How to Can I Develop a Negotiating Strategy?
What is Strategy?
Since the definition and use of the word "strategy" varies significantly in business, I think it is important to define what is meant by strategy and its use in negotiations. Strategy is simply the overall plan to achieve the objective. As a former football player, an easy way for me to think about strategy is as a game plan where certain plays would be called, adjustments made, and players used in certain situations.
A strategy will typically answer why certain actions are taken to reach a goal. In this way, strategy are not actions or tactics. Tactics are the steps taken to fulfill the strategy and will typically answer the question of how certain actions are taken to reach a goal. Bill Belichick, head coach of the NFL's New England Patriots, is famous for defensive schemes which neutralize an opposing team's two best players on offense. His possible strategy is to take away an opposing team's two best players on offense because it forces the opposing offense to call unfavorable or unfamiliar plays. Coach Belichick uses tactics in the form of defensive formations, calls, and players to execute this strategy.
In the context of a negotiation, strategy becomes the system in which a party will negotiate with one or more other parties in order to reach its desired outcome. Such a strategy will contain tactics which encourage the other party or parties to accept your desired terms.
The Objective
Defining an objective cannot be done properly without research and critical thinking. A reasonable objective takes into account a) the overall goals and strategy of the organization, b) the market value of the parties to each other and c) the market in general. An organization's goals for a negotiation should start in alignment with its overall goals and strategy, then consider the impact of the market value of the parties to each other and the market in general.
If the comparative value of the parties to each other is greater than the general marketplace, then a reasonable objective for each will reflect the additional value created by the other party. A Fortune 100 tenant may create additional value for a publicly held landlord who reports on the creditworthiness of its tenants to investors, for example. Conversely, an existing and valued landlord may create additional value for a tenant wishing to avoid negotiating a new lease and overall uncertainty.
Objectives should also be realistic in the marketplace, considering the market "best case" and "worst case" scenarios based on historical and pending transactions, potentially adjusted by market trends. Such scenarios should not only consider price, but also terms if available.
Developing a Negotiation Strategy
One way to create a negotiation strategy is to outline the likely steps it will take to reach the objective. In the example below, starting with the Objective in mind, there are seven steps potentially required to achieve the Objective. The amount and description of the steps should be reasonable, even though they are subject to change as the negotiation proceeds.
First Steps
Once an initial outline of the steps has been created we can start to describe the tactics we anticipate using during the negotiation. The tactics can consist of any action which can help lead to the objective. Tactics can be used again and again during negotiations. The key to success is understanding which tactics to use and when. As the diagram below shows, tactics indicated by the letter "T" are repeated throughout the negotiations.
Second Step
In order to develop the negotiation strategy further, the outline with the tactics can be expanded to include if-then scenarios. If-then scenarios plan for possible actions depending on how the other party responds during negotiations. The outline with the tactics developed updated for if-then scenarios might look like the following:
Third Step
Once the tactics and if-then scenarios are populated, the negotiation strategy can be summarized as explaining why the planned steps and tactics will be used during the negotiation. When the negotiation begins, those planned steps and tactics function as guides to be assessed and modified depending on how the negotiation proceeds.
While the steps to develop a negotiation strategy take some time, I believe the benefits of planning far exceed the costs. A negotiator is in the strongest negotiating position possible their objective is reasonable and achievable, the steps to achieve the objective are defined, they are prepared for the other party's actions, and they have sound tactics to help them reach their goals. They are not victims of the market, employing "lazy" ideas such as splitting the difference, and searching for less strategic ways to get a deal done. Instead, they put the odds of negotiating success strongly in their favor.
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