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Who Has the Power in a Negotiation?

One big piggy bank and one small piggy bankIn almost 30 years of working with clients to help them prepare for significant negotiations, I have frequently found that most negotiators buy into the false assumption that their counterpart has more power than they do.

I disagree. I have found that almost always, the power in a negotiation is equally balanced. However, there is one exception to this finding: if the other party truly has no need for you and would prefer to move forward without you, then you may be right, they hold all the power. When clients tell us they have no power in a negotiation, we always ask the same questions. Do they return your emails and phone calls? If you did want to meet with them, would they agree to a meeting? If the answer is yes, then your counterpart needs you, and you have more power than you think you do.

Whether you believe that your counterpart holds all the power or that you hold all the power, you are right. Ask yourself this: if you believe you hold no power, why does your counterpart agree to continue the relationship?

While there are many different types of power in a negotiation, here are just a few that will influence the outcome of a negotiation:

Reward power: If you can gain agreement, the counterpart can distribute significant rewards. A sales person making a sale and winning the monthly sales contest may be one example.

Coercive or punitive: If someone threatens to sue you if you don’t comply, they may have coercive power over you, especially if you place a high value in your company on not being sued.

Ego: Some people will enter into win-lose negotiations, with them being the loser, to avoid giving up something meaningful to their counterpart or, even worse, losing something to a competitor.

Accomplishment: Some people have a high need to get things done quickly and will concede to a counterpart’s perceived power to cross the deal off their list. I recently sold my Ford F150 pick up for $2,500 less than what I was asking for it. The buyer came with a cashier’s check in hand, test drove the truck and in 30 minutes, the sale was done. When you’re trying to sell a $20,000 truck with 100,000 miles on it, accomplishing the task on the first showing is a huge win.

Relationship: Some people have a high need to be liked or loved. When they feel a strong relationship, they are more likely to concede. The opposite is also true. If these people who highly value relationships do not like you, they will avoid you at all costs and most likely will retain the power in the negotiation.

Knowledge and expertise: When you feel that someone else has more expertise and knowledge than you do about the topic being negotiated, your counterpart most likely will hold more power. To balance the power, you will need to recruit your own expert to support your side of the negotiation.

Time: Sales are a great example of the power that time holds in a negotiation. This is what a salesperson is banking on when they say, “The sale ended yesterday and the price went up $500.00. If I could speak to my manager and gain authorization to extend the sale price to you for one more day, would you want to make the purchase?” Time makes people do crazy things in a negotiation that they would never do if they were not influenced by the power of time.

Scarcity: I recently bought a new video camera. When I went into the store with the ad offer of a sales price of $999.00 on a $1,399.00 camera, the sales person said, “I think we only have one left in the back of the warehouse. If it is still there, do you want me to grab it for you?” Without even thinking, I said yes, and when he returned, I was excited about taking possession and heading over to the checkout stand. What I didn’t realize was that model would be obsolete in a week and something even better would have been available if I just believed in my power and waited.

BATNA: This is Harvard term that stands for Best Alternative to a Negotiated Agreement. An even better word for BATNA is options. The side that has the greatest number of viable alternatives or options tends to hold more power in a negotiation. If you really want to buy a one of a kind antique car that’s selling for one million dollars, and it’s the only one on the market for sale, you have few options.

Investment: If you have worked long hours to gain a piece of new business, it becomes a lot harder to say “no” when your counterpart asks you to make significant concessions. The more time and energy you put into something, the more committed you are to making the deal a reality… even when the power has shifted and no longer is in your best interests. This is why Ponzi schemes are so successful at sucking the same people in, multiple times. Once someone has put money into a worthless investment, they are more likely to put additional funds at risk.

Gender: As hard as I have worked my entire career to build equality in business with gender, it is a fact: gender can hold tremendous power in a negotiation. My two daughters are much more successful than my son in moving money from my wallet to theirs’. Combine gender with the power of touch or a hug and the only way I am successful in the negotiation is stepping back and letting my wife take over since she’s much more objective when negotiating with the girls.

Crazy: There’s one in every organization. One person who is so effective in being crazy or bizarre in their response that no one knows how to effectively deal with them. Crazy people are the yellers, swearers, or people who otherwise respond with a level of intensity that’s disproportionate to the situation. When negotiating with crazy people, you usually have one goal: do whatever you have to do to get away from them. This means that you either cave in to something you would prefer not to, or you avoid this person altogether.

So now that we know the types of power that are utilized in a negotiation, what can you do to ensure the power is balanced or, better yet, leaning in your favor?

  1. Be well prepared: This means doing your homework before the negotiation, knowing your facts, and getting experts on your side of the negotiation. Confidence in a negotiation holds power, and the number one way to gain confidence is to be well prepared.
  2. Know the benchmarks: If you are trying to gain a raise, know the documented salary ranges for people with your experience and skills. If you are selling your car, go to Edmunds.com or KBB.com and find out exactly what it’s worth. Industry norms and precedents will tell you if your goals are reasonable and fair.
  3. Know the implicit and explicit needs of your counterpart: In order to have power in the negotiation, it’s critical that you truly know the explicit and implicit needs of your counterpart. Explicit needs are the goals they will happily tell you about, such as wanting to pay a lower price, but implicit needs are seldom stated. Although they will tell you they want you to lower your price, their implicit need is to have a successful project so they look good in the eyes of their peers.
  4. Buy yourself time: Almost always, when you take more time, you will be able to negotiate a better deal, especially if your counterpart needs you and you have options.
  5. Lean into conflict: In the martial arts business, they teach their students that when you lean into conflict, your opponent will be less able to inflict damage upon you. The same thing applies in negotiation. When you lean into conflict, you tend to demonstrate that you have confidence and power.
  6. Be clear on your goal, wish and bottom line: Establish your goal beforehand so that you can open up the negotiations below that amount (if you are buying) or above the amount (if you are selling. Great negotiators also identify a wish–I would really be excited if I could buy/sell this for $X–and identify a bottom line–if the number goes over/under $Y, I am going to walk away. When you have clearly identified these three points, especially your bottom line, you have a lot more power in the negotiation.
  7. Get a third party involved: When you are emotionally involved, there are times when a third party will be able to achieve a better outcome than you would on your own. Two of the greatest negotiations of my life were both negotiated by third parties: the home we have lived in for almost 20 years and the boat we spend sepdn so much time on. Because our real estate agent put our needs and goals above his when searching for our home, he has earned our business for a lifetime. The yacht seller’s agent had an even stronger need to put together a faster deal than I did, and did an impressive job of coaching his corporate client and myself. Getting a third party really did give us more power in these situations.
  8. Be willing to walk away: If you’re able to say, “I want this deal, but not that much,” you will find yourself holding a lot more power. Sometimes you find out the hard way. Until you are committed to walking away, you will not be able to achieve your goals.

Remember, the power in a negotiation is almost always more balanced than you might think. Use the tips above to confidently negotiate your best possible outcome.

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