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The ZOPA factor (ZOne of Possible Agreement)

Negotiation is a crucial skill in today’s world, both in business and in your personal life.

Some common mistakes may seem harmless at first, but they can cost you a lot of time and money in the long run. An elite negotiator should absolutely know these 3 pitfalls of negotiation at the risk of losing a lot.

Here are three pitfalls that every elite negotiator should avoid at all costs.

Pitfall #1: Not defining the boundaries of the negotiation

a. Not preparing your Best Alternative to a Negotiated Agreement (BATNA)

Before you enter any negotiation, you need to have a clear idea of what your BATNA is. Good negotiators always have a BATNA.
To negotiate well, it is vital to have fixed the limits which will delimit your margin of negotiation.

• The amount above (if you are the buyer) that you will not do business.
• The amount below (if you are a seller) which is not profitable for you.

This is the minimum or maximum amount that you are willing to accept or pay, depending on whether you are a seller or a buyer. This is your plan B, the best fallback, the option that you will pursue if you cannot reach a satisfactory deal with your counterpart. Knowing your BATNA helps you to set realistic expectations and walk away from bad deals.

If you don’t know your BATNA, you risk settling for a deal that is worse than what you could have gotten elsewhere. Or you may waste time and energy negotiating with someone who is not willing to meet your expectations.

“Negotiation is not a game of chance. It is a skill that requires preparation and practice.”

Therefore, you should always keep your BATNA in mind and be ready to walk away if the negotiation goes beyond your acceptable range. Otherwise, you will waste time, energy and money negotiating, because the outcome of the negotiation is likely to be to your disadvantage.

You may encounter buyers and sellers who are skilled in persuasion and manipulation techniques, so you need to be ready to counter them. A little negotiation upfront can save you a lot of trouble later.

a bis. WATNA. Worst Alternative To a Negotiated Agreement.

When you negotiate, you need to know your WATNA. This is the worst possible outcome you could get if you fail to reach an agreement. Knowing your WATNA helps you compare your options and decide what is acceptable for you. It is a useful technique to help understand what might be a negotiation outcome, that even if negative is still better than a failure, making the deal still feasible.

It also helps you strengthen your position and avoid settling for less than your WATNA.

However, you should not confuse your WATNA with your bottom line, which is the minimum you are willing to accept. Your WATNA may change depending on how uncertain the situation is. It also gives you time to prepare and determine several crucial aspects for negotiation and reconsider the bottom line.

People should use a Watna to evaluate settlement offers against a benchmark and to strengthen their position in a negotiation. A Watna gives the individual or business the confidence to accept an outcome that, while far from ideal, is better than the worst possible outcome. A Watna is most effective in negotiations with a high degree of uncertainty.

b. Not asking for enough at the start

The first offer you make or receive sets the tone for the rest of the negotiation. You absolutely need to have a good trading margin display a high first requirement.

“This is key number one in negotiation.“
This allows you to be able to make concessions and obtain compensation while remaining in ZOPA.

It is necessary to keep these limits in mind during the course of the negotiation in order to be able to put an end to it, in the event that the deal is no longer profitable for you. These limits are generally called the “breaking point” the BP.

“When the final result is expected to be a compromise, it is often prudent to start from an extreme position.”

John Maynard Keynes

It also establishes an anchor point that influences how both parties perceive the value of the deal. That’s why you should always aim high (or low) when making (or receiving) an offer. This gives you more room to make concessions and trade-offs while staying within the ZOPA.

The ZOPA is the range of outcomes that both parties are willing to accept.

c. Not looking beyond the price

Price is often the most obvious and contentious issue in a negotiation, but it’s not the only one.

Focusing too much on price can limit your options and creativity as a negotiator. You may miss out on other aspects of the deal that could add value or satisfy your interests. Negotiating only the price is a rookie mistake that severely limits your room for maneuver as a negotiator because you will quickly run out of arguments and solutions. So prepare your different breakpoints by sifting through all the negotiable points, such as:

• Payment deadline,
• Delivery time,
• Warranties,
• Packaging,
• Quantity / volume,
• Payment method,
• End of year discount, etc…

Break down your product / service or the entire commercial offer that you buy / sell, and you will find that there are many negotiable points!

Pitfall #2: Let affect take over when you negotiate

Emotions can cloud your judgment and interfere with your ability to negotiate effectively.

In a well-crafted trading strategy, nothing is left to chance. Multiple safeguards are intentionally put in place between the decision-maker and the negotiator to anticipate and prevent any emotional interference that could lead to biased decision-making. While it may not be necessary to go to such lengths in every negotiation, it is advisable to enlist the help of an intermediary if you feel that your objectivity may be compromised in an important negotiation.

Depending on the nature of the negotiation – whether commercial or personal – you could seek assistance from a union advisor during mandatory annual negotiations or engage a real estate agent when negotiating the purchase or sale of a property. Other options include consulting a financial advisor or business lawyer for partnerships, mergers/acquisitions, or takeovers; hiring a divorce lawyer when significant assets are involved; or engaging a mediator to help resolve a family dispute.

“During a negotiation, it would be wise not to take anything personally. If you leave personalities out of it, you will be able to see opportunities more objectively.”

Brian Koslow

a. Negotiation is not about letting your emotions take over.

It is about using your logic, facts, and reasoning to achieve your goals and build relationships. By following these tips, you can become a more effective and rational negotiator.

“What if you are too emotionally invested in the outcome of the negotiation?“

What if you have a personal stake or a strong attachment to the issue? In that case, you may want to delegate the negotiation to someone else who can act on your behalf. Why? Because they will have the detachment, perspective, and clarity of mind that you may lack. They will be able to make strategic and profitable decisions for you, without being influenced by emotions.

A good negotiator relies on rational analysis and strategic thinking, not on feelings and impulses. When you are desperate to close a deal, you are in a weak position. You may make concessions that you will regret later, or miss opportunities to create more value.

When you find yourself in a position to negotiate and you are ready to do anything to close the deal, then you are in a weak position. It is vital to keep a clear head and to remain lucid when it comes to business negotiations. It is professional acalculations that guide the decisions of a good negotiator and not his emotions and feelings.

b. Negotiations in a crisis situation

This is what happens in crisis situations, such as hostage-taking, occupation of premises, or hunger strikes. There is always a team of negotiators, and the decision-maker is never the one who negotiates directly with the other party.

There is always a negotiating team, and the decision maker is never the negotiator. Why ?
It’s simple, he will have the necessary composure, hindsight and clarity of mind to make the right decisions.

“The negotiator does not decide!”

Because he must analyze the situation as a whole to decide objectively and without stress. The negotiator is an intermediary, who does not have the authority to make final decisions. This is done to avoid biased and risky judgments that could jeopardize the situation.

The decision-maker is the one who analyzes the situation from a distance and decides objectively and calmly.

Pitfall #3: Wanting to negotiate what cannot be

Before entering into negotiations, it is crucial to familiarize oneself with the legal framework and common negotiation parameters. While anything not explicitly prohibited by law or impossible is open for discussion, attempting to negotiate for concessions that the other party is unable to provide is futile.

Thus, it is essential to arrive at the negotiating table with a clear understanding of the rules of the game and a precise idea of what you hope to achieve from the other party.

For both buyers and sellers, there are several points that can be negotiated. The more informed you are about the negotiation process and your desired outcomes, the more accurately you can define your ZOPA. This will increase the likelihood of achieving a successful outcome in your negotiations.

It is wise to always inform yourself about the legal framework and the usual margins of negotiation. Everything that is not prohibited by law, or impossible, is open to discussion. But it would be a waste of time to want tradeoffs that the opposing negotiator can’t give you.

You must therefore arrive at the negotiating table knowing the rules of the game, and having determined precisely what you want to obtain from the opposing party.

“We cannot negotiate with people who say what’s mine is mine and what’s yours is negotiable.”

John F. Kennedy

The more you are informed, the more precisely your Breaking Point and Zone of Possible Agreement will be defined, and the more likely you are to get what you want in the negotiation!

These are all potential sources of leverage and flexibility that can help you reach a win-win outcome. To prepare for a successful negotiation, you should identify all the negotiable points and prioritize them according to your preferences and goals.

Negotiation is not a one-size-fits-all process. It requires adaptability, creativity, and strategic thinking. By avoiding these three pitfalls, you can increase your chances of getting what you want and building lasting relationships with your counterparts.