Women are three times less likely than men to engage in salary negotiations, according to Glassdoor. This lack of engagement is often cited as one cause of the gender pay gap.
However, it’s not the only scenario that requires negotiation skills. Women who expect to succeed in the workplace, especially if they aspire to be leaders and entrepreneurs, need to know how to negotiate. HER Magazine asked several experts in this area to weigh in on the importance of negotiation skills, and provide some tips on how to develop this skill set.
Why You Need Negotiation Skills
“Negotiation skills are critical because just about everything is a negotiation in some way,” according to Jeb Ory, CEO of Phone2Action. “People tend to think of negotiations as limited to job offers, or annual or semi-annual reviews, but in fact negotiations happen every day, many times a day.”
As an employee, you need negotiation skills when relating to your boss, peers, and even vendors. “If your manager has stated that your internal goals this year include achieving an unrealistic 150% more in cost reduction than you did last year, you will need to approach this negotiation diplomatically and strategically,” says Bryan Eaves, PMP, CPA, of Sourcing Business Solutions. “On the other hand, if one of your largest external vendors proposes at 4% price increase for materials at your company, doing your research upfront and being fully prepared for the discussion are important to optimize the value and benefits of the vendor contract and partnership.”
As a leader, these skills are even more important. “Advocating for a potential hire, working through contractual terms with a prospective client, and making a case for a certain course of business action are all negotiations,” Ory says. “The more competent a manager is at negotiating the more successful that person will be overall.”
That’s because influence is one of the most important traits in a leader. As best-selling leadership author John Maxwell would say, “Leadership is influence, nothing more, nothing less.” But, how do leaders influence others? Brute force is unethical and illegal, and thinly veiled threats will cause employees to jump ship. So leaders have to use more nuanced approaches. “Persuasion, which is getting someone to do what you want, is a vital leadership skill,” according to Charlotte Westerhaus-Renfrow, clinical assistant professor of management and business law at the Indiana University Kelley School of Business. “However, some of the most important relationships leaders need to develop require a delicate dance of give and take between the leaders’ best interests and the interests of employees or third party vendors and suppliers,” says Westerhaus-Renfrow, who teaches courses on negotiation.
“Successful negotiators can use these skills to get someone to give them what they want and need in a manner that bolsters and solidifies long-term business relationships and leaves everyone feeling like they won,” she says. “No doubt about it, people like to work with and for a winner, when they also feel like they come out a winner too.”
In essence, the effectiveness of a leader is based on that individual’s ability to motivate others to do what needs to be done. “Effective negotiation results in the best ideas coming to the fore and guarantees that strategy is formulated and decisions are made in a manner that builds consensus in support of those actions among the subordinates, peers and superiors who will be tasked with executing those plans,” according to Stephen Hayford, professor of Business Law and Ethics in the Kelley School of Business at Indiana University.
“Mastering the negotiation skills set is reliable way to increase your personal power, legitimating and magnifying your position/title power, propelling people to believe that you deserve to be the boss, the leader,” Hayford explains. “You become a leader when people choose to follow you and, they will choose to follow you because of the way you make decisions, resolve conflict and exercise the power you hold.”
The Path to a Successful Negotiation
However, successful negotiations don’t just happen by chance. Westerhaus-Renfrow compares them to competitive team sports. “Skilled negotiators — just like winning coaches — prepare winning strategies, which are the pre-formulated game plans, objectives, and approaches that guide them in reaching their goals.” She says they have to learn and practice effective tactics over and over. “At the end of a win-win negotiation, the scoreboard will indicate that both sides have scored a decent amount of points — the distinctive key in negotiations is that both sides are satisfied with the ending score, and most importantly, they are eager to negotiate with each other again in the future.”
According to Westerhaus-Renfrow, these are the six steps to preparing for a negotiation:
- Research in advance and have adequate background information about your counterpart
- Know your goal
- Prepare a plan, complete with every imaginable scenario and contingency plan to mitigate surprises
- Always have alternatives. The side with the most alternatives will get most out of the negotiation
- Have a strong walk-away alternative
- Have the confidence to walk away from a negotiation for legitimate and objective reasons.
Hayford agrees and adds, “Successful negotiations is based on, springs from an accurate and complete assessment of the relevant facts, the people involved, the risks and opportunities presented by a given conflict, decision or change event– the world as it is, not as you wish it were.” Hayford says it should be win-win. “Successful negotiations reflect an optimal balance between creating value.”
Now that you know the steps, Eaves provides a real-world example of preparing to negotiate with a vendor or customer. “Preparation includes understanding market pricing, industry expected service levels, obtaining input from any stakeholders at your company, and understanding the importance of your relationship with the other party,” he explains. “For example, if you work for a large bank, it would be extremely important to understand the deposits and loan amounts that the other party has as a customer of your bank prior to your negotiation process,” Eaves says.
Remember that the goal of negotiating is to reach an agreement that is satisfactory to both parties. Ory warns that what is important to one party might not be a priority to the other party. So, he recommends the following three steps:
- List what matters most to you in order of priority. If it’s a promotion, then things that matter the most might include: title, responsibilities, salary, bonus, and time off. If it’s advocating to exhibit at a conference, things that might matter include: number of people that will attend, cost, expected return, sponsorship packages, etc.
- List what you think matters to your negotiation partner. What is their preferred order of items? For example, time of delivery, service after the sale, price, etc.
- Understand the rules and possibilities before you negotiate. When his company raised capital from our investors, Ory applied skills from business school to ensure that they got better terms.
It’s also important to understand that negotiating is a skill that must be developed. You might not be successful the first time, but the key is to learn from your mistakes, and make tweaks and adjustments as necessary. Also, don’t be deterred if you don’t get the desired response.
“You can learn great negotiation skills and yet still fail to hit the mark if you are not confident enough to negotiate past one key word — ‘no,’” Westerhaus-Renfrow says. “Confidence in the valley of ‘no’ can enable the negotiator to turn contrary signals into positive opportunities to problem-solve, identify and clarify interests, and create value for both parties.”