Few things have more impact on the long-term success of your business than your ability to make successful deals with customers, suppliers, bankers and other key constituencies. Yet most CEOs leave too much money on the table during their most important business deals. Why? Because they usually take the wrong approach to the negotiating process.
Negotiating win-win business deals
Rather than approaching negotiations as a mutual problem-solving process, most CEOs see it as a kind of mental and verbal sparring session, where the side with the sharpest mind, toughest resolve and most aggressive tactics emerges as the victor. Such an approach invariably leads to win-lose or, worse, lose-lose outcomes, and their companies suffer in the long run.
Adopting a more productive negotiating mindset requires getting rid of some outdated notions about how to negotiate effectively. In particular, four common negotiating myths make it difficult, if not impossible, to create win-win deals.
Negotiating myth No. 1: Negotiating involves competition.
Reality: Negotiations involve exchanging information and resources in order to satisfy the different and sometimes conflicting needs of two or more parties.
Negotiating myth No. 2: Negotiating involves bargaining.
Reality: Bargaining is competitive; negotiating is co-operative. Bargaining focuses on who is right; negotiating focuses on what is right. Negotiating creates long-term deals and relationships. Bargaining agreements never last because the losing party always insists on the chance to come back and get even.
Negotiating myth No. 3: Negotiating always involves compromise.
Reality: Nobody wins in compromise because both sides end up getting less than they want or need.
Negotiating myth No. 4: Effective negotiations involve the use of tactics, trickery and manipulation.
Reality: Honest, ethical negotiators never try to manipulate or deceive the other side. Tactics should only be used in self-defence.
The bottom line is that negotiating business deals has nothing to do with bargaining, compromise and competition. To create win-win outcomes, both sides must:
- strive to understand the other person’s wants and needs
- attempt to solve the other person’s problems as well as their own
- adopt a mindset of flexibility rather than rigidity
- focus on “enlarging the pie” rather than dividing it up
- always aim for win-win outcomes.
This approach may sound “soft” to those who enjoy going toe-to-toe with the other side during a negotiation. However, following these principles will dramatically increase your chances of creating deals that benefit both sides and lead to positive long-term relationships.