Have you ever walked into a negotiation and had no idea what a successful outcome would look like? It can quickly become an untenable situation.
You could compensate with a plan to take the first offer made and add a few percentage points. That might yield a successful outcome by fluke. But, if you tried that strategy and your counterpart chose to open with an extreme lowball position, you’d have a pretty difficult time explaining to your company how you just got walked over by your negotiating counterpart.
Alternatively, having a target to negotiate toward might make more sense. For one, it provides a guidepost to keep you grounded as you talk through all the parameters. It also ensures you don’t come into the negotiation too aggressive, upsetting your counterpart, or too passive and risk getting taken advantage of.
But is it smart to take the approach “target or bust?” Both approaches, “first offer plus a few percentage points” and “target or bust” demonstrate situations where proper planning takes a back seat to expediency. Most likely both approaches will yield suboptimal results.
The remedy is to know your ideal outcome and to knowing your minimum requirements for success. This is the second-to-last rule discussed in my negotiation workshops. Since the ideal outcome is usually synonymous with your negotiation target, we should assume that most diligent negotiators will sit down at the negotiating table with this information in tow. It is the second part of this equation that, if not taken into consideration, can lead to problems.
Imagine a scenario where you negotiate hard toward your ideal outcome, but your counterpart is staying firm with a position that is less than you want. Without knowledge of the concessions you can make to strike a deal, you may be compelled to walk away without an agreement. And as discussed in an earlier article, when you fail to strike when the iron is hot, you run the risk of never coming to an agreement.
This outcome has the potential to force you into a different, less attractive agreement with a secondary trading partner.
Now don’t get me wrong, sometimes the proper decision is to walk away without an agreement, and we’ll hear about that in the next article, but this is generally the case only when you cannot come to an agreement that satisfies your minimum requirements for success.
Consider visualizing your outcomes as an important preparatory step before you embark on any negotiation session. First, know what you are looking for in your ideal outcome. This includes volume, cost and other agreements. Second, understand the concessions you are willing to make for an agreement that will still satisfy your minimum requirements.
Staying within these high and low bars should keep you out of trouble and make for successful negotiations.
Mike Mauti is the managing partner of Toronto-based Execulytics Consulting. E-mail him at [email protected].