SBS XII: The Art of Effective Negotiation: Both Sides Win

Daily existence is comprised of a continuous series of negotiations. From your teenager who begs to borrow the car, to the employee who wants a raise, and the salesman who has the car of your dreams, negotiation is a fact of life.

The key to success is remembering that everything is negotiable, and that to get a deal you must ask for one. Many people stop right there because negotiating makes them uncomfortable. They view the process as a contest of wills in which power determines outcome, each party seeks to best the other, and the little guy doesn't stand a chance. That kind of positional bargaining may produce some short-term results, but it is a distasteful, win-lose process that can leave both sides exhausted, resentful and dissatisfied with the outcome.

It doesn't have to be that way. Effective, principled negotiation will efficiently produce an agreement that meets the needs of both sides while improving or at least maintaining personal relationships. In Getting to Yes, Negotiation Agreement Without Giving In, the authors Fisher, Ury and Patton contend that the key is to focus on four areas:

People. Separate the people from the issues to avoid personalizing them. Make sure each party understands the other's perception of what is involved. Recognize the underlying emotions on both sides and acknowledge them. Listen actively and speak to be understood, not to argue a position. Don't debate-cooperate.

Interests. Focus on interests instead of positions. Behind each position lie compatible interests as well as conflicting ones. To identify the interests, put yourself in the other person's shoes. Why would he take such a position? Does any aspect of your proposal conflict with those interests?

Options. Work with the other party to generate a variety of options. Separate the brainstorming from the decision-making process. Look for areas of agreement by identifying shared interests. Look for ways to dovetail differing interests by exploring options that are of low cost to you and high benefit to the other party and vice versa.

Criteria. Insist upon negotiating within mutually-agreed-upon standards of fairness. These criteria may range from current market value to procedures for resolving conflict, and will bear directly on your ability to come to an equitable final agreement. Standards such as these are also crucial to establishing a foundation of trust on which to build a relationship.

Principled negotiation works well because it is outwardly focused. Standard positional bargaining, on the other hand, focuses entirely on self. The first establishes common bonds and a shared search for solutions. The latter produces isolation and engenders ultimatums. Either may result in agreement, but the first builds relationships for the future while the second often leads to resentment and distrust.

Principled negotiation is especially crucial when an imbalance of power exists between the parties. Here are some other tips to help level the playing field:

• Hone your negotiation skills through education and practice.

• Do your homework. Use the Internet and other sources to learn all you can about the issue in question, research your options, and understand marketplace conditions.

• Determine your BATNA (best alternative to a negotiated agreement). What will you do if an agreement can't be reached? Your power in a negotiation will increase proportionately to the viability of your alternatives. A well-defined BATNA will give you needed perspective to avoid accepting an agreement you should reject, and help you make the most of your assets.

• Establish a team relationship with the other party as rapidly as possible to engender cooperation and set the stage for principled negotiation.

• Ask questions. Statements generate resistance, whereas questions generate answers and information that can lead to agreement.

• Don't be intimidated by "industry-speak." Ask for clarification if something is confusing or unclear-never be ashamed to say you don't know.

• Sell the future. If your company is growing and prospects are bright, share that information. Suppliers look for potential growth and long-term relationships to strengthen their own business. Don't underestimate the power of potential-as clearly demonstrated by the stock value of Internet-related enterprises that have yet to show a profit.

• Frame tentative options in terms that address the other party's interests and resolve issues that may present an obstacle to agreement.

• Cultivate the use of silence. Calculated silence can create the impression of a stalemate that the other side may feel impelled to break, usually by offering concessions.

• Thank the other party at the conclusion of a negotiation, even if an agreement isn't reached. Sometimes it's not about the deal you lose, but the next deal down the line.

Hawaiian Franchise Partners Cultivate Negotiation Skills

"The key to effective negotiation is first to study the situation carefully, and then to sit down and devise a strategy in which everyone walks away happy. It's got to be win-win for both parties."

So asserts Eddie Flores Jr. who, with his partner Kwock Yum (Johnson) Kam, has built up a chain of 38 L&L Drive Inns in Honolulu that offer local-style plate lunches and other popular fast food items. Since purchasing the original location in 1976, they've earned a solid reputation for large portions, high quality, flavor and reasonable prices-and consistently outsell national operations such as McDonald's and Burger King in malls where their operations are co-located.

"We've been lucky," says Flores modestly, "and have had a lot of good workers and managers with us along the way." As their operations began to expand, the partners showed their appreciation-and business acumen-by offering employees the opportunity to become franchisees, along with built-in financial assistance.

The expansion plan, developed in 1988 to reward employees (many of them Asian immigrants or local minorities) for their dedication, hard work and productivity, has resulted in 32 new L&L outlets and the creation of more than 400 new management and entry-level positions.

"Despite our relatively large number of outlets, and we aim to add four to six a year, we still function like a Mom-and-Pop operation," Flores explains. "Typically, each outlet is individually run, and we look for the best. My partner and I maintain an ownership interest in 18-20 locations; the remainder have been sold to their respective operators."

Admitting that his toughest negotiations have been with prospective landlords, Flores asserts that Hawaii's continuing flat economy since the 1980s has given him and his partner "a bigger bargaining chip" in getting the best possible lease arrangements. "The landlords want us in there."

This does not negate the need to study "your strong point and that of your opponent, as well as your weak sides," notes Flores. "You shouldn't attempt to win 100 percent, but always expect to give something away. In trying to strike a deal, aim for one that is best for both parties.

Excerpted with permission from Small Business Success, Volume XII, produced by Pacific Bell Directory in partnership with the U.S. Small Business Administration.