Negotiating Tip – Who Has The Power In a Negotiation?

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Part of developing your negotiation position is determining who has the power in a negotiation.  Are you the stronger or the weaker party?  Does it matter?  I recently helped a client develop a strategy to negotiate an agreement with another company.  The other company had written the agreement and needless to say it was very one-sided and all the terms were favorable to them.  My client was unsure as to whether he wanted to negotiate some of the terms, since the other side had all of the power.  (This perception, by the way, is one of the top ten reasons people will not negotiate.)  My response was nonsense; they need you as much as you need them.   My reasoning was simple.  He had the expertise and resources to provide them what they wanted and he knew their systems.  They were under time pressure to provide information to their clients and this person was the only one readily available to do the work.  Once he realized this and he knew that they knew this, my client was able to get several concessions from the company and was able to negotiate from a position of power and not from a weaker position.

So is power are ways equal in negotiations?  No but you can do several things to improve your power position.  First, realistically assess who has the power.  Don’t assume it is the other guy.  He very well could be thinking the same thing.  What gives him the power?  What can you do to balance that power?  Here is a quick example.  Are you dealing with a large firm that has a bevy of lawyers facing you down? Hire the expertise of a lawyer or good contract negotiator who understands contracts.  That person does not have to be on your payroll and you can temporarily augment your team to keep from being run over. 

Another question to ask is: Why do they want you?  What skills, expertise or credentials are you bringing to the table that they want?  In the experience with my client I mentioned above, the owner of power was a perception and not a fact.  In that instance both sides needed each other.  What if they are the only people in the world that can help you and you really need them?  Can’t they just tell you what they want and you have to comply?  Not always.  I was renegotiating a contract with a large aerospace company in Canada.  We could not reach an agreement on the profit we would pay them for work they were doing for us.  We had deadlocked and had a side meeting among my team.  We assessed that we really did need them since they were the only manufacturers of a critical component of a system we were building.  I remember a team member asking “What about the Israelis?”  “No,” one of my engineers said, “they got out of the business several years ago, it was too complicated.”  We were in a gloomy mood and prepared to accept the fee they were proposing.  Before we accepted it, we tried to figure out why they were dealing with us.  After some thought we realized we were a source of cash flow for them and were keeping some of their critical staff employed until business picked up.  Armed with this information, we went back and negotiated with them from a higher position of power.  We helped them keep staff, we improved our payment terms so they got their money faster and we negotiated the profit at a level more favorable to us.

Finally, one of my favorite sources of power is to know your alternatives.  Being able to say “No” or not having to have this particular contract or agreement is very powerful.  Knowing that “If not this deal, the next one” gives you confidence and power that the other side can sense  and not negate.  One saying in negotiations is  “He who has the most vested in the negotiation has the least power” is true.   If you want the deal more than the other guy, he has more power.

Whether your power is real or perceived, having it can make you a stronger negotiator and help you reach a better agreement.

One of the reasons that I started my business was to help the small businessperson or entrepreneur play on a level as the big guys.  If you need help determining where your power lies or determining a negotiation strategy, please contact me.  I will be glad to help you develop a winning plan for negotiation.

 

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Comments

  1. Sometimes it amazes me all the knowledge you have right at your fingertips. Great article, Bill.

  2. Bill, I always learn so much from your posts. I never thought about what you said that the person with the most power is the one who says no.

  3. I have very little experience in this area so this is very useful! thanks Bill

  4. Great stuff, as usual, Bill. Never underestimate what you bring to the table. It’s amazing how much power people give to the other side. I see this a lot in sales situations.

  5. I appreciate the advice to not assume that the other person has all the power. And learning the art of negotiation is certainly an important skill. How does one do that?

  6. I think for people who negotiate contracts for their work, they should bookmark this page, and share it with a group of their friends (if they are solopreneurs) or a group from their company, so they can brainstorm the points you made. Too many people review a contract alone, and do give up their power.

  7. Great tips as always – sounds like you have many people who could be calling on you Bill the next time they are negotiating a contract!

  8. Great pointers and tips on negotiation.

  9. A great lesson is that there will always be another deal, another opportunity, another sale, another one … you must be willing to walk away if it’s not right, and know that if it doesn’t work out this time, it’s because it wasn’t meant to be!

  10. YOU are the master of negotiation. Great points. Your post reminds me of the Kenny Rogers song “The Gambler…. know when to hold ’em, know when to fold ’em, know when to walk away and know when to run! 🙂
    Write on!~
    Lisa Manyon