A couple of months ago, I had an epiphany. I absolutely sucked at negotiating things for myself. It seemed like every time I was involved in a negotiation, I always came out as the loser. To make matters worse, I discovered that when I was involved in a negotiation with an incredibly hot girl, I would doubly screw the pooch.
To remedy this problem I began reading books on negotiating during my free time. That’s when I came across Negotiation Genius by Deepak Malhotra and Max Bazerman. What I discovered was that a lot of my misfortunes were due to a lack of real preparation. According to the authors, most people make their costliest mistakes before the parties’ even get together to talk. They go on to say that if one considers the negotiating process as an art form rather than a science, they will not properly prepare and be ill equipped when they try to strike a good deal for themselves.
To help people prepare for a negotiation, the authors present a five step frame work that I want to share with you guys today and get your opinions on.
Step 1: Assessing your best alternative to negotiated agreement (BATNA)
Professors Malhotra and Bazerman argue that the first step towards a successful negotiation is asking yourself what you will do if the current negotiations end at an impasse. You would start by simply taking a piece of paper and by writing down all of your possible alternative options that you can pursue if the deal falls through. Then you want to estimate the value that is associated with each alternative. Your best alternative on the list is your BATNA
Step 2: Calculate your reservation value
Your reservation value is simply your. If you are a seller it is the lowest price you would be willing to accept for a deal. If you are a buyer, it is the highest price you would be willing to pay. To come up with a good reservation value, you need to analyze your BATNA. The professors argue that your reservation value should be your BATNA plus an amount that you feel you can safely negotiate higher/lower with another party depending on if you are the seller/buyer.
Step 3: Assessing the other party’s BATNA
Similarly to when you were calculating your own BATNA, you want to think about what the other party might do if the deal does not go through. You want to go through the list of options they may have and select the best one.
Step 4: Calculate the other party’s reservation value
Once you are equipped with the other party’s BATNA, the authors suggest that a good way to come up with their reservation value is to think about what they might do if the deal goes through. You essentially want to figure out what this deal is worth to them. This is where you might have to do a little bit of research on the other party. Some questions you might want to ask yourself are ‘what are the intentions of the other party?’ ‘What do they do? / What are they good at?’
Step 5: Evaluate the zone of possible agreement (ZOPA)
The ZOPA, as the name suggests, is the set of all possible deals that would be acceptable to both parties. It is essentially the space between the seller’s reservation value and the buyer’s reservation value. Your success in any negotiation depends heavily on how much of the ZOPA you can capture for yourself.
Do all you masters of the universe do any of this either subconsciously or consciously when it comes to preparing for a negotiation? Or do you all just prefer to walk into a negotiation like bosses and let your gut handle the rest? Does anyone have an alternative framework that they like to use/have been successful with? I guess the most important question here is how do you go about preparing for a negotiation?