Many people see the goal as a negotiation being the idea of reaching agreement. While agreement is obviously the end goal of a negotiation, the idea of building value through negotiation is often overlooked. Parties will reach agreement, do the deal and move on.
According to the late Professor Howard Raiffa, a former professor at Harvard Business School, negotiation should be focused not on getting an outcome but “toward the question of how to create joint value.”
Take for example the following situation. Spencer is selling his car and Bridget wants to buy it. Spencer wants to get $20,000 for the car but Bridget offers $17,000. If the goal is simply to get to agreement, the parties are likely to haggle on price until they reach a number that is acceptable to both. Research tells us that is likely to be around the mid-point between the first offer made in the negotiation and the first counter-offer. Let’s say around $18,500 in this case.
However, imaging that in a search for value, the parties spend time uncovering each others’ interests. Spencer learns that Bridget isn’t really wanting a car just yet because she lives in a flat with no parking space. She started looking as she’s moving in about 6 weeks and will need a car then. But she likes this model and colour so thought she'd come and have a look. If necessary, she can rent a car space if she really likes the car.
Bridget learns that Spencer is selling his car because he’s moving overseas in two months. He started the sales process early so he wouldn’t be forced into a discount sale to get in done before he leaves but will have to hire a car before he leaves if he sells now. Also inspiring Spencer to start the sale process now rather than closer to his departure date is the fact that the registration is due in one month. He would rather avoid having to pay the registration out of his cash reserves.
Knowing these factors, the parties are able to come up with a better deal than an immediate sale at $18,500. They agree that Bridget will buy the car but in only in six week’s time when she has to move. She will pay a deposit on the car and agrees that Spencer can use that deposit to cover the cost of registration. She is willing to cover the costs of registration from the date of transfer and Spencer will cover the costs until then.
Not only that, but Bridget will also buy some of Spencer’s appliances and furniture that he is selling as she needs to furnish her new place and his stuff looks great. Both parties are much happier – and better off - than if they had simply traded the car for money.
As a negotiator, your job should always be to look for ways to find value in the deal. Being prepared to share what is important to you, and being curious about what is important to the other party is the best way to facilitate this process.
How have you created unexpected value in a negotiation?
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