How to Negotiate: The Basics of Negotiation

Summary

This video discusses the essential negotiation skills for project managers, emphasizing its growing importance in the profession. It introduces a five-step negotiation process: preparation, opening, bargaining, closing, and follow-up. Viewers learn how to prepare thoroughly, make a strong first impression, build rapport, and ensure both parties achieve a satisfying outcome. The video highlights key tactics, such as defining ideal outcomes and recognizing authority, ensuring successful negotiations in project management. By following this structured approach, project managers can confidently navigate complex negotiations and achieve successful results.

Takeaways

• 😀 Project managers have always needed negotiation skills, and it's increasingly recognized by professional bodies like PMI.
• 💼 PMI now includes negotiation as part of the PMP exam, starting in January 2021, under domain one (People) and task 8 (Negotiating Project Agreements).
• 🔄 Negotiation is a process aimed at finding an agreement that satisfies all parties, ensuring integrity in the process.
• 📝 Proper preparation is key to a successful negotiation, including defining goals, outcomes, and knowing your BATNA (Best Alternative to a Negotiated Agreement).
• 🔍 Research is crucial—project managers should know the context, players, history, and facts surrounding the negotiation to be well-prepared.
• 🤝 Building rapport and making a strong first impression at the opening of negotiations are essential for success.
• 📜 Defining the scope and sequence of the negotiation early on, including setting ground rules and administrative details, ensures smooth proceedings.
• ⚖️ The bargaining phase includes multiple offers and counteroffers, with the goal of reaching a mutually acceptable outcome through concessions and agreements.
• ✅ Closing involves summarizing agreements, ensuring that all issues have been addressed, and making the formal offer for final acceptance.
• 📝 Follow-up is critical—both parties must adhere to agreed-upon actions, document the deal, and maintain professionalism through post-negotiation courtesy.

Q & A

Why is negotiation an important skill for project managers?

Negotiation is an important skill for project managers because they need to negotiate with various stakeholders such as sponsors, bosses, clients, suppliers, contractors, and consultants. It is a crucial part of their role and is increasingly recognized by important bodies like the PMI.

When did the PMI decide to include negotiation in the PMP examination content?

The PMI decided to include negotiation explicitly within its examination content outline for the PMP qualification starting from January 2021.

What are the two important parts of the definition of negotiation mentioned in the script?

The two important parts of the definition of negotiation are that it is a process and that it involves searching for a solution that will satisfy all parties involved.

What are the five components of the negotiation process for project managers?

The five components of the negotiation process are preparation, opening the negotiation, bargaining, closing the negotiation, and following up on the negotiation.

Why is preparation crucial before entering into a negotiation?

Preparation is crucial because it helps to define the scope of the agreement, set goals and objectives, and determine the ideal, acceptable, and minimum outcomes. It also involves researching the context and players, and planning the negotiating strategy and tactics.

What are the three levels of outcomes one should consider before a negotiation?

The three levels of outcomes are the ideal outcome, the acceptable outcome, and the bottom line. The ideal outcome is the best reasonable result one could achieve, the acceptable outcome is a satisfactory result, and the bottom line is the minimum outcome one is willing to accept.

What does BATNA stand for and why is it important in negotiations?

BATNA stands for 'Best Alternative To a Negotiated Agreement.' It is important because it helps define one's bottom line and provides a fallback option if the negotiation fails.

What are the seven things that must be covered at the opening of a negotiation?

The seven things to cover at the opening of a negotiation include making a good first impression, building rapport, checking the authority of the other party, agreeing on the basis for the meeting, setting admin and ground rules, discussing each party's ideal outcome, and potentially leading with the seller's outcome.

What are the phases that the bargaining stage of negotiation goes through?

The bargaining stage goes through phases where parties put forward positions, exchange ideas, make offers and counteroffers, request and offer concessions, and sometimes get stuck or find ways to get unstuck.

How do you know when to close a negotiation?

You know it's time to close a negotiation when both parties feel close to an agreement, most matters have been discussed, and there are agreements around all the details.

What are the two things you should discuss after closing a deal in a negotiation?

After closing a deal, the two things to discuss are the logistics of what comes next and pleasantries to maintain good relationships.

Outlines

00:00

🤝 The Growing Importance of Negotiation in Project Management

Project managers have always negotiated with various stakeholders like clients, sponsors, and suppliers. The importance of negotiation in project management is being emphasized more by institutions like PMI, which has included it in the PMP exam starting in 2021. The negotiation process is about finding a solution that satisfies all parties and follows a clear process. The key takeaway is that if you follow the process, even if you're unsure about your negotiating skills, you will likely achieve a good outcome.

05:01

🔍 Understanding the Negotiation Process

Negotiation is a structured process involving five key stages: preparation, opening, bargaining, closing, and follow-up. Preparation is essential, where you outline your goals and objectives, identifying three levels of outcomes—ideal, acceptable, and bottom-line. You also need to know your BATNA (Best Alternative to a Negotiated Agreement) to set your minimum acceptable outcome. Additionally, research and strategy are crucial elements of preparation, involving gathering facts and planning concessions and tactics.

10:02

🚪 The Opening Stage of Negotiation

The opening stage involves making a strong first impression, building rapport, and ensuring the other party has the authority to make a deal. Setting the ground rules, defining the scope of the negotiation, and sharing ideal outcomes are crucial steps. It’s best to let the other party share their ideal outcome first if possible, especially if they’re in the seller’s role. The opening sets the tone for the entire negotiation.

💬 The Bargaining and Closing Stages of Negotiation

The bargaining stage involves both parties presenting their positions, making offers and counteroffers, and potentially making concessions. It can involve moments of stagnation but ends when both sides reach near-agreement. The closing stage involves reviewing all points of the agreement and making a final offer. A 'trial close' is used to gauge readiness, and if positive signals are received, the formal offer is made. Avoid introducing new information after closing the deal to prevent doubt.

📝 Following Up After the Deal

After closing the deal, follow-up is crucial. You need to document the agreement, share it with both parties and internally with relevant teams. Showing appreciation to colleagues and the other party is a professional courtesy. The key is to complete all agreed-upon actions promptly and avoid bringing up new negotiation points after the deal to maintain trust and avoid reopening the discussion.

Keywords

💡Negotiation

Negotiation is the process of reaching an agreement between two or more parties that satisfies everyone involved. In the video, it is described as a systematic process with five stages: preparation, opening, bargaining, closing, and follow-up. The focus is on ethical negotiation where all parties aim to achieve a mutually beneficial outcome, not simply to win at the expense of the other.

💡Preparation

Preparation is the first and crucial step in negotiation. It involves setting clear goals, identifying the best possible outcome (ideal), acceptable outcomes, and the bottom line (minimum acceptable outcome). This step also includes researching the other party, understanding their interests, and planning a strategy for concessions. The video stresses that preparation is key to avoiding failure in negotiations.

💡BATNA

BATNA, or 'Best Alternative to a Negotiated Agreement,' is the fallback plan in case the negotiation fails to reach a satisfactory agreement. It represents the best option available if no deal is reached. In the video, the speaker emphasizes that knowing your BATNA is essential for defining your bottom line in negotiations, helping negotiators avoid agreements that are worse than their alternatives.

💡Bargaining

Bargaining is the core phase of negotiation where both parties present their positions, make offers, and exchange concessions. It is a dynamic stage that involves discussions, counteroffers, and compromises until an agreement is reached. The video highlights that effective bargaining requires flexibility, as parties work through obstacles and adjust positions to achieve a mutually agreeable outcome.

💡Concessions

Concessions refer to compromises made by both parties during the negotiation process. They are trade-offs designed to move the negotiation forward toward an agreement. In the video, concessions are framed as strategic tools that negotiators should plan in advance, knowing what they are willing to give up and at what stage of the negotiation to maintain momentum and reach a successful resolution.

💡Closing

Closing is the final stage of negotiation where the parties summarize the agreed terms, ensure all details are addressed, and formally finalize the deal. It is critical to avoid introducing new issues at this point to prevent jeopardizing the agreement. The video mentions the importance of confirming the agreement and moving forward with follow-up tasks, as well as avoiding unnecessary discussions that could ‘poison’ the deal.

💡Follow-up

Follow-up is the post-negotiation phase where both parties ensure that the agreed terms are implemented and executed. This involves documenting the agreement, sharing it with relevant stakeholders, and maintaining communication to confirm that all commitments are fulfilled. The video emphasizes that proper follow-up is essential for maintaining credibility and ensuring a successful long-term relationship.

💡Authority

Authority refers to the decision-making power that each party has in the negotiation. It is important to confirm whether the person you are negotiating with has the authority to finalize the deal. The video discusses the risk of negotiating with someone who lacks full authority, which could lead to delays or the need for further concessions when the agreement is reviewed by someone with more power.

💡Rapport

Rapport is the positive relationship and trust-building aspect between negotiators. Building rapport helps create a cooperative atmosphere and increases the likelihood of reaching a mutually satisfactory agreement. In the video, rapport is mentioned as an essential part of the opening stage, where taking time to establish a personal connection can lead to smoother negotiations and reduce the chances of deceit or mistrust.

💡Ideal Outcome

The ideal outcome is the best possible result a negotiator hopes to achieve in a negotiation. It is one of three levels of outcomes that should be prepared in advance (the other two being the acceptable outcome and the bottom line). The video stresses the importance of identifying this ideal outcome during the preparation stage, as it serves as a target for the negotiation process and helps guide decisions throughout.

Highlights

Negotiation is an essential skill for project managers.

PMI now includes negotiation in its PMP qualification exam from January 2021.

Negotiation is defined as a process to find an agreement that satisfies all parties.

The negotiation process consists of five components: preparation, opening, bargaining, closing, and follow-up.

Preparation is critical and involves defining ideal, acceptable, and bottom-line outcomes.

Understanding your BATNA (Best Alternative To a Negotiated Agreement) is key to defining your bottom line.

Research and strategy are important parts of preparation for successful negotiation.

The opening phase of negotiation should cover seven key points, including making a good impression and building rapport.

Checking the authority of the other party is crucial during the opening phase.

Agreement on the basis for the meeting is necessary to set the stage for negotiation.

The bargaining stage involves exchanging positions, offers, counteroffers, and concessions.

The close stage involves summarizing progress, checking all issues are covered, and making a formal offer.

A trial close can be used to gauge readiness to agree the whole package.

Once the deal is closed, it's important to confirm and record the decision without introducing new information.

Follow-up after closing the deal includes logistics, documentation, and thanking involved parties.

Negotiation is a straightforward process, though individual situations can introduce complexity.

The video aims to make viewers feel confident about managing negotiations for successful outcomes.

Transcripts

project managers have always needed to

be able to negotiate it's part of our

job we're negotiating with stakeholders

with ago she ating with our sponsor our

boss our clients we're negotiating with

suppliers and contractors and

consultants and nine years it always

been a part of our role but it is

increasingly being recognized by

important bodies like the PMI the PMI

has now included explicitly within its

examination content outline for the PMP

qualification negotiation which will

become part of the examination from

January 2021

it sits within domain one people and

it's task 8 negotiate projects

agreements so in this video I want to

talk you through the basics of

negotiation for project managers

[Music]

negotiation is a process of searching

for an agreement that satisfies all

parties and there are two important

parts of that definitional I want to

highlight firstly it's a process which

means no matter how concerns you are

that you may not be able to negotiate if

you follow the process you will get a

decent result you can't predict what

that result will be but the process will

get you there

and secondly it's a process of searching

for a solution that will satisfy all

parties this means that a negotiation is

a process that has integrity you're not

trying to get more one over on the other

party that's cheating you're looking to

satisfy all parties so if you're worried

that negotiation feels somewhat

uncomfortable you don't need to because

your goal in negotiation is to produce

an agreement that everyone will find

acceptable so what is the negotiation

process the negotiation process has five

components to it first

there's preparation then there's opening

the negotiation then at the heart there

is bargaining then we close the

negotiation and finally step five is to

follow up on the negotiation preparation

going into a negotiation unprepared is

setting yourself up to fail so think

about the scope for the agreement you

want and what are your goals and

objectives for the negotiation what do

you want to achieve what does a good

outcome look like in fact you need to

think about three levels of outcome to

have in your mind going into the

negotiation the first is your ideal the

best reasonable outcome you could

achieve the second is an acceptable

outcome the sort of outcome you think

you might achieve that would be

acceptable and finally there's your

bottom line the minimum outcome will

prepare to achieve

any outcome below that minimum outcome

is worse than not negotiating at all

which means you have to know what your

best alternative to a negotiated outcome

is your Batna without knowing what you

would do if the negotiation failed you

can't define your bottom line and

remember any negotiation below that

bottom line is just a negotiation about

how much you're prepared to lose there

are two more things that you need to

build into your preparation and the

first of those is research you need to

research the context you need to

research the players the people the

history or organization has had with

their organization you need to find all

of the facts make sure you've got them

assembled and in good order so that you

can access them as soon as you need them

and the second thing is to think about

your negotiating strategy and tactics

how are you going to move from the start

of the negotiation to a close in an

orderly fashion

what concessions you prepare to make and

what concessions are you likely to ask

for what are you going to focus on first

and what are the little details that

you'll wrap up the negotiation with at

the end and how will the members of your

team if you're not negotiating as an

individual but working with colleagues

how will they work together to make sure

that the negotiation runs smoothly and

you get the best you possibly can from

it step 2 is opening and there are seven

things you must cover at the opening of

a negotiation and whilst the order I'm

going to present them in isn't

absolutely fixed it's a good order and

it's one that will often make a lot of

sense firstly you have to make a good

impression when you first meet the other

negotiators from the other side you must

make a good first impression you must

come across as well-prepared and

professional secondly you need to build

rapport with them because negotiation is

a human to human activity it's harder to

cheat somebody you know

and it's easier to come to a

satisfactory agreement when you know

somebody well so take time over the

pleasantries over the niceties of

building a relationship third you need

to check the authority that the other

person has to make an agreement because

if they don't have full authority then

chances are you need to reserve some

concessions before getting to the final

agreement with them knowing that they

may refer the draft agreement up to

somebody with more authority who may

then ask for further concessions next

you need to agree the basis for the

meeting are we negotiating the whole

transaction or a part of it

are we looking for a draft agreement or

a final agreement what is the process by

which we're going to confirm the

agreement and after that you need to

think about admin and ground rules how

are we going to conduct this negotiation

one of the Arrangements around timing

and timeouts what's our agenda what's

our sequence who's going to sit where

and then we get to the nub the two most

important parts of the opening stage are

what their ideal outcome is and what

your ideal outcome is and if possible

you should get them to share their ideal

outcome first and that way if necessary

you can mold your outcome having heard

what theirs is but both parties will

want to hear the other party's outcome

first don't get yourself into a standoff

to the extent that any negotiation

usually has someone who is more in the

role of a seller and someone who is more

in a role of a buyer the usual default

is that their seller will lead with

their outcome first

when you've opened the next step in the

negotiation is the bargaining stage and

the bargaining stage moves through a

number of phases the parties will put

their positions they will explain them

and you will exchange ideas this will

lead to a number of offers in response

to those offers will be counteroffers

there will be requests and offers of

concessions sometimes you'll get stuck

and sometimes you'll find a way to get

unstuck

but the bargaining stage will end when

both parties feel they are close to an

agreement it's evident that most of the

matters have been discussed and there

are offers and concessions and

agreements around all of the different

details now it comes to the closed stage

at the close stage we summarize where

we've got to and we check that all of

the issues have been covered if they

have which at one by one each component

of the offer and all of the concessions

are agreed by both parties if it's

evident that there is nothing more or

likely that there is nothing more you

can go for a trial close if we've agreed

all of this are you ready to agree the

whole package or I believe we've agreed

everything on the basis of what we've

just said I'm happy to agree the package

you then make the formal offer are you

prepared to agree this package if when

you make your trial close you get the

wrong body language or the wrong signals

then you know you need to go back and

find out what the issues are if you get

right signals then you can make your

offer with a high degree of confidence

and it's going to be accepted and when

the offer is accepted confirm it and

record the decision

at this point there is nothing more you

need to do to close the deal anything

else you say can do nothing but poison

the deal so the only two things you miss

talk about after closing the deal are

firstly the logistics of what comes next

what's going to be in the follow-up and

secondly pleasantries it's been nice

doing business with you

if you mention anything else from the

whole sphere of the negotiation best

case is the other parts you go yes know

that worst case is you will introduce a

new fact which will introduce doubt in

their minds so keep quiet it's sometimes

called by sales people buying back the

deal you mentioned something else that

you didn't mention it turns out that

that's not appealing to them once you

close the deal you must do all of your

follow-up you must do everything you

committed to doing during a negotiation

and you must do it when you committed to

do it document in the agreement share it

with both parties share it internally

with people within your organization who

need know as a courtesy

thank any of your colleagues who have

been involved in a process and as a

courtesy

thank your counterparties as well so

there you have it a simple five-step

process for negotiation there's nothing

mysterious there's nothing complex about

negotiation it's the individual

situations that create the complexity

but I hope now you'll feel confident

going to your next negotiation knowing

what the stages are and how to manage it

for a successful outcome

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