Contract Negotiation Concessions

Video Transcript

Hello. My name is Barry Payne on behalf of Expert Village. All right, we've looked at some of the things which skilled people avoid in the negotiation. Now let's look at some of the things that they do more, they do more than the average negotiators. First of all, in any negotiation you know you have the power to vary the terms and you're going to have to make concessions. There are various ways of thinking about this, but first of all, have a look at the slide. You'll see that skilled people make far less unconditional concessions than the average. What do I mean by an unconditional concession? An unconditional concession says "Look I want to be a good guy too. I'm selling and I'll reduce the price to help us get a contract". Skilled people do not do that. Skilled people only ever offer concessions when they at the same time ask for something in return. Why? There are two powerful reasons as to why they avoid unconditional concessions. The first one is the obvious one. You know that if you're going to make a concession in one area of the contract and you ask to get something back the penalty of making that concession from you is reduced because you've got something in return. You might say "Look I'm willing to move slightly on price, you're on the same side, provided you in turn will change your position on volume". Okay. Now those two items do not actually have to equal one another financially, but you're mitigating the damage of making a concession. Secondly, there's a psychological reason. The researchers who were observing these negotiations told me they noticed on a number of occasions when the other party made an unconditional concession they felt annoyed. If you've been holding onto a point of arguing for it for a long time and then suddenly just move from it people think you're being frivolous. They say "Are you serious about this negotiation"? So it makes a lot of sense to make concessions only when you get something in return. Finally, let's just have a quick look at how to make concessions. Let?s suppose you have ten points to concede in theory of ten million, ten dollars, whatever it might be. Suppose you do it, take a look at the chart, like this. 2, 2, 2, 2, 2. When you've made five concessions of 2 what's the other party thinking? That's right. It's going nice and steady let's have another 2. Now suppose you make concessions like this - 1, 2, 3, 4. Now what's the other side thinking? Well, it's getting interesting. Let's go for 5 or 6 next time. Finally, what if you make concessions like this - 4, 3, 2, 1. You know what? They're going to be thinking, hey, we're scraping the barrel here we're going to have to settle around this point. Now you've done nothing different. In the three cases, you've conceded 10 points. In the first one you're encouraging them to push for another two. In the second one they're really going to start getting stuck in and wants a huge concession. In the last one they think they're going to settle. One warning. I am not encouraging you to make a major concession on a major issue early on in the negotiation. Absolutely not. So let me put brackets around that floor and say that when you're halfway through a negotiation start to think about this point. I've no objection to you making a small concession on a minor issue indeed persuasion theory would suggest that that's quite a useful thing to do, but never make concessions without getting something back.

Community Members who...

• Favorited this Video
• Rated This Video

Thumbs up or Thumbs down? Be the first to rate this video!

Top Tags