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
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.
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
The following are the basic phases in the
Phase I: Pre-bargaining Phase
1. Information: Learn as much as possible
about the problem. What information is needed from the other side?
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?
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
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
2. Documentation: Always prepare a closing checklist to
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
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
I Wish You
David Balovich is an author, credit consultant, educator, and public
can be reached at
email@example.com or through the Creditworthy website.