Negotiation is an essential part of business, as well as of politics and everyday life. It has been said that it is the number one skill needed in management.
It is sad therefore that many people do not know that there are different kinds of negotiation, and that it is important to adopt the kind most appropriate to the particular situation. I do not intend to look at every possible type of negotiation, but I will point out one important division that should always be kept in mind.
The most popular understanding of negotiation was that advocated recently by Piers Morgan. He was talking about Brexit (what else?) and likened it to haggling in a bazaar. The vendor suggests a price far higher than he expects to get. The buyer offers less than half. They move towards each other in a series of steps and end up with something reasonable.
This kind of negotiation is combative. One party wins and the other loses. The vendor wins if he gets more than the market price for his goods. The buyer wins if he gets them for below the market price. Some say that’s capitalism.
There is another model, however, where the aim is to find a solution which is beneficial to both, or all, parties. It is called a ‘win-win‘ situation. The bazaar model could be called a ‘win-lose’ situation.
Different industries have different traditions regarding the type of negotiation practiced.
In many situations, it is desirable to establish a long term relationship with suppliers and customers. Management and the workforce also should be considered as long term partners in business from this point of view. Sensible businessmen want a harmonious relationship with others. It is not in your interests for your customers or your suppliers to ‘lose’. That could mean they have to cut back, reduce quality, or go out of business. Short term wins can lead to long term failures if you drive too hard a bargain.
I do not want to be insured by a company that keeps offering such low premiums that it loses money. Will it be there when I need it?
When might you prefer the win-lose model?
When it is a one-off situation. When you are not expecting to see the other party again. When you do not care about their future. Grab the money and run!
Where does that occur most?
One industry where that is the norm is property. (Real estate in the USA). You want to get as much as possible for a plot of land you are selling. If that leads to a cash flow crisis for the purchaser, what is that to you? And vice versa.
Where did Donald Trump make his billions? Real estate. Yes. He is an expert in win-lose negotiations.
I hope both sides in the Brexit negotiations will go for a win-win solution. It is not in Britain’s interests to have impoverished and embittered neighbours across the channel. Ongoing cooperation in business, security, the environment and defence will always be needed.
How do you negotiate with your clients?