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How to negotiate for a win-win outcome

Last week, a group of Supper Club members took part in an interactive digital workshop on negotiation. Led by Niro Sivanathan, professor of organisational development at London Business School, the session focused on practical advice and tips for improving how you negotiate in order to achieve better outcomes more often.

Fundamental to achieving such good outcomes from any negotiation is understanding. Your mindset, according to Sivanathan, should always be "to seek to understand before being understood".

Negotiation is, he explained, simply a decision-making process by which two or more people agree how to allocate scarce and dependent resources. It is often the case that "winners" in a negotiation don't always feel like they have won. They often end up having paid too much or settled for too little.

have a best alternative

He also focused on the idea of BATNA - or the best alternative to a negotiated agreement. BATNA is what allows you the ability to walk away. The best way to establish this is to ask yourself what you are going to do if you don't make an agreement. BATNA, gives you freedom and is, according to Sivanathan, the single greatest source of power at the bargaining table.

Key tip: Do not enter into a negotiation if you don’t know what BATNA looks like.

Know the reservation

Connected to this is the idea of knowing your "reservation price". This is your bottom line, the point at which you are indifferent as to whether you achieve a negotiated agreement or walk away. Beyond the reservation price, you prefer no agreement. To find your reservation price, it is plus or minus things that make you want to do the deal. Your reservation price should never change unless something else fundamental shifts, such as your BATNA or the overall terms of the deal.

Key tip: Do not reveal your reservation price. If you do, you leave no room for concessions and contrary to the myth revealing it doesn't help establish trust.

Initial offers matter

Think carefully before you make an initial offer. This matters because final agreements are more strongly influenced by initial offers than by subsequent concessionary behaviour. The initial offers provides an anchor. People make estimates based on this initial anchor value and make adjustments from there to yield a final answer. But very often they don't make sufficient adjustment.

Due to something called "midpoint bias" – there is a tendency to settle towards the point halfway between the first offer and the first counter offer. Therefore you need to have an aggressive first offer, although to be credible this must be based on sound rationale. You need to be able to explain the offer, because you need counter parties to buy into what you’re offering.

Key tip: Do not confuse an aggressive first offer with aggressive behaviour. Be confident and move forward with your first offer.

Winners plan, then execute

Successful negotiations do not just happen. Niro was at pains to explain that the best negotiators are in the habit of using a planning document. A key part of this planning is to think about your counterpart's BATNA. Understanding this will change the way you approach the negotiation. Here again, Sivanathan highlighted the importance of understanding before being understood.

Key tip: Successful negotiations are 80% planning and 20% execution.