As a Product Manager, you’re basically the centre of the universe #inflatedego.
Surrounded on all sides by sales, marketing, training, support, management, customers and developers – you have to consolidate everyone’s point of view, formulate and execute a plan, whilst keeping them all (relatively) happy.
You’ll also have to do your fair share of negotiating. From pushing back requirements from corporate customers, to getting other teams to do your bidding to buying more time from management. Most of the time you won’t have direct power over people that you need to do things (in the best interest of the product). So negotiating is a key skill you’ll need.
This topic is covered in four parts:
- Basics – what negotiating is and when to do it
- Before the table – how to plan [template provided]
- At the table – what tactics to use
- On the balcony – how to pause, assess and reflect
A negotiation is where two or more parties come together to give up something the other party wants, to get what they want more.
Why do people negotiate anything?
- Parties negotiate because they think they can get a better deal than by simply accepting what the other side offers them.
- Parties expect a “give-and-take” process.
If you didn’t negotiate and “walked away” from the deal, that options is called your Best Alternative to a Negotiated Agreement (BATNA). These translate to leverage or power in any negotiation setting.
What are some situations that call for negotiating?
- To agree on how to share or divide a limited resource
- e.g. development time or roadmap space
- To create something new that neither party could attain on his or her own
- e.g. corporate licenses in exchange money to fund new teams
- To resolve a problem or dispute between the parties
- e.g. breach of an Service Level Agreement (SLA)
What are typical types of negotiation?
- Collaborative – this is an integrated approach, where you are ‘growing the pie’ together, creating value on both sides.
- e.g. “…let’s have Development and Support collaborate on how to get better customer outcomes, and drive up NPS”
- Competitive – this is a distributive approach, where you are ‘dividing the pie’, and zero-sum by nature.
- e.g. “…with all other intangibles having been discussed, let’s discuss final licensing and pricing”
Often negotiations involve both collaborative and competitive phases.
One source of competition focuses around the parties’ resistance point. This is the minimum or maximum they are willing to concede.
For example, Party A has a resistance point of $500 a month for additional cloud storage space, meaning they won’t pay more than that.
Party B has a resistance point of $400 as the minimum price for additional cloud storage.
The bargaining zone is the range between two parties’ resistance points. Assuming there is overlap, a deal can be done. In the case above, anywhere between $400 and $500 will be acceptable to both parties.
The resistance point is typically informed by the parties’ BATNA. For slightly more than $500 a month, Party A may be able to pay for an alternative backup solution, and thus it becomes their walk-away option.
You can see how the strength of your walk-away option informs what you’re willing to accept. We’ll revisit BATNA’s more in planning and tactics sections.
When should you not negotiate?
- If one is able to meet one’s needs without negotiating at all, it may make sense to use an avoidance strategy.
- It simply may not be worth the time and effort to negotiate for small wins, or at the larger cost of political capital, compared with your BATNA.
- In situations where to do so would be unethical
We have our basics and negotiation lingo down pat. It’s time to start planning.
Ganegoda, D 2019, Class 2: Planning For Negotiation, lecture notes, Negotiations, Melbourne Business School, delivered 23 Feb 2019