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The recipe for win-win negotiations

Win-Win NegotiationA win-win is any deal where both parties come out with a net gain. But not every negotiation should set out to create a win-win deal, and of those that do, many don’t end up getting there.

Here’s why:

There are two ingredients in the win-win recipe: style and scope; and neither will get you to a win-win on their own.

So first, to get to a true win-win, you need to demonstrate the right style of behaviour.

Specifically, a style that will engender trust, creativity and openness - three qualities that are essential if you’re going to build a shared understanding of the situation, and of the potential ways to create a benefit for each other.

It’s that understanding that will help you uncover the true potential of any deal.

The second ingredient is the scope of the deal itself: how much genuinely new “value” could it create within the relationship?

It’s a simple question of maths: both parties can’t “win” if the overall deal doesn’t create value. The more value it creates, the more there is to share and the more room there is for a win-win outcome. One way to increase that value is through “differential negotiables”, things that you can trade that are worth more, or cost more, for one party than for the other. And a shared understanding is the key to finding them.

Take payment period as an example. Typically, bigger companies can get cheaper debt than smaller companies. If a big company pays a smaller one later, the smaller one takes on more debt. If it pays earlier, the bigger one has to take on that debt instead, but at a lower interest rate. The shift saves one business more than it costs the other; it's that differential that creates value within the relationship.

The more differential opportunities you can get on the table, the more the focus from all sides will shift to “joint value creation” and the more scope you’ll have to craft a genuine win-win deal. And it feeds back into the relationship, positively reinforcing that collaborative style.

BOTTOM LINE: It’s easy to talk about “win-win” deals, and for it to end up as a triumph of style over substance. However, if you can trust your counterpart, and be creative in expanding the scope and openly exploring all the negotiables, you’ll almost certainly find that the potential for a win-win is there. The question is then, who wins most?

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