Mastering Personal Negotiations
The authors suggest that the negotiations skills used in the business world are also applicable to personal life. They speak of negotiations in the family (dealing with parents, siblings, spouses, and children), negotiating as an individual customer with a business (car salesmen, employment interviews), and negotiating in civic life (neighbors, nonprofit organizations, PTA, etc.)
Your Personal Table
The authors assert that most people fail to approach their personal negotiations in a controlled and coordinated manner, and generally end up neglecting their "personal table" - by giving up too much to others, accepting too little, or simply avoiding negotiating for the things they wish to obtain.
There is also the potential for misunderstanding, when a lack of clarity in negotiations results in another party that does not understand what you expect of them, or has unrealistic expectations of what you have made commitments to do.
The problem compounds itself by the damage these misunderstandings do to your ongoing relationships with others: you find yourself in hostile waters when, had you managed personal negotiations more carefully, you would have made contacts and won allies.
EN: After stressing the importance of interpersonal negotiation, they pretty much abandon the topic without providing useful guidance, and instead go into a series of random discussions about consumer negotiations. Some of this is interesting or informative, so I'll detail it selectively.
Dealing: Buying a Car
The authors provide guidance for automobile purchasing, which is of significant importance as it is generally an individual's second largest regular expense.
Note that in most cases, buying a car is a very competitive negotiation: the seller doesn't really care about an ongoing relationship with you (he'll forget your name five minutes after you drive away) and is trying to maximize his commission (which is derived from the price he can make you pay).
- Start by making a list of requirements and determine what kind of car you need by considering how you will use it. It is a mistake to become enamored with a specific model before knowing what you need, and this knowledge will also prevent you from being distracted by alternatives that don't fit your needs.
- Figure out how much you can afford to spend, in terms of your down payment and monthly payments, to arrive at a price range. This generally will result in a range of comfort, in which you can define your target and walk-away points.
- Identify several specific cars that meet your requirements and seem close to your price range. Important: do this without speaking with a dealer (they will attempt to initiate negotiation before you've had the opportunity to prepare)
- Research the value of the car - book value of a used car, or invoice price of a new one. This will be higher than the amount the dealer actually paid, but it will provide you with insight.
- Do some initial research on specific cars: get the history, do an inspection (if used, get a mechanic involved), and do a test drive.
- Start the negotiation by asking the seller for their "best price" (even if there is a price marked on the vehicle) - this will be their opening.
- Make a counteroffer. You initial price should be 5% below the invoice price or book value. If they balk, state your reasons for making such a low offer.
- Bargain hard - it will generally take time. Make your concessions small (maybe $100 at a time) and try to get larger concessions from the seller.
- If they do not make significant movement toward your range, be prepared to walk away - but don't threaten. State that you feel like you can get a better deal elsewhere, and you'd like to shop around. Maybe you'll be back. If they don't make a significant jump, then leave.
In particular, don't fall in love with a specific car, or feel the need to buy immediately. Having alternatives and time to negotiate gives you power in the situation.
Nibbling is common with car dealers, especially with new cars: extended warranties, add-on components (paint sealers, floor mats, etc.) can often be added after the fact. A good tactic to counter a nibble is to appear to be upset that these extras "should have been included" and act as if it's going to queer the deal. The salesman should back down, and may even make the nibbles into concessions.
There are some differences in new and used car buying. Primarily, there is a larger markup on new cars and less information available to the consumer. Also, the "love" factor tends to be a lot higher, and the dealers will be a lot more skilled at negotiations (the most aggressive and highly-trained salesmen are in the new-car showroom). Doing mechanical inspection is not needed (though you can turn to reports of reliability) and you will have to use design qualities rather than wear-and-tear to dicker down your offer.
Dealing: Buying a House
The authors provide guidance for real estate purchasing, which has a higher dollar value than an automobile purchase, but tends to occur less frequently. Fundamentally, the difference is that most real estate transactions are handled through intermediaries - the buyer and seller each have an agent to represent their interest and assist them in the negotiation process.
One issue is that the buyer is at a distinct disadvantage: the seller, the seller's agent, and even the buyer's own agent are all interested in closing the deal, and selling at the highest price possible (for the agents, the amount of their commissions is derived from the amount of the sale), so finding an agent you can rely on is of paramount importance.
Employment Negotiations
Once a company makes a job offer, there is generally an opportunity to negotiate the offer: salary, vacation, incentive or signing bonus, relocation expenses, work schedule, starting date, and work location. Larger firms are more rigid than smaller ones, and will often claim that their offer is controlled by policies or executive decisions. That's generally a lie.
However, you cannot approach the situation competitively: the nature of an employment interview is starting a relationship - and if you are aggressive, they may decide that the relationship is not worth getting into. Said another way, you can negotiate yourself out of a job.
Salary is generally negotiable within a range - you should start with an opening that is at least 10% above your target, as they will negotiate downward. Also, even before salary negotiations begin, know your target and walk-away points - and if the employer's opening offer leads you to think that they will not negotiate into your range, don't waste your time applying. You will also need to be knowledgeable about the job market, and how you compare to other applicants, in order to make a case in a logical manner.
There may also be other parts of a compensation package to consider: a signing bonus, relocation expenses, the potential for future earnings, flexibility in location and hours, benefits packages, employee parks, paid training, vacation allowance, profit-sharing and bonus plans, etc. In some cases, you may be wise to forfeit some regular income in exchange for these concessions - and they tend to be easier to get.
Negotiating with a small company is somewhat different: they tend to be less sophisticated and have fewer resources. They may not know what a fair offer is, given the job market; they generally do not have as many concessions to offer; there is generally less opportunity to advance within the company to regain ground later. These differences can work for or against a candidate: they may be rigid and inflexible (just walk away) or they may be open to negotiate a great deal (you can get a lot, but be careful not to take advantage, as that will haunt you later).
Negotiating a Raise
In general, employers tend to take their employees for granted: they offer small, incremental salary increases to existing workers, which can often result in their employees being underpaid, given the market and the experience they have gained. In this sense, negotiating for a raise can be to the mutual benefit of the company (who wants to retain trained talent) and the employee (who is otherwise happy with the situation, but feels he could be making more elsewhere).
The primary tactic for negotiating a salary increase is to call attention to the market - what the salary ranges are for similar positions, and candidates of similar credentials, in the industry and region. You can back this tactic by discussing your personal credentials and history of accomplishments to negotiate a salary that's in the higher end of that range.
The drawback is that there is a high price for failure: if you do not succeed in this negotiation, but stay at the same job, you're clearly signaling that you're satisfied with your current salary and there is no need for them to pay a penny more to keep you. It may even be assumed by your employer that, having failed to get what you want from them, you are already looking around and have no plans of staying on long-term.
Generally speaking, you should be prepare to walk if the negotiation fails. Do not use that as a threat (it damages the relationship if it succeeds, makes your situation untenable if it fails), but be prepare to do it all the same - if you fail at a salary negotiation, your future is not bright.