Effective Negotiation
- Eva Luong
- Nov 19, 2018
- 4 min read
Updated: Dec 4, 2018
Negotiation & Its Importance
Disagreements arises when individuals aim to achieve the best possible results for their position or for an organization they represent. Therefore, negotiation being the process by which compromise or agreement is reached is ideal to resolve disagreements while avoiding disputes. Furthermore, this tool is especially important to recognize and capitalize on opportunities to negotiate for future career success.
In fact, effective negotiation is a highly sought after skill in today's competitive market. From a UK study, it is estimated that UK businesses lose around £9 million per hour due to poor negotiating skills (Hardoon, 2012). The same study also concluded that UK businesses could increase their overall profitability by as much as 7 percent annually if they improve individual's negotiation skills (Hardoon, 2012).
Not only is negotiation applicable for boardroom meetings and hammering out contracts, it extends to be invaluable when discussing the responsibilities an employee or new hire will have (EC Sourcing group, 2018). This ensures that both parties understand exactly what is expected of the other. The benefits of this skill not only improving one's career success, it also is applicable in one's personal life and well-being. Negotiation can be learned, and can be improved radically with practice.
Theory
Anchoring Effect
The Anchoring Effect is a cognitive bias that describes human tendency to rely heavily on the first piece of information offered, this being the "anchor", when making decisions (Harvard College, 2018). This cognitive bias influence decision-making because individuals will use an initial piece of information to make subsequent judgments. Once an anchor is set, other judgments are made away from the anchor, and there is a bias toward interpreting other information around that anchor. For example, the initial price offered for a used car sets the standard for the rest of the negotiations. Prices that are lower than the initial price seem more appealing even if those prices are still higher than the car's actual worth (Harvard College, 2018).
Anchoring can be used in the Low-Balling Technique, which is a compliance strategy using persuasion to get a person to agree. For example, a person using this technique of negotiation will give an unattractive offer like giving an unreasonably low price in the initial offer so that the other person cannot bring the price much higher or it would seem unreasonable. This effect can be used as a key tool to make your negotiation more effective. This can be demonstrated in the case of negotiating between the buyer and seller of a product or in contract deals between companies. One party can state the initial offer, making it the anchor. This will settle the starting point of the negotiation where the negotiation can then move forward until a reasonable range intersects to settle the agreement.
Implementation
It is highly recommended for leaders to build on their negotiation skills in this hyper-connected competitive market.
In any negotiation, the 3 key factors that can affect the outcome of a negotiation are:
Attitude to the issues and the personality of the person in the process of negotiating.
Knowledge, the more you have the greater your participation in the process of negotiation and understanding of the issues to find a better solution for both parties involved.
Interpersonal skills will allow you to effectively communicate and reduce misunderstanding in dealing with a difficult situation.
Stages of Negotiation
Preparation: Both parties will research and prepare their side of the argument as best as they can by broadening their knowledge of surrounding areas and issues for the subject of negotiation.
Discussion: parties of each side put forth their understanding of the situation with equal opportunity to present their case, this includes questioning, listening and clarifying. At this stage it is helpful to take notes in case there is a need for further clarification. Listening is key in this stage since disagreement commonly occurs when one party talks more and listens less.
Clarifying Goals: Based on the discussion, both sides need to clarify their goals and viewpoints. It is best to list these factors in order of priority. Going through the step of this stage will identify or establish a common ground for both parties involved. This step reduces misunderstandings which can create barriers for both parties to reach a beneficial outcome.
Negotiate for a Win-Win Solution: at this stage parties feel their viewpoints are taken into consideration and all parties will begin a detailed back and forth negotiating for their desired results. This is the most important stage of negotiation because this is the combination of all the previous efforts and preparation to settle an agreement. This process can generate a creative solution to meet the desired goals of both sides and all parties walks out satisfied feeling that they have gained their desired results through the negotiation. Although this may not always be the case, but it should be an ultimate goal for negotiation. Seeing as demanding aggressively to get what one wants might seem like a victory at the moment, the reality is that the lack of goodwill generated by this action may cause problems in the future.
Agreement: any agreement needs to be made clear so that there is no room for misunderstandings. It is essential that all parties involved keep an open-mind to achieve a satisfy solution.
Course of Action: after coming to an agreement, there needs to be a course of action to implement the decision to be carry out.
In Case of Failure in Negotiation
If negotiation breaks down, then it is best to re-schedule another meeting. This allows all parties to compose themselves and think rationally than let their emotions take over in heated discussion or argument. It is recommended to look for other alternative solutions and bring in a mediator for the next meeting. Therefore, preventing the disagreement from destroying potential future relationships (Skills You Need, 2018).
Please click here for more useful tips on effective negotiation!
Ted Talk
References
EC Sourcing Group. (2018). Top 5 Reasons Negotiating Skills Are Needed in Business. Retrieved from https://www.ecsourcinggroup.com/top-5-reasons-negotiating-skills-are-needed-in-business/
Hardoon, A. (2012, December 20). Why negotiation is an important skill to learn. Bonhill Group Plc. Retrieved from https://smallbusiness.co.uk/why-negotiation-is-an-important-skill-to-learn-2137753/
Harvard College. (2018). Anchoring effect. Retrieved from https://www.pon.harvard.edu/tag/anchoring-effect/
Skills You Need. (2018). What is Negotiation?. Retrieved from https://www.skillsyouneed.com/ips/negotiation.html
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