Quick reminder1
Last week I posted a quick three-party negotiation exercise that offers key lessons about bargaining power in multi-party cases. You can do it remotely with colleagues and friends, or at the dinner table with family. There’s an anonymous poll for entering your results. In a post next week I’ll weigh in with my thoughts and recommendations. Looking forward to seeing your responses! Mike
Coping with uncertainty
Last week’s article, “The Fog of Negotiation,” focused on the importance of strategic agility and nimble moves in the midst of what is often a fluid and unpredictable process. It demands continuous learning, adapting, and influencing as the negotiation unfolds.
Here we turn to dealing with uncertainty at earlier stage, when you’re formulating your approach. There are many unknowns at this point, too, such as:
1. Is there room for agreement (and if so, how much)?
2. Have I defined my “walk-away” option; might it improve or disappear?
3. Will my counterpart be trustworthy: should I be open or cautious?
4. Do they respond well to carrots, or might I have to bring some sticks?
5. Will this be easy, or will it be hard?
6. Etc., etc., etc.
Viewed one way, that’s a daunting list. The less clear the answers are, the more stressful planning to negotiate can become. In their book, Make Your Own Luck, my colleague Howard Stevenson and Eileen Shapiro remind us that:
“Acting in the face of uncertainty is scary, because you are acting before all the facts are in—though in truth you are always acting before all the facts are in, whether you are doing what you planned to do or making a shift based on new information.”
Rather than being frozen by unknowns you’ve identified, though, put that list to work in a positive way as a learning agenda. Use it as you prepare to negotiate and also as a key element in executing your strategy.
For instance, let’s say you’re undertaking a deal for which there aren’t many comparables. If so, it’s hard to know if there’s a lot of room for agreement, just a bit, or none at all.
First, get into the head of the person you’ll be negotiating with and do a best-case/worst-case assessment. Under what circumstances might they be generous to you? If they are a supplier, might they be over-stocked? Or if they’re a start-up, would sealing a deal with you help them land other partners?
Do the downside, as well. The supplier may be flooded with business and have no need to give you special treatment. Or if it’s the start-up you’ll be negotiating with, they may have a hyper-inflated view of the value of the service they’re offering.
Reckoning the best/worst numbers (or packages) may give you a somewhat clearer view of boundaries of the ZOPA (the Zone of Possible Agreement). And if the range of uncertainty remains high, that realization should drive your strategy when you go to the table.
Specifically, be cautious about putting a specific offer on the table too soon. If you make an extreme ask, you run the risk of having to backpedal significantly. Or if you are too modest, you may be underselling yourself.
Instead, at the outset, focus on learning more, getting a better sense of the other party’s priorities and constraints. Then you’ll be able to calibrate your earlier estimates of what’s possible. That’s the on-going learning component of the agility model I described in last week’s piece.
A bias for action
The more important the negotiation, the more important is preparation. Even in small transactions, foresight pays off. There will always be uncertainties, however. So, when should you decide to take the plunge and begin the process? Remember, there’s much in negotiation that you can learn only by being at the table.
Jeff Bezoz, Amazon’s founder, has a general answer. “Most decisions should probably be made with where somewhere around 70% of the information that you wish you had,” he says. “If you wait for 90%, you’re probably being too slow.”
In negotiation, it comes down to being proactive. I’m talking about an inclination, not an ironclad rule to leap before you look. You shouldn’t be rash. Sometimes waiting and seeing before you begin is best. Still, your general tendency should be to press ahead even when some important facts are hazy.
The test of that proposition is spelling out when taking action would be unwise or premature. Specifically, standing pat makes sense provided that:
Doing so is costless. That is, if all your options remain open and you won’t lose credibility.
You believe that time is on your side and your leverage will improve.
There’s a good chance that by learning more, you can make wiser decision.
Sleeping on the decision will make you more comfortable with your choice.
On the other hand, the less true that one or more of those factors appears to be, the more likely it’s time to take a deep breath and get things started.
Housekeeping
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Please share the piece with people in your network who want to expand their knowledge of negotiation. Thanks! Mike
Photo credit: Edge2Edge Median on Unsplash.