Archive for: May, 2023

Negotiation: How to Buy a Car

May 21 2023 Published by admin under Uncategorized

Negotiating is a skill that all of us need, but few of us have. Perhaps it’s the fear of stepping out of our comfort zones, or simply the fear of rejection. It’s not in most people’s human nature to be confrontational or simply just asking for what they want. A negotiation is nothing more than settling differences. It’s simply the process of reaching an agreement while advoiding a dispute. Very rarely, people will agree on everything. In fact, the opposite may be true: we agree on nothing. Therefore, we need some sort of way to settle these differences. Each side seeks to get the best possible outcome. No news there. However, since this is not always possible, both sides need to feel they’ve benefited or else a desirable outcome will not be feasible. Many people think negotiations only happen in high profile situations like government affairs, the legal system, or big business. But the truth is it affects each of us all the time. At some point, all of else will apply for a job, buy a house, or buy a car.

The first step in any negotiation is preparation. This involves gathering all facts of the situation and making them known to all parties. When buying a car, the parties don’t interact beforehand. Usually, the first interaction is on the car lot. However, with the invention of the internet, the buyer can go to a lot with a car and price in mind. Prior to this, the buyer only had the kind of car he wanted, or thought he wanted. I did two things before I went to the lot. The first was to find a car on the company’s web site. I found a BMW with 70,000 miles for $17,000. Then, I went to the Kelly Blue Book for used cars website and did a comparison. I put in the information and got a price range of $15,500 – $16,500. Finally, I did an internet search for tips on buying a car. Obviously, there was a difference between the two parties. Remember, we haven’t interacted yet. Two important parts of the negotiating process must be determined here: the minimum acceptable outcome or walkaway point. These can help take emotion out of the equation. My walk away point was the top level Kelly Blue Book price of $16,500.

The next step in the process is discussion. Here, the parties actually meet and put forward their case and explain their understanding of the situation. The key here is to avoid saying too much and listening to little. You don’t want to tip your hand by giving out too much information or miss important points by failing to listen to the other side. This part is hard for many people because it involves discipline and good listening skills. It is at this point where a negotiation can be won or lost. The ability to shut up and listen may be the most important skill in negotiating since it forces you to take your ego off the table. The salesman’s case was to try and get me into a newer car. Not surprising. He would make a bigger commission on that. He tried to use the MSRP and monthly payment argument. But because I was prepared, I knew the car I wanted and wasn’t going to be swayed.

At this point of the process, both sides should list the priority of what they want accomplished. Without these, barriers to reaching a desired outcome are sure to arise. Sometimes you may need to take a break if it looks a desirable outcome is not achievable. It could be just a lunch break or setting up another meeting several days or weeks into the future. You always want to clear your head and keep emotions out as much as possible. When you do return, always start with what has been agreed upon previously and go from there. In my situation, there was only one goal for both sides: the salesman wanted to sell me a car and I wanted to buy one. He did try to sell me a different one, but that obstacle was cleared rather quickly. I said “sure if you want to give it to me for my walk away price.” He chuckled and we moved on. At this point, we can determine which side has the power. I had the power because I had other options. I could go to a different lot and buy the car. Sure I could have said I’d like to think it over. Salespeople know that if you leave the showroom, you’re going to a competitor and probably not coming back. But that would’ve taken effort on my part. Most people want to buy a car from the lot they visited. They don’t want to spend days going through the buying process. That was true in my case and the salesperson knows that.

We took the car for a test drive. Here is where the salesperson can take control of the process. He gets a chance to explain the cars features and demonstrate the benefits of owning this particular vehicle. His experience tells him that once someone gets behind the wheel, and the car is sound, the chances of a sale rise dramatically. He tried to sell me some add ons like a warranty and fabric protection. But because of my preparation, I was able to stay on top and avoid those.

The next part of the negotiating process is for both sides to start thinking win/win. It’s at this point both sides have determined that they won’t get everything that want. Since this isn’t always possible, an alternative strategy, or plan B, must be considered. Both sides need to feel they’ve gained something positive. He came down in price to $16,500. He made the first offer. The list price of $17,000 isn’t an offer. It was the starting point. Even though that was my walk away price, I figured since I knew the Kelly Blue Book range, he must have too. After all, he’s aiming high and I am aiming low. We both want the best deal. I countered with the low end of $15,500.

Two points must be made here. Never accept the first offer, or anchor offer. This should be viewed as one side trying to set the tone and gain control. You will always wonder whether you could have gotten more. The other is always get something in return for a concession. Think win/win. Both sides gave something up. A good rule of thumb is to ask for three times what you think your worth. Of course it may seem outrageous, but at least you’ll know you probably couldn’t have gotten a better deal than the one you got. Three times his concession of $500 actually took us down to $15,500, the low end of the Kelly Blue Book price.

Another negotiating point in a deal like this is trade in value for your old car. The process is the same. I didn’t have any leverage on this point. My car was on its last leg and was only going to be used for parts. It wasn’t worth risking the deal so I took what they offered. But be sure to know the Kelly Blue Book trade in value for that as well. In the end we agreed on a price of $16,000. It seems on the surface like I won because I received $1,000 in concessions and remained steadfast on the car I wanted. But from his point of view, he was most likely happy to move stock with little effort, so it was a win/win for both parties.

Negotiating is necessary to determine your true market value. The negotiation process doesn’t start until someone says no. As mentioned earlier, one of the biggest impediments to a successful negotiation is the fear of rejection. You are not being rejected. It’s just that you and the opposing parties want different things. Think of a negotiation as an opportunity to solve a problem. The person with the least to lose has the biggest advantage. There is less emotion and they are willing to take bigger risks in getting what they want. If the gap is significant between the parties in this area, it will be difficult to satisfy both sides since one of them isn’t really interested in a win/win situation. Remember to always ask for more than you want.

I didn’t do this in my negotiation. I wish I did and it is one thing I would have changed. Part of the reason is I thought I was getting what I wanted. I picked out the car that I wanted. I should have gone in there with two or three models in mind. I also didn’t threaten to think it over and act as if I was leaving. Perhaps if I did, I could’ve gotten a car with fewer miles and some additional perks. I also didn’t look at the MSRP on the car. I usually think of the MSRP on only new cars. If I did, I would have had a stronger bargaining chip. Finally, I should have gotten pre-approved financing before I went to the dealership. Having a fixed rate and loan in hand would have been a strong bargaining chip. I got a bad rate from the dealership which I later refinanced. With a new car, you may not have the option because the deals they offer are tied in with using their financing department. But when purchasing a used car, always get preapproved financing. It’s one additional piece of ammunition that can put you in charge of the negotiation process.

There were many lessons to be learned in this exercise. The first is the process is an art that no one can fully master. I certainly didn’t do a great job, but it wasn’t as nerve racking as I thought. Getting better shouldn’t be difficult. Of course, it will take a lot of practice to be able to do one of those high profile negotiations where the stakes are high. I learned each side is searching for the best possible outcome. They aren’t out to take advantage of you. The best way to avoid this is to aim high in the beginning. Being the one in charge is definitely an advantage. Setting the tone for a negotiation certainly gives that side an advantage. I was able to stick to my plan, which surprised me a little. I thought I would get talked into something else. You must have a plan going in. Conflict resolution is not a zero sum game where one side wins and the other loses. Both can win. Finally, this is a skill everyone must have. We will all negotiate in some manner at some point of our lives.

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Effective Negotiating And Why It’s Important

May 20 2023 Published by admin under Uncategorized

What Is Negotiation?

Negotiation is the process of discussing an outcome with another person or group of people, each with different targets on the same issue, with the aim of reaching a result that is ideal for both parties. Take a car sale for example – you would probably negotiate the price with the seller to come up with a price you are both happy to pay.
In the workplace, negotiation is done in many areas – negotiating when setting deadlines for tasks, priorities for work, utilization for team members, budgets, and many other areas.

Why Negotiate?

The aim of negotiation is to create a win-win situation – a situation that everyone is happy with. Most situations that need negotiation and agreement are not immediately accepted by the other party. This is when a discussion or negotiation is needed – to come to an agreement on an issue. If we didn’t negotiate, a lot less would get done and relationships would not be made as easily between people.

Do Your Research

Before starting any negotiation, do some research on the other party, in relation to the issue at hand. Find out what their motivators are. Why are they not agreeing to your initial terms? What’s their aim, their purpose regarding this situation? If they are not happy with the project schedule you have prepared, for example, find out why. Find out if they have a busy schedule of work, or lack resources during the lifecycle, or other factors.

Decide On Your Lowest Position

Something else you’ll need to do before starting the negotiation discussion is to work out what your lowest position is. This is a point that represents the most you will give the other party, or the lowest point you will go on a price/time/terms. This is the least favourable to you. It’s not the point at which you start, or the point you should be aiming to get to. It’s the point that you won’t go any further on.

Determine The Point Of The Negotiation

When you start the process of negotiating an outcome, highlight the point of the negotiation. Even though this may seem obvious, it’s a good idea to mention it at the start. For example, you could say. “We’re here to come to an agreement on the budget required to implement a new software system”. This is an effective negotiation technique and is used to make the issue clear to both sides.

Make Your Proposals Gradually

You’ve worked out your lowest position, but you shouldn’t start at this point. You should have a position in mind that is more favourable to you. Mention your proposal to them (budget, time, resourcing, an idea, whatever you’re proposing) and ask if they accept those terms. If not, they would make another offer back to you, which is more favourable to them.

From here, don’t rush straight to your lowest point. Make moves gradually to their favour, and at some point you’ll should reach a solution. If you jump straight to your lowest offer, then they either accept it (which is good for you, but could be better) or they reject it (which means you have no more room to move).

A Win-Win Result Is The Aim Of Effective Negotiating

The aim of effective negotiating is to get a result that both parties are happy with. This could be close or far from the original proposal, but as long as both parties are relatively happy with the end result, it’s a good negotiation. Try to keep it professional – try not to let your emotions get involved. Remember, what you’re negotiating at work is most likely a professional or business decision and not an emotional one.

Know When To Walk Away

At some point, you might reach a stalemate or a dead-end in the negotiation discussion. No matter how effective your negotiating has been, there may just be a point where no further action can be taken. The other party won’t budge, and you won’t change your offer. This is the time when you may need to consider walking away. Make them a clear offer on the issue, and mention it’s up to them to accept or decline. Keep it professional – not making an agreement may be better than committing to something that is unfavourable to you and that you can’t deliver on.

Be Respectful

You should try to keep it professional at all times during the negotiation, and should be respectful of the other party. Don’t get emotional during the negotiation process, try to keep your mind on the outcome and respect the other party’s requests and their issues. This is a good way of getting a win-win result for both people involved. It’s a good way to improve your communication skills as well.

Putting some of these effective negotiating tips into practice during your next negotiation will hopefully help your chances!

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Sharpen Those IT Negotiation Skills

May 19 2023 Published by admin under Uncategorized

How many times in the course of a day do you find yourself negotiating a situation? I would be willing to guess that you encounter both planned and unplanned opportunities for negotiation several times a day, yet more often than not, you may find the act of negotiation difficult. If you push too hard, the deal goes astray. If you’re too soft, you become known as a pushover.

The key to sound negotiation is ensuring the appropriate approach to the kind of negotiation to hand. Within the IT environment, there are many kinds of negotiations that take place on an ongoing basis; we are continually involved in negotiations with users, partners, executive management, staff and, of course, suppliers. As a matter of fact, the environment within which we negotiate has become so specialised that a generic approach to all different kinds of negotiations no longer delivers optimal results.

There are similarities between the approach to best practices in negotiations and that of implementing best practices in the workplace supported by the deployment of IT solutions. To facilitate the achievement of corporate objectives through negotiations, IT departments should consider the creation of an organisational negotiation capability. As in the IT environment, strategy drives process which, in turn, drives implementation and support.

This means that a negotiation strategy should be defined, a supporting negotiation process designed and implemented, and a negotiation supporting infrastructure established to continuously drive the improvement of negotiated outcomes whilst minimising the losses associated with sub-optimal supplier and end user agreements.

DISCOVER YOUR LEVEL OF COMPETENCY - WHAT IS BEST PRACTICE NEGOTIATION?

To avoid the losses associated with sub-optimal agreements, it is necessary to pursue a ‘Whole Brain’ approach to all negotiations. In addition to negotiating in a ‘Whole Brain’ manner, IT negotiation practitioners dealing with suppliers should also empower themselves with a basic understanding of purchasing strategy, and the application of different negotiation styles to suit the negotiation to hand. Let’s explore these two concepts in a little more detail.

Whole Brain Negotiations

It has been proven that all humans have preferences for certain categories of activities within the context of understanding, interpreting and engaging in communication and negotiations. The Herrmann Whole Brain Model provides a useful metaphor for understanding ourselves and our negotiation preferences.

Figure 1: The Herrmann Whole Brain Model

We all have preferences for activities contained within each of the 4 quadrants. Interestingly, less than 3% of us have an equal preference for all 4 quadrants. Since more than 1 million people have completed the HBDI (Herrmann Brain Dominance Instrument) profile, we are in a position to monitor the trends that are of particular interest to negotiators in the IT environment. For instance, we know that professional buyers who represent organisations in their negotiations with IT suppliers typically have strong preferences for the A & B quadrants, but less of a focus on the C & D quadrants. This approach often leads to opportunities being missed to extract additional value. It also frequently results in too little focus being expended on understanding the relationship dynamics resulting from different types of negotiated agreements.

On the other hand, we know that sales resources representing IT suppliers typically have a stronger preference for the C & D quadrants. This leads to them often overlooking key risks, and hampers their identification of the real business impact offered by their solutions.

The best advice for any IT negotiator is to pursue a ‘Whole Brain’ negotiation model where due attention and focus is given to activities in all four quadrants.

  • Quadrant A – Value

IT negotiators must have an understanding of the facts that underpin any negotiation. Failure to gather and understand the relevant facts that support optimal deal making results in failed negotiations, or negotiations where value is left on the table.

  • Quadrant B – Process

Any negotiation without a robustly defined negotiation process and management infrastructure runs the risk of a less-than-ideal outcome. A framework is required to provide an environment in which risks can be proactively managed. A robust negotiation process ensures positive momentum and provides a reference for avoiding unforeseen complications and risks.

  • Quadrant C – Relationship

Agreements can only be concluded between organisations represented by people. The way we interact with other people is critical in negotiation success. The importance of relationships in negotiation is amplified in an environment where continued partnerships and long-standing relationships result from business interactions.

  • Quadrant D – Vision

Parties to an agreement need a shared vision of the losses and benefits. It is only by having an understanding of all parties’ respective vision that driving motivators or interests can be determined. A key part of negotiation competency is the ability to generate options that will serve the needs and interests of all involved. Purchasing Strategy and Fit for Purpose Negotiation Models

As IT executives acting as custodians of valuable company resources, it is incumbent upon us to ensure the appropriate application of negotiation strategies and tactics to achieve key company objectives. In this context, it is key to understand that there is a number of different negotiation engagement models available to us, depending on the objectives to hand.

Figure 2: Basic IT Purchasing Considerations

It would be unwise for us to engage in collaborative negotiations with a supplier that is providing products or services at a commodity level. Similarly, it would be equally unwise to engage in highly competitive negotiations with suppliers that are providing us with solutions that will have a significant strategic impact on our organisation.

We know that in negotiations, as in life, victims have a tendency to become aggressors. It therefore follows that if we are too competitive in our approach to negotiation, we can often leave suppliers feeling that they need to reclaim what they believe is rightfully theirs. We can recognise the symptoms of a deal that was negotiated too competitively by the issues that we pick up subsequent to closing the deal – issues with service level agreements, escalations and so forth. If deals are not profitable for our suppliers, they will go to great lengths to cut corners so they can meet their profit objectives – often to the detriment of their clients who drove too hard a bargain.

When we enter into negotiations with suppliers providing strategic solutions that have a high value to our organisation, it is important that we create a collaborative frame for the negotiations to ensure that we are able to extract maximum value from the proposed partnership.

Figure 3: ‘Fit for Purpose’ Negotiation Engagement Models

In conclusion, when negotiating in the IT environment, it is critical for practitioners to approach the entire negotiation process (preparation, engagement and debriefing) from a whole brain perspective and to apply the appropriate negotiation strategy in support of our organisational objectives.

Summary Box

Define a negotiation strategy

Answer the following questions:

  1. What group or groups of people should be capable to negotiate effectively in their vocational environments?
  2. What are the key negotiation characteristics of successful negotiators in your department?
  3. Should you be providing any free products or services to your clients or user community?
  4. Should you be providing any concessions to your negotiation counterparts without receiving a counter concession of equal or greater value in return?
  5. What are the drivers in your organisation for the implementation of leading practice negotiation skills?
  6. How will you measure success in the negotiation environment? – (consider both leading and lagging indicators)
  7. What are the specific actions that you will need to take to implement an organisational negotiation strategy?

Implement a supporting negotiation process:

The negotiation process must be robust and have a high utility value to its users. The single most important consideration in implementing a negotiation process is ensuring a consistent application of leading negotiation practice across the department or organisation. Additionally, this will result in a shared vocabulary and a common platform for the evaluation, refinement and improvement of negotiated outcomes. Build your negotiation process around the following key areas:

  • Deal qualification
  • Deal objectives identification (for all parties to the negotiation)
  • Aspiration base
  • Real base
  • Contracting zone
  • BATNA analysis (Best Alternative To a Negotiated Agreement)
  • Negotiation role definition and team composition
  • Deal specific negotiation strategy & tactics
  • Framing
  • Negotiating climate
  • Negotiation debriefing

Implement a negotiation training programme

Once an organisational negotiation process has been defined, all participants in the negotiation process should be trained in its use and application.

Create a negotiation support environment

It is important for executives to create an environment that supports the development and application of an organisational negotiation capability. Some of the key enablers are:

  • Creating an environment for negotiators to simulate negotiations on a regular basis (on a quarterly or bi-annual basis)
  • Creating a negotiation reference database – in its simplest form a log of resources with specific reference to the types of negotiation and relevant experience of organisational negotiators
  • Automating the use of tools to support the negotiation process implementation
  • Providing an individual coaching environment where resources can be coached in leading negotiation practice by managers
  • The establishment of a corporate negotiation capability is no easy task and will require dedication and commitment at an organisational level. If approached circumspectly and applied wisely, the investment associated with the establishment of an organisational negotiation capability will deliver spectacular returns that will entrench competitive differentiation and superior stakeholder returns.

Successful Example Box

A large Global IT organisation with a focus on the Telecommunication Sector found the size of the deals that they were negotiating increasing substantially due to the underlying technology infrastructure moving from an analogue format to a digital format. Suddenly, the deals being done by the sales teams escalated from a value of around £1 – 10 million to £300 million plus, because the solutions now had relevance on a regional and national basis as opposed to only a local level.

This necessitated a change in the way that negotiations were conducted on all levels including with suppliers, partners, manufacturing, clients and other internal and external stakeholders. All of a sudden, there was a lot more complexity and risk involved in deal making on both the buy & sell side of the organisation.

Early diagnosis of the problem led to the engagement of expert help to facilitate the definition of an organisational level negotiation strategy and the design and deployment of a supporting negotiation process. The negotiation process was designed in such a way as to support both the relevant purchasing and sales strategies and training is currently being rolled out across the enterprise to instill a corporate negotiation capability with a specific focus on two things:

  1. maximising margins and savings on purchasing budgets
  2. identifying and mitigating risks

A key requirement of the negotiation process was the ability to integrate with the company standard purchasing and sales processes to ensure the most effective deployment of resources.

Early results are pointing to enhanced returns resulting from agreements as a result of:

  • An improvement in the skills level of all negotiators due to best practice based negotiation skills training
  • The application of a uniform negotiation process which allows for the dissemination of relevant information on a uniform basis
  • A common negotiation vocabulary and a best practice cross cultural negotiation approach across territories
  • Individual negotiation competency, preference & style analysis
  • Optimal negotiation team composition & role definition
  • Best practice based negotiation debriefing & refinement

Having reduced losses associated with an ad hoc approach to negotiation, the organisation is now gearing up to roll out the negotiation programme on a global basis.

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