Business Administration: The Art of Negotiation

In the world of business, negotiation is an art form. Organizations and individuals often do a dance with one another — giving a little but also taking a bit — to strike a deal that feels favorable to all parties involved.

Knowing how to negotiate a business deal is critical for anyone who plans to have a long-lasting career in business. Regardless of your industry, position, or expertise, it’s important `to have a solid understanding of the best negotiation tactics in business.

What Is Business Negotiation?

Business negotiation is defined by Investopedia as a strategic discussion between two or more parties. The point of negotiation is to produce a resolution that is favorable to all parties involved, but to accomplish this, both parties must come to the table with a willingness to compromise.

Negotiation in business may occur to:

• Sell products or services
• Come to terms on an agreement
• Hire new employees
• Merge two or more businesses together

How Do Negotiations Work?

Business professionals frequently find they can develop and improve their negotiation skills over time and become more comfortable with the process the more they participate in negotiations. Generally speaking, negotiations are not impromptu discussions. The business professionals and organizations involved have an opportunity to prepare in advance, and they typically rely on a specific negotiation tactic depending on the circumstance.

What Makes a Good Negotiator?

Individuals can become skilled negotiators by studying the best negotiation tactics and strategies, as well as by participating in a wide range of discussions and negotiations. According to Forbes, some qualities that good negotiators possess include:

• Attitude – Negotiators who know how to be firm but fair are often able to get what they want out of the discussion, while still maintaining a positive relationship with the opposing party.
• Ability to listen – While it's important to come to the table prepared with statements and reasoning, an effective negotiator also recognizes the value of listening to the other party to best understand their perspective.
• Situational awareness – No two negotiations are alike, and experienced negotiators know how to read a situation to employ the best tactic.
• Emotional awareness – Maintaining a pulse on the feel of the discussion allows negotiators to navigate the emotions at play and strategically make compromises that could help all parties strike a deal.

Preparing for Negotiation

Preparing ahead of time is crucial to the success of a negotiation. To create a negotiated agreement that benefits all parties, it is essential to have an in-depth understanding of the other party's position. According to Indeed, you should identify the following factors during the preparation process:

• The opposite party's primary goal and objective
• The individual who will be leading their negotiations
• The strategy they will be most likely to use
• Their rate of success in previous negotiations

By completing research and preparing for the discussion in advance, you could approach the negotiation with confidence and poise.

Negotiation Strategies and Skills

There are defined negotiation strategies and skills that can help expedite the process and ensure a favorable negotiated agreement is created. Some of the most effective negotiation strategies include:

• Displaying confidence through positivity and avoiding aggressive confrontation. Remember, your negotiation is not an argument; it's a strategic discussion that focuses on conflict resolution.
• Preparing for the worst-case scenario. Identifying the worst possible result from the negotiation allows you to focus on generating a better outcome for your party or organization.
• Remaining flexible during the negotiations. Be aware of what you absolutely want to leave the table with, but don't be afraid to give up a little to reach some common ground.

Examples of Negotiations

These are sometimes when negotiations may be necessary:

• A large corporation is looking for suppliers to assist them on an upcoming project.
• An individual is looking to purchase real estate and is hoping to come up with a favorable sales agreement.
• An employer is hoping to recruit a qualified employee and is going to negotiate with them to come to terms on a hiring contract.
• A manager is looking to negotiate with an executive to receive a specific budget allotment for their department.

Negotiation Process in Business

To come up with the terms of a deal, you can follow the typical negotiation process. These are the steps involved in business negotiation:

1. Preparation

Preparation is the first step in the negotiation process, and oftentimes, it has the largest impact on your success. Before you begin preparing for a negotiation, you should ask yourself a few questions:

• What do I want as part of this deal?
• What am I willing to give to get what I want the most?
• What is at stake for myself or for my company?
• What will happen if the negotiation is not successful?

By being aware of the magnitude of the negotiations, you can begin to prepare accordingly. During this stage, you should learn as much as possible about the other parties involved in the negotiation and start determining the best strategy to use.

2. Need and Rule Definition

Before negotiations can begin, you must set the parameters for the discussion. You want to outline both the needs and rules for the process.

In negotiation, need is defined as the outcome that is desired from the negotiation. You should identify your needs during the planning stage and prioritize them accordingly.

After the needs of both parties have been clearly communicated, then the rules of the discussion should be set. By deciding what tactics can — and cannot — be used as part of the negotiations, both parties can come to the terms of the deal faster.

3. Exchange

After the preparation stage is complete, all parties can come to the table to begin the discussions in earnest. A traditional business negotiation begins with an exchange of information.

To start, you and your organization will present your case. You will outline your needs, any reasoning you have for those needs, and data that may validate your position. Once you have finished your introductory statements, the other party will do the same. The exchange of information provides all parties with a starting point for the discussion and can also help set expectations for how the negotiations will move forward.

4. Clarification and Justification

After the initial exchange of information, you may need to provide additional clarification or justification for your needs. This is when your preparation pays off. During the clarification and justification phase, you should justify your needs with:

• Actionable data
• Convincing arguments
• Real-world scenarios for outcomes

5. Bargaining

Once you have moved through these initial stages of the negotiation process, you will begin bargaining in earnest. This is when the dance begins, with both parties recognizing that there must be give and take throughout the bargaining process. In addition to focusing on your needs, you want to have the best alternative in mind if you are forced to compromise.

In many cases, a moderator oversees the bargaining process. The moderator will allow both parties to outline concessions and make compromises until all parties agree on a favorable resolution. Generally, negotiations are more successful when both parties agree to remain congenial throughout the process. When negotiations become adversarial, both parties are likely to leave the table feeling as if they didn't truly get what they needed out of the discussion.

It is during this process that you rely heavily on the specific negotiation skills and strategies you and your team decided on during the preparation phase. By being aware of the situation and developing circumstances, while simultaneously accommodating the emotional tone of the conversations, you can successfully navigate the bargaining stage.

6. Closing

After all parties have agreed on the terms of the deal, you can begin to close the negotiations. Negotiations are not complete until an agreement has been made, either verbally or in writing. Most times, the best approach is to draft a deal and have all parties sign off on it. By outlining the terms in writing and having all parties involved sign the agreement, you can better enforce the terms of the deal.

7. Review and Implementation

Once you have a signed agreement in hand, you may return it to the rest of your team for their review. From there, it can be implemented, and your organization can continue moving forward and working toward its goals.

Perfect Your Business Acumen at Lindenwood University

Learning how to negotiate in business doesn't happen overnight; it requires a solid foundation in the best business practices to put your newfound skills into practice. At Lindenwood University, we offer skills-based business administration degree programs that allow you to learn about the best negotiation tactics in business as you explore various leadership and management techniques. From an online bachelor's degree in business administration to a master's degree in business administration, you are sure to find an educational opportunity that complements your career goals.

Request more information about our business degree programs today.