By David Zehren and Joe Friedman
Unfortunately, many negotiators settle for mediocre outcomes even when excellent outcomes are available. They don’t do this intentionally, of course. It happens because they don’t adequately discover—through good questioning and good listening—exactly what the other party’s needs and preferences are. And, often, they don’t do an adequate job of revealing their own needs and preferences. The result may be an agreement that looks good on the surface. But with a closer look we see that other solutions were available that would have been better for both parties.
Acting dumb might be smart.
That’s why in your next negotiation, act a little dumb. Acting dumb requires asking a lot of questions. It might also require that you avoid making assumptions, and that you confess your ignorance or confusion in order to draw from the other party a more detailed understanding of their situation, their goals, and their restrictions.
Playing dumb and asking lots of questions is important whether you are negotiating as a creative problem solver or as a bargainer. But there’s no point in haggling over the terms until you determine which of those terms are most important to the other party.
Start the negotiation as a creative problem solver.
A banker recently told us the following story about how creative problem solving played out in one of his negotiations:
Five years ago, we were competing for a loan with a bank far smaller than ours. The prospect had banked with the small bank for better than 20 years, but we were confident that given our size and the breadth of services we could offer, a better deal could be negotiated.
As happens so many times, we were led to believe that rate was the most important factor in winning the business, and we knew we were competitive. (The prospect had been willing to talk about their existing bank relationship, so we knew who it was and had a ballpark understanding the deal he had on his current financing.) As we were getting towards the end of the process, we felt it was increasingly less likely that we would win.
What negotiable items could we use the shrink the rate and make our deal more desirable? We offered a rate reduction in return for compensating balances. We offered a rate reduction if the prospect moved his personal business over to our bank. We offered a rate reduction for commitment to use our Treasury or Cash Management services. None of these seemed to increase the prospect’s enthusiasm.
Since we had met several times, and I thought I had at least earned some respect, I asked straight out, “What’s going on?” I explained that I was pretty sure we had offered the best deal and a more robust set of services, and was really perplexed by his lack of interest.
He explained that 20 years ago, when no financial services company would come close to lending to his start-up company, his local community bank did. As his business had grown, so did the relationship with the bank. He felt a debt of gratitude to his bank, which resulted in a fairly strong dose of loyalty.
That was the “eureka moment.” We offered him a loan that would cover what he needed—above the lending limit of his existing bank. Because the loan amount was smaller, he ended up paying more for it than on our original offer. And he didn’t care! Now five years later, he does more business with us than he does with his community bank, and for us it’s a very profitable relationship.
Does that sound too simple? Do you think the sales reps and other negotiators in your organization consistently uncover the real needs in important negotiations? If your answer is yes, you are lucky. And unusual.
Uncover the underlying interests.
We work with sophisticated sales forces in numerous industries. And during our seminars we make sure that at least one of the exercises involves digging beneath the surface to find what the other party really needs, as opposed to what they are asking for or demanding. Those who do a good job of uncovering underlying interests often find creative solutions that work well for both parties.
So here’s the bad news and then the good news about uncovering underlying needs in a negotiation. Fewer than half—in fact, only 38% of the sales reps and managers we work with succeed in uncovering the real needs in the first negotiation scenario we present them. Now for the good news: with some guidance, some practice, and some on-the-job reminders, that success rate can double to more than 75%.
Creativity is important, but of course, it may not be enough. Negotiating often requires good, tough bargaining in addition. We’ll cover that in a future article.
For now, remember this: If you act a little dumb, and ask good questions, and listen carefully, you will learn a lot about the other party’s underlying needs and preferences. Combine that with a true understanding of your own needs and preferences and you’ll be ready for creative problem solving and good bargaining. And those are the keys to successful negotiations that make both parties winners.
David Zehren and Joe Friedman are partners at Zehren-Friedman Associates, a consulting firm that provides training in sales, presentation, and negotiation techniques that are grounded in principled persuasion. Email: firstname.lastname@example.org; email@example.com