by John Di Frances

Mention the words “negotiation session” to almost any business executive and you’re sure to see some signal of apprehension. Most executives relish upcoming major business negotiating sessions with about the same zest as they do a root canal. They know the stakes are always high: Negotiate too hard and the deal is lost; be too timid and they may leave money on the table, which in today’s economy is nearly as bad as losing.

Successful negotiation is an art. And the three most important concerns in any negotiation are relationship, risk and value. Before beginning any negotiation session, smart executives cross three mental bridges that cultivate success. 

1. Clarify the relationship
Prior to negotiating, ask yourself, “What is the current real and perceived business and personal relationship? And what is their value to my organization’s future?”

Far too often people hold on to the past, not realizing they must be willing to let go of what they have to reach out for something better. Carefully consider what could be lost during the negotiation, but also understand what new doors may open given a successful negotiation. Too many business leaders continue pursuing existing relationships beyond their prime simply because it is easier and more comfortable than developing a new relationship that better suits the organization’s future. Thus, you must place a well-thought-through value on continuing the relationship in view of the pending negotiations.

2. Clearly structure the outcome both parties desire
Many people enter a negotiation with the drive to win, but never commit to paper precisely what that means. Yes, they have a general idea (i.e., to place the contract at the best price or cost); however, they have not defined the optimal combination of price/cost and all other terms that reflect both parties’ best long-term interests. Identify the magic package that allows everyone to believe they have been treated fairly. Begin by preparing a written scenario that outlines what each party should view as a great deal. This often leads to the optimum win-win agreement.

3. Determine your walk-away point
Knowing when to walk away is the hardest and most important part of any negotiation. This is a decision you must reach before the negotiation, because it is difficult to identify this point in the heat of the negotiation. You must approach your walk-away point calmly with the prior two points in mind, because negotiators truly need to understand what each side requires to make a great win-win agreement. Then, if the other side becomes unreasonable and prevents your desired outcome from happening, you can weigh the value you placed on the relationship and ask, “Do we really have a mutual relationship or merely one party taking undue advantage of the other?”

Negotiation Basics
With the above three steps clearly laid out, begin negotiating. At this point, truth and candor are of paramount importance in building trust between parties. However, you should not reveal all your intentions at once. After all, negotiating is a more formalized variation of common marketplace bartering. It is all about give-and-take and each party's perceptions of value. You offer; they counter; you respond…and so it goes. This is why you must clearly understand the structure of the win-win deal from both perspectives before negotiations begin.

Realize that negotiation requires the patience and confidence to be still. If the other party precipitates a long silence, wait and say nothing. Let them break the silence. If it is truly a relationship, they will. Remain steadfast and solemn, but not sullen. Hold out firmly for your high priority/risk issues.

Understand that holding out for a lost cause is not only against your best interest, but also makes you appear stubborn and foolish. Know when to give in. If it is not a walk-away issue, then concede graciously and negotiate onward.

Most important, you clearly need to know when you are approaching the point of no return – the point where you will walk away. You have the opportunity to steer the negotiations away from falling into a lose-lose spiral where relationships deteriorate and from which parties may not recover.

If the deal cannot be had without violating your prior walk-away decision, then walk away. Clearly articulate your position and reasons, then leave courteously, letting the other party know that you mean what you say and leaving the door open for them to reopen the discussion after conceding to your walk-away issue(s).

In the most extreme instances, the other party may demonstrate bad faith or a lack of regard for the truth. If this happens, run from the negotiations. No business relationship is worth the risk and inevitable pain that results from dealing with dishonorable people and organizations. After all, would you continue playing cards with someone after you learned they were using a marked deck? Of course not. Run away from dishonest negotiations and do not leave the door open. Let them know that you have no time for or interest in doing business with those who do not understand truth and integrity.

Above all else, never talk openly about how much you or your company will profit from the deal, and refrain from gloating over the terms of the agreement afterward. Both are evidence of bad taste and a severe lack of personal discretion. News like that has a habit of getting around. Very often, successful negotiations sour because someone with loose lips let slip an indiscreet comment that led the other party to believe they were taken advantage of or misled.

On the positive side, celebrate the outcome together with the other party at the conclusion of the deal. Go out together to lunch or dinner. In doing so, you celebrate the success of everyone involved and thereby further reinforce the relationship for the future.

Negotiate to win
Few things are sweeter than a successful negotiation session where both parties leave with a winning solution. In order to arrive at this point often, integrate the above negotiation strategies into your next session. The results will lead to more successful relationships for all parties involved.

John Di Frances is the Managing Partner of Di Frances & Associates, LLC. He advises senior executives globally and is a featured professional speaker. His prior leadership experience includes various positions with both international and domestic corporations. Clients include corporations, government agencies, not-for-profit and academic organizations. For more information please visit his Web site at: www.DiFrances.com.

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