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Sanjay Yadav on the Process-Based Skills of Negotiation

Tags The EntrepreneurEntrepreneurship

06/23/2020Hunter Hastings

Key Takeaways And Actionable Insights

Negotiation skills are vital to your business.

How well you negotiate will directly affect your cash flows, your costs, your margins, your scale, your financing and your resource allocation. It will indirectly affect your brand reputation, your organizational designs and your delegated management capabilities based on the employment contracts you negotiate.

Negotiation can be taught and learned.

As with everything in business, knowledge absence renders your outcome more uncertain. If your knowledge of the appropriate skills is lacking, you might experience disappointing results when negotiating with customers, suppliers, partners, employees and others in your ecosystem. If your role includes negotiating, allocate some time to skill development.

Negotiation is a process — best results come from knowing how to do the right things in the right order. For example, taking time to establish shared trust at the outset is better than having to recover lost trust later in the process. Think through the process from beginning to end — including what could go wrong or what unexpected difficulties might arise — so that you are never thrown off-track. When you know the correct next step to advance negotiations, you’ll be prepared in advance for that step and be ready with the appropriate action.

Negotiation is responsive to many Austrian principles.

Individualism: Austrian economics helps us think about the individual with whom we are negotiating, rather than the organization he or she represents. Every individual in every negotiation has unique identity, unique needs, a unique set of preferences and a unique context. Understanding individualism helps build trust and rapport.

Empathy: We are trained in Austrian economics to go inside the mind of the customer, in our imagination, in order to empathically understand their dissatisfactions and unmet needs. The same is true when working with a negotiator on the other side of the desk from us. Empathy helps us understand their goals and motivations, and to potentially create some subjective value from that knowledge. And it helps us think about the best tone and language.

Roundaboutness: Your actions early in the negotiation process will emerge as consequences later. If you pitch an absurdly high price at the beginning of a negotiation, thinking it will give you flexibility to lower it later, you’ll lose the trust of the other party and make negotiating harder. Small positive signals at the beginning can become major negotiating advantages later.

Entrepreneurial mindset: An entrepreneur thinks in terms of solving a problem — or relieving a dissatisfaction — for others. The market rewards creative solutions. Negotiation is an entrepreneurial undertaking — think about how to solve the other party’s problem.

Understanding value and communicating value are critical success factors.

Austrians have the best understanding of value. This is a huge advantage. At the outset, be sure to spend significant time communicating to the one with whom you’re negotiating the value of your offering. Value is not related to cost; it’s related to the experience your customer / partner / supplier is going to have as a result of collaborating or contracting with you. Be sure your counterparty can properly assess the subjective value you are going to create for them. If they anticipate the same value that you propose, then negotiation will not be a barrier to an exchange.

You can establish a negotiation culture.

Some companies — especially a small one negotiating with a large one (and especially with the procurement department!) — fall into the trap of feeling overwhelmed or under-qualified. Confidence in both content and process is important for success in negotiation. You can develop a negotiation culture of confidence via training, practice and preparation.

Negotiation is a universally applicable skill.

Mastery of the negotiation process is a life skill as well as a business skill. You’ll feel confident about establishing and managing relationships between your company and its customers, as well as with people you contract to provide services at your home, and in any kind of association or organization. You might find yourself negotiating with your spouse. Use your skills!

Negotiators are happy people.

Sanjay’s sign-off advice: negotiators are happy people. They know the value they are offering, they know how to get the appropriate rewards for their value, they are comfortable and confident with the process of negotiated value exchange, and they know how to resolve conflicts.

Additional Resources

"Negotiation" (PDF): Mises.org/E4E_71_PDF 

Discover negotiation readiness: PurpleSkyPartnership.com

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
Author:

Hunter Hastings

Hunter Hastings is a member of the Mises Institute, Business Consultant, and co-chair of the Rescue California Educational Foundation. He is also host of the Economics for Entrepreneurs podcast.

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