3 negotiation principles that will make you a lot of money
1. Begin with the end in mind
Stephen Covey's book - The Seven Habits of Highly Effective People, talks to this principle.
I start with this one as a key negotiation principle because too many business leaders do not start with the end in mind.
In negotiation, when you're thinking about what you are trying to achieve you must start with a vision of the end state. A vision of what you're trying to create for your business and the ideal deal that you're ultimately trying to land with your suppliers and/or your customers.
When you begin with the end in mind, you create a map of what you want in your mind, BEFORE you create it in reality. By creating the map clearly in your mind first you are able see what is needed to bring that deal to life, not only that but, you are also better able to share that vision with the team that you're working with.
Team members aren't necessarily just the individuals that are going to be sitting at the table doing the actual negotiating with you. They can also be the supporting team members, whether that's HR, Finance, or other parts of the business that you're working with to bring the deal together.
Unless you're able to articulate a clear vision and begin with the end in mind, it's difficult identify what steps are going to be involved in bringing that deal to life, which impacts how you get other people behind that vision to support you.
In large, complex negotiations, when you don't begin with the end in mind, you create inefficiencies in the way you plan for the negotiations and how you negotiate at the table.
Often misalignment internally creates more friction than the actual deal negotiation itself.
When you begin with the end in mind, the first thing that you need do is to understand what is the ideal scenario that you are trying to create for yourself and your business. You need to consider who needs to be on board with that ideal scenario and who needs to sign it off.
Identify all the interested parties in your business that need to be involved and remember sometimes the most interested party is not the decision maker, so there can be resistance and challenge back from various parts of the business. Especially, if the scenario you're opting for could have adverse consequences for parts of the business either in the execution or delivery of that deal.
When you begin with the end in mind you're answering - What is the vision for the deal? Where are we heading? What are we trying to achieve and why?
Rally people around that vision so that everyone's got clarity and opportunity to input. Identify very clearly who the interested parties are, and determine who needs to be involved right from the outset, who's sign off you need to progress your vision and bring it to life.
When you do this, you are far more effective in bringing to reality the vision you've created.
But when you don't start with the end in mind, it's easy to make a significant number of mistakes along the way, which costs you money, along with wasted time and effort, rather than making you lots of money.
2. Preparation elevates execution
As a rule, you must spend more time preparing than you do the amount of time you spend executing in the negotiation.
There are various amounts of research that tell you exactly how much time that you should be spending in preparation relative to how much time you're in a negotiation. It varies from 90% of the negotiation success being linked to preparation, which would indicate for every one hour of negotiation face to face time, you'd be spending nine hours of preparation. And it can go all the way down to spending three times the amount of time for your preparation in relation to the amount of time you're spending executing, so if it's a one-hour meeting, and the ratio is three times, you're spending three hours of time preparing,
Three to nine hours of preparation time for a one-hour meeting is quite a vast range but the essence is clear. You must spend significantly more time preparing than you do executing.
If you do not spend time focusing on preparing and only focus on executing, you're not maximising the value you can create.
Start and determine first and foremost what is the planning to execution ratio you are going to apply in your business, and stick to it.
By not preparing fully its natural to only focus on execution 'at the table' and this is the mistake that many businesses make. Because when you're only focused on who you need to be at the negotiating table it becomes very tactical, and it's very one dimensional in terms of negotiation approach and style. But when you zoom out and plan effectively, what you start doing is thinking about the negotiation more holistically, which gives you the opportunity to evaluate power and appropriately create leverage.
e.g What do we need to know? How can we predict the other counter-party's response? Where is our influence? What do we have that we can use to create leverage? What do we need to consider and influence away from the table? How do we design the deal such that we are the architects of the ideal scenario? How can we have our counterparty respond in the way that we can predict their response, rather than leave ourselves vulnerable reacting to a situation live in the moment?
Too often I hear business leaders say, oh, let's see what they come back with and we'll determine what we do next. You never want to hear that sentence because, frankly, if you're waiting to determine your next move based on what the counter-party comes back with, you haven't planned enough.
If you haven't planned for each of the scenarios that could happen, you can't be prepared and ready to respond with the moves you need to make in a timely and effective way.
Consider a chess game. If you're playing chess and your game was being timed, and your counter-party makes a move, and it's only after the time has started you start thinking about what you need to do next. Not only are you wasting time, but it's highly inefficient and it's unlikely you'll have evaluated all the different ways that they could then still potentially checkmate you. It's also the most stress you can put your body under, which means you won't be able to think clearly.
If you spend more time preparing in advance than you do executing, so that you have your range of scenarios already in mind, then when the counter-party comes back with a response, you can confidently make the best move you can in response to their move, because you've already anticipated the number of different directions they could have moved and anticipated what your moves would be in response to them.
What that allows you to do is be more efficient with time during the negotiation so that you can always be several moves ahead. It also allows you to be more effective the deal you negotiate. You're not just reacting in the moment and sub-optimising the deal because you've not spent enough time planning.
3. Keep your chimp in the cage
You must separate your feelings from your behaviours.
In The Chimp Paradox - Dr. Steve Peters talked about our limbic brain being an emotional machine that automatically responds when it is triggered, into a fight or flight response, by the external environment.
Fight or flight is our adrenal response to stress, and when we respond from that state, we do and we say things that we do not mean to say or do.
Outside of flight or fight, when our logic brain, our frontal lobe, has been switched back on and we're back in our executive centre of our brain, we can think more calmly and rationally about what needs to be said, and how we need to act in the negotiation.
But when you're under stress, if you're experiencing the fight or flight response, the chimp has been released from the cage. You are not in charge anymore, your chimp is.
Often then, your ego takes front and centre stage, you sub-optimise a deal because of your chimp's desire to 'survive', it wants you to 'win' and you get entrenched in your emotions. It becomes very difficult see things clearly.
When you can't see things clearly, you sub-optimise the opportunity to look for where value can be created because your focus is solely on winning, 'surviving'. Often this leads to deadlock.
Keep your chimp in the cage by developing emotional intelligence.
If your business and your key commercial team leaders have low emotional intelligence, then they can't be highly effective, highly skilled negotiation experts.
Strong negotiation performance and low EQ don't correlate. A high level of emotional intelligence is needed to be able to be effective in negotiation. Why? because if you have low self-awareness or you have low ability to self-regulate your emotions, you are not going to be able to maximise the value you get in a deal.
Under stress your decision making is impaired, and your response to stress is elevated. The way you communicate and build interpersonal relationships is also going to be impacted. With low EQ you are less likely to be aware of the ways that you are limiting the deal.
EQ plays a huge role in developing negotiation mastery, work on developing your EQ.
Another way to keep your chimp in the cage by creating a pause, a space between the stimulus and the response. The stimulus is often what your counter-party has said and there's often a desire to react immediately. Too often this reaction is an emotional one and if you've been triggered to react then your emotions are in charge and it means your inner chimp is out.
To keep your chimp in the cage. Slow down, create time for a pause and give yourself the space to get back into your frontal lobe, in your executive centre, and give a considered, conscious, rational RESPONSE instead of an unconscious reaction.
In a negotiation you will feel stress, it's a time when you're under extreme pressure to get results. Negotiations are often high stakes environments, to limit your risk give your body the experience of that stress in a safe environment so that your chimp doesn't come out the cage in a negotiation, do this by practicing role playing.
If you practice role playing in your business, working with each other on the potential responses your counter-party could give you, you simulate the kind of pressure you could be under. This way you get to evaluate your stress response in advance and see your chimp in action in an environment where it won't cost you, or your business, millions!
Through role-playing, and putting you body in a simulated stress environment, you are less likely to get your chimp coming out of its cage in a live negotiation.
To summarise, if you want to make a lot of money in a negotiation then you must:
1. Begin with the end in mind
2. Prepare to elevate execution
3. Keep your chimp in the cage
