be amenable to your request. You never know unless you ask.

Being Afraid to Offend

Walking around on eggshells won’t get you anywhere in negotiations. Don’t be afraid to be direct and clear in your intentions and requests. You don’t have to be disrespectful in order to be direct. In fact, often it is taken as a sign of respect to be upfront about your intentions and desires, especially when kept entirely professional and removed from the personal.

5 Stellar Negotiation Techniques 

These perhaps lesser-known “tricks of the trade” will make you feel like a master negotiator when put into practice.

Use the Number Scale

Implement a number scale in your negotiations to help both parties reach better clarity as to what is truly important. The number scale works like this: One is neutral and ten is practically non-negotiable. When in conversation with the person you are negotiating with, ask that both of you ascribe a number value to the various desires on the table. You will then see a clearer picture of what the most important factors on either side are. You will also see what is less valuable. Then, when working towards an agreement, both of you will be able to more easily give-and-take with each other due to the greater understanding of what is truly valuable to each of you.

Clarify, Clarify, Clarify

Don’t be afraid to ask questions and more questions. Don’t assume you know. Even the greatest listeners misunderstand sometimes. Repeat what you believe you heard from the other party back to them and receive their feedback that yes, you did understand them before proceeding.

Make the First Move

This is essentially giving yourself home field advantage. If you present your offer first, the other party must either accept your offer or respond with a counteroffer that will be more in your favor than whatever they had in mind initially.

Utilize Silence

Sometimes all it takes is a little patience and space devoid of talking to probe the other party to rethink their position or reveal more information that will be helpful to you. Silence makes a lot of people uncomfortable. If you can sit in it and wait, you may find that the next thing out of the opposing party’s mouth is helpful to you in some way.

Flex Your Emotional Intelligence Muscle

Business is business, but it’s nearly impossible to entirely remove all trace of the personal. Triggers happen, and emotions can rise. Listen with your heart, not just your head and meet the other party where they are sometimes. Understanding, compassion and empathy go a long way and can be a refreshing surprise amidst tenuous business dealings.

Principled Negotiation (Win-Win Negotiation)

Ultimately, the best possible outcome is for you and the other party to emerge from negotiations satisfied with what you both have received from the engagement. Perhaps neither party got everything they asked for, but if it appears as though the dealing was fair and that both parties sacrificed and gained in relatively equal measure, that would be considered a win-win. Principled negotiation takes time, effort and a willingness to stick it out through potentially arduous hours of conversation.

In order for a win-win to occur, neither party can tap out before a mutually beneficial agreement is reached. Yes, it takes more time and energy than just playing hardball or backing down completely to the wishes of the other side, but it will make both parties far happier in the end. Whenever possible, go for the win-win. It saves relationships and ensures that both parties emerge victorious from the negotiations.

The Best Tips for Mastering Negotiation

1. Have a Goal in Mind

Know what you want before you go in. Simple as that.

2. Know Your Opponent

Professional athletes watch tape of their opponents in order to understand their tactics and ways of approaching the game. It should be no different in business. Learn about who you are about to face. How have they approached negotiations in the past? What is their personality? What do they respond well to and what are they triggered by? Learning all you can about your negotiating “opponent” gives you a massive leg up throughout the process.

3. Have a Strategy

Like a great chess player, you need to anticipate not only your moves, but the moves of who you are facing. The more you think ahead and strategize, the more you run the negotiations rather than the negotiations running you.

4. Have Something to Give Away

A great tip – add something to your initial list of desires that you fully expect not to receive in the end. Then, when it is time, you can offer to lose that item if the other party will either give you something in return or concede something on their list of wants.

5. Know When to Walk Away

Sometimes the conversation isn’t going anywhere. It’s alright to take a break and return to the conversation later. It’s also alright to end the negotiations altogether if you can clearly see that the other party isn’t interested in working with you to find a win-win.

6. Always Insist on a Counteroffer

If your offer is rejected, don’t allow yourself to be pressured into immediately presenting another offer. Rather, insist that you receive a counteroffer from the other party. This gives you something to work with and places you in a position of strength.

7. Make it About Them

You know what you want. But if you also identify what they want, you can word your arguments in a way that makes it about how they are also going to be getting what they desire from the deal. Rather than driving your own agenda, work with the other party to show them how by you getting what you want, they also get what they want. You’re not negotiating in order for them to leave unsatisfied – your intention is for everyone to walk away happy.

8. Stick to Your Principles and Values

Your set of values and principles will no doubt be different in some way to those of the person sitting across from you. It is very important that you don’t inadvertently absorb their set of values and principles. Only by following your own code will you leave with an agreement you are satisfied with.

9. Address Emotions First

If for some reason emotions are involved in negotiations, talk through those first. This is where compassion and empathy come in really handy. If someone is angry or upset, seek understanding of their feelings and assuage their fears in whatever way you can. Let them know that you intend for both parties to walk away in a state of joy, not pain.

10. Remember That Every Negotiation Will Be Different

Every negotiation will be different because every person sitting across from you will be different. Even if you are entering into negotiations with someone you’ve negotiated with before, the circumstances will not be the same and therefore it is important that you don’t assume that just because the negotiations went well before that this round won’t come with challenges. Do your homework, ask questions and always approach each round of negotiations with a clear mind and fresh perspective.

Conclusion

Ultimately, when two or more parties come to the table to negotiate an agreement, the focus of each person is on getting the best deal they can, not on how to make the other party or parties unhappy. If you can lock in on what the other person truly wants and face them with empathy, respect and a willingness to come to the best agreement possible, there is a high likelihood that all parties involved will leave happier than when they came in.

Developing your business negotiation skills will be time well spent as you continue to climb the corporate ladder and engage in more complex business dealings. While some say that everything is negotiable, it’s safe to say that there’s one point that isn’t negotiable at all: The better negotiator you are, the more valuable you are to your company.

Be on the lookout for future articles on how to negotiate contracts and how to negotiate salary. These articles will provide an even deeper look into how negotiation can help you achieve what you desire and deserve.