Chapter 4 - Preparation
Preparation is essential to successful negotiation, as an unprepared party is at a significant disadvantage to a prepared one. Preparation includes understanding more about yourself (your goals and what you hope to gain), understanding the other party (their goals and what they hope to gain), as well as other factors that might influence the negotiations, with an aim of reaching a satisfactory conclusion.
Identify Interests
Negotiations can be frustrated when the parties are not firmly aware of their interests, and facilitated when there is clear understanding. When interests are clear, it can often be plain to see where agreement already exists and where negotiation is necessary to achieve agreement, enabling the parties to ensure the right topics are discussed.
If interests are not made explicit, then there follows a great deal of guesswork, which is clouded by posturing. People often demand things they don't need, with the expectation that these will be whittled away and they will still get what they do need.
The author tells a story in which two managers are arguing over floor space for their staff, each bargaining for a larger share. A mediator was called in and asked a simple question "why do you need this space?" which led eventually to the recognition that they needed less than they claimed they did, and that it was possible to create a common/shared work area that could be used at different times (one staff needed workspace in the morning, the other later in the day).
In this instance, pushing each other around over an arbitrary desire was not likely to lead to an agreement, as each was dug in to an arbitrary number as a bargaining position. It was only when the two parties understood each other's needs that they were able to discover a mutually acceptable solution
In negotiations, people will readily disclose what they want - this is implicit in their bargaining position - but their needs are generally more reasonable, and are considered in the acceptance of an actual bargain.
Look for Value-Creating Trades
Negotiation very often proceeds as a string of trades, with each party offering more or demanding less in exchange for a similar concession from the other. This becomes somewhat clouded by emotion because each side feels it is losing a little bit each time, even if its current bargaining position is far removed from their acceptable range.
Ideally, these could be value-creating trades in which each side gains something of a little more value than whatever it is asked to give in return. (EN: The author doesn't mention this explicitly, but the notion of trading is not zero-sum because values are subjective. A person who swaps ballet tickets for baseball tickets feels he has gained something he prefers, and so does the other party who gave them the baseball tickets for the ballet tickets.)
The author tells another story about a business that is looking to expand and liquidate some of its old equipment, who comes across a potential buyer of the equipment who needs the equipment and is looking to get rid of a shop in the location the other party wishes to expand. In this (contrived) example, it's obvious that each possesses something the other values more.
Another historical example is the way in which British sailors visiting the pacific items would bring nails with them because the islanders had no source of metal and were willing to trade significant amounts of food for a simple nail. To the islanders, there was plenty of food on their islands and it wasn't worth as much as metal, which they lacked. To the sailors, nails were simple and cheap items at home but food was much more important when ships were at sea. So each side was happier with what it received in trade.
The author touches briefly on the buzzword of "synergy" which was rather popular a few decades ago. The basic concept is that two firms can produce more value by working together than they can separately, which is often the justifications for mergers and acquisitions, and a prominent factor in the negotiation of a proposal to merge or acquire firms. (EN: It's an odd thing to bolt onto this chapter, and odder still because "synergy" was often not achieved by mergers and it fell out of fashion in favor of downsizing and outsourcing shortly thereafter.)
Gather Relevant Facts
A bargaining position is essentially an argument, and has greater strength when it is supported by factual information. Particularly in negations over price, a bid is a statement that an given item is worth a given amount of money - often based not on its actual value, but on the desire of the seller to get a certain amount of money.
By doing some research - finding out what other sellers are demanding for a similar item in the same market - the buyer can convince the seller that his asking price is unreasonable.
(EN: The use of "convince" is significant here. Value is subjective and the fact that others have sold at a given price doesn't prove a given value. It's so common trick in price negotiation to use skewed or even falsified numbers that such research is often doubted when it is presented. And even when the numbers are fair, the seller has his heart set on a price and may not budge.)
Having done research before a negotiation gives you the power of facts against an opponent who has none, and it also gives you the ability to recognize when an opponent is presenting distorted information. It's also suggested that if another party presents facts in support of their argument, you would be well advised to do some research to validate them.
(EN: Again, this seems skewed to the competitive negotiation style. In collaborative negotiations, where there is more trust and cooperation, research to determine a fair solution tends to be less contentious.)
Determine Alternatives and Reserve Price
The concept of alternatives and reserve pricing were discussed in the previous chapter, and are revived here because researching alternatives and determining the reserve price are steps to take prior to entering into a negotiation.
In addition to considering your own alternatives and reserves, consider what those of the other party might be. (EN: Which is true enough, but no useful information is provided for how to go about doing so.)
Learn About the Other Negotiator(s)
The author offers the general advice that you should seek to learn about other parties before the negotiation. In particular, you should seek information about their communication and negotiating styles. When negotiating with other employees inside an organization, chances are good that you already know a bit about them, and it should be relatively easy to approach people to gather information about them.
(EN: the author is extremely vague on how to go about getting the information, what kind of information you should seek to gather, and what to do with it when you have it. He seems to take it for granted that you can find out that someone is a "hard bargainer" and know how to adjust your tactics accordingly.)
There's a brief mention that rank is important to some people: an executive might take offense if approached by a lowly salesman, and would not take seriously anyone but a sales executive with a title as impressive as his own.
(EN: This sounds like good advice, but is likely specific to older generations in the workplace who are more status-oriented. The silent generation was definitely attentive to matters of rank, the boomer generation less so, and then a sharp drop to the present generations in the workforce.)
There's also the suggestion to refuse to speak to anyone who doesn't have the authority to enter into an agreement, and would need to get approval from someone else. Salesmen often pull this trick such that they can offer a deal but retain the ability to withdraw the offer unless the sales manager approves it ... and when they return they demand additional concessions.
(EN: Also an idea that sounds good, but could be very bad given that the present culture of empowerment means that the manager with budget authority often includes, even to the point of deference, the input of lower-level employees. Try to squeeze past them or, as the author specifically suggests, give them the impression that they are unimportant and demand to speak to their "boss" and you'll get a frosty reception when you have to get their support.)