Reaching an Agreement through Negotiation

March 26, 2021

Business is booming and sales orders and inquiries are rapidly coming in but the selling terms are variable and negotiable in order to get the most business. Conversely, the economy is not so good and you’re doing everything you can think of to get business. Either situation calls for negotiation and when presented with a negotiation, you want to be prepared.

When contracts and agreements are well defined and each party understands and approves all of the details, then negotiation is not an issue. On the other hand, when parties cannot agree to the terms of a contract or become involved in a dispute, negotiation becomes important in reaching a compromise solution.

Negotiation is a discussion with the aim to reach an agreement or resolve some type of disagreement. In the context of business, this might involve rather simple items such as sales terms, shipping methods, product specifications, or pricing. On the other hand, negotiations certainly might involve more detailed or complex items such as delivery dates, product quality, or very high dollar amounts, etc.

When parties start to negotiate, it is important to understand the following five steps in the process to achieve a positive result. 

Preparation – Before entering into a negotiating process, each party must be thoroughly prepared regardless of the situation or items to be negotiated. This requires studying and understanding the details of all issues. Each party must know not only their side of the contract, agreement, or issue but also know what the other side is thinking about the same item or items in question. 

Trust – The negotiating process goes much smoother when both parties have mutual trust of the other. This means that each party enters into the process having trust that the other party will be honest, ethical, and sincere in reaching a compromise agreement. This starts the process on a positive note rather than feeling any initial apprehension toward the other party. Apprehension and anxiety lead to defensive attitudes, which are counterproductive to the negotiation process.

Alternatives – When a party enters into negotiation, alternatives must be thought about in advance. This is the purpose of negotiating – resolving some type of issue or disagreement. If both parties are rigid in their thoughts and have no desire to seriously consider alternatives, then little can be gained from the process; thus, there is no purpose to negotiate.

Communication – All parties involved in a negotiation must be able to clearly articulate their thoughts and ideas, so the opposing party can clearly understand the other party’s position, analysis, and opinions. Open and honest communication is a necessary ingredient for a successful negotiation process.

Practice - As with many things, practice makes perfect. This holds true for the negotiating process. It is important for a negotiating party to practice in advance:

  • An opening statement expressing the facts as the party knows them
  • An explanation of the issue or disagreement
  • A resolution desired from the negotiation, and 
  • Acceptable alternatives

Although these points will not necessarily all be delivered at the same time, a party to the negotiation process should practice all of the above subject areas, so there will be no hesitation when the opportunity arises to speak about the various items.

There are no guarantees when parties enter into negotiation but following the five points of preparation, trust, alternatives, communication, and practice can help achieve a satisfactory end to the process.

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