Do you have a big negotiation coming up? Do you feel ready?
According to Negotiation Genius by Deepak Malhotra and Max H. Bazerman, the first step to effective negotiation is preparation. Before you enter a negotiation, you must have your negotiables ready and gather as much information as you can about the other party.
Let’s look at how to prepare for a negotiation so that you’re ready for anything.
How to Prepare for a Negotiation
The authors share their advice on how to prepare for a negotiation, suggesting that you calculate BATNAs, RVs, and the ZOPA—and then uncover as much information as you can about your counterpart and their negotiables. Let’s go through their recommended steps.
Calculate BATNAs, RVs, and the ZOPA
The authors suggest that learning how to prepare for a negotiation requires three things: your and your counterpart’s best alternative to a negotiated agreement (BATNA), reservation value (RV), and zone of possible agreement (ZOPA).
Step 1: Calculate Your BATNA and RV
In every negotiation, you want to make a deal that leaves you better off than if you hadn’t negotiated. To ensure this outcome, you must determine when you should walk away. You can do this by calculating your best alternative to a negotiated agreement (BATNA) and your reservation value (RV).
Your BATNA is the course of action you’ll take if your current negotiation fails and ends without a deal. For example, if you’re selling a boat, your BATNA is what you’ll do if you can’t agree on a price with a potential buyer—for example, you might take a lower offer from another buyer.
To determine what your BATNA is, identify all available options should your current negotiation fail. Then, select the option that has the highest value as your BATNA. For example, if your alternative options are to sell your boat to another buyer for less money, keep the boat for yourself, or give it away to a relative, you might decide that accepting the lower offer gives you the most value out of the three and should therefore be your BATNA.
Next, define your RV, the worst deal you’re willing to accept in your current negotiation. For example, this might be the highest price you’re willing to pay or the lowest price you’re willing to sell. You need to know your BATNA before you can accurately calculate your RV.
Step 2: Calculate Your Counterpart’s BATNA and RV
To get the best possible deal for yourself, you must also calculate your counterpart’s BATNA and RV to assess how much value they’re willing to offer that you can seize.
First, calculate your counterpart’s BATNA by thinking about what they would do if the negotiation ended without a deal. Consider the information you’ve gathered in your research and think through possible alternatives. For example, if you and your counterpart fail to reach an agreement on your boat’s price, their alternatives may include finding another boat to purchase, renting, or waiting until a similar model is available.
Next, calculate your counterpart’s RV by considering why they want to make a deal. Then, think about how much benefit they expect from this desired outcome. For example, if you think your counterpart plans to flip your boat for a profit, you might research how valuable that could be. Then, you could reason that their RV is higher (they’re willing to pay more) than if they were simply using the boat for entertainment purposes.
Step 3: Calculate the ZOPA
Once you’ve calculated BATNAs and RVs, identify the zone of possible agreement (ZOPA): The space between your RV and your counterpart’s RV. For example, if the lowest you’re willing to sell is $10,000 and the highest your counterpart’s willing to pay is $15,000, then the ZOPA is between $10,000 and $15,000. This range gives you a more tangible measurement of how much value you can either claim or surrender during a negotiation. To claim the most value, you want to make a deal as close to your counterpart’s RV as possible.
Uncover Hidden Information
Beyond your counterpart’s RV or interests, you should also pay attention to less obvious factors that may influence their willingness to accept or reject your offer. The authors suggest you look for information that negotiators commonly overlook, such as:
1. Other parties involved. Reflect on how the actions of other parties may impact a negotiation. If you only focus on the negotiation at hand, you may achieve a deal that produces less value rather than more. For example, if two parties are in a bidding war for a company and a deal will result in a financial loss for the losing party, the two parties may continue to raise their bids until they both end up worse off. The winning party overpays while the losing party loses money.
2. How the other side makes decisions. Your counterpart may be bound to specific decision-making rules, such as being required to weigh criteria differently or needing to get the approval of a supervisor. By discovering this, you can figure out how to meet these criteria in a way that’s most suitable for you.
(Shortform note: When you’re trying to find out who has the decision-making power, you may encounter “blockers”—people who claim to have decision-making authority when they really don’t. These might be assistants or people who can influence the decision-maker but aren’t actually involved in making the decision. To deal with blockers, you must first understand the blocker’s needs, treat them with respect, and validate their importance so that they can facilitate your access to the real decision-maker.)
3. How strong the other side’s position is. Negotiators may overlook their competitor’s strengths or underestimate how much information they have. To avoid this, the authors recommend you deliberately consider what unique advantages your competitors may have.
|Find Your Black Swans
The hidden pieces of information Malhotra and Bazerman urge you to look for might be examples of what Chris Voss refers to as unknown unknowns, or “Black Swans.” In Never Split the Difference, Voss writes that there are three types of information in a negotiation: known knowns (information you have), known unknowns (information that’s hidden but you know exists), and unknown unknowns (information that’s hidden that you also don’t know you lack).
Voss argues that Black Swans are often the most important pieces of information to uncover because they give you insight into your counterpart’s deeper desires, anxieties, and perspective of the world. To uncover this information, Voss recommends you build rapport with your counterpart and pay attention to any nonverbal cues your counterpart might be giving off.
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Here's what you'll find in our full Negotiation Genius summary:
- Why a good negotiation depends on your ability to create value
- How to avoid common negotiation pitfalls and make attractive deals
- How to decide whether or not to make the first offer