on September 24th, 2008

1. These pieces that I write every week aim to pass on some tiny, condensed bit of information to engineering professionals. The amazing thing, however, is that I get far more learning passed back to me from your comments. Thank you.

2. Negotiating is always a thorny topic, but I can guarantee that if you haven’t already utilised the techniques that I have outlined below, you can now make yourself a few thousand additional dollars a year. And for your firm, millions of dollars - real dollars. I believe most of us engineering professionals don’t negotiate enough. We accept the status quo when purchasing or selling something. In our quantitative minds, we accept that the price must be right as it is generally set by others “who know better”. Or we believe it is unprofessional and demeaning to “haggle” over an item. And we often believe that it is about a win-lose scenario - if you beat the price down sufficiently, the other party loses. But believe me, even in established department stores, with a supposedly rigid pricing structure, you can negotiate if you have a reason (imperfections in goods, out of date goods, no spares available). People are looking for reasons to give you a great deal. And a better price. Obviously, you have to justify the reason for the lower price. Simply applying the battering ram approach and demanding a lower price isn’t going to be successful. It is critical to understand the other person’s point of view almost as well as your own – ensure you are clear about what he/she wants and then look for alternatives to the standard solutions. I remember a university exercise, many years ago, in which my classmates and I were split into two groups/tribes. We were living on an island and had to negotiate over a crate load of oranges that had washed up onto the island. The crate load of oranges was crucial for the survival of the group – less than this was not adequate to prevent death, so a compromise seemed impossible.  But we had not clarified exactly what each party really wanted – we had assumed that the other tribe needed it for the same reason that we did. It turned out that the one tribe needed the orange skins and the other the flesh of the oranges. Inevitably, the brute force, winner takes all strategy simply didn’t work. But if we had gone to the trouble to understand the other party…….

There is definitely no point in destroying the other party in negotiations. It is better to protect their interests, particularly if you are looking for a long term relationship – otherwise it may come back to haunt you. We were the consultants to the construction of a power station. The client was tough and wasn’t prepared to tolerate any relaxation of the original contract terms (delays in delivering the power station occurred due to unexpected wet weather and labour disputes). The contractor ended up with particularly severe terms in the negotiations for liquidated damages and went out of business shortly afterwards. This resulted in a power station that had to be completed by someone else at an enormously increased cost and with huge delays.

A few proven techniques with negotiating – no matter whether you are the buyer or seller:

• Avoid an adversarial – you-lose-I-win approach
• Build trust and co-operation - work as partners
• Try and uncover hidden issues when listening to the other party.
• Research your position and that of the other party thoroughly and work out possible solutions before you negotiate.
• Communicate your position clearly and simply and make sure the other party understands you. Clarify your understanding of the other party’s requirements. Indicate a proven commitment to coming to a win-win solution - What do you have that the other party wants? What can you give away at minimal cost to yourself, but which is worth a lot to the other party?
• Reframe the problem so that it is solvable by a win-win solution. What compromises are possible?
• Wait in silence when you have stated your price - do not talk.
• Look for solutions by “expanding-the-pie.”
• Write down the final agreement and confirm this is what has been understood

As far as negotiation goes, William Shakespeare’s advice (in Much Ado about Nothing) from the 1500’s is timeless, insofar as trusting a third party when interpreting a situation:

Friendship is constant in all other things
Save in the office and affairs of love:
Therefore all hearts in love use their own tongues;
Let every eye negotiate for itself
And trust no agent. 

yours in engineering learning


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