In a business negotiation, two polar-opposite errors are common: reaching agreement when it wouldn’t be wise to do so, and walking away from a mutually beneficial outcome. How can you avoid these pitfalls? Through careful preparation that includes an analysis of the zone of possible agreement, or ZOPA in business negotiations.
The Agreement Trap
The “agreement trap” describes the tendency to agree to a deal that is inferior to your BATNA, or best alternative to a negotiated agreement. That is, we sometimes reach agreement even though a significantly better deal is available to us elsewhere.
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Many people dread negotiation, not recognizing that they negotiate on a regular, even daily basis. Most of us face formal negotiations throughout our personal and professional lives: discussing the terms of a job offer with a recruiter, haggling over the price of a new car, hammering out a contract with a supplier.
Then there are the more informal, less obvious negotiations we take part in daily: persuading a toddler to eat his peas, working out a conflict with a coworker, or convincing a client to accept a late delivery.
“Like it or not, you are a negotiator … Everyone negotiates something every day,” write Roger Fisher, William Ury, and Bruce Patton in their seminal book on negotiating, Getting to Yes: Negotiating Agreement Without Giving In.
What do these negotiations have in common, and what tools should we use to get what we need out of our everyday negotiations, large and small?
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If you have discussed the problem with your neighbour and reached agreement about what should happen, it is important to make sure you and your neighbour are both clear about the details of the agreement. It can either be verbal or in writing.
Most agreements with your neighbour won’t require any formality and a simple handshake is usually enough. However, a written agreement can help to reduce misunderstandings in the future.
Benefits of a written agreement
If the agreement involves payment of money, it is probably better to have it in writing. This can be as simple as giving a receipt or it may be a lengthier document setting out what is to be done for the exchange of goods or money. Even if the agreement does not involve money, there may be good reasons to put it in writing:
- It provides a clear record of what was agreed to.
- It helps reduce misunderstandings and gives both parties something to refer back to.
- It is a helpful reminder of what you need to do and when.
What to include in the agreement
The agreement should include complete details of :
- Actions – set out exactly what each party has agreed to do.
- Timeframe – when the agreed actions will happen.
- All relevant details – for example, type of fence, height and colour of fence, how tree branches will be removed.
- Cost – who is going to pay for what, who will organise quotes.
Remember that both parties should sign the agreement and each should keep a copy.
Tips to make sure you have an effective agreement
Good faith
An agreement is only as solid as the commitment of the people who have made it. An agreement should reflect a genuine commitment by both sides to do what has been agreed and should always be entered into in good faith.
Trust
Creating trust is one of the best ways to ensure that you both stick to what has been agreed. Trust is created when people see that actions match words. A good way to match actions to words is to only promise what you can deliver in an agreement.
Be clear about timeframes
An agreement will have more chance of success if both parties agree on what should happen when. The agreement should say what will happen if the agreed timeframe cannot be met. For example:
- In two weeks [give date], party A will provide party B with a quote for the cost of the fence.
- If this timeframe is not met, the parties will re-negotiate a suitable timeframe for the quote; or if this timeframe is not met, party B will obtain a quote and provide it to party A.
Review progress
The best agreements are those where the parties are clear about their interests and concerns. It is important to:
- Stay in touch after the agreement has been made to ensure that you are both happy with how the agreement is going.
- Deal with any problems at an early stage.
Don’t hide mistakes
Mistakes often happen in an agreement. A mistake or mishap can mean the agreement needs to be changed. Acknowledge mistakes and address them as quickly as possible before they escalate.
Negotiation strategies
You need to ensure that you negotiate something that is realistic for your budget and that you and your neighbour can agree to. If your neighbour provides you with a quote for a new fence and you think it is too expensive, you could:
- offer to get another quote
- negotiate to pay by instalments.
As with any negotiation, communication is the key to arriving at a good solution.
Understand your obligations
Also see: obtaining legal advice. If your neighbour wants a fence that is more expensive than a standard fence, you may not want to pay the additional cost. However, you are required to pay at least half the cost of a standard fence. A good tactic might be to negotiate that you pay half the cost of a standard fence and your neighbour pays the rest.
Don't promise what you can’t pay
Work out what you can afford before you start negotiating and have a Plan B in case your preferred payment option isn’t successful.
Look for solutions
Work co-operatively with the other person to find a mutually acceptable solution. If you are feeling under pressure to agree to something you are not comfortable with, you should seek advice.