Shrewd negotiation skills are often critical to achieving significant financial success. The ability to get what you want when there are disagreements among parties separates many self-made entrepreneurs, as well as most other highly successful people, from the rest of the pack that doesn’t achieve great results.
We commonly see that great negotiators take time to develop extensive, powerful negotiat- ing strategies aimed at maximizing the leverage they have in dealmaking situations. Smart preparation that generates greater leverage can, and often does, make a substantial differ– ence in terms of their outcomes.
Here’s a look at how skilled negotiators strategize and prepare in order to build leverage, so you can take a page from their playbooks.
What and how
Leverage is having what the other side wants or cannot do without. The more leverage you have, the more you can motivate the other people involved to give you what you want. One way to think about leverage is this: The easier it is for you to get up and walk away from a ne– gotiation—and the harder it is for the other side to do the same—the more leverage you have.
To build leverage, the two principal areas of negotiation to address are what and how. The what aspect involves asking questions such as these:
- What results do you want?
- What results are most important and which ones less so?
- What results tie back to the bigger picture (your larger goals beyond this one negotiation)?
The how aspect is all about bargaining tactics that are going to enable you to get what you want to the greatest extent pos- sible. More precisely, how is all about ways to maximize the leverage you have in the negotiation.
Information is power
Two Principal Areas of Negotiation to Address
A key to strengthening your leverage is to have options. These are alternative courses of action that can be within the negotiation or outside of it. Example: The entrepreneur looking to sell her company has greater leverage with any potential buyer when there are other po- tential buyers waiting in the wings. Part of your how negotiating strategy is to find ways to maintain or increase your leverage.
One especially effective way to enhance your leverage is to understand what the other side really needs from the negotiation and the rationale behind those needs. Often these deep needs are hidden and go beyond the initial position they have stated. By understanding the other side’s why, you can better frame the discussion to show them how your positions can get them there—which, of course, gives you more leverage.
To uncover such deep insights and knowledge, you need to be empathetic, which is pred– icated on the astute use of questions coupled with accurate feedback. When you are em- pathetic, you essentially help the other side open up and tell you their story—thereby giving you crucial information that can potentially increase your leverage.
In short, great negotiators understand that information is influence and power—and they seek out information from the other side skillfully to gain leverage.
Important: While leverage often can be fluid—shifting from one side to the other throughout a negotiation—you are looking to minimize it shifting away from you. You want to always be in the driver’s seat, even when the other side does not see it that way.
As part of their efforts to build strong negotiation strategies, great negotiators often de– velop multiple scenarios in order to think through alternative courses of action in various situations.
While there may be lots of different scenarios developed, the core wants and hows tend to remain fairly constant. It is an exercise that looks like this:
If they say X, I say or do Y.
If they do X, I respond by doing Y.
In every scenario that’s considered, a key element is seeing how you can further increase your leverage. What actions (within and outside of the negotiation proper) can you take that will put you in a better position to achieve your desired results?
That said, the planning and preparation—for all the various scenarios—become secondary when a negotiation actually begins. That’s because a scenario rarely plays out exactly as planned. The real value of developing and running scenarios is to better prepare you to adjust your tactics quickly and focus on gaining leverage no matter how the negotiation plays out.
Five mistakes that diminish leverage
Just as leverage can be created, so too can it be lost—and there are a plethora of ways you can destroy the leverage you have. For example:
- Failing to adequately prepare
Many people go into negotiations thinking all the action takes place when people are face- to-face. Not true. The more you can go into a negotiation with a very clear knowledge of what and how, the more quickly and effectively you will be able to adjust and respond. And by running through various scenarios in advance, you are likely to be more prepared mentally to address the tactics of the other side. You also might be more likely to stay focused on your desired outcomes and not make unnecessary concessions.
- Letting your emotions derail your negotiation efforts
Emotions have a tendency to produce impulsive statements and actions. Getting “worked up” when negotiations get intense therefore often leads to bargaining errors. Spontaneous responses fueled by emotion usually weaken your situation and diminish your leverage. An- ger, for example, typically negates leverage—while threats born of frustration tend to reveal your weaknesses. Both mainly help empower the other side—at your expense.
By keeping your emotions in check, you will likely be better at sticking with your negotiating strategy and building your leverage.
- Not being empathetic
Information is power, as noted above, and one of the most effective ways to get information about the other side is to be empathetic. Helping them share their thinking, their wants and their concerns with you is often the easiest way to get information that results in you gaining leverage.
And yet, too many people fail to recognize the value of empathy. Most great negotiators are highly empathetic because it frequently lets them frame the negotiations in ways that permit them to maximize their leverage—and thus get more of the results they want.
- Focusing on why you should get what you want
Your rationale for your own wants is not especially important to the other side. They are much more interested in what they want, naturally. Your perceptions of fairness, for example, are not nearly as meaningful to them as their perceptions of fairness.
When you move away from why you want what you want and shift the focus to the counter- party, you can put yourself in a great position to frame the negotiation as you see fit.
- Losing sight of your bigger objectives
Do you want to become more successful, or do you want to win an argument? We see too many people in negotiations become so intent on proving that they’re right that they actually lose out in the end and don’t get what they want or need. If you get too hung up on making the other side admit you’re correct and they’re incorrect, you lose leverage.
You always need to keep what in mind as well as your larger objectives beyond the current negotiation. For example, say it’s likely that you will be negotiating with the current counter- party in the future. A scorched earth policy might get you a short-term win today, but it could end up being a serious long-term loss if the other person refuses to ever deal with you again.
We all have to negotiate at some point—be it in a business environment or in our personal lives—to get what we want. By understanding the what and how of the situation at hand, prepping by running various negotiation scenarios, and using empathy to draw out crucial information from the people “across the table” from you, you can create leverage that drives you to the negotiation winner’s circle time and time again.