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Improved negotiation skills can have a positive effect on virtually every aspect of your life, not the least of which is your shop’s profitability.
Think of the last time you were involved in a negotiation. Were you negotiating an estimate with an adjuster? Perhaps you were negotiating with your boss or another employee? Maybe it was a price negotiation with a vendor or supplier? Did you and your spouse negotiate where to go to dinner or what to watch on TV? In any event, the last time you were involved in some sort of negotiation was probably within the last hour.
We negotiate with just about everyone all of the time. Negotiation is an ongoing, cradle-to-grave process. We’re constantly involved in negotiations at work and at home.
So it goes without saying, then, that improved negotiation skills can have a positive effect on virtually every aspect of our lives – including our profitability in business. These same skills may be used to reduce everyday expenses and even ease the stress we face in both our professional and private lives.
Yet most of us have no formal training in negotiation. Have you ever attended a class on negotiation? Probably not. At best, we might have attended a session at the International Autobody Congress & Exhibition (NACE) or read a book. The fact is that most of us learn basic negotiation skills in the sandbox and obtain advanced negotiation skills training at the “school of hard knocks.”
Many fear negotiations. We’re hesitant to enter into a negotiation for the same reason that we don’t ask for the sale when writing a damage evaluation for a customer – we’re afraid of rejection! We hate to hear the word “No!”
It’s time to improve those negotiating skills. A good negotiator enjoys the process of negotiation and has no fear of the word “no.” “No” just means keep negotiating!
There are two basic styles of negotiation practiced today: positional negotiation and principled negotiation, with positional being the most common.
In positional negotiation, each party “locks into” a position. Once locked in, they defend their position to the death.
I witnessed a positional negotiation between a three-year-old child and her mother recently at the grocery store checkout line. It was 3 p.m. and the child wanted candy. She grabbed her mother’s arm, pointed to the display and said, “Mommy! Candy! I want candy!”
The young mother denied the child’s request, explaining that it was too late for candy and that it would spoil her dinner.
The negotiation continued as the child, locked into her position of wanting candy communicated her desire in a louder voice, “MOMMY, I WANT CANDY!”
The young mother locked into her position of denying candy and said, “NO CANDY! IT WILL SPOIL YOUR DINNER.”
The child then threw herself on the floor screaming, restating her position that she wanted and needed candy. To avoid further embarrassment, the young mother handed the crying, twisting child a piece of candy, paid the grocery bill and dragged the winning negotiator from the store. The child had tears running down her smiling face and a candy bar in her mouth. Mom was angry.
That’s positional negotiation. You see it every day:
Adjuster: “I can’t see more than four hours!”
Shop: “I won’t touch it for less than seven hours!”
Positional negotiation frequently results in frayed nerves, angry and combative participants and an end negotiation that’s good for neither side. In the body shop, hearing phrases like, “Then I’ll just find someone who can….” is the result of positional negotiation.
Principled negotiation is the alternative and vastly superior style of negotiation. In principled negotiation, the focus is on finding as many possible optional solutions as possible, keeping emotions out of the negotiation and focusing on each party’s interests rather than problems or positions.
To begin to learn the principled negotiation style, read “Getting to Yes” by Roger Fisher and William Ury. That book is referenced in virtually every other book or training seminar on improved negotiation skills. If you do nothing else to improve your negotiation skills, get that book and read it.
Principled negotiators really listen to their counterparts, trying to discover real interests and needs. Then, working together, they find optional settlements that satisfy each party’s true needs and interests. The principled negotiator will look to objective criteria to resolved disputes. Emotional outbursts are the enemy of the principled negotiator.
I recently was asked to “referee” a dispute between an adjuster and a shop estimator. They were locked in a positional negotiation regarding payment
of a not-included labor operation. The estimator insisted on payment, the adjuster denied payment. It was getting loud.
Locking into their respective positions, each negotiator risked significant losses. The shop could lose a nice repair and damage a relationship with the adjuster, his company and the customer. The adjuster risked significant expense in moving the job to another shop, cycle time delays and a damaged relationship with the shop and the customer.
After taking a few moments to let things cool off, we began to search for options to resolve the conflict in such a way as to meet the interests of both sides. The adjuster wasn’t opposed to compensating the shop for the operation, but he didn’t wish to subject himself to an audit that would surely be triggered by his payment of the not-included operation. Once that was revealed, the adjuster offered a solution based on acceptable language that wouldn’t result in an audit. In the end, both sides achieved their goals and their individual interests were served. That’s a “win-win” negotiation result!
Down and Dirty Tactics
We’ve all seen or heard the many dirty tactics out there: the manipulative or threatening negotiator, unreasonable delays, threats, shouting, etc. These are “dirty” negotiation tricks.
When hit with a dirty trick or tactic, realize that it’s the sign of a poorly trained negotiator. Good negotiators want to arrive at a mutually satisfactory conclusion. In fact, good negotiators want to be invited back to negotiate again. So, when faced with a dirty trick, the first step is to pause, take a deep breath and avoid letting emotions rise to the surface.
Once we’ve taken control of our emotions, we can figure out how to deal with the dirty trick. Once way is to simply ignore it and keep right on negotiating in a principled manner. One question that’s frequently asked is: “How do you deal with a positional negotiator?” The answer is to simply keep negotiating with principled techniques and train the other side on how it should be done. They’ll usually come around.
If we know that the other side has a tendency to get loud and abusive, try to conduct the negotiation in a public place such as a restaurant. Bullies like to bully one-on-one, so they try to avoid the limelight generated by childish screaming in a crowded place.
Another option to deal with the dirty trick is to simply point it out: “Bob, giving me a take-it-or-leave-it ultimatum is a dirty negotiation trick, I don’t appreciate it. Let’s get back to some honest negotiation and settle this professionally.”
The last and possibly best option is to simply revert to your best alternative to a negotiated agreement and walk away. If the other side really wants to reach an agreement, they’ll get back to you knowing in advance that you won’t tolerate abusive negotiation tactics.
I was once subjected to a series of dirty tricks while negotiating a real estate purchase. My attorney and I were to meet with the seller and his attorney. We chose to have the negotiation at the seller’s attorney’s office so that we had the option of leaving. That turned out to be a good thing.
We were seated in a conference room with the sun in our eyes. Our chairs were broken, stuck in a low position and wobbling with one short leg. The way the negotiation was staged was a dirty trick. When our opponents entered the room, we couldn’t even see their eyes due to the sun setting behind them.
My attorney looked at me, told me to keep my mouth shut and follow his lead. He told the seller’s attorney that we didn’t appreciate dirty tricks and were saddened to be subjected to such a tactic, and we walked out.
The opposing attorney caught up with us as we were getting into my car, apologized profusely, claimed total ignorance of the broken chairs and suggested that he had no idea about the sun glaring in our eyes. We returned to a different conference room with functional chairs and window shades. We were also in a significantly better bargaining position as the sellers were well aware that we were willing to leave if negotiations weren’t conducted in a professional manner.
Preparation Is Key
In any negotiation, preparation is the key to a successful outcome. Before the negotiation begins, we should look at alternatives and determine what we want from the negotiation and what the other party wants from it. We need to determine what we have that they want and what they have that we want (some refer to this as determining negotiation currencies). We should look for a variety of possible options for settlement and determine what objective criteria we may use for the peaceful resolution of areas of disagreement. We should gather all relevant documentation, and last but not least practice
Most importantly, we need to determine our best option should the negotiation fail. Fisher and Ury refer to this as knowing your BATNA: Best Alternative to a Negotiated Agreement. We need to know what our best alternative is so that we know when to walk away from the deal – before we’re in the heat of the negotiation.
For example, let’s say you’re going to negotiate a raise in pay from your boss. If you’re not successful, your best alternative may be to get another job. You could make your “best alternative” stronger by actually interviewing for another position, finding out what your skills are worth in the marketplace or even having a job offer in hand.
Prior to negotiation, we need to know what the best possible outcome is and what the most likely acceptable outcome may be. We need to know when we may be better off just walking away.
Determine your true interests before entering into any negotiation. What are you really trying to gain from the negotiation? Examples of interests include price, terms, features, delivery or getting paid for one more not-included operation. Prior to the negotiation, look for as many settlement options as possible that may satisfy your needs. Don’t lock in to any one item. For example, you may receive a great price for an item, but the terms of payment may be unacceptable.
Using the raise example above, locking in on a raise figure could harm you in the long run. What if you and your boss work together to find options so that you receive more value from your work and satisfy your true needs? Perhaps the company can pick up some education expenses or offer to help with child care instead of a simple raise. Perhaps an adjustment to your benefit package will result in the same increase in value to you without a significant increase in expense to the company.
Try to determine “their” interests prior to the negotiation. What do they need? Look for many possible interests or needs before you begin. Often, many of their needs are easy to satisfy, so focus on those items of agreement first.
Practice the negotiation whenever possible. If there are two estimators in the shop, practice negotiating a large repair with one estimator playing the role of insurance adjuster. The rehearsal will set the stage for the real negotiation, and many possible settlement options may be found during the role play.
Whether we’re negotiating a repair estimate, a DRP, or the purchase of a car or home, it pays to prepare for the negotiation. Gather all relevant documentation, rehearse the negotiation and don’t lock into any position. You’ll have a more successful conclusion with less stress for all involved. And don’t forget to have fun negotiating. Practice your negotiation skills whenever the opportunity presents itself.
Listen and Learn
Set the stage for negotiations. Whenever possible, negotiate on your home ground or office. Attorneys have conference rooms for a reason: to negotiate the site of negotiation prior to the negotiation itself. Home turf has its advantages.
Create a professional, interruption-free environment for negotiations. Turn off the phones, even the Blackberry, and provide a setting in which you won’t be interrupted by others. Ask the other party to turn off their phone as well.
There are times when you may not wish to negotiate on your ground. If you want the power to walk away, negotiate on their turf.
Take your time. As a general rule, the party under a time constraint loses. Don’t rush the negotiation. Act as if you have all the time in the world. Ignore deadlines and relax.
Avoid emotions! The emotional negotiator loses. Some negotiators try to get their counterpart angry or upset on purpose. When we’re angry or emotional, we don’t make good decisions. Keep emotions out of negotiations.
If things begin to get emotional and voices get louder and veins pop out, take a break. Simply stop for awhile until emotions are calmed. Some call this “going to the balcony” or “hitting the pause button.”
Focus on interests, not positions. Keep listening to your counterpart. Don’t lock into a position or offer an ultimatum. Try to work together in an attempt to find a solution that provides value to both parties. Ultimatums close off communication, so avoid them.
Make any concessions small. Frequently, we offer a concession in an attempt to bring negotiations to a close. When offering a concession, make it a big deal. Pause before and after the concession. Offer small concessions but make them seem important.
After offering a concession, ask for one in return: “In an effort to bring this to a conclusion that works for both of us, I’ll pay $1,200 for the refrigerator. In return, I expect you to deliver it, set it up and remove my old one at no additional charge.” In this case, a concession was made on price but, in exchange, concessions were requested.
Keep track of concessions. Many shops have entered into DRP agreements without fully evaluating the cost of concessions.
Look for areas of agreement first. Focus on areas of agreement prior to dealing with areas of disagreement. Often, if we focus on the things we agree on, the areas of disagreement seem insignificant.
In the estimator and adjuster negotiation, use a yellow highlighter to mark all lines on the damage evaluation that both sides agree are required. Generally, most of the lines on the damage evaluation will be agreed upon. Then, look at the three or four items of disagreement. They won’t seem so important when the rest of the page is marked yellow to signify areas
Negotiate the negotiation. Frequently, it’s best to determine the manner negotiations are to be conducted prior to the actual negotiation. Agree on the rules of negotiation before negotiations actually begin.
Once again, let’s look at the estimator and adjuster negotiation: “Bob, we need to go over that ’07 Camry, but before we get into that, can we agree on a process to avoid problems? First, if I’m asking for something and you don’t agree, let’s ask the question: ‘Is it required?’ If the answer to that is yes, then let’s ask, ‘Is it included?’ If the answer is no, then we agree to negotiate fair and reasonable compensation. We’ll use the XYZ database and P-pages, I-CAR documentation as well as manufacturers’ recommendations to determine the proper methods to repair the vehicle.”
Negotiating the process by which the negotiation will take place sets the ground rules for what follows. If both sides agree to the process of negotiation, the actual negotiation is vastly simplified.
Get Some Class
Improved negotiation skills will result in improved profitability. Learning to negotiate in a principled manner results in improvements in virtually every aspect of your life as negotiation is a cradle-to-grave process.
It would be foolish to think that simply reading a trade magazine article will make anyone a good negotiator, but hopefully by reading this you’ll be encouraged to read a book on negotiations or maybe attend a one- or two-day class. That investment will pay back immediately and continually.
Hank Nunn is the president of H W Nunn & Associates, a collision industry consulting company. He has over 30 years experience in the collision industry as shop owner, technician, jobber store owner and consultant. Hank is currently Sales and Marketing Manager and Facilitator for DuPont’s SMART Seminar Series. He is a frequent speaker at NACE and other industry trade association meetings. Hank may be reached at [email protected]