What are the three types of Negotiating No?
Every negotiator gets a No regularly. If you don't get a No regularly, then you are too generous and leaving too much value on the table. Negotiators shouldn't be afraid of No because No helps define the limits of the current negotiation. So, what should you do when you hear No? One of the wisest answers given to this question was in a 2016 Harvard Business Working Paper by Negotiation expert Jim Sebenius. Sebenius says you should evaluate which of the three kinds of No you have:
- A tactical No
- A reset No
- A final No
1. A tactical No
A tactical No is saying no to try to produce a better offer from the other party, because so many sellers always respond to No by offering a lower price. If for saying No the buyer regularly is rewarded with a lower price, then we are training the buyer to say No more often. The least a seller should do is in some way repackage. For example, if the order was twice as big, with longer delivery, with 50% deposit and transported by you, then we could consider a lower price.
2. A reset No
A reset No is when you leave the table (stop negotiating) and reset the table: reset the negotiation. Resetting the negotiation can be done in different ways. One way is to change the parties at the table. It could be as simple as both party's management negotiators cannot agree, both party's need to change to executive negotiators to try to achieve a long-term agreement.
Another way is to bring in other parties from other organisations. Sebenius's book, 3D Negotiations is filled with examples of adding different parties. One of my favourites is a shipping and port authority ("The Authority") negotiating with a powerful union ("Union") regularly and unsuccessfully. The Union simply stopped or slowed the flow of goods - $6 Billion a week - and then Big Customers intervene telling The Authority, they must settle. The Union knew how to win.
The Authority wanted to introduce technology changes to improve productivity of the port. They tried and failed. It appeared to be a win-lose negotiation if The Authority won, the Union lost jobs and members, and if the Union won, they kept jobs and The Authority lost productivity improvements. How could The Authority reset the table?
The Authority began by changing their board, so it represented Big Customers with largest shipping tonnes, who were keen to see the productivity improvements and keen to avoid a slowdown or stoppage of trade.
Then, The Authority discussed with a broader group of Retail Customers and connected with their interests: to be able to track containers electronically to make their supply chains efficient.
Finally, The Authority visited several government departments (Commerce, Treasury, Labour, Transportation, Homeland Security and the Office of the US Trade Representative). They explained how the previous negotiations finished. Also, how they wanted to avoid a stoppage or slowdown and agree on some important technology changes that would benefit the government.
Acting away from the table, they reset the negotiation.
Apart from changing the parties, what else can you do? Well, at any point, before or during the negotiation you should assess the balance of the deal/no deal for the parties. For example, ask:
1. What are the consequences of No Deal? Split these into Good and Bad consequences
2. What are the consequences of a Deal? Split these into Good and Bad consequences
Once you have listed these consequences, you can see the current No Deal/Deal balance. How does it look from their perspective? To avoid optimistic analysis to support your position, always get a second opinion from someone not involved in the negotiation.
Armed with this information, ask two more questions:
3. How can you make the consequences of a No Deal worse?
4. How can you make the consequences of a Deal better?
A simple way to summarise this analysis is using a table.
To capture more value, always ensure you explore all options for a reset No, before you say a final No.
3. A final No
A final No is when an acceptable agreement "does not seem feasible with this party". At this point, you will turn to your Best Alternative To a Negotiated Agreement or BATNA. Sebenius offers more wise advice to avoid errors in choosing your BATNA.
How can you reset the negotiation to create more value by changing parties (at the table or behind the table) or by changing consequences?