Managing in hard times: a negotiating ploy

It can be easy to close a deal when the economy is booming. But when growth has slowed – or gone into reverse – negotiation becomes an art.

Adam Galinsky, a professor at Northwestern University’s Kellogg School of Management, says one of the keys to successful  negotiation when times are tough is the ability to understand the perspective of the person on the other side of the proposed deal and then use that knowledge to find creative ways of resolving deadlock.

“In a downturn what you really need to do is figure out what people’s core interests are and whether there are ways in which you can provide for their core interests and also get the best outcome for yourself,” he says.

One way of doing this is to give the other side of the negotiation multiple options rather than presenting them with just one offer, Prof Galinsky suggests.

This reduces the risk of an outright rejection of your terms, while increasing the chances that the other party’s underlying preferences will be revealed through their response. “People love choice,” he says.

An article Prof Galinsky co-authored on this topic used the example of a software company that began all its sales negotiations with customers by making three offers involving three variables: the price; the range of software included; and the payment terms. Profits rose after it introduced this strategy.

Making multiple offers is no guarantee of instant success. It is more of an opening gambit. But there is an acknowledged weakness to such a scatter-gun approach, since a canny negotiator could cherry-pick the most attractive elements from each of your offers and then combine them into a counter-demand that you’ll find hard to stomach. 

At that point, so the theory goes, you should hit back with a fresh selection of three, subtly-differentiated offers that take into account the other side’s needs. However, I have a sneaking suspicion that this is the point in the negotiation when theory goes out of the window - and the mud-wrestling begins.

This is the second in a series of occasional posts on managing in a deteriorating economic climate. The first, on pricing, can be found here.

About the authors

Stefan Stern writes a column on Tuesdays on management. He is winner of the 2010 Towers Watson award for excellence in HR journalism, and has previously won awards from the Work Foundation and the Management Consultancies Association.

Ravi Mattu is the editor of Business Life, the FT's management features section, and a former editor of the Mastering Management series. He joined the FT in 2000 from Prospect magazine

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