Negotiation is a way in which individuals or parties reach agreements or deals with one another—either in a business setting or other spheres of life. In fact, negotiation is non-negotiable in the business world. It can have a great impact on business performance if done successfully.
In a study, it was gathered that 70% of employers expect their potential employees to try to negotiate the proposed salary and benefits.
Besides business, negotiation is part of our everyday life- we use it at home, in buying our favorite car, house, even in dealing with disputes. Therefore, it is vital to understand the definition of negotiation, elements of negotiation, and also negotiation skills.
What is Negotiation?
The negotiation is an approach to reaching a point between two or more individuals or parties where each side will agree. It also means influencing the other party to make them agree to what is best for you through effective dialogue.
Negotiation occurs in many areas including the workplace, government, legal system, international relations, etc.
It is also important in the home. Having good negotiation skills will help you manage your home effectively. Knowing how to negotiate effectively is highly essential in all aspects of life even in the home.
However, for effective negotiation, you need to possess the necessary negotiation skills.
Types of Negotiation
Knowing how to negotiate successfully depends on your familiarity with different types of negotiations. The types of negotiations have two possible outcomes.
- The first outcome: everyone benefits, also called a win-win situation
- The second outcome: only one part benefits, also called the win-lose situation
Based on the above outcomes, we need to know the different types of negotiations. See them below.
This form of negotiation occurs when all the parties involved benefit from the agreement i.e. a win-win situation. The integrative agreement could take a long time because both parties must be completely satisfied with the agreement.
An example of this negotiation is a consumer refusing to buy a product at the initial rate of $500. After an effective dialogue, the seller and the buyer may agree to a lesser price that benefits both of them. This negotiation definition is also called integrative agreement.
An example of integrative negotiation
This form of negotiation is not based on the needs or interests of both parties. They negotiate to gain more than the other party. It is a win-lose outcome. It often occurs in a situation where there are limited resources or a scenario whereby a service provider or a consumer is not interested in a win-win situation.
A simple example of distributive negotiation is buying a product at the supermarket. The prices of products at the supermarket are fixed, which may not be based on the consumer interest or need, and it may not be equivalent to the value of the product. A consumer will either buy or ignore.
Five Stages of Negotiation
To have the right results in negotiating you need to develop a structured technique. These stages of negotiation will guide you on how to negotiate in any circumstance.
- Define the ground rules
- Clarify information
- Negotiate and agree
- Conclusion and Implementation
This is the first phase of negotiating, but it is often overlooked as unnecessary. If it is impossible to present a proposal without thorough preparation then you shouldn’t go to the bargaining table. As the saying goes: “If you fail to plan, you plan to fail.”
In learning how to negotiate, you should understand that preparation allows both parties to have a smooth negotiation. This phase of how negotiating involves both parties doing their homework before coming to the table.
It includes researching the policy and history of the other party and then comparing theirs with your own policy. It also includes determining the possible outcome and the least possible outcome.
For example, Corporation A will try to determine the least amount corporation B will settle for, while corporation B will try to figure out the highest amount corporation A can pay. You can come up with such projections at the preparatory stage.
2. Define the ground rules:
This stage involves establishing the rules and procedures that will set the ball rolling for the negotiation. It includes knowing the answers to the following questions:
- Where will the negotiation occur?
- When will the negotiation take place?
- To whom are you negotiating?
- Will there be time constraints? If yes, under what time will it exist?
- Will there be an occurrence of out-of-bounds issues?
- What if there is no agreement at the end?
It is based on these rules that you will kick-start the talks. This also includes both parties stating their initial prices, interests, demands, and expected possible outcomes.
This is the stage where you will clarify your position based on the ground rules, in the event of disagreement or misinterpretation. Also, to further justify and strengthen your claims, it is important and necessary for both parties to amicably discuss their reservations in order to reach a compromise.
4. Negotiate and agree:
This is where the main show begins. While integrative negotiations are not possible sometimes, it should be your aim. Aim for a win-win outcome where both parties’ claims are taken into consideration. After the initial offer from both sides, each party can offer different proposals to reach an agreement.
5. Conclusion and implementation:
After an agreement is reached, both parties can conclude the discussion with appreciation irrespective of how the discussion ends. The real negotiation definition should involve ideas pointing towards a win for everybody. Successful negotiations shouldn’t just be about reaching a compromise, but rather about building long-term relationships.
After the agreement, there is a need to take into consideration the outcomes of the meeting and create a strategic plan to implement them. This may involve producing an updated contract, and tracking the progress of its implementation.
This is where the effectiveness of the negotiation lies, you cannot have an effective negotiation without these skills, and you should always seek to improve them. Learn the negotiation skills, but aim to know how to negotiate the right way.
1. Active Listening Skills
Having active listening skills does not only involve listening to the other party. It also includes the ability to read the other side’s body language as well as verbal communication.
It is important to pay full attention to what the other party is communicating in order to find an angle for debate or compromise. This is better than using most of the time to explain your perspective.
2. Put your Emotions under Control
It is vital to keep your emotions under control during negotiation. Of course, there is a tendency to get emotional especially if the party does not agree to your terms. However, try as much as possible to be calm. Poor emotional intelligence might cause stress, and make the negotiation end poorly (for you).
During bargaining, you must be able to state your claims clearly and effectively in order to prevent a misunderstanding—or unnecessarily elongating the duration of the bargain. Ensure that you are adequately prepared in case you will need to present your views. Simply put, develop your presentation skills.
4. Good Decision-making
A negotiator must have the ability to make good decisions promptly. For example, he or she should be able to know the best time to compromise, to stand his/her ground, or to let go of the deal.
5. Build a lasting relationship
Part of a successful negotiation is creating a long-term relationship even if both parties did not come to a compromise.
If a team is involved in the process, it is important for the members to cooperate in order to achieve the best possible results.
Five Elements of Effective Negotiation
Choose your most preferred mode of communication for the process. Will it be face-to-face? Will it be through emails, phone calls, or teleconferencing? Your decision will depend on the situation. You will need to consider the other party when making a final decision. For example, proximity is a major factor to consider.
2. Developing relationship:
You should not take it as business as usual. You should seek to establish a positive relationship with the other party. Try researching the habits, and background of the other negotiator.
3. Emotional intelligence
Some studies have revealed that emotional intelligence is very significant in negotiation Therefore, emotional intelligence is a strength in negotiation which you must employ at the bargaining table. Emotional intelligence involves understanding the situation, controlling your emotions, trying to appeal to the emotions of the other party, and so on.
4. Know the stakeholders
Take every stakeholder into consideration—anybody that will be impacted by the outcome of the decision. Among all the elements of negotiation, this is the one that concerns everyone that will be directly or indirectly affected by the deal.
5. Determine the value of what you are offering
It is important that you determine the value of what you are offering, and then expressively and extensively discuss it. For instance, a real estate agent will not only talk about the beauty of the house but also the proximity of the house to public transportation and good schools.
Examples of Negotiation
- Contractors to client negotiations
- Employee to third party negotiations
- Bargaining the price of a car or a home
- Purchasing of products or services
- Negotiation is necessary when dealing with new hires, clients, and prospects.
Negotiation is a must-have skill in life. Anyone can develop the skill naturally to some extent. But knowing more about how it works will help you to develop your skills. Hopefully, the elements of negotiation discussed in this guide were enlightening enough for you. You can do more research on your own in order to get more knowledge.