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Career Development

Negotiation Skills: Definition and Examples

January 24, 2020

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Negotiation is a type of discussion used to settle disputes and reach agreements between two or more parties. Generally, a negotiation results in a compromise where each party makes a concession for the benefit of everyone involved.

Negotiations occur frequently within the workplace and may occur between coworkers, departments or between an employee and employer. Professionals may negotiate contract terms, project timelines, compensation and more. Negotiations are both common and important, so it’s helpful to understand the types of negotiations you might encounter as well as how to improve your negotiation skills.

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What are negotiation skills?

Negotiation skills are qualities that allow two or more parties to reach a compromise. These are often soft skills and include abilities such as communication, persuasion, planning, strategizing and cooperating. Understanding these skills is the first step to becoming a stronger negotiator.

The skills you’ll need depend on your environment, your intended outcome and the parties involved. Here are a few key negotiation skills that apply to many situations:

  • Communication: Essential communication skills include identifying nonverbal cues and expressing yourself in a way that is engaging. It is important to understand the natural flow of conversation and always ask for feedback. Active listening skills are also crucial for understanding the other party. By establishing clear communication, you can avoid misunderstandings that could prevent you from reaching a compromise.

  • Persuasion: The ability to influence others is an important skill for negotiation. It can help you define why your proposed solution is beneficial to all parties and encourage others to support your point-of-view.

  • Planning: In order to reach an agreement that benefits both parties, it is crucial you consider how the consequences will impact everyone in the long-term. Planning skills are necessary not only for the negotiation process but also for deciding how the terms will be carried out.

  • Strategizing: The best negotiators enter a discussion with at least one backup plan, but often more. Consider all possible outcomes, and be prepared for each of these scenarios.

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Types of negotiation

Most negotiation outcomes will fall into one of two categories: Win-Win or Win-Lose. By understanding the different types of negotiations you may encounter, you can determine the most relevant skills for your role and work to improve them.

Here are forms of negotiation:

  • Distributive negotiations: Also called distributive bargaining, this form of negotiation occurs when there is a limited amount of resources and each party assumes if they lose something, the other party will gain something. Instead of each party attempting to come to an agreement based on their interests and needs, each party is working to get more than the other party. For example, a client may feel if a provider does not lower the price for a service, they will be paying too much, and the service provider may feel if they decrease their price, they will losing money.

  • Integrative negotiations: Often referred to as a “win-win,” an integrative negotiation occurs when everyone benefits from the agreement. In order to come to an integrative agreement, each party receives some value. The integrative negotiation process may take longer because both parties have to feel fully satisfied before coming to an agreement. For example, if a client believes a provider should reduce the cost of their service to $800, and the provider believes they maintain the cost of their service at $1000, the two parties may negotiate to a $900 service. In this case, both parties “win” $100.

  • Management negotiations: Negotiating with management can be stressful. In some cases, employees may feel uncomfortable sharing their wants and needs with someone in a more senior position. However, you’ll often encounter this sort of negotiation during the job seeking and hiring process. You may have to negotiate your salary, benefits and job duties. Each of these elements can directly impact your job satisfaction, so it’s essential to address them. Additionally, negotiating these factors gives you an opportunity to demonstrate your communication skills to your employer. You might also have to negotiate with management in your current position when re-evaluating your employment contract or requesting a raise.

  • Coworker negotiations: Depending on your job, you may have to negotiate with your coworkers. Many positions require close teamwork and without strong negotiation skills, you may face imbalances in work distribution. Negotiation skills allow coworkers to develop a plan that benefits the whole team. You may also have to negotiate when solving conflict in the workplace.

  • Vendor negotiations: Some employees manage external vendors, and their performance rating may be affected by how they negotiate. Also, the ability to reach an agreement with service providers can affect your professional relationships and general business success.

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Tips to improve your negotiation skills

Not all forms of negotiation are effective, and measuring success can be challenging. To evaluate your effectiveness, it is wise to identify how well your intended outcome aligns with the final agreement.

Follow these tips to improve your negotiation skills:

  1. Identify the final goal
  2. Practice building rapport
  3. Be willing to compromise
  4. Consider imposing time restrictions
  5. Take the multiple offer approach
  6. Exercise confidence
  7. Don’t take “no” personally
  8. Understand your weaknesses
  9. Practice

Below are a few ways to strengthen your negotiation skills.

1. Identify the final goal

What are the minimum terms you need? How much are you willing to negotiate? It’s important you enter negotiations knowing what you want out of an agreement and how much you’re willing to compromise. For example, your ultimate goal may be to negotiate a salary of $80,000, but you would be willing to settle for $75,000.

2. Practice building rapport

Successful negotiation requires you to effectively communicate not only your own goals, but also to understand the other party’s wants and needs as well. In order to reach an agreement, building rapport is essential. This can assist you in easing tension. In order to build rapport, showing respect for other parties and using active listening skills are critical.

3. Be willing to compromise

Without compromise, it can be nearly impossible to reach an agreement. By preparing ahead of time, you will already have an idea of the terms you’re willing to sacrifice as well as the ones that, if they aren’t met, you would be willing to walk away from the deal.

4. Consider imposing time restrictions

Setting a timeline on the negotiations motivates both parties to reach an agreement. If terms cannot be met in that time, the two parties can take time to reevaluate their needs and return at a later date.

5. Take the multiple offer approach

By presenting multiple offers at once, you can save time in the negotiation process and increase the likelihood that you’ll agree on at least one of your preferred outcomes. If the other party declines, you can then ask for feedback on each one and revise terms until you reach an agreement that meets everyone’s needs.

6. Exercise confidence

It can be challenging to ask for what you want. However, successful negotiation requires self-assurance. By exercising confidence in your negotiation, the other parties can be more inclined to believe in the benefits of your proposal.

7. Don’t take “no” personally

Sometimes, each party’s goals and needs are too different to reach a compromise. When this happens, evaluate the process, consider why things that did not go as planned and look for ways you may be able to improve your efforts next time.

8. Understand your weaknesses

Take time to identify your areas of weakness and focus on growing those skills. For example, you may need to improve your ability to build rapport or your power of persuasion. Understanding your weaknesses is the first step to overcoming them.

9. Practice

One of the best ways to increase your comfort in negotiations is to practice often. Consider trying a mock negotiation with a trusted friend or colleague.

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How to prepare for a negotiation

Whether you have an upcoming salary negotiation or are planning to ask for a raise during your next performance review, preparation is key.

When preparing for a negotiation, be sure to identify the following:

  • What you want to gain
  • Where you are willing to compromise
  • Terms you refuse to accept
  • Potential objections you may face
  • All possible outcomes

By considering this information ahead of time, you will be less likely to confront something unexpected during your negotiation.

Do your research

Before entering a negotiation, evaluate all parties and consider their goals. For example, if you’re nearing the end of the hiring process, you may be preparing to negotiate salary. The employer likely wants to hire someone who can complete the required job duties for a competitive salary. You likely want to offer your experience and knowledge to a company in return for what you perceive to be fair pay.

It can also be helpful to research the person with whom you are negotiating. Understand the limitations of the negotiator. Do they have the ability to give you what you want? Sometimes the person you are negotiating with will be unable to meet your demands. For example, a hiring manager may have a maximum compensation amount they can offer based on the budget provided by their department. Understanding these limitations can help you strategize.

Know your priorities

Negotiations often require each party to compromise. Setting your priorities ahead of time can help you evaluate what you refuse to give up as well as where you’re willing to budge.

Consider the opposition

Consider the potential opposition to your negotiations. Do you think that your manager will object to a pay increase because of declining sales? Will you be denied a higher starting salary for a position because your requested rate is above the average range? Write down all the potential oppositions and then gather the information you can use to argue your case.

Define your BATNA

Understanding the best alternative to a negotiated agreement (BATNA) is crucial to improving your negotiation skills. For example, you may determine that if you cannot get a salary increase due to budget cuts, you’d be willing to settle for additional vacation days. Defining these alternatives ahead of time can help you create a backup plan before the negotiation process.

Know when to walk away

One of the hardest parts of negotiation can be knowing when to walk away from a deal. It is important to enter all negotiations recognizing that you may not be able to come to an agreement. For example, a hiring manager may not be able to offer you a salary high enough to justify accepting the job offer. Once you realize no further compromises can be made and one or neither parties is willing to accept the terms, it’s probably time to walk away.

Keep your timeline in mind

A timeline can significantly impact your position of power in the negotiation process. For example, if one or both parties are rushing to reach a decision, at least one party may give up too much and regret their actions. For example, if you’re trying to get a new job quickly, you may take a position with lower pay than you deserve, or you may compromise too much on benefits. In this case, you may find yourself unsatisfied with your decision long-term.

The same rule can apply for a longer time period. If a company is considering partnering with a vendor but they do not yet need their services, the vendor may have a harder time convincing the company to meet their terms. The company may push harder for discounted rates and more value because if the vendor does not agree, they still have time to find another solution.

Related: How to Negotiate Salary (With Examples)

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Challenges to negotiating in the workplace

The workplace is ever-changing, but negotiation remains constant. Keep in mind that changing business practices can present new challenges. In addition to learning negotiation skills, it also necessary to know how to adjust them to a specific situation.

For example, many meetings today are entirely on the phone or over the internet, and some negotiations may occur via email. These methods of communication can inhibit your ability to read non-verbal cues, so you might suggest interacting through a video chat instead.

Negotiation skills can help you develop your career, secure a higher salary and meet critical business needs. Continuous practice is key to improve your negotiation ability.

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