Contract negotiations are just another level art of winning personalities. The outcome is to be attractive for both parties, with no loser. If negotiation is based on the intention to have the upper hand and a one-sided result, then it will never lead to a mutually beneficial long-term business relationship.
Negotiations contain multiple emotions on both sides of parties.
A good negotiator is a good listener and an effective communicator. Listening to others reduces communication gaps and misunderstandings. Effective communication is the key to any business process used at various skill levels. Negotiation is a process, and before getting into it, preparation is needed.
The preparation for an effective negotiation means, the collection of historical facts if the contract under negotiation is subject to renewal. The last price is to be agreed upon by the management team before starting the process with the other party. Once terms and especially the 'last price' is agreed on within the management team, then the negotiator gets the flexibility to get in-depth in the discussion.
Now comes the negotiation time, it's all about listening to the other party, carefully. Giving them chance to speak out. Being in receiving mode helps the negotiator to understand the thinking process of the other party. Let them propose the term first, do not get into ‘hurry mode’ to speak out.
During negotiation, patience, and communication can lead to the best results.
Keep emotions away and let them not ride the discussion.
Once negotiations are completed, a second phase i.e., post-negotiation phase begins. The key to good negotiation is never to forget to thank another party for the time spent. Making follow-up call by email or verbally, adds to the confidence building. Showing them interest even if the deal is not favorable helps to build a relationship with suppliers which eventually helps in future business.
Basically, even if the deal is not agreed upon, keep the options open for future discussions.
Is a better price only outcome of negotiations?
A cheaper price is not a success for the negotiator. Let's say we are negotiating the purchase of a 'centralised chiller' for a building. The interesting fact is the price will show an enormous variation between two-three suppliers. This variation is mainly with the future maintenance cost, spare parts, etc, if covered. The base model is most easily comparable. Thus, the price is not the only outcome we expect in a successful negotiation. The entire period of service/usage is to be considered. Sometimes, the equipment gets outdated soon with technology changes or otherwise, is the reason for a cheaper price. Thus, price should not be the only motive of negotiation. Availability of the product for a longer time or even length lead-time is to be weighed.
Hard Negotiation is something that distrusts others. Instead of respecting the other party’s point of view, imposing their own terms is a one-sided negotiation. It often reaps no result. It can also lead to conflicts or arguments. Success in business requires trusted partners, repeat customers, and skilled employees. Going for a hard negotiation opposes the idea of a ‘win-win’ solution, which is of prime importance for a successful business. Hard negotiation emphasizes results only and the soft part of the negotiation which is relation building is completely absent.
Extreme demands and the concept of ‘take it or leave it’ is another form of hard negotiation. It is advisable if the negotiation is not reaching a solution and then the last offer is placed.
Amiable Negotiation needs.
Collection of historical data
Give them enough chance to speak
Be a careful listener
Calm posture and patience
Keep emotions away
A must fr any leader, also hard negotiation topic explained very clearly.