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The Art Of Business Negotiation

January 22, 2013

chess_peacePlaying the Game

Negotiation can take many forms, but ultimately the difference between success and failure comes down to two simple words: Yes or no. Two sides of a coin; though negotiation is more akin to a high-stakes poker game than a coin-flipping contest.

Whatever form a negotiation takes, it usually involves two kinds of resources: those that the parties involved are hoping to obtain through negotiation, and the resources they use during the negotiation. The former usually refers to physical or financial resources that can be exchanged (trade) or combined (alliance). The latter refers to abstract ideas that determine how likely one party is to convince the other; the most important factors being their levels of power and trust.

Power and Trust

According to Harvard Negotiation Law Review, the power each party brings to the table comes in three forms:


  1. Authority: One of the two parties may have a higher level of authority over the other, whether it’s a nation with greater diplomatic influence, a company with more resources or an individual with a higher rank.
  2. Alternative options: The more alternatives a party have the greater their power level.
  3. Threat: The capacity each party has to damage the other. In negotiation between two nations this usually refers to military power, whereas in a business negotiation it may be the damage caused through competition.

The level of trust can also come in different forms, such as:

  • Empathy: Both sides have values or experiences in common that creates a bond between them.
  • Deterrence: This overlaps with power, as one party will be more inclined to trust the other if they know the other party has more to lose from failing to keep up their side of the bargain.
  • Reputation: A party that has made a point of always fulfilling their side of the bargain has successfully cultivated an invaluable resource in negotiation. Even if the other side doesn’t particularly like them, having a reputation for integrity will always be an advantage.

You’d assume the party with greater power is automatically in the stronger position, and technically that is the case, but if it was that simple there wouldn’t be much to negotiation.

As it is, good negotiators know that power lies mainly in perception. All that matters is if one party is perceived as more powerful than the other. It takes a skilled negotiator to manipulate perception while mitigating the risks of doing so. It’s not easy to tread the line between bluffing and stating the truth from a certain point of view. It’s not the resources but how they’re used that really matters, hence the demand for skilled negotiators.

Tips for Negotiation:

  • Research on the other side. Know as much as possible about their levels of power and trust (meetinsnet.com and inc.com)
  • Seize the initiative. Research shows that the side that makes the first offer usually gets the better result.
  • Even if you are the one who makes the final decision in your organization, always pretend there’s a higher authority, whether it an important stakeholder or someone higher up in the company. This is to provide an escape route should the other side force you into a corner (the old “I’ll have to consult with ‘____’ before making a final decision” trick).
  • Remain emotionally detached; don’t resort to personal insults or respond to provocation.
  • After making an offer, don’t change it until the other side has made a counter-offer, no matter how long they play the waiting game.
  • Pay attention, not just to what the other party is saying but to their body language.

They say the pen is mightier than the sword, but the tongue commands both. Armed with wits alone, a good negotiator can bring an end to conflict before a shot has been fired, and forge contracts that change the face of an organization.

Featured images: License: Royalty Free or iStock http://www.sxc.hu/photo/453531

Written by Matthew Flax on behalf of Now Learning, an Australian education portal that promotes tertiary courses in finance, business and accounting, as well as a variety of other subjects.

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