April 7th, 2014

Consultative Negotiations: Why Not Just Split Things Down the Middle?

consultative-negotiations

Consultative Negotiations: Why Not Just Split Things Down the Middle?

Compromise is a much-heard term these days, particularly with what is going on in the world these days. Politics is said to be the art of the possible. We get the two sides with positions seemingly set in stone. They should compromise; they should split the difference. This forgets that effective policy is frequently not splitting the difference but is rather taking ideas from both sides and mixing them into a better whole. Compromise is creating a third position, not split things down the middle. Both sides seem unhappy at first but will eventually realize that all have benefited.

Sometimes, compromise is just not possible. You have to stand pat. You have to realize that you might be facing a situation where half a loaf is not better than no loaf at all.

In the business world, as in the political world, sometimes, things can be split down the middle or at least compromised. Often, this means splitting the whole package, not just the cost. Any business purchase includes price, but it also includes delivery time, payment terms, and scope of offering. These may be easier areas in which to make concessions.

During the negotiations process, your counterpart’s position on various issues (demands is the best way to put it) may be asking for things greater than he or she really needs, either as a negotiating ploy or because he or she does not really know what they want. If you immediately consider seeking a quick agreement by splitting things down the middle, you may end up quite unhappy with the result, perhaps bitter enough to make it hard to work together again with this customer.

This is also assuming you have not offered set positions yourself, which are negotiating ploys rather than what you are prepared to accept. This is adversarial negotiation, not the more effective consultative negotiation. For most people, this is playing the other person’s game, letting him or her choose the battlefield.

So, find out what the other person really needs. Use your preliminary “due diligence” research and questions during negotiations to cut through your counterpart’s apparent position to find the core of real need.

Unless you can uncover needs, you risk having your negotiation deteriorate into haggling. The key to a successful win-win negotiation is to find out what the other party really needs: that is, what is motivating his or her demand.

If you negotiate demands, you will often find yourself “splitting the difference” while not splitting the real difference. Suppose you work for a bank. Suppose that you and your customer disagree on rate. If your real needs are risk reduction and spread, and your customer’s real need is managing cash flow to meet a pay schedule, you probably can reach an agreement much more easily by looking at alternatives to satisfy those needs rather than by arguing percentage points. For example, you may consider trade-off items such as liquid collateral, marketable securities, guarantees, or add-on business — all of which can help you achieve your yield and give the other party what he or she needs.

Unless you identify needs, you may find that splitting the difference will be a knee-jerk reaction. You may also find that you left money on the table because you didn’t take all of the elements of the deal into consideration. Avoid becoming glued to positions and blind to opportunities. Ask ,“Why?” and think, “What if?” before and during the negotiation.

In the short story “Gift of the Magi,” by O. Henry, the wife cuts her hair to sell to buy her husband a watch fob, and her husband sells his watch to buy her a comb. Their failure to communicate led to unnecessary sacrifice on both sides. If this happens to you, you won’t even have the consolation of a story of real love and sacrifice.

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About The Author: Dario Priolo

As Chief Strategy Officer, Dario Priolo is responsible for driving Richardson’s market, product, and corporate strategy and planning — sharing critical insights with clients to help them win in today’s changing market place. Dario gathers intelligence and market and customer knowledge to: drive Richardson’s innovation; ensure that Richardson offers the best and most relevant solutions for clients that exceed client satisfaction; and raise awareness of Richardson’s extensive capabilities with sales and business leaders.

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