Deal or no deal? Understanding Negotiations and How to Get Better at Them

Whether straightforward or devilishly complicated, negotiations are at the centre of commercial relations and human interactions  

For thirteen days in 1962, the world held its breath.  

During the Cuban Missile Crisis, the nuclear standoff between the Soviet Union and the USA, the fate of the world was literally at stake. President Kennedy Be Careful’ advised one poster at a public rally in New York – an enormous understatement during the most fraught, dangerous negotiation in human history. 

Thirty years later, how did a flyfishing hook and a pair of pliers connect to the birth of South Africa’s democracy? Violence was raging across the country as the multiparty Congress for a Democratic South Africa (CODESA) negotiations repeatedly stalled. The storming of the World Trade Centre in Kempton Park by 3,000 members of the Afrikaner Weerstandsbeweging (AWB) in June 1993 triggered a complete breakdown in trust between the ANC and the National Party as the main players, and appeared to be the fatal blow to the constitutional negotiations.  

Reluctantly, chief negotiators Cyril Ramaphosa and Roelf Meyer accepted an invitation to a trout farm on the weekend after talks were suspended. Bizarrely, Meyer got a fishhook embedded in his hand, so deeply that not even Ramaphosa’s wife, a nurse, could assist. Far away from a medical facility, and with Meyer in great pain, Ramaphosa took charge by yanking the hook out with pliers. As Mathew Blackman and Nick Dall note in their recent book, Spoilt Ballots, over 17,000 people died as a result of political violence between 1989 and 1994, but the flyfishing incident had at least served to re-establish trust as a foundation for restarting the negotiations.  

The story shows how, in a negotiation, solutions can sometimes be rooted in small and simple things. Equally, the CODESA negotiations and the Cuban Missile Crisis illustrate just how complex they can be. A swirling, convoluted mingling of issues and identities,  histories and hopes, emotions and expectations clutter both how agreements are reached and whether, ultimately, they have a satisfactory outcome for the participants. 

Most of us are not in roles requiring high-powered or even regular, formal negotiations. But negotiations are part of everyday life. At work, we need to shift a task deadline or a financial target with our manager; to get to resolutions in team meetings; to agree a project or annual fee with a client. Big things at some point in our personal lives include negotiating a mortgage bond or the rental charge for where we live – and a marriage proposal. And even when we don’t consciously realise it, we’re constantly negotiating internally with ourselves in a form of personal deal-making that resolves conflicting wishes and responsibilities (‘if I have a pizza now I’ll work out twice tomorrow’).   

So, what are the key aspects of a negotiation, and what should we be aware of, as a foundation for our dealings with others?  

The framework for a successful negotiation  

Smart negotiations start with a grasp of the conceptual blueprint for how they could work efficiently and optimally.   

The golden rule is to negotiate on principles, not to bargain over positions. In their seminal book Getting to Yes, Roger Fisher and William Ury explain that adopting a position obscures the underlying issue and is a barrier to compromise. In a service level agreement (SLA) and fee negotiation, ‘We will not accept less than R10m’ impliedly rejects the gains of a long-term contract, even if that were to be at, for instance, 5% lower. If the other party pushes back – perhaps R10m is a significant escalation on that paid to the previous service provider – the face-saving manoeuvres cloud further discussion. The chances are that the fee position will shift downwards, by which time the credibility of the negotiator has been eroded.  

It’s more efficient and productive to negotiate on the principles of the issue. In this example, both parties want to conclude the SLA; they will be working together for a reasonable period of time; cordial relations make sense for both parties. ‘Could we look at a 3-year contract rather than two? If so, we can lock in resources at lower rates, so the annual fee could come down to R9.5m. Would that be more in line with your expectation?’  

Adopting a series of positions stagnates discussion, whereas concentrating on the principles of negotiation, and focusing on the problem and mutual interests, helps to make progress.  

Pay attention to the people. Negotiators – no matter how apparently erratic, intransigent or unreadable – are people. Excellent negotiators are attuned to others: what they may be feeling, their behaviours, and body language. As such, one of the most important aspects of negotiation has little direct relation to the issue at hand: emotions. Being able to identify your emotions, and having a sense of the other party’s emotional cues, is a valuable asset for a negotiator.  

Further, empathy helps a negotiator interpret perceptions the other party may hold. Getting to Yes includes the story of a worker who complained bitterly to his union leader that management always selected him for overtime or as team supervisor when the situation required. The union leader, prepared to take the next step to strike action, raised this example in a heated meeting with the company’s representatives. The manager was amazed, replying that he thought the worker appreciated the added responsibility and the income from extra shifts.   

Good negotiators learn to identify roadblocks rooted in these sorts of misinterpretations. Sometimes conflict resides in people’s heads rather than as an objective truth.  

Explore options for mutual gain. In a principled negotiating framework the participants are primarily problem-solvers. By putting heads together, scenarios can be found which add more value for both parties than a straightforward compromise around what each brings to the initial discussion. (And reaching agreement is easier if both parties feel a sense of ownership of new ideas.)  

Establish objective evaluation criteria. This generally relates to large contract proposals with multiple deliverables, or where there is a technical knowledge gap between the parties. Rather than subjective measures being endlessly debated, with trust being eroded, it helps to establish protocols in a sort of pre-agreement which sets the guide-ropes for the specific terms under negotiation. Are there professional or industry standards to benchmark performance, or regulatory guidelines to reference? Environmental, social and governance (ESG) performance criteria, for instance, are increasingly being standardised, worldwide, in multiple industries.   

Making the right moves 

A negotiating playbook that is often quoted is to ‘think about playing chess, not checkers’. (Checkers is a simpler game, with far fewer available moves at any point.) Two chess grandmasters, Bachar Kouatly and former world champion Anatoly Karpov, partnered with a leading French business strategist and CEO to author Chess and the Art of Negotiation. The book’s premise is that knowing your own motivations helps steer your strategy, that understanding those of your opponent gives insights into their approach, and both allow you to optimise tactics to navigate the labyrinth of possibilities. 

But, says Harvard Business School professor of negotiations, Deepak Malhotra, there are many reasons why negotiations should not be treated like a game of chess.  

Chess, he points out, is a zero-sum game in which one player wins and the other loses. The best negotiators, on the other hand, change the outcome they seek to one of mutual gain – a problem solved, or value creation opportunities for both parties.  

In any game, the goal is known. In a negotiation, this isn’t always the case. By assuming that your counterpart knows precisely what they want, you in turn adopt certain strategies and counterpoints. But your assumption may be wrong. And, do you think your opponent knows what your goal is? Are you totally clear about that yourself?  

The point is that complex situations – in business and life – teem with unknowns and uncertainties. They can change rapidly, and both parties’ incentives and interests may evolve as the negotiations progress. Unlike chess, where the rules are set and the pieces and their values are fixed, real life is fluid and the asset or service at the heart of the negotiation may be valued differently by the parties.  

Building your muscles as a negotiator  

Still, there are some similarities between negotiation and chess. On a simplistic level, studying the subject, practising it, and building experience will make you a better negotiator (or chess player).  

More generally, developing emotional intelligence and soft skills – being able to ‘read the room’, to build consensus using empathy as well as firmness, and persuasive choice of language – are assets for a negotiator. A growth mindset helps, too, in multiple ways.    

If you lead major negotiations involving teams, insist on building the individuals’ capabilities, and the cohesive attributes and synergies of the unit. Think carefully about the composition of the team for particular assignments. Those most knowledgeable may not be the best negotiators, as they may be most attached to certain specifics. On the other hand, no matter how senior or experienced, a negotiator is handicapped without deep insights to the specific problems and context. The team should have a blend of both, and all team members must have strong characteristics of resilience and emotional intelligence.        

Negotiations require planning and preparation. Laying the groundwork is critical. Even when plans go awry, or need to flex, all the previous preparation helps to course correct.  Do your research, and try to understand the essence of what your counterpart needs. Know your points of leverage, and the other party’s. Understand as much as possible about the context for the negotiation, including, if relevant, previous years’ histories. (For instance, was there a major fee cut a few years ago, meaning that the current base is low?)  

Know your mandate, your limit – and what happens after your limit. The process of forging and agreeing solutions assumes that the negotiator has a mandate. Principals and senior stakeholders not participating in the discussions should make it crystal clear to the negotiating team what their mandate is, and how far their parameters and options stretch. Without this clarity the negotiations may be inefficient, requiring regular breaks to revert to the principals. Worse, the negotiations will break down if one party believes the other is wholly unauthorised; this wastes times and shows a lack of good faith.  

Preparations are especially important in relation to fixing the limit beyond which an agreement cannot be reached. Is this situation familiar: a three-month negotiation, many  obstacles overcome,  multiple contract iterations, a brick of a contract document awaiting one last signature…and then yet another compromise is requested? Even the most patient negotiator may conclude that trying to forge a worthwhile business partnership is pointless.  

Knowing the limit – your walk-away point – before negotiations start helps efficiency, prevents discord between your team members, and mitigates emotional reactions to alternative proposals.   

Related to this, it’s important to consider the next logical step after a limit is reached: your Best Alternative To No Agreement (‘BATNA’). This is the final fall-back – it’s not a good situation, because an opportunity has been lost, or something forfeited, due to the failure of the negotiation. But thinking about this in advance is a form of negotiating strength; the knowledge that not all will be lost steers the team away from unwarranted compromises. For example, if there is no path to concluding a new SLA with a major client, could your organisation work on an ad hoc basis with them, rolling services over from month to month at the current price? Or, are you poised to absorb fixed costs for a  few months while moving fast to seek a replacement client? 

Opening gambits. Consider that it may not pay to reveal, too early in the discussions, what your goal is. After all, the other party may, for whatever reason, make an opening offer that improves on what you were hoping for! If you go into a performance review hoping to negotiate a 10% pay rise, wouldn’t it be nice if your manager conveys how impressed she is with your performance and offers you, straight away, a promotion…which includes a 15% increase? 

Anchors and biases. Being aware of our cognitive biases, and the way they anchor our viewpoints, can be a strength in a negotiation. For example, if we know that we tend to anchor our responses to aggressive tactics with counterthreats, we can practise changing to a questioning approach instead. ‘I feel you are giving a cost ultimatum. Why don’t we look at restructuring the fee you propose, to include part as a bonus, allowing you to earn the full amount, but only on certain performance criteria?’ This tactic avoids point-scoring, but retains a strong persuasive factor and allows you to productively redirect the next steps.  

Build and maintain trust. June 2022 saw yet another episode in the ongoing saga of Brexit. Britain’s withdrawal from the EU was negotiated over two-and-a-half years, then followed by a one-year transition period. The UK formally exited the EU on 1 January 2021;  less than 18 months later it is unilaterally reneging on an international treaty whilst simultaneously wanting to renegotiate aspects of it relating to the intricate Northern Ireland Protocol.  

Circumstances change. New necessities emerge, sometimes unpredictably. Most negotiation experts agree, however, that breaking trust is only ever worth the price if you are never likely to have to negotiate again with the other party.  

“I know that building trust is key to getting concessions from the other side,” says Lord Peter Hain, referring to the intricate negotiations he worked on between Ireland, Northern Ireland, the EU and Britain in 2007, now being jeopardised as part of the current British government’s ongoing Brexit saga.  

Although political history offers lessons, we should remember that it teems with threats, postures and ploys which do not hang over our negotiations at work and in our personal lives to the same degree. Indeed, we should think carefully before using these tactics in negotiations. “He’s no fool who gives what he cannot keep to gain what he cannot lose,” wrote American missionary, Jim Elliot. He was referencing a spiritual context, but the quote has relevance for negotiators: perhaps the best guide-rope is to negotiate with an open heart and mind, to gain reciprocity and respect.  

Ultimately, negotiation is about dealing with our differences. How are you handling the differences you may have with the people in your life and at work? 

 

Five tips to finetune your negotiation skills  

Knowledge is power. Think laterally about how to better understand your counterpart’s angles. If the organisation is a public company, access their annual report to see their take on trends in the area of the specific negotiation. Consider social media platforms such as LinkedIn to learn something about the person you will be negotiating with.  

Be confident. A significant part of any negotiation is common sense, or can be related to past experiences. If you’ve done the groundwork, and are commitment to the process, a positive outcome is likely.   

Be prepared to be flexible. No matter how many options you plan for, unexpected positions or situations may arise. Know that these are a normal part of negotiating processes. Just because you haven’t thought of them doesn’t mean they don’t merit consideration – and they may have potential as even better solutions.  

Allow for time-outs. Sensitive negotiations are taxing. When stress levels are high, and emotions are strained, it may be a good idea to pause. Usually, both parties benefit from this, but if you feel necessary, do this unilaterally – it will be better to refocus than to continue in a suboptimal mental state.  

Forget about winning. Winning implies that the other party loses. More often than not, even in adversarial relationships, it is better to settle on an equitable arrangement. As a litmus test, instead of asking ‘Have I won?’, ask ‘Is this a wise solution?’ 

 

Written By:

Gavin Olivier

Senior Partner and Managing Executive

DigitalCampus

 In partnership with Dave Gorin 

 

Sources: 

‘Negotiation Obstacles’, Brian Buck, Scotwork, 5 June 2022 

‘Getting to Yes: Negotiating Agreement Without Giving In’, Roger Fisher and William Ury (Arrow Books, 1st edition, 1983) 

‘What’s Your Negotiation Strategy?’, Harvard Business Review, July-August 2020 

‘5 Good Negotiation Techniques’, Program on Negotiation, Harvard Law School, 5 November 2020 

‘Chess and the Art of Negotiation: Ancient Rules for Modern Combat’, Anatoly Karpov, Jean-Francois Phelizon and Bachar Kouatly (Praeger, 2006)  

‘Negotiating Democracy in South Africa’, The Nelson Mandela Foundation 

(accessed on Google Arts & Culture) 

‘Never Split the Difference: Negotiating as if your life depended upon it’, Chris Voss (HarperCollins, 2016) 

 

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