self employed

Your Skill in Making Deals Will Directly Affect the Success of your Business

You may not think of yourself as a negotiator, but Harvard Business School professor, Michael Watkins, says you are. “A good part of your time is spent negotiating,” he says. “There is no skill more essential to business success than the ability to carry out a successful negotiation.”

He’s right, of course. Whether you’re dealing with suppliers, employees, financial sources, prospects, or customers, you are actively involved in the complex process known as negotiation. Your skill in making deals will directly affect the success of your home-based business. Professor Watkins, a nationally recognized expert on business negotiations, teaches his students how to break the negotiating process down into four simple steps.
                                                                                                                                  
1. DIAGNOSE THE SITUATION

 “The first step in preparing to negotiate from a position of strength is to diagnose the situation thoroughly,” says Watkins. In particular, you need to learn:

a) Who are the players? Who will, or could, participate? The key parties to a negotiation may seem obvious; sometimes they are — but not always. There may be players in the background who can influence the outcome, or new players may enter the discussions and unexpectedly influence the talks.

If you’re negotiating with a supplier’s representative, the cast will probably consist of just the two of you. However, if you’re negotiating with an equipment manufacturer, you need to know if the person or persons you’re dealing with have the authority to make a deal.

b) What are the rules of the game? There are basic rules and codes of conduct that apply to all business negotiations, dealing largely with courtesy, diplomacy, and other aspects of behavior on the part of the participants. Watkins suggests that you consider the following questions before you enter into any negotiation:
~  What laws and regulations might apply here?
~  What social conventions will shape the parties’ behavior?
~  Are there codes of conduct that apply?
~  What other rules of the game may influence the other party’s behavior?

A clear understanding of these “rules” will help start you off from a position of strength.

c) What issues will you negotiate? “It’s unwise to treat the agenda as fixed,” says Watkins. “The set of issues the parties will negotiate is itself subject to negotiation. No matter how obvious the basic issues appear to be, it is worthwhile to probe beneath the surface.” You should also identify and deal with what Watkins calls toxic issues — potentially volatile issues that have a high emotional content. “It’s often prudent to defer a toxic issue until the other issues are worked out,” says Watkins.

d) Define your walk-away position. The next step is to define your walk-away position (WAP). What is the least you are willing to accept to enter into an agreement? Establishing this value as a benchmark and keeping it clearly in your mind will help you avoid getting so caught up in the heat of negotiations that you turn down an alternative deal that was actually better than your WAP.
                       
2. SHAPE THE STRUCTURE
“It’s a mistake to approach the ‘game’ as fixed,” says Watkins. “Business owners tend to focus on what will happen during negotiations and not on influencing the context in which deliberations take place. Pay more attention to who is, or could be, involved as well as what’s at issue and how the situation should be framed.” Here are two key elements he feels you should address before negotiations begin:

a) Setting the agenda. Negotiating professionals agree that taking part in setting the agenda is a crucial step in successful negotiations. By helping define the issues to be discussed and setting their priorities, you put yourself in a position of strength when the discussions begin. “Good negotiators don’t just play the game,” says Watkins, “they shape the game.”

b) Controlling information. Information is power. Arguably, there is no other activity where this old axiom is truer than in negotiations. Exerting control over who gets access to what information is another way to gain a position of strength in discussions.

For example, in negotiating with a vendor, you would probably want to share the fact that you have been talking with a competitor. However, if you learned that your account was too small to interest the competitor, sharing that information would be a poor strategy.

3. MANAGE THE PROCESS
The third step is determining the best way to handle face-to-face negotiations. Among the steps important to this phase are:
           
a) Sensitivity to early interactions. “How a negotiation begins,” says Watkins, “tinges everything thereafter. Initial impressions persist and are resistant to change.” He stresses that mutual respect at the beginning of the process increases the likelihood of eventual agreement, but bad blood at the beginning can poison all that follows.

In what he calls “irreversibilities,” Watkins observes that negotiators often walk through doors that lock behind them. In particular, he cautions against trying to take back a concession once you have made it. Any action that undermines trust is likely to provoke an irreversible change in the attitude of the other participants.
           
b) Tipping points. Keep yourself aware of thresholds in negotiation that Watkins calls “tipping points.” These are the sensitive points in the talks where even tiny concessions or refusals can lead to major shifts in positions. “You should always be aware of your own emotional thresholds and coping mechanisms to avoid being pushed over the edge. Be very careful when raising issues that are hot buttons for the other side.”
           
c) Emotions. Emotions, either real or feigned, play a part in most negotiations. “A timely display of anger, for example, can demonstrate resolve so long as it is employed infrequently,” says Watkins. However, you must keep any display of anger under careful control. Emotional outbursts of any sort can easily escalate, generating emotional conflicts that make rational judgments all but impossible. “Once strong emotions are triggered,” says Watkins, “they dissipate slowly. The psychological and hormonal effects of anger can’t simply be turned off; the result may be temporary inability to think rationally.”