Negotiation is a skill that is important in life and business. The better you are at putting forward what you need and want, the more effective you can be in everything you do. There are many places to get tips on negotiation. Steve Jobs had some great ones, at least through example. And there is information about how to avoid some common problems.
But what if the problem you face is something you've always heard is a smart move? That's what I learned from a discussion with Simon Letchford, managing director of Scotwork North America. The company provides high-end negotiation training, mostly to Fortune 500 companies across 38 countries.
Many people see themselves as strong negotiators, and often they are right -- to a point. "Whatever the level of natural talent, it's generally enough to do okay or well enough," Letchford said. But you can miss many of the subtleties, like how to read someone's communications to uncover what they're really looking for.
However, the big surprise was something far more basic. There's a common mistake passed off as smart negotiation. When first talking to other parties, you may be inclined to let them make the first proposal, whether price range or setting other terms and conditions.
I'll admit that in my freelance and consulting work I've often done this intentionally. The theory is you get a better idea of what someone is willing to pay and you avoid underbidding. But, as testing and simulation have shown, it's always a mistake. You get worse outcomes.
"If you polled a thousand small business owners, I'd say more than half would say let the other side go first," Letchford said. "Making a firm confident proposal is one of the strongest things you can do as a negotiator." If you wait for the other party to go first, "once they've made that proposal, it's harder to move them off that position."
Although hearing what the other side has to say may sound good, there are some serious problems with it in addition to the difficulty of getting someone to move:
- You assume someone will tell you honestly what they're willing to consider and that they won't deliberately low-ball as a negotiation tactic.
- Even if there is a chance they'll offer more, how often have you seen that happen? Probably almost never, so there's not much, if any, advantage to be gained through the tactic.
- You should assume the other party knows the market as well as you do, so banking on a positive surprise is likely wishful thinking.
- You gain credibility and demonstrate confidence by making your proposal first, which aids in further negotiations.
- The first person who sets out a proposal controls the process, which is beneficial in a negotiation.
There may be the rare time when you propose something below what the other party would have paid. But you will more than make up for it over all the times you control the negotiation and get more of what you want.