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Six ways to blow a negotiation

Six ways to blow a negotiation

Stanford expert Margaret Neale shows where the landmines are in dealmaking -- or any kind of bargaining.

Masterful negotiation is among the most valuable skills of the C-level executive. Negotiation is a critical part of a finance chief's dealings, whether with vendors, customers, or other external business partners, or with colleagues. Moreover, negotiation skills can be invaluable in career-related conversations.

This week's Stanford Knowledgebase newsletter features useful insights from Stanford Graduate School of Business professor and negotiation expert Margaret Neale. According to Neale, successful negotiation results from pursuing advantages in all possible circumstances. When executives lose sight of this big picture, they can fall prey to some common missteps in negotiation strategy. Here are some common pitfalls Neale cites:

Planning poorly. Pre-negotiation homework should be extensive and detailed. Things to consider before talks: your bottom line, your walkaway point, and time constraints. Don't forget to consider alternatives in case you fail to reach an agreement.

Assuming the "pie" is fixed. Usually it isn't, Neale says of the size of the complex pastry that your deal starts out to be. Approaching a negotiation with assumptions about pre-existing limits can cost you the outcome you most desire. In negotiation exercises in her executive-education classes, Neale says 20% to 35% of students assume "a fixed pie," and miss out on what both parties want.

Not listening to your opponent. Successful negotiation hinges on understanding your opponent's point of view and how he might evaluate your offer. Neale suggests "framing" your position to your opponent -- i.e., presenting your offer in such a way that your opponent understands your view. This technique allows you to influence the level of risk your opponent will accept.

Being insensitive to cultural factors. Cross-cultural negotiations are not always just like negotiations at home. Understanding cultural differences can create huge benefits; ignoring them, on the other hand, can result in big problems.

Paying too much -- or too little -- attention to "anchors." To reap the most benefit from the bargaining dynamic of "anchoring and adjustment" negotiators must begin the talks by clearly establishing the bases of negotiation. Lack of clarity at this crucial stage can cause missed opportunities.

Caving too quickly. Always negotiate -- even if the initial offer meets your requirements. If nothing else, accepting an offer right away makes the opponent feel he or she could have done better. "Never give anyone their first offer," Neale says; "it makes them crazy."

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Tags business issuesnegotiationcontract negotiationbusiness negotiationnegotiating

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