3JM Company Inc.



Published Articles by David Balovich

Title: The Art Of Negotiation
Published in: Creditworthy News
Date: 12/4/12


It has often been said that credit is not rocket science but rather a process of gathering and analyzing information to minimize risk. In addition the extension of credit includes the art of collecting. A process of motivating someone to do something, pay, that they don't necessarily want to do at the time that we want them too.

Whether we are obtaining the information we require; application, financials, guaranties, security agreement, etc. or requesting payment, everyone of these activities requires us to negotiate with the other party.

Negotiating has been defined as an interactive communication process that may take place whenever we want something from someone else or another person wants something from us.

"Take it or leave it!" "This proposal is non-negotiable." "Don't ask me again, we're not going to sign your agreement. This is all we are going to do." "This is it. If you don't want to accept the payment amount, forget it." "Negotiating with you is a waste of time. We'll see you at the courthouse!" How do you feel when you hear statements like this? How do you feel when people are belligerent; when they hang up on you, literally or figuratively; when they let you know that they do not want to have a dialogue with you about such ethereal subjects as your needs, interests, or concerns about a proposal or a transaction?

When we react negatively to ultimatums, inflexibility, and statements like those in the preceding paragraph, we may come to the realization that other people feel the same way. Unless we are in the military, or subject to some similar hierarchical organization, we will conclude that, if we want to have a relationship with the party on the other side of the table or the other end of the phone then we must negotiate.

Negotiation is unavoidable.

Most of us negotiate with one another frequently. Once we realize this, theoretically, we have two choices: accept the fact that negotiation is a way of life in our culture and improve our skills so that we can negotiate with confidence; or, do nothing about it. Some may argue that negotiation is an art, that it is intuitive; or, that we all know how to negotiate, learning basic skills on the playgrounds of life. Perhaps there are naturally gifted negotiators. But, as a consultant, mediator, and credit manager who has spent over 20 years negotiating customer settlements, negotiating transactions for clients, and negotiating personal transactions, I can attest to the fact that many negotiators are not naturally gifted.

The majority of people simply don't know how to negotiate and that is understandable. Our parents don't teach us how to negotiate, probably because their parents didn't teach them how to negotiate. And despite the fact that negotiating is a vital skill, we're generally taught nothing about it in school. That leads to the second reason there are so few skilled negotiators: people don't think it's possible to learn how to become a skilled negotiator. Since we're not taught how to negotiate we just assume it cannot be taught. The third, and I believe most powerful reason is fear.

We can all improve our skills as negotiators. But, how? Conjure up two individuals: the "Skilled Negotiator" and the "Novice". The Skilled Negotiator is not someone who works miracles, who can pull off remarkable "swindles" or hypnotize his or her opponents into barking like dogs and doing other things they would not ordinarily do. The Skilled Negotiator is simply demonstratively better than the Novice. The Skilled Negotiator's skills are obvious. While he or she may not walk on water, they will consistently obtain the best deal possible under the circumstances. On occasion, perhaps even frequently, they will get remarkably good results. Why?

What sets the Skilled Negotiator apart? Why do we consider he or she a master? What do they know that the rest of us do not? What can we learn from them? I have concluded that Skilled Negotiators follow certain rules that novices are unaware of, do not understand or that they simply do not implement. In this column and the next we will review the basics of negotiating.

Fundamental Elements of the Negotiation Process

Negotiation is normally a four-step process: preparation, information exchange, explicit bargaining, and commitment. Some negotiators consider negotiation a dance with four steps.

The following are the basic phases in the negotiation process:

Phase I: Pre-bargaining Phase

1. Information: Learn as much as possible about the problem. What information is needed from the other side?
2. Leverage Evaluation: Evaluate the leverage we have and the other party's leverage at the outset. This is important because there may be a number of things we can do to improve our leverage or diminish the leverage of the other side.
3. Analysis: What are the real issues? Separate the emotions from the issues.
4. Rapport: Establish rapport with the other side. We need to determine from the beginning if the other side is going to be cooperative.
5. Goals and expectations: Goals are one thing; expectations are something else. It is important to determine both prior to communicating with the other party.
6. Type of negotiation: What type of negotiation do we expect? Will this be highly competitive, cooperative, or something unusual? Will we be negotiating face to face, by phone, through a mediator, or in some other manner?
7. Plan: What's the negotiation plan?

Phase II: Bargaining Phase

1. Logistics: When, where, and how will we negotiate? This can be especially important in multi-party cases.
2. Opening offers: What is the best offer we can justify? Should we make it an opening offer or wait to let the other party go first?
3. Subsequent offers: How should we adjust our negotiating plan when responding to unanticipated moves by our opponent?
4. Tactics: What sort of tactics will we employ? What sort of tactics will our opponent be using?
5. Concessions: What concessions are we prepared to make and how will we make them?
6. Resolution: What is the best way to resolve the problem? Is there a practical solution? Be on constant alert for compromise and creative solutions.

Phase III: Closure Phase

1. Logistics: How and when will we close? At the negotiation or a later time? Who will prepare the final agreement?
2. Documentation: Always prepare a closing checklist to follow.
3. Emotional closure: It's one thing to end a legal dispute; it's another to address the underlying interests and needs of the parties. If we neglect the latter, the agreement will probably not sustain.
4. Implementation: It's not over until it is over.

Some of these elements are self-explanatory and elementary. We will address more issues in the next column.

I Wish You Well,

David Balovich is an author, credit consultant, educator, and public speaker. He can be reached at 3jmcompany@gmail.com or through the Creditworthy website.

The information provided above is for educational purposes only and not provided as legal advice. Legal advice should be obtained from a licensed attorney in good standing with the Bar Association and preferably Board Certified in either Creditor Rights or Bankruptcy.  

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