Articles > Positional and Mutual Gains Negotiating (Part 2)
Positional and Mutual Gains Negotiating (Part 2)
by David Bryson
Norton Media
This article on commercial negotiation skills describes an approach to negotiation which might broadly be labeled "positional
bargaining". This is probably the most common form of commercial negotiation. The applicability of this approach
reflects the author's experience as a senior commercial negotiator, feedback from many of the executives that he has
trained, as well as research.
Perhaps the best-known alternative to "positional bargaining" is "mutual gains negotiation", described in the book "Getting
to Yes" by Roger Fisher and William Ury of Harvard University. This approach is prevalent amongst many American
corporations and increasingly in other countries as well. The merits
and demerits of each approach will be the subject of subsequent
articles on this site.
Introduction
My objective is to touch on the more important aspects of successful
commercial negotiation. Inevitably I will be generalising, and
most of us will be able to think of exceptions to some of the "rules".
Don't get hung up on these exceptions - that might stop you giving
due consideration to the important general principles! I will cover:
- procedures e.g. a template for preparation
- behavioural skills such as listening
- attitude.
Of the three, attitude is the most important (despite having fewest
words written about it).
Attitude
The attitude that you bring to your commercial negotiations will dictate outcomes to a very large extent. It is the foundation
on which your negotiation outcomes are built. What successful negotiators need is an attitude of quiet but absolute
determination to get the very best possible deal for their own side, every time. No compromise.
In case this is misunderstood, what I am not suggesting here is a lack of subtlety (quite the contrary); nor that we should
employ overtly aggressive behaviour (rarely, if ever appropriate in commercial negotiation). What I am stating is that if
you don't have this attitude, my advice is to avoid important negotiations in case the other side does!
The negotiating task
Since the expression "win-win" has become popular (and widely misunderstood), what we are actually trying to achieve
in commercial negotiation has become unclear to many. So, let me be clear:
a successful negotiator's sole objective is to gain all the money on the table by the use of all the power at his/
her disposal.
Of course, in commercial negotiation, we often need to consider long-term relationships. And so the skill is in determining
how much money is available to us without jeopardising our relationship with the other side, where this is relevant.
The MSP
How do we do this? Let me start my explanation by introducing the concept of maximum/minimum settlement points
(MSP's). The definition of an MSP is
"the point at which an individual would rather not have a deal".
(Others might refer to "the walk-away point" or "reservation price".)
Estimating where the other side's MSP lies for each particular tradable is a matter of judgment.
(Note - In this article, money or price are most commonly the variables/tradables referred to, but the principles can be
applied to any others e.g. delivery dates, payment terms, man hours.)
We make a judgment about the other side's MSP based on the evidence available to us in preparation, and then we test
our assumptions during negotiation by asking questions and listening.
Our task in negotiation, then, is to come to agreement at the other side's MSP - by definition, the best deal we
can get - as long as it is at a level that is acceptable to us.
We must also set our own MSP for each variable in advance of any negotiation. Why? Most importantly, by setting our
own MSPs in the cold light of day - before the other side has had a chance to manipulate our minds - we ensure that we
never do a disastrous deal. And the very process of thinking carefully about our MSPs means that we are more likely to
take sensible decisions about where these MSPs should lie, rather than leaving it to superficial examination. Finally,
agreeing MSPs with our line manager, where appropriate, gives them (or us, if that is our role) a high degree of control
over outcomes. This can be good news not only for the organisation, but also for the negotiator, who knows that his boss
is OK about what's being agreed.
Remember that an MSP is not a goal (this will be much higher or lower), it is a safety net. Our own MSP is not
where we want to end up, but it is a point at which we would rather do the deal (just) than walk away.