The premise is simple: in life, you will have to negotiate.
Be it as part of a relationship, at work, school, sports team, or as member of an organization, if you interact with people you will negotiate. Unfortunately, negotiations often make us uncomfortable. They carry a reputation of being about the steps to make a deal in a zero-sum game. That is wrong. Negotiations are about relationships. Long term relationships in particular, and when done right result in win-win scenarios. If to you that sounds counter-intuitive, you currently probably feel uncomfortable before, during, or after a negotiation.
This post is about how to prepare for negotiations and how to act during them so that you feel confident and comfortable. Some of the content will seem like common sense to you, and it should. Systematizing such common sense is the difficult part, and that is what this post will show you how to do.
A Successful Negotiation? What?
Let’s start from home: how negotiations feel to me to see if you agree. To me, the word negotiation has always had a negative connotation. It would bring into my head an image of a customer making a deal at a car dealership, and feeling uneasy afterwards. That discomfort may come from many places. Maybe you see the end result as a win-lose situation. Maybe you like things to be fair, and in the spirit of not taking advantage of other people you tend to take a soft position and end up giving up too much (if this is the case, in the future you will probably avoid negotiating with those who took advantage of you in the past). Or maybe you tend to be too firm and end up taking advantage of the other side. Whether you enjoy that or not, it will definitely leave a bad impression on the other person. Remember that we live in a small world, and you rarely interact with people just once.
Let’s now expand the limited view of negotiations that encompasses car-dealership, home-buying, or salary negotiations into a much broader and accurate representation. Have you ever successfully been able to reach a fair compromise of interest? That’s negotiation. More specifically, let’s talk about principled negotiation. It’s an approach to negotiation that focuses on understanding the interests of the parties involved and in managing and resolving conflict. It highlights the process of investigating what the interests of the other parties are, embrace them as valid and make them resonate with yours, to then achieve an agreement based on an objective criteria that is fair to all. It’s not me-vs-you, but rather a cooperation to achieve the best result possible.
Easier said than done. To reach a successful and satisfying agreement, there are things you must do prior to and during a negotiation. To illustrate the dos and don’ts when it comes to preparing for and managing a negotiation I present the following two examples of salary negotiations I underwent: one of them successful, the other one far from it.
First, what to do prior to a negotiation.
Before a Negotiation
One of the main reasons negotiations feel uncomfortable is because we under-prepare. Lesson 1: do your homework. The more you prepare the more likely you are to be the driver of the agenda and the better you are likely to do.
Successful Preparation for Negotiation w/ Company A
I had received the offer letter from Company A a week prior to our scheduled call to discuss terms. During that week, I prepared extensively by gathering all the information from two other offers I had previously received plus this particular offer and putting everything into a spreadsheet. I adjusted monetary values to reflect cost of living, as all three offers were in different cities. That way we could compare apples to apples. I then defined an objective criteria to discuss salary: hourly rate. All three jobs required different weekly time commitments, so an hourly rate was a fair and objective point of comparison. Lesson 2: find objective criteria that you can evaluate the terms on.
It’s more often than not the case that someone is looking for a fair deal. The challenge is usually on agreeing about what “fair” means. In that spirit, I decided to make “fair” the theme of the negotiation, and I prepared sound reasoning for why I thought what I was asking for was fair. One productive way of doing this is by objectively looking at your competency and comparing yourself with the market. That way you can request benefits that are at par with what someone else with similar qualifications and experience in the market would receive. Lesson 3: Look for and defend what is fair, but be ready to explain why your requests are fair.
I was not planning to get Company A to raise their offer so that I could then go to the other two companies and get them to do the same. That’s unprofessional and borderline immoral. My goal was to get Company A to match the higher hourly rate from the two other offers. If they didn’t, my BATNA (Best Alternative To Negotiation Agreements; meaning, the best option available if an agreement is not reached) was to accept their initial offer. I decided that although it was not what I considered to be fair market value, it was not too far off, so I would take it. This, however, did not need to be disclosed. Lesson 4: never lie or try to manipulate the other side, but always keep in mind that the other side may want to take advantage of you, so be strategic about how much you disclose and when.
In any negotiation you want to look at the big picture. If you can negotiate things as part of a package you are more likely to think of creative solutions to reach an optimal outcome. So, considering the perks Company A offered, and the fact that it was a smaller company with fewer resources, I decided to ask for slightly less hourly pay when compared to the other two offers I had received. While Company A was slightly less competitive on salary, the fact that it was a small company offered other perks that larger companies could not. In hindsight, the indirect benefit was that they appreciated me understanding this and made the negotiation flow better. Lesson 5: think of the deal as a package, a basket of items; it’s not about the “magic figure” but about exploring options and meeting the real interests of those involved.
That’s how I prepared for negotiation w/ Company A. Before we look at how the negotiation unfolded, let’s look at how I under-prepared to negotiate with Company B.
Unsuccessful Preparation for Negotiation w/ Company B
Some years later, I was faced with another negotiation opportunity. I had received the offer on a Friday after a great conversation with the office principal. It was a good offer, but with slightly less benefits than I had envisioned, so I got to work.
Similarly to the previous negotiation, I decided to compare compensation at an hourly level and request that Company B matched what I was making at my current company (the offer was slightly less on an hourly basis, but higher as a total yearly sum). So far not too bad.
I looked at vacation days and thought they were not enough, so I chose to request more. What was my basis for requesting this? I had no real basis, other than that it felt a little too low. So far not so good anymore.
I looked at 401K contribution from the company and, since it was lower than my current employer contribution, I asked for them to match that as well. Doesn’t sound too bad.
Here are the mistakes I had made so far though: First, in their view the offer was already almost too generous, and the fact that this job required longer hours was just part of the industry. Therefore my argument of hourly rates was not a good one. Second, what I had failed to understand, because I didn’t care to investigate it, was that in larger companies terms like vacation and 401K are not as negotiable as in smaller ones. When a company has 3000+ employees, they need to be fair to all, so their room for modifications to a particular offer is slim. They offered exactly what they would offer a new employee with my qualifications. That was fair, and I was asking for more without a logical justification.
Overall I had not done my due diligence of investigating this new industry and how it operated. Nor had I looked into what a fair salary, vacation and 401K package was. I did not do my homework. Now let’s look at how these two negotiations unfolded.
During a Negotiation
Successful Negotiation w/ Company A
As ready as I could be, I received the call at the expected time. The first thing I did was to thank them for their generous offer. Truly thank them for the opportunity, and I could tell they appreciated that. Lesson 6: be gentle on the people, but be firm on the issues.
My initial focus was on asking questions and clarifications to understand all components and why they were that way. We spent a good amount of time doing this. Lesson 7: instead of focusing on selling your position, practice investigative negotiation; act as a detective trying to understand the other side’s motivations, reasons and expectations.
After making sure all things were clear, we then finally touched on the numbers. I asked things like “how did you come up with that number?”, not to refute their explanation, but to understand it. Lesson 8: Bringing up the numbers early kills the creative process and anchors the conversation. Instead of arguing numbers, first define what the most adequate criteria for evaluating them is.
I explained that as generous as their offer was, I wanted to see if it was possible to agree on a number that both sides would feel comfortable with, as I did think that based on the market the offer was a little low. We discussed why that was, and they explained they have a range of values for someone with my qualifications, and that they could offer more but up to a certain point. At the end we agreed that losing the opportunity (for both of us) for a couple of thousand dollars was not worth it, and we compromised. I offered to send my spreadsheet with all the numbers and calculations from where I drove my conclusions. To finalize the conversation, I mentioned that my intention was not at all to get paid more than what I deserved. First, it’s not right, and second, it’s not smart to take advantage of people who you will be spending your days with for the foreseeable future. Lesson 9: Focus on the interests, not positions. By realizing what their real interests are, you will more often than not notice that your positions are much more in alignment than they initially appear.
We finished the conversation and I felt good. Regardless of the outcome, it felt fair and productive. It also greatly helped that the person I talked to was just an honest and great person overall. The next day I received a revised offer just slightly below what I had originally asked for but they had agreed to push the start date so that I could go on a month-long trip I was dying to go to. I took the offer without thinking it twice. Lesson 10: Process improves relationships. Work with the other person.
Unsuccessful Negotiation w/ Company B
Not much to say here. I was busy so I took the little preparation and uneducated requests I had and I put them on an email. I barely thanked them for the offer and mostly focused on my requests.
To my surprise at the moment, but no surprise now, I got a phone call where they kindly explained that my offer was rescinded.
After noticing the many mistakes I made, I apologized and asked for a second chance. They were kind enough to give it to me and after phone and in-person meetings I received the initial offer again, which I accepted.
Extra Lesson: In person and phone conversations are much more adequate for a negotiation. Not only is the other side more likely to agree to your requests, but you are more likely to ask questions and understand them. Then you can focus on their needs as well. You can also more easily explain your reasoning and work with them on a process that improves relationships.
Besides the lessons learned through the examples above, here are some bullet points with other important rules of thumb:
The negotiation framework presented here is based on building trust and fostering relationships. A good negotiator understands that all human interactions are based upon exchanges. Exchanges of emotions, attitudes, words, expressions, goods, services, time, and so on. Even when one is not formally involved in a negotiation, we are still negotiating the exchange of those intangible components that construct human interactions. When you give your attention and interest to what someone is saying and show empathy, you almost always receive the same treatment back. That’s what negotiations are about. In the long-run, building trust is the most profitable game one can play.
Other than by personal experiences, this post is mostly inspired by Stan Christensen Negotiation class at Stanford University, as well as the books Getting to Yes and Difficult Conversations. I highly recommend watching/reading any material you can get your hands on from those three sources.
“When people act irrationally, remember that these people are reacting rationally to the world as they see it. It is perception that is skewed, not the response to that perception”
- Robert Fisher and William L. Ury
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