Negotiation Dynamics: “Nothing of value is obtained without effort”

Last modified: 19 June 2024 10:31
Day one insights from a world-class course.

On Wednesday, May 29, the highly acclaimed three-day course, Negotiation Dynamics of the Amsterdam Institute of Finance, commenced. Renowned as one of the premier negotiation training programs globally, it is led by Ingemar Dierickx, a senior partner at D&AC – Negotiation Advisors. For over three decades, Dierickx has been advising clients across a wide range of industries, bringing a wealth of experience to his teachings.

Price negotiation – Package Deals
The focus of Day 1 was on two topics: mastering price negotiations and structuring complex package deals. “Price negotiations are no longer politically correct”, began Dierickx. “Nowadays, the magic word is win-win.” However, he quickly pointed out that not all ‘wins’ are equal.

“Price remains the most significant element in many commercial negotiations”, Dierickx continued. The morning session was dedicated to price negotiations, while the afternoon shifted to juggling multiple factors to negotiate package deals and creating optimal deal structures. Participants were briefed on the agenda for the following days, which included breaking deadlock and dealing with aggressive negotiating challenges.

Participants immediately engaged in a one-one one negotiation involving the potential sale of a small parcel of land. The task was to negotiate the best possible price.

The exercise revealed a wide range of negotiating styles. Differences in language use, information management, and overall strategy were evident. Some teams reached agreements swiftly, while others took longer; some failed to close a deal entirely.

Dierickx provided feedback, highlighting common mistakes such as negotiating without gathering all necessary information. “When you realize that you are missing information, take a time-out”, he advised. ” Don’t resume the negotiation until you’ve obtained information from an unbiased source.”

The negotiation process
The initial exercise aimed at achieving favorable outcomes while emphasizing the importance of the negotiation process. “The first, and perhaps the most important, characteristic of effective negotiators is that they are very good at observing the process”, Dierickx emphasized. “What is happening? By observing the negotiation process, you can learn a lot about your counterpart.”

He stressed never accepting the first proposal. “Not just because you can get a better deal, but because you want to cement the deal by going through the negotiation process. Nothing of value is obtained without effort.”

Dierickx elaborated on the language of negotiation. “When you hear ‘yes, but’, it actually means ‘no, because…'” Negotiators who repeatedly say “yes, but” project a negative image of themselves: they are argumentative, and they are not interested in the input their counterpart may offer to shape a mutually acceptable solution. Dierickx calls them “donkeys”. The objective in negotiation, he reminds participants, is not to win an argument, but to close a profitable deal. “Simply replace ‘yes, but’ by ‘yes and’. By saying ‘yes, and’ we project a positive image of ourselves: we show that we welcome suggestions from our counterpart, and that we are building on – rather than fighting against – these suggestions.” Dierickx also advised never to outright accept or reject a demand by our counterpart. “Never say ‘yes’ or ‘no’. Say ‘if’ instead.”

The twin drivers of bargaining power: alternatives and information
The first driver of bargaining power is having a solid no-deal alternative. Improving your BATNA (Best Alternative To a Negotiated Agreement) strengthens your bargaining position. A good BATNA will shore up a negotiator’s confidence.

“There are two dimensions to every negotiation”, Dierickx reminded participants, “an information game and a test of confidence. Negotiators often use aggressive tactics to destabilize their counterparts. For example, a procurement manager may bellow, in an ominous tone of voice, ‘I already have another offer’ or ‘You’ll have to do better than that, much better.’ Such tactics often destabilize novices. Negotiators won’t be impressed, however. They project the image that they are perfectly happy with the status quo.”

The second driver of bargaining power is information. Preparation is key to successful negotiations, as underscored by the initial exercise’s outcomes. “Identifying what you need to know, and what your counterpart knows and doesn’t know, is crucial”, Dierickx explained.

Participants learned the importance of getting the other party to open up and reveal their motivations. “Ask open questions”, Dierickx advised, “and always ask follow-up questions. Show that you are interested.” Inexperienced negotiators typically ask closed questions. “They are afraid to lose control of the bargaining process”, said Dierickx. “Effective negotiators don’t worry about ‘losing control’. They know their counterparts will only open up when they can express themselves the way they want to.”

A final caveat
Before signing a deal, negotiators should always ask themselves two questions:

• Can I write my counterpart’s victory speech? If you cannot do this, it means that you are missing vital pieces of information.

• Under what conditions would the that deal I’m about to sign turn out be a bad deal? This question, which Dierickx dubs the Richard Feynman question (after the Nobel prize winning physicist, ed.) underscores that a critical error is thinking we understand the world completely.

Conclusion
Day one concluded with participants feeling exhausted but enthusiastic. Armed with valuable insights and techniques, they were motivated and ready to tackle the challenges of day two with renewed vigor. The lessons learned on this first day set a strong foundation for mastering the art of negotiation.

Three elementary pieces of information you need in any negotiation
1) Who are you negotiating with?
Find out everything you can about the person you are dealing with, including personal details such as their hobbies, lifestyle and other ‘fun facts’. Effective negotiators are genuinely interested in the person they are dealing with. Bad negotiators are only interested in themselves.
2) What are the other party’s no-deal alternatives?
If you can identify the other party’s no-deal alternatives, you can figure out their limit.
3) What are the possible blind spots for my counterpart?
Do not assume that your information is also available to your counterpart. Figure out what information your counterpart likely doesn’t have.

Amsterdam Institute of Finance is a knowledge partner of the Belgian M&A Community

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