Negotiation is a part of life. It’s how we work out our differences. We negotiate for big things (like buying a house or car), work-related things (like who will take responsibility for a project), and small things (like who will wash the dinner dishes).
I remember one of my first attempts at a big, important negotiation. I had just graduated from school and been offered a “real” job in an actual office, and I knew that this was my best opportunity to negotiate my salary. I tried, but it was a pretty pathetic exchange. Here’s how it went…
Hiring Manager: We’d like to offer you a job. We’ll pay you $ amount.
Me: That’s wonderful! But would it be possible to pay me something in the range of $$ instead?
Hiring Manager: No.
Me: OK, then! I accept the job!
Sad. Obviously, I wasn’t a great negotiator. But it is a really important skill and it’s something that I’ve been trying to get better at over the years. I think it requires practice and a certain amount of bravery. But it also requires having an understanding of key negotiating concepts.
According to Harvard Business Essentials, there are four key concepts that you must understand in order to negotiate successfully:
- BATNA (best alternative to a negotiated agreement) –This is what you plan to do if a negotiation doesn’t work out. For example, let’s say that you’re house-hunting, and you’ve found two houses that you like. The one that you like best is a little more expensive than the other (and possibly a little overpriced). You decide to put an offer on the more expensive house and try to negotiate the price down. If you can’t negotiate it down, you intend to walk away from the deal and put an offer on the less expensive house. That’s your back-up plan – your BATNA. You need to know your BATNA before you start negotiating. If you don’t know what your alternatives are, you won’t know if someone is offering you a good deal or a bad one. And if your BATNA is weak, it puts you in a weak bargaining position. Try to strengthen it, if you can!
- Reservation price – This is the worst deal that you’re willing to take. If you don’t get your reservation price, you’re walking away from the deal.
- ZOPA (zone of possible agreement) – This is the range of offers that would satisfy both sides of the negotiation. It’s the zone where deals are made and both parties leave feeling satisfied. It’s basically the area between each negotiator’s reservation price. For example, let’s say that you’d like to buy a rare Star Wars action figure (still in the box!). You don’t want to go higher than $100. The seller doesn’t want to go lower than $75. The area between those two prices is the ZOPA.
But what if the seller won’t go any lower than $110? Then there is no overlap, and no ZOPA. In situations like this, you could try to offer a little something extra – something that might have value to the seller but not be very important to you. And this brings us to our last concept…
- Value creation through trades – Use your imagination and think creatively to come up with things that might have value to the other party. You can use those things to sweeten the deal and hopefully get something you want in exchange for something that you don’t really value. This requires both sides to communicate openly and honestly.
Remember, being able to negotiate is so beneficial! It can help you, both in your personal life and professional career. Hopefully these key concepts will make the process a little easier. Good luck!
Harvard Business Essentials: Negotiation. (2003). Boston, MA: Harvard Business School Press.