Renegotiation – Things to keep in mind

The new Prime Minister has promised he will try to re-negotiate the Withdrawal Agreement with the European Union. He will be wise to keep in mind some negotiation essentials, the previous absence of which could be said to have significantly contributed to the position we currently find ourselves in.

Negotiation Essentials

Balance the power

Too often, commercial negotiation seems to be simply a process of one side (usually the supplier) giving a series of price reductions to the other side (usually the customer). This continues until they can go no further and the deal is done or abandoned. Often this happens when one side needs the deal significantly more than the other and is actually not a negotiation at all.

Negotiation is the process which occurs when two parties have an equal need to agree the deal i.e. there is a balance of power in the negotiation. This comes from confidence in the value of our offer to the other party and we can only get this by detailed (and validated) understanding of how we help the other party with the challenges and opportunities presented to them. Arrogant or even fearful assumptions are no substitute for focused conversations.

Define your parameters

Flexibility is the key here. If you see success as achieving specific, rigid numbers (price, margin for example) you are likely to be disappointed and come away resenting the other side if you don’t achieve exactly what you want. This can affect future relations and deals. Define the ‘Zone of Agreement’ for the negotiation – an achievable range of possible outcomes within which both sides should feel comfortable. Clearly, the closer to your side of the zone the final result lands, the better the deal for you and vice versa but this approach will avoid ‘I WON, YOU LOST!’ and the resulting emotional fallout.

Give and take

If you are asked to make a concession in any aspect of the negotiation (usually the price), then seek a compensatory change from the other side. The principle to follow can be verbalised as “If I…..then you…..” Negotiation should be a two-way, not a one-way process and flexibility is again the key to a positive outcome. Your offer will never just be comprised of one fixed element, it will typically be made up of a number of components. Some you can move on and others you can’t. The movable components are the ones used to shape a mutually acceptable deal so knowing which of these is most important to the other side will enable you to use them tactically to obtain maximum value. As we have seen recently, setting too many unmovable ‘red lines’ will significantly restrict the likelihood of a positive result.

Be prepared to walk away

You will undermine your position and credibility, tilting the balance of power away from you, if the other side thinks you can’t or won’t walk away. This will merely empower them to ask for more and give less and they will keep doing it. As we have seen, equal power balance in a negotiation comes from confidence in how your offer benefits the other party. Consequently there must be negative implications for them if a deal cannot be reached. This in turn will motivate them to find common ground rather than suffer the consequences and makes a deal much more likely.

Further details

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