STEP 2: Understand the process
At the start of a negotiation, each party has a position – they know what they want. As they discuss their various concerns, they make concessions on different points in order to reach agreement with the other party. For each concession, they will expect something in return. This trading of concessions is the process of negotiation. There are two different types of concession, and it is critical that we understand the difference: CONSTANTS A constant is something that has a fixed value that is apparent to both parties. The most obvious example of a constant is price. If one person gains on price, the other person must, by definition, lose.
VARIABLES A variable is something that is of greater value to one party than the other. These can be harder to spot but there are often lots of them in a negotiation. Examples might include providing guarantees, agreeing to a deadline, or delivering at a particular time of day. Any of these might be important to the other party, but easy for you agree to. Often variables are given away for nothing, as people haven’t realised their value to the other party. So, identifying and understanding the variables in a negotiation is key to success. In fact, you sometimes find out that things you hadn’t thought were important, are more significant to the other party than something as obvious as price.
NEGOTIATING IN FINANCE | STEP 2: UNDERSTAND THE PROCESS
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