Deal or no deal

From AIG to Royal Bank of Scotland, negotiating skills are more important than ever in the industry. But how do you ensure talks are successful?

The measure of success isn’t necessarily that you get your own way; it’s about everyone feeling they’ve had a good encounter. Or so says Gerard Nierenberg in The Art of Negotiating, a book that embraces an “everybody wins” philosophy rather than “winner takes all”.

Roy Hebburn, divisional claims manager (technical) of Allianz Insurance, agrees. “You’ve got to make the other person believe they walked away with a bargain, more so if it’s a client,” he says.

This doesn’t mean rolling over. Both parties must be willing to give something. Before the talks start, you must have a clear idea of what you are trying to achieve and what you are prepared to compromise on.

“Any successful deal is rarely down to the final negotiation; it’s about the work that has gone in beforehand,” says Clare Ryder, founder of insurance consultancy Salient Solutions.

Your research should cover the needs of the other side too. “Ask yourself if you have grasped what their business is about and what they are trying to achieve,” she says.

You should also ask yourself if you truly have the authority to make a deal. “It’s no good attending a negotiation when you don’t have the authority to carry it,” says Hebburn. “There is nothing worse than needing to ask someone else if you can offer another amount.”

When the meeting starts, you need to follow certain protocols. If you haven’t met before, exchange names, job titles and business cards. Find out why each person is there and establish who is the most senior.

First, say something to establish, build or mend the relationship. You could refer to past successes together or common interests, or even compliment their services. End your introduction with a prediction of agreement, then start the momentum towards the deal.

You’re better off speaking first, according to some commentators, because this means the numbers you mention will “anchor” the deal.

One law firm that advises a UK bank warns against using “floppy” words or phrases that suggest you are unsure of your position or that might encourage the other side to ask for more. Phrases to avoid include: “We are hoping for”, “We’d like” and “My opening offer is”.

When the other side presents its proposition, the law firm recommends “flinching” so they know the offer is not acceptable. Make sure you get the timing right, as a delay undervalues the gesture. And don’t overdo it – you don’t want to offend.

Hebburn says you should be realistic, however. “Insurers should be wary of negotiating too hard when they are procuring services – the maxim of ‘you pay peanuts, you get monkeys’ is right. If you don’t pay a supplier a rate that will allow them to make a realistic profit, you won’t get the quality of service you think you should have.”

He also warns against getting talked into a corner. “You should always have a way out. The worst thing is to say, ‘I am not paying a penny more’. Third-party claimants could threaten to litigate and costs start going up and you find yourself having to negotiate again. If you have to negotiate again after ‘not a penny more’, you show weakness.”

If you get stuck on a minor issue, move on to the next item on the agenda and come back to solve the problem when you have made agreements elsewhere.

Major issues can be solved too. Point out the consequences of “no deal” for both parties. If that doesn’t work, change the package – perhaps the quantity or cost is too high – or invent new options. If you still can’t agree, adjourn the meeting to review and cool down. This can help put things in perspective.

The last option is to walk away or enter into litigation. But Ryder says you should be honest if you can’t negotiate any further.

“Tell the person you are talking to you are not prepared to move on. Give them the reasons, but also try and come up with some alternative solutions. It is best to be frank rather than beating the issue and wearing your opponent into the ground.”