Addressing Power Imbalances in Negotiation
By Chuck Doran and Stephen Frenkel
Participants in MWI’s Negotiation Trainings often ask how they should handle significant power imbalances in negotiation, especially when they perceive themselves to be in a position of lower power. “A collaborative approach is all well and good,” they say, “but what happens when the other side doesn’t need to buy into that approach because they have the upper hand?”
It’s essential to point out that, even if one party has less power by certain standards (financial resources, level of influence, etc…) they still have some power, and they can learn to leverage that power more effectively. And when you consider that effective negotiations create and extract as much value as possible from all players in a negotiation, power differentials become less daunting. After all, if either party was so powerful that they didn’t need the other, why would they be negotiating together in the first place?
Our challenge is to make this understanding explicit and confirm that both parties recognize the value of taking a collaborative approach to negotiation. Through this confirmation, we build our capacity to maximize value productively through systematic pre-negotiation preparation.
As you prepare for your negotiation, ask yourself the following questions to identify sources of power:
What is important to you – and to the other side?
It’s vital to find out what’s important to you and to your counterpart. Negotiation experts call these interests – the needs, concerns, goals, and fears that drive people’s actions and underlie their positions or demands. Interests are the reason we negotiate in the first place, and they define what people really hope to get out of their negotiations.
If you are negotiating price, first shift the focus to other matters that are important to the other side and to you – customer service, access, time to market, quality, and other tangible or intangible aspects of the deal – and articulate how you can meet the other side’s needs. This is essentially your value proposition.
Recognizing your own interests alongside your counterpart’s interests allows you to maximize the value available, and it increases the likelihood that they will listen to your needs as you demonstrate how doing so helps to create value. You’re no longer a “commodity;” you’re an exception that brings more value to the partnership than anyone else.
What will you do without this deal?
Your value proposition may be compelling, and at the same time, you should know exactly what you are going to do if you do not make a deal with the other side. In other words, you should define your alternatives to a negotiated agreement.
Rather than identifying what you would do in theory, research and improve upon your alternatives prior to your negotiation. Who else could you meet with or work with who might satisfy your interests more effectively? Developing your alternatives answers questions that can make us feel powerless in negotiation: what happens if I’m not able to make this deal? Is this a good deal, or is there something better out there?
Knowing how you define success, and what you’d do if you don’t reach agreement, can prepare you to walk away if the proposed outcome does not meet your needs. If the other side is pushing unfavorable terms (such as unreasonable risk or liability without appropriate rewards), knowing that you have an alternative to go to can be empowering in and of itself.
What will define a fair outcome?
Identifying objective standards – benchmarks, norms, and measures that create a shared understanding of what is a fair and reasonable outcome to the negotiation – helps you to define what you should and should not accept in a negotiation. Pointing to an industry norm which states that certain terms are out of the ordinary is more persuasive than basing your rejection of those terms on your own feelings of fairness.
While this seems like basic advice, many negotiators wait to define these standards until they hear the other side’s proposal. Researching objective standards prior to negotiating, and raising those standards at appropriate times, protects you from being influenced by unreasonable requests.
This is especially important when you perceive that the other side has more power than you in a negotiation, because you may feel pressured to accept their offer without comparing it to a different standard. You should know what’s fair as determined not by you or your counterpart, but by others – your industry, laws, expert opinions or other facts that aren’t capable of being manipulated by either of you.
What can we gain by working together?
Your success depends not only on your ability to prepare for the negotiation and to execute effectively, but also on your ability to engage with your counterparts and to educate them on the value of taking a collaborative approach. Securing a commitment from your counterpart to negotiate collaboratively is a critical step in dealing with perceived power imbalances.
Communicate your level of commitment and the consequences to them and to your relationship should they try to coerce you to accept unfavorable terms. Help them take a long-term view by pointing out that the short-term benefits of taking advantage of their power will have unfavorable long term consequences, which can include but are not limited to: a damaged relationship, your looking to extract value elsewhere in the process, both of you building a damaged reputation for business in your industry, etc. It’s important for them to realize that a bad deal for you is essentially a bad deal for them. Once it’s clear that you’re interested in a deal that’s fair, reasonable, durable and sustainable, together you can generate the options that satisfy both of your needs.
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To learn about building your team’s negotiation skills, contact Chuck Doran at 617-895-4026 or cdoran@mwi.org.
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