what does it mean to sit first when negotiating

Idea in Cursory

The Problem

Some of the costliest mistakes in negotiations accept place before anyone sits down at the bargaining table. That's because deal makers tend to focus besides much on substance—offers, counteroffers, concessions—and not enough on procedure.

The Solution

Iv strategies can assist ready the stage for a successful negotiation.

• Negotiators need to address matters of process at the outset.
• They must set realistic expectations.
• They need to clearly place all players that will influence or be influenced by the deal.
• And they must set the psychological frame through which the deal will be viewed.

Countless books and manufactures offer advice that can help deal makers avoid missteps at the bargaining table. Merely some of the costliest mistakes take place earlier negotiators fifty-fifty sit down to discuss the substance of the deal. That'south because people fall prey to a seemingly reasonable—simply ultimately faulty—assumption about deal making. Negotiators ofttimes take it for granted that if they bring a lot of value to the table and have sufficient leverage, they'll be able to strike a great bargain. While those things are certainly important, many other factors influence where each party ends up.

In this commodity I describe on my experience advising scores of companies on deals worth millions or billions of dollars to present four factors that tin accept a tremendous touch on on negotiation outcomes. In each case, I provide guidance on what negotiators should do before either side starts making offers or counteroffers.

1. Negotiate Process Before Substance

A couple of years ago, two cofounders of a tech venture walked into a meeting with the CEO of a Fortune 100 company who had agreed to invest $10 million with them. A calendar week earlier, the parties had hammered out the investment amount and valuation, so the meeting was supposed to be celebratory more than than anything else. When the cofounders entered the room, they were surprised to see a team of lawyers and bankers. The CEO was besides there, but it shortly became clear that he was not going to actively participate.

As presently as the cofounders sabbatum down, the bankers on the other side started to renegotiate the deal. The $x 1000000 investment was still on the table, but now they demanded a much lower valuation; in other words, the cofounders would have to surrender significantly more disinterestedness. Their attempts to explain that an agreement had already been reached were to no avail.

What was going on? Had the cofounders misunderstood the level of commitment in the previous coming together? Had they overlooked steps involved in finalizing the deal? Had the CEO intended to renege all along—or had his team convinced him that the deal could be sweetened?

Upset and dislocated, the cofounders quickly assessed their options. Accepting the new deal would injure financially (and psychologically), but they'd get the $x million in needed funds. On the other hand, doing so would significantly undervalue what they brought to the table. They decided to walk out without a deal. Before they left, they emphasized their strong desire to do a deal on the initial terms and explained that this was a matter of principle as well as economics. Inside hours, they were on a airplane, non knowing what would happen. A few days afterward, the CEO called and accustomed the original bargain.

The gutsy movement worked out for the cofounders, but it would have been amend not to permit things go wrong in the first place. Their mistake was a common one: focusing too much on the substance of the deal and not enough on the process. Substance is the terms that make up the last agreement. Process is how yous will get from where yous are today to that understanding. My communication to deal makers: Negotiate process before substance.

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Consider another scenario. You've been negotiating with someone for months. You have a few final concessions that y'all've been holding back—they're plush but worth making if information technology will close the bargain. With the finish line in sight, you make the concessions, and the other side responds: "This is dandy. I appreciate your flexibility on these issues. Let me share this with my dominate to see what she thinks." Unfortunately for you, you had no idea your counterpart even had a boss—yous thought he was the final decision maker. The negotiations are clearly not over, and you lot take nothing left to give.

The more clarity and delivery you lot have regarding the process, the less likely you are to make mistakes on substance. Negotiating process entails discussing and influencing a range of factors that volition impact the event of the bargain. Ask the other party: How much fourth dimension does your company demand to close the deal? Who must be on board? What factors might ho-hum downwardly or speed up the process? Are there key milestones or dates we should be aware of? Remember to find out simple things such as, Who will be in the meeting tomorrow? What volition the agenda be? Since we are non going to hash out the issues of importance to u.s. in the next meeting, when will we address them?

Of form, you lot can't always get clear answers to every question at the kickoff—and sometimes information technology is premature to ask sure questions. But you should seek to clarify and achieve agreement on every bit many process elements as possible—and equally early on as is appropriate—to avoid stumbling on substance later.

2. Normalize the Process

A businessman who owns multiple manufacturing facilities in Asia in one case told me that he no longer does business organization with companies from the Due west unless their top managers are willing to first fly into his city to meet with him. My initial thoughts were: Is this near ego? Is it about edifice relationships? Is it a cultural norm or ritual of some sort? Really, none of those had anything to do with his precondition to signing a contract.

Here's how he explained it to me: "Until they have flown into my metropolis and then driven to our manufacturing plants—which are located 20 kilometers from the airport but take most 3 hours to reach—until they have experienced that, they only don't understand how things piece of work around here. And if they don't empathize, we encounter serious problems. Because the first time at that place is a delay or disruption, or if we need to renegotiate something, they will immediately presume nosotros are either incompetent or stealing from them. One time they've seen how things actually work, we can have a more productive relationship."

Unless business partners sympathize what is "normal" in a given context or culture, they are likely to misunderstand or overreact to adverse events. The same is truthful in negotiations of all kinds: It is important to normalize the process. If you've ever been involved in an ugly conflict that went into mediation, you may have seen this in action. When a good mediator sits down with parties who are in a biting dispute, she might say something similar, "You think you hate each other today? I can assure yous, nearly three days into this process, you're going to detest each other even more. And when that happens, I want you lot to remember something: That's normal."

Tell counterparts what to look so they don't overreact to bumps in the route.

If the mediator does non give this warning, the parties are much more likely to abandon the process when emotions heighten and things seem to exist falling autonomously. Merely if she explains at the first that it'southward normal for things to get worse before they get better, the parties are more than likely to keep at it. By normalizing the procedure, she effectively manages their expectations.

The same principle applies to any negotiation where there's a take chances that things will non get perfectly smoothly. If y'all conceptualize delays or disruptions on your side, tell your counterparts. This allows you lot to shape how they will interpret a negative upshot should one occur and to ensure that they practice non overweight its significance. You'll accept a much harder fourth dimension trying to influence their perceptions or win back their trust later something goes incorrect that they did not expect.

Normalizing the process entails discussing, in advance, any factors that might cause the other side to question your intentions or ability or to doubt the likelihood of a successful outcome. Y'all might explicate typical barriers that need to be overcome, moments during the process when information technology'southward mutual for parties to feel anxious or pessimistic, events that might filibuster progress, and the divergence betwixt disruptions that are commonplace and easy to resolve and ones that are more serious.

Encourage the other side to do the same for yous. People oft hesitate to discuss "what might go wrong," because they're focused on presenting themselves and the claim of the bargain in the best possible light. This is especially true in sure cultures and in contexts where competition is fierce. Your analogue might be thinking, "Why should I talk about problems if my rivals are pretending things volition exist great?"

That's understandable. If other parties call up that mentioning a potential disruption could toll them the business, or that you'll use it as a lever to extract greater concessions, they're unlikely to be truthful. To encourage people to be open about problems, make it safe for them. Explain that you are experienced enough to know that every deal and relationship is likely to encounter difficulties and disruptions, and that y'all desire to acquire more about the specific run a risk factors that might play a office in this case. And if you can signal (or commit to) having no intention of belongings those factors confronting them, you have a better chance of reaching an agreement that works for both sides.

3. Map Out the Negotiation Infinite

Some years ago, a client of mine was preparing to sell his stake in a company that was jointly endemic by four entities. The owners had been squabbling for many years; it was clear that the asset would demand to be consolidated under one political party (or perhaps two who could get forth). It was also clear that no one wanted to sell. However, there was piffling pick in the affair, because ane of the owners—Visitor Ten—was a much larger company with the power and the ascendancy to push people out. It announced that information technology would buy out the other 3.

My customer wanted to look until Company X had bought out the other two owners earlier negotiating the sale of his shares. He figured that by being "the last piece of the puzzle," he would be able to hold out for more than money.

When we met to discuss his strategy, I asked him to step back and "map out the negotiation space." This consists of every party that can impact the negotiation, along with whatsoever party that will be affected by the negotiation. In my experience, a strategy that makes perfect sense when you're thinking bilaterally—that is, about the relationship between any two parties in the negotiation—can suddenly get ineffective or even disastrous when you take a multilateral perspective. I encouraged my customer to evaluate the interests, constraints, alternatives, and perspective of all the relevant parties. Ane of the things we looked at was how much equity each party had and how much of the board each one controlled:

Nosotros and so focused on the interests of each company: What exactly are their interests in this bargain? How would you rank their priorities? The four parties had known i another a long time, and my client did not have whatever trouble identifying what mattered most to each. Visitor Ten, for example, was concerned about three things, and its priorities were equally follows: (one) Reputation: It did non want ties with any organization that could hurt its reputation. (ii) Control: Information technology wanted buying merely in businesses where it had a majority of lath seats, and (3) Money: Information technology would desire to pay every bit picayune every bit possible, only this was not as big a concern as reputation and command.

After delving into the perspectives of all parties, we unearthed ane more important fleck of information: Company A was the to the lowest degree interested in selling and was already putting upward a fight that could drag things out.

When we put all these details together, information technology became clear that the "last piece of the puzzle" strategy would be unwise. Why?

For Visitor Ten, command was a higher priority than coin. To get control, it needed to buy either my client or Company A—every bit shortly equally information technology fabricated either buy, information technology would command more than than 50% of the board seats and hence the visitor (for near decisions). Therefore, if my customer were the concluding to sell, he would exist negotiating with Company Ten after it had control. At that time, my client would be able to go paid only for his 1/half dozen share of the firm'south equity. Just if he were to sell kickoff, at a time when Company A was refusing to sell and was making things hard for Company X, he could monetize two assets: his shares and his lath seat. In other words, the last party to negotiate would have the to the lowest degree leverage and limited opportunities to monetize its assets.

Make sure to consider the perspective of every political party that can impact the bargain.

In the real world, you lot'll never have every bit consummate a motion picture as you'd like, but you put yourself at further disadvantage if yous focus as well narrowly on the party on the other side of the tabular array. You accept to appraise the perspective of all the parties that can influence or are influenced past the deal: Who has the power to influence the person on the other side of the table? How might the strategy or deportment of other parties change your alternatives, for meliorate or worse? How does the deal touch on the interests of those who are not at the table? How will this negotiation touch on your leverage with future negotiation partners? If multiple parties are involved in the deal, does it make sense to negotiate with them simultaneously or in sequence, together or separately?

Your analysis might suggest a change of strategy—that you should negotiate with a different party commencement, filibuster the bargain or speed information technology up, bring others into the room, expand or contract the scope of the deal, and so on.

4. Control the Frame

The outcome of a negotiation depends a dandy deal on each side's leverage—the better your outside options are and the more ways you have to reward or coerce the other side, the more likely you are to achieve your objectives. But the psychology of the deal tin can be just every bit important.

In my experience, the frame, or psychological lens, through which the parties view the negotiation has a significant consequence on where they finish upwards. Are the parties treating the interaction as a problem-solving practice or as a battle to exist won? Are they looking at it as a meeting of equals, or do they perceive a deviation in status? Are they focused on the long term or the short term? Are concessions expected, or are they seen as signs of weakness?

Effective negotiators will seek to control or suit the frame early in the process—ideally, before the substance of the bargain is even discussed. Here are three elements of framing that negotiators would exist wise to consider.

Value versus price.

I've worked with many engineering companies whose innovative products provide tremendous value for customers but are priced significantly higher than what their competitors are charging—or what customers are paying for their legacy systems. While the high price is justified by the value proposition, salespeople often face up firsthand resistance when a potential customer learns that the cost volition exist five or 10 times the amount he is currently paying. As well ofttimes, the salesperson will hear something similar: "Yous are charging five times what others charge. No one pays that much for this kind of thing!"

From the outset, command the lens through which parties view the negotiation.

One of the most common mistakes salespeople make in those situations—without fifty-fifty realizing it—is to apologize for having a high toll. They practise this when they say "I sympathise it'south pricey, but…" or when they hastily betoken a willingness to adjust the price. My communication: Always justify your offer, but never repent for it. When you apologize, you indicate that even you don't think the toll is appropriate, and yous give the other side license to haggle. The entire frame of the negotiation becomes about toll, when what you really desire to discuss is value.

A ameliorate response would be, "What you seem to be asking is, How is it that despite a higher price, nosotros still have a long and growing list of customers? We both know that no one will pay more for something than information technology's worth, so let's hash out the value nosotros bring so that you tin can determine what's best for you."

In negotiations of all kinds, the sooner y'all can shift the discussion abroad from the cost to your counterpart and focus on the value you bring to the table, the more probable it is that yous will be able to monetize that value.

Your alternatives versus theirs.

Enquiry and experience suggest that people who walk into a negotiation consumed by the question "what will happen to me if in that location is no bargain?" become worse outcomes than those who focus on what would happen to the other side if in that location's no bargain. When you are overly concerned with your own alternatives, and peculiarly when your exterior options are weak, you remember in terms of "what will it accept (at a minimum) to get them to say yep?" When you make the negotiation well-nigh what happens to them if there is no bargain, you lot shift the frame to the unique value you offer, and it becomes easier to justify why y'all deserve a good bargain.

Equality versus dominance.

Not and so long ago I was consulting on a strategic deal in which our side was a pocket-size, early-stage company and the other was a large multinational. Ane of the most of import things we did throughout the process—and peculiarly at the outset—was make sure the departure in company size did non frame the negotiation. I told our team, "These folks negotiate with two kinds of companies—those they consider their equals and those they call up should feel lucky just to be at the table with them. And they treat the 2 kinds very differently, regardless of what they bring to the table." Over the years, I've seen many large organizations impose demands on their perceived inferiors that they'd never crave from those they considered equals. In this negotiation, I wanted to brand sure our counterpart treated the states like equals.

To keep the dominance frame from taking agree, we started shaping expectations and perceptions at the very kickoff, before we even considered the economics of the deal. For case, any time our counterpart made a procedural demand—nonetheless small—that we felt they would not take made of an equal, we respectfully pushed back on it. Any time they included a provision in the term sheet that seemed i-sided, even if it would not have been a costly concession, nosotros redrafted it to be symmetrical. And throughout the negotiation, we made sure they understood that although our firm was much smaller, we were equals in this negotiation because of the tremendous value nosotros offered. While I am not an advocate of nitpicking on modest issues, in this case we did and so intentionally to help prepare the right frame.

Negotiators tin can shape the frame in endless other ways and on many other dimensions. At the very to the lowest degree, you desire to ensure that the psychological lens that takes concord respects the value you bring to the table.

In The Art Of State of war, Sunday Tzu posits that every war is won or lost before it fifty-fifty begins. In that location is truth to this sentiment in most strategic interactions. While information technology would exist unwise for negotiators to minimize the importance of carefully managing the substance of a deal, they should brand every effort to avoid the mistakes that tin can occur before anyone has fifty-fifty formulated an offer. Past paying attention to the four factors discussed here, y'all increment your chances of creating more than-productive interactions and achieving more-profitable outcomes.

A version of this commodity appeared in the December 2015 issue (pp.66–72) of Harvard Business Review.

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Source: https://hbr.org/2015/12/control-the-negotiation-before-it-begins

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