Give a better alternative
If you provide more than their next best alternative, people will want to deal with you repeatedly, whether it is a colleague or a business person. Note that giving people more than their next best alternative is not the same as giving people what they ask for. What people ask for is irrelevant if nobody can give it to them.
Giving people their next best alternative is fundamental to the win-win approach that is so often talked about but rarely achieved. Giving others and yourself more depends on searching for new alternatives.
- Reduce the benefits to others, and share the increment between you and the counter-party. Identify all parties and what benefits they get. In any situation, the benefits are shared between many parties: you, the counter-party, and others. In some deals, reducing tax achieves this. To increase short-term profit, managers and shareholders in corporations typically cut capital expenditure and staff. In turn, managers and staff squeeze suppliers to achieve their common goals.
- Include what was outside. Example: A client asked the consultant to do some work. Even if the project was successfully, there would not have been significant impact for the client. Alternative – they redefined the scope of work to include a short project that would increase the value of the company substantially.
- Exclude what is inside. Example: A company agreed to buy a group of mines for $2 billion, but at the end was able to fund only $1.5 billion. The seller agreed to take out a certain number of mines.
- Change the time frame. Example: The other party wants $10m. You cannot come up with the money. If the cash is received immediately, the other party would have to pay a high percentage as tax. You pay them over a longer period, the other side’s tax is reduced, so it the present value of your payments.
- Make something contingent. Example: The seller wanted $500 million. The buyer was prepared to pay only $300 million. They finally agreed on a base of $300 million – but an additional $100 million was payable once a certain profit target was achieved. Another $100 million depended on meeting a further profit target.
Everyday we enter into numerous negotiations – some major, some small. You can apply these ideas on those occasions. Even when there is no negotiation, we should try to give people a better deal.