When negotiating, is your instinct to split the pie or take it all for yourself? How about expanding the pie?
Those are clear, helpful metaphors that highlight one of the key issues we face in all negotiations: How to handle the tensions between the importance of relationships and the importance of the outcome.
Mike Figliuolo, managing director at thoughtLEADERS, LLC, a consulting firm, puts those two factors into a classic matrix and comes up with four negotiations styles to pick from:
Split the pie: This is the path when your relationship with the other person is not all that important – you are unlikely to see them again – but the outcome is also not significant. The example is purchasing a souvenir when on vacation. You won’t see this person again, and there’s no burning need to get the best deal on price for your souvenir. “Just find the middle point where both of you are happy and move on with your vacation. Haggling takes time, energy and effort, so just split the pie,” he notes.
Serve the pie: Here the outcome is still not essential, but the relationship is. An example might be negotiating payment terms. You want to get paid in 30 days, but the customer wants 60 days. It’s not a big cost factor for you, and you don’t want to risk ruining the relationship. “So in this situation, serve the pie. Give your negotiating partner what they want in the interest of maintaining or even strengthening your relationship,” he advises.
Take the pie: When the relationship is of low value and the outcome of high value, go for as much as you can get. An example would be the purchase of an automobile, when you may never have to deal with that salesperson again, but the cost is considerable. Get as much value as you can out of the negotiation and don’t worry about the relationship.
Expand the pie: This should be the intention when the outcome is important but the relationship is also valuable, and you want to maintain and strengthen it. Look for ways to create new opportunities for both parties, so each gets more value from the negotiation and partnership. The example is purchasing a large IT system from a strategic vendor, when the long-term relationship is important since they’re going to give you ongoing support for the system. Both sides have to look for ways to add benefits for the other.
It’s a simple system and underlies most of the negotiations you enter. So take time before each negotiation to consider which of the four approaches is best. As well, guard against making the three classic negotiation mistakes that trainer Clint Babcock outlines for salespeople and applies more broadly:
- Talking too much: A stream of words, justifying and defending your product or position, will get you nowhere. Instead, become inquisitive about the other party’s situation so you can better advance your product or position.
- Offering or agreeing to concessions immediately: Negotiations are strategic, and you have to expect a call for concessions. Don’t rush to accept. “Hold onto concessions for as long as you can; don’t give them up until late in the sales or negotiation process, and plan to get something in return, such as a firm commitment to do business,” he writes on the Great Leadership by Dan blog.
- Believing that money is the only issue: The best negotiation discussion is about finding the best fit solution. And, of course, as Mr. Figliuolo points out, relationship can be a big factor.
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