Stress and aggression trigger the brain’s threat system
So many negotiations are unsatisfactory because we dive into money and numbers before uncovering the needs or hot buttons of the other side. Negotiation then becomes a battle of wills to see who can squeeze the most from the other side. This makes negotiation a stressful, negative experience, triggering the brain’s threat system. This can undermine long-term trusting business relationships, creating a win-lose mentality rather than win-win.
What’s important to the other party?
Before negotiations begin in earnest, it is essential to find out what is important to the other side. It is also the time for you to demonstrate real listening and ask questions to show that you fully understand their needs. This will help maintain rapport and activate the brain’s reward circuitry, getting negotiations off to a healthy start. Think for a moment about the last time you chose a builder to work on your house. You may have told them that price was critical, but in actual fact, there would have been many other factors that influenced your choice, for example, their reputation, trustworthiness, guarantees, quality of workmanship, personal recommendations etc. Similarly when you choose a web designer or marketing expert, price is in the mix, but probably not at the top.
Before negotiations begin in earnest, it is essential to find out what is important to the other side.
This is backed up by research by Neil Rackham showing that business-to-business purchasing decisions are based firstly on the vendor relationship, then vendor stability, followed by responsiveness. Price is only fourth on the list. However when we are the seller, and the other side tells us that price is the key driver of the purchasing decision, it is all too easy for us to accept the statement at face value and offer concessions out of fear of losing the deal.
Find out their interest vs position
Asking questions and listening provides a much gentler and less hostile start to the negotiation. It helps to reduce the fear factor on both sides. It gives both parties a clear understanding of each other’s needs and helps to uncover the interests behind the position as demonstrated by the following story:
Two sisters were fighting over an orange. After a lot of arguing, they took half each. One sister ate her half and threw away the peel. The other grated her half of the peel to make marmalade and threw away the flesh.
How many opportunities for a win-win deal are you throwing away through insufficient or too narrow discussion? Next time you negotiate, make sure you spend a significant proportion of the time discussing the interests at play, rather than haggling over your position.
So what are tradeables?
Let’s take an airline as an example. In years gone by you bought a ticket and that was that. Today, we have to consider how much hold luggage, hand baggage, meals, how flexible the ticket is, penalties for changes, speedy boarding, allocated seats, airmiles payment and redemption, loyalty points and the list goes on. Airlines were forced to change their pricing strategy because of market pressures introduced by the low-cost flyers. Yet many businesses I talk to today stick to inflexible pricing strategies and then moan that their customers think they are too expensive.
In the case of a one-off purchase, for example buying a car, the relationship element is less important than when we are dealing with a customer, supplier or third party over time. In this case the relationship is just as important as the negotiation outcome itself. What’s at stake is future business, reputation and of course the ease of working together after the negotiation. The key error that most of us make is not spending enough time identifying our tradeables. As a result the relationship can suffer.
What neuroscience says…
Imagine you’re selling website design services, your tradeables might be licence fee, training, maintenance, guarantees, hosting, periodic upgrades, support etc.
Being clear about exactly what you’re selling puts you in a much stronger position if the customer demands a discount. Without tradeables you will either have to agree to a discount which will directly impact your bottom line, or you will have to say no, which risks spoiling the relationship and could even blow the deal.
Tradeables allow you to provide options for the other party. And neuroscience demonstrates that options create a sense of control which triggers the brain’s reward system. Whereas being told sorry, that’s our bottom line triggers our threat system and impacts the relationship negatively. In essence what you’re trying to achieve in any negotiation is to find something that will cost you little but is of significant value to them, and vice versa. Thus win-win!
All too often people believe they have no option other than to yield to price concessions - with a certain amount of resentment or resignation. However, careful consideration of your tradeables and pricing options provides a route to better outcomes and better relationships.
Give them options
We were recently negotiating with a large corporate to roll-out a global training programme. Their procurement department was trying to squeeze us on price. We knew if we started yielding, that would be the thin end of the wedge! So instead, we offered them a series of pre-prepared tradeables – online follow-up, certification, refresher webinars. So rather than saying no to a discount (which would have triggered a threat response), tradeables enabled us to demonstrate flexibility and a willingness to work with them to arrive at a mutually beneficial agreement.
All too often people believe they have no option other than to yield to price concessions – with a certain amount of resentment or resignation. However, careful consideration of your tradeables and pricing options provides a route to better outcomes and better relationships.
I don’t have time to delegate!
When my children were young, as well as running a demanding business, I was a single parent.
One of the things that really got to me was that my kids couldn’t even load the dishwasher properly. Surely that was the least they could do after I’d cooked the dinner!
They’d put the plates in the wrong section, the cutlery the wrong way round and the glasses upside down. I’d get increasingly irritated as I re-stacked everything. Why bother trying to get them to do it. It was quicker for me to do it myself – at least it would get done properly! Sounds familiar?
After several months of frustration it dawned on me that if I wanted them to stack the dishwasher properly, I’d needed to invest some time training them.
The problem was that I felt I didn’t have any spare time to carry out the training. It was a leap of faith for me to realise that the future reward would compensate for the time invested in training today.
The cost of failing to delegate
We see this type of thinking in the workplace – the time and effort to develop staff is an investment, and the payoff will only occur in the dim and distant future. Too often staff are set up to fail – for example when a high performing technician is promoted to a manager without any training for the new role.
What’s at play here is a cognitive bias called temporal discounting, where we attach a disproportionate value on the here-and-now compared with the future. The future seems vague and distant, whereas now is vivid and Technicolor!
In financial terms, our brain views £70 today as more appealing than £118 in 3 months time. We also see this type of thinking in the board-room where short-term dividends often trump longer-term investment.
So next time you catch yourself thinking “it’s quicker to do the job myself than get someone else to do it –then correct their mistakes”, STOP. Think. What is the cost of failing to delegate?
- Depriving your staff of learning and development opportunities
- Chaining yourself to operational detail rather than strategic initiatives
- Keeping yourself and your staff in their comfort zone
- In short – preventing organisational growth
Harvard Business Review cites that most leadership teams spend just three hours per month making strategic decisions – in fact they dedicate more time choosing the company Christmas card!
Don't fall victim to temporal discounting. Doing everything yourself is not a strategy for growth.
- Don’t fall victim to temporal discounting. Doing everything yourself is not a strategy for growth
- Spend your precious time on issues that exert the greatest impact on your company’s long-term value
- Seek every possible opportunity to delegate, develop others and grow!