Key Terms to Help Get You Through Your Next Negotiation

To help you avoid having to breathe fire as in the cartoon above, I’ve compiled a list below of a few key terms that will give you a leg up when you engage your next negotiation. Whether you’re trying to buy a new car, find middle ground on wages with a labor union, or settle on a cost structure for procurement contracts, being a good negotiator is an invaluable skill to have in your professional repertoire. As President Obama recently found during the debt ceiling debate, negotiating skill can be the difference between success and default.

• Anchor:  Anchors are reference points around which negotiations evolve. As this working paper by Professor Adam Galinsky of Northwestern University recommends, negotiators should anchor aggressively and make the first offer in most circumstances. Why do anchors work so well even among educated negotiators?
  
  “The answer lies in the fact that every item under negotiation (whether it's a company or a car) has both positive and negative qualities—qualities that suggest a higher price and qualities that suggest a lower price. High anchorsselectively direct our attention toward an item's positive attributes; low anchors direct our attention to its flaws.”
   
• Frame:  Make sure you “frame” the context of the debate in a positive perspective. The excerpt below from “Negotiation Strategy: 6 Common Pitfalls to Avoid” profiles research by prominent Stanford Business School professors and provides a telling comparison of how framing makes a difference in an argument.
  
  “For example, you are a purchasing manager renegotiating an hourly wage contract with a subcontractor. The subcontractor currently makes $10 an hour. You are willing to elevate the subcontracting firm to $11 an hour. Another organization recently boosted its rate with your subcontractor to $12 an hour. You know that when the negotiators for your subcontractor hear your $11 offer, they may think they are going to have to give up a dollar an hour.
  
  You must get them to focus on the point you are starting from — $10, not $12. You frame the issue positively by talking about all the ways your contract is different from the others. Your contract has some advantages outside of the hourly pay. The other side will be more willing to risk lower wages for the purported other benefits. A common mistake is negotiating from a negative frame: "The other firm's deal offers more, but we can afford only $11.”
   
• Bundling:  Have you ever bought a combo meal at a fast food restaurant? If so, you’ve enjoyed the advantages of bundling – the practice of offering or supplying related products or services at one all-inclusive price. For a word that many of us are familiar with, it’s incredible how deeply the concept has penetrated our conception of what’s normal. Have you ever bought a computer without prepackaged software or a car without a sound system? Maybe you have, but you’re definitely in the minority.
  
  Not only can this concept allow you to sweeten deals at the end of a long negotiation, but it can also allow you to bridge previously insurmountable objections and change the “frame” of the debate. For example, negotiating to lower your employee’s bonus is a very different thing from discussing how he would feel about more vacation days in exchange for less bonus upside. Furthermore, if final deadlines are fast approaching for either party, bundling can allow you to add in previously off-the-table items to help close a deal.

If you can anchor, frame, and bundle effectively, give me advance notice so I’m not across the table from you at a major negotiation. In an age when people interact directly less and less for both their professional and personal lives, having the finesse and savvy to not blink when the chips are down (excuse the cliché) can take you and your company from good to great.

For more insight on this topic, register to attend the Inner City 100 Symposium on May 9th where Harvard Business School Professor Francesca Gino will be presenting Negotiating to Yes. The session is designed to help entrepreneurs not only advance their personal negotiation skills, but also help diagnose and resolve negotiation-related problems across many different interpersonal, organizational and cultural contexts.

BY Sathya Vijayakumar on February 17th, 2012

TAGS: small business | negotiation | executive education | business | entrepreneur | ic100