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The rules of negotiation

Four ways to optimise outcomes in a negotiable transaction

At one point or another, everybody negotiates – whether over dinnertime with children or trade deals with governments. The complexities may vary, but the rules stay the same.

Tim Cullen, Associate Fellow and Founder of the Oxford Programme on Negotiation at Saïd Business School, is an experienced negotiator who knows that trust and reciprocity are at the heart of successful negotiation. Here, he offers four rules of negotiation that can help you achieve better outcomes in any transaction.

Rule 1: Do your homework

First, don’t approach the negotiation table before you’ve studied the situation from every angle. ‘Make sure you have an immense amount of information at your fingertips’, says Cullen. This includes anticipating issues before they occur, while also knowing that you can’t prepare for every curveball that may come your way.

Second, know what you want the outcome of the negotiation to be. ‘It is astonishing how many people go into negotiations without a clear understanding of what they want to achieve’, says Cullen. Understanding your counterparts’ goals – and the relative importance of different issues to them – is equally crucial. This is where many mergers and acquisitions go wrong.

Rule 2: Do not think in terms of winning and losing

Thinking of negotiation as a competitive sport or battle to be fought is counterproductive. ‘You will often hear people talking about their “opponent” in a negotiation. But that is one word we try to banish from the lexicon’, says Cullen.

Instead, think about negotiating as a process that tries to make both sides happy. By achieving a mutually-satisfactory outcome with your ‘counterpart’, you won’t just create value; you’ll increase your chances of negotiating with them again.

A game of chess

Rule 3: Do be open and straightforward

In a negotiation, demonstrate to your counterpart that you are someone who can be trusted, says Cullen. ‘In some of my Chinese negotiations, I found that there was an element of mistrust to start with – partly because they did not know me – and I did not know them, and partly due to cultural differences.’

To do this, you want to be open without giving information away. Keep your cards close to your chest, but don’t lie; this will damage credibility and trust. If people ask you a question, try to answer it honestly. It is OK to say, ‘I can't tell you that’ or ‘That's something we may be able to talk about later’.

Group of people in a discussion

Rule 4: Do not give away more than you need to

‘Negotiation is all about trading’, says Cullen. ‘This works on the principle of reciprocity: If I give you something, I expect something in return, and vice versa.’ Both sides are at the table because they believe there is something in it for them. You need to analyse exactly what it is that you have, which they need.

For example, when the cabinet secretary of one foreign country was deciding to purchase a bespoke negotiation training programme, Cullen invited him to try the Oxford Programme on Negotiation, free of charge. ‘Although it cost me nothing to have an extra person in the room, the value to him was £7,800 worth of free executive education.’

By looking for negotiable items where the cost and value to each side is different, you can make very worthwhile trades. ‘In fact it is the same principle as “terms of trade” and “comparative advantage” that underlie international trade between nations.' Cullen adds.