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Information is the Currency in a Negotiation
Negotiations Undertaken Without Information
So much effort is spent making proposals in a negotiation. Those proposals meet the needs of the person making the proposal of course, but so often proposals are made without regard to whether they meet the needs of the other party. In fact the needs of the other party may not even have been considered in the formulation of the proposal.
When a negotiation is undertaken in this way, a proposal made without regard to the other party’s needs is rather aimless, and is likely to be rejected. Whether it does meet the other party’s needs, and therefore whether it will be accepted, is entirely subject to chance.
So many negotiations are a series of aimless proposals that accidentally are on target and are accepted, but more often are off target and are rejected. These are negotiations undertaken without information, or with little information to assist the formulation of proposals.
Negotiations Undertaken With Information
In contrast, proposals formulated having gathered and assessed relevant information are proposals that will meet the needs of the party making the proposal, as well as being more likely to meet the other party’s needs, and therefore more likely to be accepted by the other party.
Which is the more efficient negotiation: the one without information with aimless proposals that probably will not be accepted, or the negotiation with information to help formulate proposals that meet our own needs, and have the prospect of meeting the other party’s needs as well?
Which negotiation is more likely to build the relationship between the parties? Which negotiation is more likely to put the relationship under stress? Which negotiation is more likely to have impasse?
Information is the currency of a negotiation
The party with the most currency is the richer party.
So it is with information in a negotiation. The party with the most information in a negotiation is the richer party, which will secure the best outcomes.
The party without information negotiates aimlessly, and cannot as a result get the best outcome. In contrast, the party with information negotiates meaningfully and relevantly, equipped to make proposals of its own choosing, and which therefore meet its needs, and which meet the other party’s needs as well.
The challenge in a negotiation is to get information. The more serious or larger the value of the transaction, the greater the time and effort that should be invested in gathering information. But even smaller transactions benefit from some degree of information gathering.
Good negotiators prepare and gather information
Negotiation preparations are critical. For larger transactions or high value transactions, the time spent in the preparation phase can be as much as 20% to 30% of the total time that it takes to negotiate the transaction. Negotiation preparation involves much more than formulating best outcomes. That can sometimes be wishful and fanciful. In the preparation phase information is gathered and assessed about the other party, about the other party’s representatives with whom we will be negotiating, the other party’s decision makers, and their decision making processes. Information is assessed about our own needs and goals, as well as alternative ways or pathways to achieving those needs and goals. Importantly, the transaction needs to be benchmarked, its financial terms, and other terms as well.
At first meetings, good negotiators ask questions and seek more information from the other party
The “automatic gear” approach to first meetings is to start the negotiation. But at first meetings, a good negotiator will not necessarily start negotiating, but instead will ask questions of the other party, continuing to gather information. Are there any gaps in the information gathered in the preparation phase that need to be filled? Is there any information gathered in preparations that needs to be validated or clarified? First meetings should not necessarily be occasions where we “dive into the negotiation”. In fact, we should not start the negotiation at all until a time of our choosing, when we feel that our preparations are as complete as they can be. First meetings are therefore opportunities to gather more information.
At first meetings, good negotiators communicate information rather than make proposals
First meetings as well are occasions to communicate information to the other party. We do not want the other party to make aimless proposals. Instead, we prefer that the other party makes meaningful and relevant proposals. Fist meetings are therefore an opportunity to communicate information to the other party about our needs and goals, to better equip the other party to make more meaningful and relevant proposals to us, and as well to be better equipped to evaluate the proposals that we make to it.
Good negotiators do not repeat or justify their rejected proposals, but seek criticism about their proposals
When our proposals are rejected by the other party our “automatic gear” inclination is to justify and repeat the proposal, and to seek to persuade the other party that our proposal is fair. Often, this only results in our proposals continuing to be rejected. A good negotiator does not repeat or justify rejected proposals. Rather, the good negotiator uses a rejected proposal as an opportunity to invite criticism and evaluation of the proposal made, in an effort to gather more information about the other party and its needs and goals. In this way the good negotiator is better equipped to make another proposal, of its own choosing, so it is a proposal that meets its own needs, but as well is a proposal that is more likely to meet the other party’s needs too.
Good negotiators do not reject the other party’s proposals, but communicate information
The “automatic gear” response to a proposal that does not meet our needs is to reject the proposal. A good negotiator will not reject an unsuitable proposal, having as that does, negativity. Instead the good negotiator will use the opportunity to communicate information to the other party about its needs and goals to make the other party better equipped to formulate another proposal that will be more likely to suit the goals and needs to be met.
Is it worth the trouble?
The more significant or the greater the value of the transaction, the greater the importance that we gather information for the negotiation, and the greater benefits we will have from having done so.