The COVID-19 pandemic has caused uncertainty and has changed the way that we do business in the foreseeable future, especially when negotiating agreements. Many individuals feel the stress of negotiating during this time because of the uncertainty, a lack of alternatives, and general inequality in bargaining power. As a result, parties need to be cautious when negotiating to protect themselves from saying yes to an agreement that is unprofitable, unrealistic or may jeopardize the relationship of the parties. In many circumstances taking a holistic approach may be more beneficial than the traditional strategy when negotiating during the crisis to leverage bargaining power.
THE TRADITIONAL APPROACH TO NEGOTIATING – BATNA
The traditional approach is called BATNA and is an acronym for the Best Alternative to a Negotiated Agreement. Under this approach, each party thoroughly researches their current options and alternatives before negotiating an agreement. By comparing all options, parties understand how much they are willing to settle for and know when it’s best to walk away. The problem with using BATNA during the crisis is that parties may not have alternative options and believe they do not possess enough bargaining power to negotiate a favourable outcome so they may settle for an unfavourable one. Instead, parties should work together to find creative ways to add value to each other in order to increase their bargaining power.
REMODELLING YOUR STRATEGY – A HOLISTIC APPROACH
A holistic approach encourages parties to think outside of the box to negotiate an agreement. Each party should consider their goals regarding competitors, suppliers, customers, etc. and focus on how they can work together to come to a mutually beneficial agreement. When taking a holistic approach, the following strategies should be utilized:
- Outline and Consider Each Parties’ Goals
First, consider each parties’ goals. Ask in advance of your meeting what outcome each party is looking to achieve outside of the business transaction, especially if you are the one with less bargaining power. Before the negotiation, consider brainstorming your own list of goals and the possible goals of the other side. Consider brainstorming how you may assist with overcoming those challenges. Finally, actively listen to the other party during the negotiation, write down their goals, and repeat them back to ensure you understand what they are looking for. Then share what you have brainstormed for them outside their stated goals. This demonstrates a genuine interest in maintaining a long-term relationship.
- Consider the Scope of the Contract
Once you discuss each party’s goals, consider how this might impact the scope of the contract. Instead of focusing on providing monetary value, think about how you can assist each other outside of the transaction to meet each other’s goals. This may include narrowing the scope of the contract where you offer less at the onset but enter into a long-term business relationship.
- Consider What You Have as Leverage
Once you understand each parties’ goals, apply the knowledge that you have gained to bring value to the agreement even if you believe you have a weaker bargaining position. For example, do you possess a large network of business relationships, promotional streams, or access to suppliers that you could introduce them to? Offering something to help the other side achieve its goals even if it is outside the main transaction gives you leverage.
- Use Idle Time to Your Advantage
If the other party is dragging on the timeline or is not willing to negotiate, it may be beneficial for you to accept the current deal and to focus your attention on bettering your position so that you have more leverage in the future. Concentrate on improving how you showcase your position, strengthen current relationships, and building new ones. Consider requesting deadlines at the onset of negotiations to keep each other on track.
We hope that these strategies assist you with your negotiations during the pandemic. If you have any further questions, please feel free to contact us at [email protected]
Tanya Walker and Jordan Routliff were panelists at a webinar hosted in partnership with the DeGroote School of Business and the McMaster Alumni Association. The link to view the webinar is here.