The five stages of negotiation: How to reach a win-win outcome
Updated: Nov 4, 2020
Negotiations are often viewed as big, formal events: when we start a new position and negotiate our salary or when we are looking to rent a property and we negotiate the price.
But, if we stop and think about it, we are actually negotiating every day. Which movie are we going to watch, who is going to throw the rubbish out, why should our team at work agree with and implement our ideas?
“So much of life is a negotiation - so even if you're not in business, you have opportunities to practice all around you” - Kevin O'Leary
Although we are engaged in day to day negotiations, without sometimes even realising it, the formal nature of an important, work-related negotiation can feel more threatening and stressful.
As a matter of fact, 61% of workers do not feel comfortable or confident enough to negotiate their salary and working conditions. In their mind, negotiation is a synonym to compromise.
Negotiation is not compromise
When we compromise, no one gets what they want. When we successfully negotiate, each party benefits from giving another party something they want.
Suppose two people want to go out to dinner. One wants Greek food while the other Indian. If they decide to instead go for sushi, they are both compromising, neither eating what they want. If on the other hand, they decide to go for Greek food on that day and get Indian food the next day, or next week, then, they have successfully negotiated a win-win solution.
Negotiated solutions work much better than compromises. By following a structure, preparing well and communicating effectively, we can walk into a discussion with the ability to reach a mutually beneficial agreement.
So how can we do it? Here are five key stages that we can follow to ensure that we are ready for a negotiation:
1. Prepare and Plan
Firstly, we must finalise and clarify our own goals for the negotiation as well as our BATNA - Best Alternative to a Negotiated Agreement. What is it that we really want to walk away with? This is where the zone of potential agreement (ZOPA) comes in.
Know your ZOPA
Our ZOPA does not have to revolve around a single parameter. Many negotiations focus on the price figure, while tend to ignore quality and time. If a customer is requiring the best quality of service, at a discounted price, immediately, then they are getting everything while we end up compromising.
By doing our research and coming into the meeting aware of these three parameters, we can make sure to try to shift the balance between quality, time and cost to reach a reasonable and mutually beneficial deal.
We also focus on understanding the nature of the negotiation by researching, the people involved and their individual expectations. Having an in-depth understanding of the situation is the most important part of a negotiation. It will help narrow the focus.
As Negotiation expert Chris Voss outlines, “Negotiation is not an act of battle; it’s a process of discovery. The goal is to uncover as much information as possible.”
It is essential to gain an understanding of the needs, goals and objectives of the opposing party. What are they hoping to walk away with? What might their hidden agenda include?
2. Define the Ground Rules
Once we have prepared and prepped, it is important for all parties to define some ground rules for the negotiation. Agreeing on the theme, initial positions, procedure and technicalities will help make sure everyone is starting from an equal place.
Here are some useful questions that can be asked at this stage:
Where and when will the negotiation take place?
Is the negotiation going to be limited to specific issues?
Who will be in charge of the negotiation? Will a third party be involved?
What are the initial positions of the parties involved?
3. Clarify and Justify
Once the ground rules have been set, the negotiation discussion can begin. Parties are given the opportunity to clarify and justify their position. This is a chance to inform and communicate with each other in a transparent and candid manner:
What are our/their issues?
Why are they important?
Why and how we/they reached initial demands?
Take some time to plan and write down the questions we could ask before we walk into the room.
This stage is not confrontational in character. If we disagree with or do not understand something that the other party is saying, we can ask further questions to clarify what is communicated.
4. Bargain and Problem Solve
This is when the most interactive stage of the negotiation begins. At this point, all included parties will “give and take” in an attempt to reach an agreement.
After the initial offer, each party can make counteroffers up until the point where everyone is in agreement. The goal of this stage is to reach a mutually beneficial agreement, a win-win outcome, welcomed by all the parties involved.
Active listening, note-taking and making sure that we look at the opposing arguments through an objective lens is very important. At the same time, we want to avoid becoming emotional, making unreasonable offers and addressing personalities instead of the issues.
“The most difficult thing in any negotiation, almost, is making sure that you strip it of the emotion and deal with the facts.” - Howard Baker
5. Close and Implement
To make sure that each person will get what was agreed, we can use formal contracts where the agreed points are explicitly stated.
Remember to always thank all parties involved, no matter the outcome. Honest and calm negotiations can help build trust, respect and lead to good long-term relationships.
Negotiating successfully requires us to walk into the room prepared, communicate effectively, listen actively, remain calm and look at things objectively. Following these five stages can help us add structure to the negotiation process and lead us to a win-win agreement faster.
Please get in touch with the Higson team if you would like to learn more about the importance of negotiation and the different negotiation stages.