What Matters in a Negotiation

Negotiation is an unavoidable part of life.  Whether you are negotiating a starting salary at a new job, the purchase of a home or car, or whether you or your spouse are going to go pick up your sick child from school, negotiation simply cannot be avoided.

I have found that people generally have one of two reactions when they hear the word “negotiation” – they either rub their hands together with glee, or roll their eyes and moan about how much they hate it.  Both of these people are wrong. Negotiation shouldn’t be thought of as a battle to be won or lost; it should be thought of as an opportunity for everyone to win… but not overly win too much in relation to the person they are engaged with.  Herein lies a common misconception about negotiations, the misconception that money equals value.  In order to have a successful negotiation, you need to understand what both parties stand to lose or gain in doing the deal, and what combination of things it is they really value. Remember that value isn’t always solely financial. 

Let’s look at an example.  Let’s say you are in the market for a new car.  Every person involved with that deal holds different values.  As the buyer, your goal is to leave the dealership with a good deal on the vehicle equipped with the things you want.  The sales rep likely values his commission and quota, and not only wants to sell you the car at a markup but he/she is also judged by management on the number of units (cars) sold, so that is generally important too.  In contrast, the dealership manager is likely to be on a bonus schedule based solely on units sold.  The price of the individual car doesn’t matter as much to him as the sale does. Everyone in this situation is motivated by something different.

So how do you come to a consensus?  In order to do that, it is important to understand that sometimes you are dealing with multiple people with varying cares and objectives.  Your job is to get everyone, including yourself to meet in the middle.   But before you do that, STEP 1 is to determine whether you are dealing primarily with financial objectives or emotional value.  In my experience, emotional value can be just as, if not more powerful than financial value.  Maybe the salesman you have been working with is having a rough month.  He needs to sell more cars to avoid being fired. The value of your deal just transitioned from financial to emotional.  He may be willing to be more flexible with his commission in order to make the sale happen. The $1000 commission he is accustomed to might be able to drop as low as $500.  The question is, where is that line?  Where is the line at which he is willing to do the deal or walk away?  Do you have emotional or financial leverage in the deal that will get him/her there?  

You have to understand what is valuable to someone before suggesting a structure and then convincing them that structure is the most appropriate for all parties.  In my experience, a lot of people are not emotionally involved enough to prescribe emotional value themselves.  I wind up doing it for them.   

You have to remember that this only works well when the deal is mutually beneficial.  People will walk away from something that isn’t benefiting them.  I have seen countless people lose deals because they were too focused on their own perspective.  They were unable to consider what about their deal was beneficial to the other party, and therefore took a hardline stance that backfired.  Negotiations should never be hard.  If you do your homework, a negotiation can transform from a battle of wits to an easy conversation in which you are walking someone through the ways in which they win.  Who is going to walk away from that?

So instead of spending your time researching negotiation techniques and idolizing Glengarry Glen Ross, research what is important to the person you will be working with.  The key is understanding where they come from, where their values lie, and structuring a deal that prioritizes those values while at the same time achieving what is most important and valuable to you.  If you negotiate this way, you will never lose.