Many of us have already conducted some form of negotiation before our workday begins… on the commute or morning dog walk. Negotiation occurs when there is more than one possible outcome from a situation in which two or more parties have an interest but have not yet determined what the outcome will be.

We engage in negotiation in all aspects of our lives. In the context of business relationships, let's take an example where a customer is unhappy with goods you have supplied under contract. The customer has communicated their grievance. Before rushing to respond, here are five steps you should bear in mind when entering negotiations.

1. Take time to think

    When you are confronted with an unhappy customer do not retaliate. It is ok to say, 'Thank you for raising your concern. I will get back to you shortly'. This is a great opportunity for you to a) show your professionalism and b) think about your desired outcome. Would you be happy offering a refund or exchange, or do you think the customer's concern is unfounded? Consider what your alternative is to a negotiated outcome. Are you content to lose the customer relationship entirely or to have to litigate where the court will be the ultimate decision maker?

    It is worth mentioning the age-old phrase, 'Pick your battles'. Taking a step back allows you to see if it is more advantageous for your business, reputation, or time to provide a solution for your customer. Reasons for doing so may be to retain their goodwill or to assess the impact of a protracted dispute on the wider perception of your business. The best approach can depend on the value of the relationship, the value of the transaction or the impact an unresolved dispute may have on your business in the market you operate within.

    2. Listen – silence is golden

      In your initial response to the customer, offer to listen to their concerns. An in-person meeting can be beneficial as you will be able to read the other parties' body language. Do not interrupt or get defensive. It can be useful to take notes in lengthy discussions so that you can later refer to these if needs be. Effective negotiators listen far more than they speak.

      To show the other party you have been actively listening it is useful to reflect back to them what you have heard. This also avoids misunderstanding. Consider the strategic value of a verbal apology – it often costs nothing but unlocks the dispute. An apology is not an admission of fault. It is good to agree as much common ground as you can – this builds trust and reduces the issues in dispute. Effective listening can for example, reveal that your customer was more concerned about the late delivery of the goods rather than their quality. This leads to a win for both parties as the customer appreciates your understanding of their concerns and you focus on what matters. This leads to the next step…

      3. Change the perspective – present your point of view

        Do not explicitly reject the other party's point of view. Instead present your views as being additional, rather than opposite, to theirs. At this stage it is worth ignoring any ultimatums that the other party may present. For example, they might ask you to provide them with an immediate refund under threat of finding a new supplier. In this scenario, you could point out the difficulties you face in providing a refund as well as the disruption they would incur in sourcing a new supplier. Here you are highlighting the benefits of reaching an agreement. Think of this as the problem-solving stage. The workings behind the solution.

        4. Offer the solution

          Now that you have highlighted the benefits for both parties reaching an agreement, present your offer with confidence.

          Remember to include all that you took from listening to the other party's concerns. Within the presentation of your offer, you could include some low-cost, high-benefit trades. For example, if you know that your customer was unhappy with late delivery you could look to offer a delivery tracking service or a discount on delivery costs for bulk orders. The mantra is give to gain. This can allow the customer to walk away after the negotiation feeling that they have 'gained' something. Framing your language in the form of asking the customer if you could do something for them rather than telling them how it will be, is another way to: build consensus; help reach agreement; and forge long lasting relationships.

          5. Make it hard for the other party to say no to your solution

            There may be some push back before you achieve agreement with your customer. Reflect on your initial thoughts at step 1. At this stage, you can make the customer aware of the alternatives if no agreement is reached. Are you prepared to litigate over matters and lose the customer relationship? Drawing attention to the disadvantages to both parties of an imposed decision which removes all negotiating power from you and your customer can be an effective and sobering tool in resolving disputes. Avoid threats. Don’t rush your negotiation. Think carefully about using ultimatums and only make them if you are prepared to follow through.

            When it comes to negotiation, it is worth remembering that taking time to think and allowing your customer to speak while you actively listen is often your greatest tool in finding an effective outcome.

            Negotiation remains the most efficient and cost-effective way to resolve differences. We are ready to assist you with negotiation before positions harden with your counterparties. We can advise you on avoiding disputes, effective negotiation from a position of understanding your legal rights and if unavoidable, resolving your disputes through negotiation, mediation or litigation.

            Contributor

            Ken MacDonald

            Partner