Negotiations Training
MAT
Dilbert on Negotiations
You don’t get what you deserve in life…
You get what you negotiate
2
Dilbert on Negotiating
Clearly we can do better than Dilbert!
3
Agenda
• Importance of Negotiations
• Negotiations Styles and Tips
• The Negotiation Process and
Preparation
• Creating Alternatives
• Final Exercise & Key Takeaways
4
Let’s start with the facts…
1• 70% of people say they don’t like negotiating
2• 80% of business people say they want to be better
negotiators
3• 90% of people after finishing a negotiation say they
have no idea if they could have done better
And, most importantly…
• Everyone negotiates every day
5
Negotiations happen – even when you don’t want
them to
6
What types of negotiations have you been involved in?
Remember, everyone negotiates every day
•
•
•
•
•
•
Note: Write answers on flipchart paper
7
This is the last day of MAT – You should be
structuring/segmenting your answers
Types of
Negotiations
Daily
Periodical
Professional
Personal
Let’s put the list we just developed in our 2-by-2
8
Everyone has personal and professional negotiations
on a daily and periodic basis
Types of
Negotiations
Professional
Personal
Daily
Periodical
• Deadlines for delivering
work to boss
• Asking for more
responsibility / money
• Amount of improvement
needed in work by
subordinates
• Purchasing equipment /
supplies / products
• Driving – passing and
turning others
• Buying a car / house
• What time you’ll be
home for dinner
• Winning support for
your ideas
• Agreeing with partner /
spouse on key decisions
• Who does chores /
errands
Other examples and segmentations are possible as well!
9
Learning comes from doing: Let’s do an exercise…
• In Negotiations, as in most things in life,
the more we practice the better we get
• The following exercise will give you a
chance to try your negotiation skills
• This is a competitive negotiation between
groups… The goal is to maximize profits!
10
Exercise Instructions
• You are each a member of the Board of an Oil Company in
one of two countries: Alba or Batia
• Alba and Batia sell oil to a third country, called Capita
• Alba and Batia make profits depending on:
-What price they sell oil at, and
-What price the other country sells oil at
• However, Alba and Batia have bad relations
-They do not talk to each other
-They each want their country to grow more than the other
Note: Trainer should read Trainer’s Note that accompanies case for full information
11
Exercise
Do exercise!
13
Post-Exercise Questions
• What were everyone’s final profits?
-Write them on a flip-chart
• What did we learn?
14
The negotiation mentality has to be win-win
Wrong Mentality: I Win, You Lose
Right Mentality: Let’s Find a Way to Both Win
Win
Wi
n
Wi
n
Wi
n
Wi
n
Wi
n
Wi
n
15
You need to focus on the big picture and long-term
Wrong Mentality:
The Tree
Right Mentality:
The Forest
Wrong Mentality:
The Battle
Right Mentality:
The War
16
However, you also need to master the following
three things:
Negotiation
Styles
Process and
Preparation
Creating
Alternatives
• Understand your own
• Be aware of theirs
• Prepare, prepare, prepare
• Recognize that most negotiations succeed
because of work done in advance!
• Identify win-win opportunities
• Think outside the box
These three items will be the
focus of the rest of the module
17
Agenda
• Importance of Negotiations
• Negotiations Styles and Tips
• The Negotiation Process and
Preparation
• Creating Alternatives
• Final Exercise & Key Takeaways
18
What is your negotiation style?
• Think of a negotiation you are
currently involved in (or have recently
been involved in)
-Write it down
• Take 1 minute to think about how you
would describe your style in this
negotiation
-Write it down
• Take 2 minutes to tell the person next
to you about the negotiation and your
style in it
-4 minutes total
19
Circle the element which is more your negotiation
style for each of the following pairs
OPTION A
OPTION B
Participants are friends
Participants are adversaries
The goal is agreement
The goal is victory
Make concessions for relationship
Demand concessions from relationship
Be soft on the people and the problem
Be hard on the people and the problem
Trust others
Distrust others
Change your position easily
Dig into your position
Make offers
Make threats
Disclose your bottom line
Mislead as to your bottom line
Accept losses to reach agreement
Demand gains to reach agreement
Search for the answer they will accept
Search for the answer you will accept
Insist on agreement
Insist on your position
Try to avoid a contest of wills
Try to win a contest of wills
Yield to pressure
Apply pressure
20
What is your negotiation style?
• Sum up your Total of Option A and
divide by 13
-This is how much you make Concessions
• Sum up your Total of Option B and
divide by 13
-This is how much you Compete
But, is there another
option?
21
Collaboration > Concession or Competition
Collaboration is the balance of consideration for self and others
22
Circle the element which is more your style for each
of the following pairs (1 of 2)
Concession
Collaboration
Competition
Participants are friends
Participants are
problem solvers
The goal is agreement
The goal is a
win-win outcome
The goal is victory
Make concessions for relationship
Separate people
from the problem
Demand concessions from relationship
Participants are adversaries
Be soft on the people & problem
Be soft on people,
Be hard on the people and the problem
hard on the problem
Trust others
Proceed independent Distrust others
of trust
Change your position easily
Make offers
Focus on interests
not positions
Explore interests
Dig into your position
Make threats
23
Circle the element which is more your style for each
of the following pairs (2 of 2)
Concession
Disclose your bottom line
Accept losses to reach agreement
Search for the answer they’ll accept
Insist on agreement
Try to avoid a contest of wills
Yield to pressure
Collaboration
Avoid having a
bottom line
Invent options for
mutual gain
Develop mutual
options
Insist on objective
criteria
Reach a result
independent of wills
Be open to reason
not pressure
Competition
Mislead as to your bottom line
Demand gains to reach agreement
Search for the answer you will accept
Insist on your position
Try to win a contest of wills
Apply pressure
24
Collaboration – The Negotiation Vision
Collaboration
Avoid having a
bottom line
Invent options for
mutual gain
Develop mutual
options
Insist on objective
criteria
Reach a result
independent of wills
Be open to reason
not pressure
Collaboration
Participants are
problem solvers
The goal is a
win-win outcome
Separate people
from the problem
Be soft on people,
hard on the problem
Proceed independent
of trust
Focus on interests
not positions
Explore interests
25
What is your negotiation style?
• Think back to the negotiation you talked with
your partner about a few minutes ago
• Take 3 minutes (total) to answer the
following questions with your partner:
-Were you more conceding or competing?
-How can you use the concept of collaboration to
help you specifically in that negotiation?
-What is the one thing you want to improve in your
personal negotiation style?
26
A proactive personal style is positive, and never
angry
“If you can make a man laugh, you can make him like you”
– Alfred E Smith, NY State Governor
“You can’t shake hands with a clenched fist”
– Ghandi
27
Some people are Competitive negotiators…
28
Use non-verbal communication to SOFTEN the hardline position of others
S MILE
• Make a positive, friendly, connection
O PEN POSTURE
• Show you are open to negotiate
F ORWARD LEAN
• Create a bond
T OUCH
• Put yourselves on the same team
E YE CONTACT
• Maintain the bond and the focus
N OD
• Gain their trust
29
Here are 8 tips to negotiating well… (1 of 3)
1• Don’t be afraid to negotiate!
• Experienced negotiators know you can negotiate anything
• Other people will take advantage of you if you’re shy/timid
• Not wanting to negotiate can be very expensive!
• It’s like anything – the more you practice, the better you get. So
practice!
2• Don’t get suckered by “rules” or “standard contracts”
• Experienced negotiators know you can negotiate anything
• Rules are often a trick – experienced negotiators refer to rules
because they know people respect rules
• There are no standard contracts – You can always negotiate
• You should feel 100% comfortable making contract changes
before you sign – the other party might say this is not normal,
but it is!
30
Here are 8 tips to negotiating well… (2 of 3)
3•
Never be the first to name a figure
• Once you give a figure, that becomes the anchor point – and
you’ll never know what you could have got
• Ask them “What’s their budget?” or “What are they expecting?”
– You have nothing to lose
4•
Ask for more than you expect to get
• Always start high – the worst that happens is they feel good
because you’re giving them a “special deal”
• Once the other person gives their number, even if it's much
better than you expected, say something like "I think you'll
have to do better than that". Don't be arrogant or aggressive.
Just say it calmly.
5•
Don’t get emotionally involved
• Keep calm, patient, and friendly
• Leave your ego at the door and look for win-win opportunities
31
Here are 8 tips to negotiating well… (3 of 3)
6•
The final decision doesn’t rest with you
• This shouldn’t be a way to re-negotiate after agreeing, but does
give you time to evaluate the terms without the pressure
• This prevents other people from rushing you
7•
Don’t act too interested
• Giving the impression that you’re willing to walk away will have
a big impact on the negotiations. It’s even better if you really
are willing to walk away.
• Play the reluctant buyer or seller
8•
Don’t make the other person feel they’ve been cheated
• Negotiations should leave both parties feeling satisfied – or it
will come back to bite you in this or a future deal
• Be willing to give up things that don’t matter to you to gain
goodwill
32
Your character – who you are and how you act – will
follow you through negotiations
“Men of genius are admired…
Men of wealth are envied…
Men of power are feared…
But only men of character are trusted”
-Alfred Adler, Austrian Psychologist
In Negotiations, be a man or woman of
character
33
Agenda
• Importance of Negotiations
• Negotiations Styles and Tips
• The Negotiation Process and Preparation
• Creating Alternatives
• Final Exercise & Key Takeaways
34
Preparation is the key to negotiations
• “By failing to prepare you are preparing to fail”
– Benjamin Franklin
• “If I had 6 hours to cut down a tree, I’d use the first hour
sharpening the ax”
– Abraham Lincoln
• “Information is a negotiator’s best weapon”
-
Zdenek Necas,
Czech Adventurer &
Entrepreneur
Should Abraham Lincoln have spent more time
preparing?
35
Typical negotiations have three parts
Request bids
Receive bids
• Contact
suppliers
• Receive bids
• Inform them of
what you want
• Discuss pros
and cons of
each supplier
• Ask for lowest
possible price
• Ask when they
can submit bid
by
• Analyze bids
Negotiate
• Choose
supplier(s) you
are most
interested in
• Contact them to
negotiate best
possible price
Typical negotiations follow this standard format…
and have little planning / preparation
36
The right way to negotiate is to start with a plan,
negotiate terms first, and provide bid feedback
Request bids
Develop
Plan
Reques
t
Compa
ny Info
• Identify
scope
• Identify
all
possible
• Create
suppliers
work plan
and
• Identify
timeline
company
info
• List
required
stakeholders
• Send
suppliers
• Set goals
detailed
request
for info
Prepare
Terms
(RFP)
Receive bids
Negotiate
Negotiat
e
Final
Terms
Provide
Bid
Feedback
• Create
• Request •
terms
feedback
you want
on terms
included • Update
•
• Think
terms
outside
where it •
the box
makes
for all
sense
terms
• Inform
suppliers
terms are
final
Request
&
Receive
Bids
Ask
suppliers
for bids
Set a
firm date
Receive
and
analyze
bids
• Provide
relative /
absolute
feedback
• Make it
clear to
all
providers
they
need to
reduce
price
Hold
Final
Negotiatio
n
• Inform
selected
providers
they are
in final
stage
• Hold final
round (in
person if
large
purchase)
37
The key to negotiations is to do them on your
terms
Common Misconceptions
• We’re a small company and
they’re a huge company –
we have no leverage
Reality
• Before you sign a contract
is when you have ALL of the
leverage – ask for what you
want
• We can’t change the terms
• Suppliers won’t provide
their company information
• It takes time and hard work
to do the preparation – but
it’s worth it!
• This works for big and small
negotiations – the only
thing that differs is the
extent of your effort
If you are the customer and there are competitive suppliers,
YOU have all the power to set the terms the way you want them
38
Two recent TACA & Volaris negotiations followed this
process to success
Maintenance Components
Flight Simulator
Scope
• 10-year Component repairs
contract for TACA & Volaris
Airbus fleet
• Purchase of Flight Simulator for
Pilot Training
Key
Success
Factors
• Following the process
• Following the process
• Setting terms in advance of
price
• Setting terms in advance of
price
• Creating a competitive
environment
• Creating a competitive
environment
Timeframe
• 3 months
• 3 months
Results
• Large savings over previous
contract terms
• Purchase price significantly
below market price
39
Developing a clear plan will lead you to success
1
Identify scope
Create workplan and
timeline
List stakeholders
Set goals
Develop
Plan
• What’s in scope? What’s out of scope?
• Why?
• What activities do we need to plan?
• How long will each activity take?
• Who needs to be involved?
• How and when should we get them
involved?
• What do we expect to achieve?
• What are our financial targets?
If you don’t make time to plan, you might as well not negotiate
40
A detailed Business Questionnaire was sent to each
Supplier at the very beginning of the process
TACA-Volaris Component Maintenance
Business Partner Questionnaire
Table of Contents
1.1 Company Information
1.2 Financial Information
1.3 Organization & Capabilities
1.4 Key Accounts
1.5 Engineering and Technical Capabilities
1.6 Component Maintenance Capabilities
1.7 Staffing
1.8 Inventory Management
1.9 Customer Support and Account Management
1.10 Pricing Proposal Questions and Payments
1.11 Quality and Schedule Requirements
1.12 Warranty
1.13 Components Shipment
APPENDIX A: SUB-CONTRACTOR INFORMATION
2
Request
Company
Info
• Ask for as much
information as
you want – Don’t
be shy!
• This is your
chance to learn
more about the
suppliers
• If they don’t do a
good job filling
this out, it’s an
indicator of how
much they value
your business 41
The terms should be prepared using supplier
contracts and internal brainstorming
•
Analyz
e
suppli
er
contra
Use oldcts
contracts
• Request supplier
contracts
•
Conduc
•
t
intern
•
al
sessio
Identifyns
company
needs
• Think creatively
about what else
to include
3
Synthesis
Set
terms
Feedback
Prepare
Terms
(RFP)
Update
terms
Synthesize
thoughts
• Create
• Use process • Finalize terms
document with
shown on
that you want
all terms other
next slide (or
– The
Use external
than price
other similar
negotiations
consultant /
process)
should be on
- Product
SME if
description
your terms
needed
• Hold multiple
- Service levels
- Timelines
- Penalties
- Additional
benefits
- Volume
discounts
- Etc…
rounds of
feedback if
necessary
• Remember
however that
everything
has a cost
42
Feedback on terms should be addressed fairly, and
must be agreed before negotiating price
4
Supplier input required
RFP Category
Supplier 1 Response – Round 1 TACA Response
3.4.3 Over and
above repair
conditions
Question from Supplier: If we
understand the paragraph in the
RFP correctly, you mean that
“over and above pricing” will only
apply to repairs or removals due
to: (see table on left)
Yes, Over and above
pricing only apply to
the circumstances
listed in the RFP
4.4 Turn Time
Requirements
The return destination of subject
component has to be specified by
Volaris-TACA on the first day of
shipping from any Volaris-TACA
designated station
We cannot provide a
return destination as
inventory planning is
dynamic
4.5.2
Responsiblities
Under the assumption that all
packages will be awarded to
Supplier
Please see Revised
RFP Requirements
sent on May 22nd for
new terms – overall
cap on Penalties
For PMAs used upon Volaris TACA's request, TAT-performance,
MTBR performance guarantee and
AOG rules as set forth in the RFP
will not apply
All Components, OEM
or PMA, that are part
of the Agreement will
be subject to TAT,
MTBR, and AOG
penalties
- Penalties
4.11 PMA
support and
credit
Negotiate
Final Terms
Supplier 1 –
Compliance (Yes/No)
43
A Pricing Sheet should be based on your terms and
allow you to compare apples-to-apples
5
Request &
Receive
Bids
44
Qualitative Feedback should be provided to allow
suppliers to address areas of weakness
6A
Poor
Below
Average
Average
Provide Bid
Feedback
Excellent
Good
Key Strengths
Company Simulator Experience
• Experience with
A320 simulators
A320 Simulator Experience
• Competitive prices
Customer Service Level
RFT Period
Software Upgrades Package
Weaknesses
• Customer service
Spare Parts Support Package
• Level of detail
• Software upgrades
Warranty Pricing
• Product is new
45
Pricing Feedback should also be provided in a way
that forces competition
6B
Provide Bid
Feedback
Level D Simulator plus Airbus Parts & Data
Supplier 1
Competitor
Competitor
Competitor
Legend
0%-15%
away from
best offer
15%-30%
away from
best offer
30%+
away from
best offer
Note: Price variation in legend can and should be different for each supplier
46
A final negotiation day (also possible by email) will
ensure you get to the lowest price
Simulator Final Negotiation Day
7
Objectives
Hold Final
Negotiation
Time
Agenda Item
9:00-10:00
Thales Meeting
10:15-11:15
Mechtronix Meeting
11:30-12:30
CAE Meeting
12:45-1:45
Flight Safety Meeting
• We will give feedback and
ask for additional benefits
1:45
Updated Offers Due (FS @ 2:15)
• Review updated offers
1:45-3:00
Lunch & Discussion
2:45
Second Round Notification (Top 2)
• Choose and inform top
two suppliers
3:00-3:30
Second Round Meeting
3:30-4:00
Second Round Meeting
• We have asked suppliers:
- To present advantages of
their company / product
- To address any perceived
weaknesses
• Give additional feedback
• Look for win-win ways to
reduce price
• Ensure clarity
4:30
Final Offers Due
• Receive final offers
5:00-6:00
Exec Update with A Schkn’t & J Solares
• Review offers
6:00
Inform supplier / Final ask
• Make decision
• Make final ask
47
How can you use this process?
• Imagine you are responsible for negotiating Volaris’s new photocopier
leasing contract
• What would you do for each of the first three elements of the process?
1
2
3
Develop
Plan
Request
Company Info
• Identify scope
• Identify all possible
suppliers
• Create terms you
want included
• Identify company
info required
• Think outside the
box for all terms
• Create work plan
and timeline
• List stake-holders
• Set goals
Prepare Terms
(RFP)
• Send suppliers
detailed request for
info
• How can you use this process in any work-related negotiations you
have now or will have in the near future?
48
Agenda
• Importance of Negotiations
• Negotiations Styles and Tips
• The Negotiation Process and Preparation
• Creating Alternatives
• Final Exercise & Key Takeaways
49
You can always negotiate…
50
Creating alternatives starts with interests instead of
positions
Interests
• What’s really
important to me?
• Can I put myself
in your shoes?
• How can we both
achieve our
Positions
• How can I
explain my
position?
• Why don’t they
understand me?
• How do I win?
interests?
53
Once you identify interests, you can start generating
alternatives
Position
• I want a salary
increase
• I need 25%
savings on this
contract
• You clean the house
this weekend
Interests
• I want to be
recognized equally
with Jose
Alternatives
• Title
• Office
• Responsibilities
• We’re having a tough
quarter
• Salary
• Short-term vs longterm pricing
• I need to make this
look good for my
boss
• Benefits related to
other products boss
manages
• I look after the kids
all week and want to
be appreciated for it
• Flowers
• Vacation
• Dinner for two
54
The Pareto Principle demonstrates how you can be
equally satisfied in different situations
Pareto Principle
Other
Benefits
• You can be equally happy at any
point on the line
• So, you can make trade-offs (find
alternatives) that enable an
equally satisfactory agreement
• Remember – everyone has a
differently shaped line!
Money
55
Knowing your BATNA (or more importantly having
one!) allows you to negotiate confidently
Best Alternative To a Negotiated Agreement
Or, your next best option
• The most single powerful tool in a negotiation is the ability to get
up and walk away from the table without making a deal
• Negotiating from a position of real need is a bad, bad situation.
You are almost certainly going to lose. The other party will push
until they find your threshold of pain
• In order to negotiate effectively, efficiently, and wisely, it is
crucial to prepare. Preparation means studying the interests and
BATNAs of the other side as well
• Think about wanting to buy tickets to a football game – but
they’re only available from scalpers. You start to negotiate. Then
you think… This is getting expensive… What’s my BATNA?
56
Never negotiate without having alternatives
• What are examples of business negotiations
you have done (or might do in the future) on
behalf of Volaris?
• What alternatives did you (or can you) create?
• What happens if you don’t have alternatives?
57
Look for points of leverage you can benefit from
What is leverage?
• Imbalances of information
• A situation which is competitive between two parties who both
want your business
• Something that is more important to one party than the other
How can you use leverage?
• Search for and identify points of leverage as early as possible
• Hold your position when you have a point of leverage
- The other party will eventually agree
• Don’t flaunt it
Generate alternatives taking advantage of your points of
leverage
58
Agenda
• Importance of Negotiations
• Negotiations Styles and Tips
• The Negotiation Process and Preparation
• Creating Alternatives
• Final Exercise & Key Takeaways
59
One more exercise…
• Hand out Parker exercise
60
One more exercise…
• What did we learn from this exercise?
61
If you only remember four things from this
session:
1
Negotiation
Styles
• It’s about collaboration
2
Process and
Preparation
• Negotiations succeed because of
work done in advance
3
Creating
Alternatives
• Always create alternatives
4
-Not concession or competition
Everything is negotiable
62
Here are the 8 tips to negotiating well…
1• Don’t be afraid to negotiate!
2• Don’t get suckered by “rules” or “standard
contracts”
3• Never be the first to name a
figure
4• Ask for more than you expect to get
5• Don’t get emotionally involved
6• The final decision doesn’t rest
with you
7• Don’t act too interested
8• Don’t make the other person feel they’ve
been cheated
63
And finally, a list of negotiation tactics…
Tactic
• Authority Limits
Explanation
• Need to go to boss for approval above $x
- Used to get agreement on lower price
• Change the Negotiator
• Switch negotiators mid-negotiation
- Allows the new person to re-open items
• Cherry Picking
• Combine the best prices on different items
- Ask other side for best deal including other’s pricing
• Final Offer
• State that this is the final offer
- Use it only when you mean it or lose credibility
• Good cop / Bad cop
• Work in pairs, one nice and one tough
- Nice one can gain knowledge, tough one blamed
• Hovering Pen
• Say you’re ready to sign, then raise final issue
- Try to take advantage of other’s eagerness
• Mind tricks
• Act to extremes – rude, crazy
- The real act here is distraction
• Signaling
• Signals can be true or false and intentional or unintentional
- Look for them and use them, but proceed with caution
• Walk Out
• What if?
• Leave the room because of an issue
- Usually designed to make the other person over-think something
• Ask lots of questions, indicating creative solutions
- Used to understand other side better, especially by buyers
64