In blog #34 I discussed single variable negotiations. Today we will discuss the multiple variable type..
The English Premier League is the world’s richest football league and every summer there is a flurry of transfer activity as each club looks to strengthen their squad by buying new talent. The money exchanged each summer is enormous, over GBP 1bn and the stakes for the winners and losers are high.
Football transfer negotiations are multi-variable negotiations in the truest sense of the meaning and monitoring them is fascinating. Every player has a value calculated by a third-party database which serves as a starting point for valuation however in practise, each club is able to demand whatever fee they think the market will pay – and this is a function of many variables which may or may not be in play in any given transfer negotiation.
Some of the variables at play include how wealthy the buying club is (resulting in the seller looking for a higher price), whether there is another club interested in buying the player (creating competition for a scarce resource), the extent to which the buying club needs to fill a position (eg a last minute injury to the first choice goalkeeper or striker will mean that everyone knows the buying club has a problem and thereby increase their price), the amount of time remaining in the transfer window (the closer to the end of the window, the more a buyer will pay if they are desperate to fill the position), and of course the preference of the player who has the ultimate say whether or not to accept an move. This is a far from exhaustive list of the variables that can influence a football transfer negotiation, but it gives an idea of the many dimensions those negotiating the deals must operate across.
We can take great insight from this insight for our business negotiations. While the variables influencing our negotiated outcomes will be different, they will be still exist. The problem is often that we don’t look for them. Instead, we think that what is already known and ‘on the table’ are the only variables that require consideration. This can be fatal to a deal or result in giving a huge amount of value away (ie dealing at a price much lower than could have been achieved). For example, not knowing that the star player has just been injured and will be out for the first half of the season could result in the selling club not holding out for a higher price, unaware that the buying club is in a position of relative weakness.
Which become the primary considerations in any given negotiation are open to definition and interpretation. Skilled negotiators will try to position the variables where they have the better position as the primary considerations. For example, rather than allowing the injury to the star player being the primary consideration, the buying party will position on their ability to pay the full (but lower) amount in cash without any conditions as the primary consideration.
This is clearly a subject worthy of far more than 600 words however, to keep this blog to a 3–4-minute read, I will finish with one final comment: skilled negotiators always go into negotiations with a plan B, C and D. If their counterpart thinks that they have no other options, they will hold them to ransom and they buyer will pay above market. While the seller will be looking to create competition for their asset (ie other buyers as is typical in merger and acquisition deals), the buyer needs to be able to communicate that they have other options (ie other targets acquisitions) in order to neutralize the sellers move. In negotiation theory this is referred to as BATNA (Best Alternative to a Negotiated Outcome). For discussion on this concept, refer to blog #44, Life is one long BATNA.
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