The structure of a negotiation

*This content comes from Lexis®PSL and features external links to subscriber-only content*

Produced in partnership with Beth Pipe FCIPD of OnLive Learning

When entering into any negotiation, be it a multimillion-pound business deal or an agreeing the office coffee rota, there are two main elements to consider:

  • the structure and stages of the negotiation
  • the human aspect—emotions and negotiation style

This Lexis®PSL Practice Note covers the first element:

  • the structure of a negotiation
  • planning and preparation
  • discussions
  • proposals and concessions
  • agreement
  • making it work

See Lexis®PSL Practice Note: The human side of negotiation for guidance on the second element

The structure of the negotiation

A negotiation typically has five stages:

  • planning—what do you need to prepare before the negotiation
  • discussions—where you establish what is on the table
  • proposals and concessions—where the main negotiating happens
  • agreement—final terms are finalised
  • making it work—putting the negotiated solution into practice

Most people focus on the central three stages, but by spending more time planning, you can put yourself in a stronger and more confident position. There is also a tendency for people to overlook the fact that the end of the negotiation may signal the start of an ongoing working relationship—consideration of the long-term impact of the negotiation may influence any concessions agreed to.

Stage 1: planning and preparation

Key things to consider

When planning and preparing for a negotiation there are several key things to consider:

What are your objectives?

What do you want to achieve from this negotiation in the short and long term?

What are your priorities?

What MUST you achieve—what do you absolutely have to get from this negotiation?

What do you WANT to achieve—what would be great to get but wouldn’t be a deal breaker if you didn’t?

What would be NICE if you got it—what would be the icing on the cake?

Who you will be negotiating with?

What do you already know about them?

What do you need to know?

Where can you find out more information?

What are you negotiating about and what is on the table?

What else apart from money needs to be considered – time, repeat business, public reputation etc?

Where to start

What is your opening position and what is likely to be theirs?

Balance of power

One of the most important things to understand in any negotiation is where the power lies, ie who has the power in the negotiation and what form does it take? By understanding this you can use it as leverage to come to a mutually beneficial agreement.

Power

Possible leverage

Size

Are you a large organisation offering enormous potential to those who work with you?

Can you trade volume purchases for better pricing?

Are you a small niche provider but have specialist, hard to come by, skills?

Current market

How do current market conditions benefit you?

Has the power in the market shifted putting, are you in a stronger or weaker position?

Could that change again soon?

Knowledge

Knowledge is power—what do you know about the other side, both as a firm or organisation and as a person?

Do you know what they are typically influenced by or what is important to them?

Time

Money may not be an issue but time may well be, eg does one side have a tight and immovable deadline such as year end?

Brand

Is the PR of attracting a big name client worth a concession on terms?

Reputation

What are you known for, both as a person or a firm? What about the other side?

Status/title

Are they likely to wheel in the bigwigs just to impress you?

Are you the managing partner or can another senior position bring some clout to the table?

Location

Is the negotiation on neutral soil or does one or other of you have home advantage?

Lexis®PSL Precedent: Negotiation preparation tool can help you with your preparation.

Stage 2: discussions

Picture this scenario – you are in charge of two children and you have one orange. Both children come to you at the same time and ask for the orange. What do you do?

Most people answer that they would cut the orange in half and give each child half each. Fair enough; let’s say you do that. You then watch as one child squeezes the orange to drink the juice and discards the skin, whilst the second child uses the pith of the orange in a cake they’re baking and discards the rest.

By asking why you go beyond the stated position of each child “I want an orange” and instead establish each child’s interests, or reasons, for wanting the orange. Once you understand the reasons and can more clearly define the problem, then you can start working towards more creative solutions.

Questions are the most powerful tool you have at your disposal during the course of a negotiation—by asking lots of questions you can build a clearer picture, not only of what the other side wants but, much more importantly, why they want it. Other question types to consider:

Question type

Purpose

Example

Open

Encourage the other side to talk and expand on their interests

Can you take us tell us more about what you want from this deal?

Closed

To get one specific piece of information

What's your final deadline?

Probing

To give you more detail on a previous answer

Can you tell me specifically what the impact of that would be?

Recap

Demonstrating you have heard and understood their point

“So, what you’re saying is..... is that correct?”

Stage 3: proposals and concessions

When the other side makes a proposal, you have four options:

  • say no
  • say yes
  • adjourn to think about it
  • make a counter proposal—remember if you are making a proposal or counter proposal you must make it conditional, eg “If you agree to us using your name in our marketing literature, we are prepared to offer you xxx terms.”

This is where the research you have done beforehand should really pay off. You need to know the value of everything on the table and what it is really worth to the other side.

Also be aware of knock on costs—before you walk away from the negotiating table ask yourself how much it would cost you to get back to this point with another client or provider or with the opponent on another date.

When making concessions yourself, bear in mind that:

  • any concession suggests there may be flexibility elsewhere on other terms, so be very clear about what you will and won’t trade on
  • large concessions on price may give the impression prices were over inflated to begin with
  • smaller concessions generally indicate fine tuning when agreement is probably within reach
  • round numbers may suggest the rounding up of figures—a more precise number gives the impression it has been thought through in detail and carefully calculated.

Stage 4: agreement

Once the negotiation is completed it is advisable to read through and recap on all of the points to remind everybody what has been agreed and give them a final chance to ask questions or to voice concerns.

It also needs to be agreed who will document and distribute the agreement if this isn’t obvious from the meeting. While preparing additional paperwork can be onerous it does at least give more control over the content.

Stage 5: making it work

As previously mentioned, the end of the negotiation typically signifies the start of the working relationship (although this will not be the case where you are negotiating with an opponent in a dispute). Many well negotiated solutions fall down after the event. To avoid this happening, it is important to consider:

  • are the people agreeing the negotiation the people who will be making it work?
  • who will you need to work with in the future?
  • what are the agreed lines of communication?
  • what are the success criteria—how will you know everything is working well?
  • is there a contingency?
  • where is the escalation route if problems arise?

P.S. If you want to keep up to date with the latest Crafty Counsel content, news from the sector and updates from the legal community then subscribe to our newsletter here!