Summary of “Bargaining for Advantage”: Successful negotiations involve six key foundations: your style of negotiation, your objectives and aspirations, the benchmarks and guidelines, the relationships, the aims and objectives of the other party, and the power of leverage; and to be able to succeed in each of the four stages of a negotiation: strategy development, ability to share in-depth information, openness and concessions, conclusion; this book explains each of these in detail to help negotiate the most favorable deal possible.
Full title: Bargaining for Advantage – Negotiation Strategies for Reasonable People By G. Richard Shell, 2000 (first edition), 2006 (current revised edition), 282 pages.
Chronicle and summary of the book “Bargaining for Advantage”:
Part 1: The six key foundations to a successful negotiation
Chapter 1: The first foundation – Your negotiation skills
Two men entered the conference room of a large building in New York. They greeted each other warmly, but with some caution. Seated on opposite sides of a large conference table; they started discussions on a possible merger between their two large companies.
One of them was Peter Jovanovich, the CEO of a respected American publishing house; Harbourt Brace Jovanovich (HBJ), which was on the edge of bankruptcy. As the son of one of the company’s founders; Jovanovich was dedicated to the preservation of his family’s heritage. On the other side of the table was Dick Smith, the business owner of General Cinema, a huge; well-funded conglomerate that was in search of a company that would allow them a route to enter the world of publishing. With them were lawyers and financial advisors.
Both parties had carefully prepared their “scripts” to start the negotiations. After months of analysis, Smith had identified HBJ as the most appropriate choice for General Cinema, but he was not sure that Jovanovich would support his vision of the opportunities that were possible. He had prepared a detailed presentation of General Cinema’s financial strengths and its reputation. He would be sympathetic to HBJ’s current financial condition and was ready to provide help. But he would be cautious, with no wish to raise expectations about his offer.
Jovanovich’s team, equally optimistic, had prepared him for the role of “auditor”: Jovanovich’s approach would be curious, but evasive. He was not to reveal the urgency of the situation and his need for help.
On cue, Smith began his presentation, but within seconds Jovanovich interrupted him – and HBJ’s advisors stared at him, somewhat confused. It wasn’t planned. What was Peter going to do?
As he spoke, Jovanovich took a small box from his pocket and laid it on the table between him and Smith. He opened the case, to reveal a watch with the acronym HBJ engraved on it. He pushed it towards Smith.
“My father always gives a watch like this to his partners at the beginning of a new business relationship. This shows my sincere feeling that General Cinema is the right buyer for HBJ”.
It was a risky statement and both men knew it. The nervousness in the room abated. The two men, with the help of their team; began to talk in earnest about how the deal could be closed. They talked through the night.
Many years earlier, and a long way from New York:
In the Tanzani Valley, East Africa, two elders who represented two different lines of the Arusha people met late one morning beneath a large group of shaded trees. Far off in the distance, behind the elders, was a huge mountain, which stood more than 4,500 meters in height: Mount Meru. Two groups of men accompanied the elders, and stood either side of an open area under the trees. In rural Africa, the shaded areas provided by the trees act as a conference room.
The two elders formally addressed each other, whilst they recounted a dispute between two adjacent farmers. Each elder described a list of complaints and asked for compensation for a range of offences. Each man claimed ownership of a vacant piece of land between the two farms, which was once the property of a family whose lineage had died out. This argument resulted in a series of incidents. One of the farmer’s sons damaged an irrigation fence on the other’s land, which in turn led the farmer who owned the fence to hit the son in retaliation. The father of the beaten son went to see the elders, to request a formal meeting to settle the dispute.
A full day of debate was needed. Everyone had brought food.
It is with the example of these stories that G. Richard Shell, like all good storytellers, begins his book. Two groups. Two problems. Two cultures. And yet in both instances people were engaged in a unique and familiar process called “negotiation” – an instantly identifiable human behaviour that helps people achieve their goals and solve problems.
Everyone negotiates numerous times every day. As children we negotiated for the things we wanted: attention, special treatment, a toy… As adults we negotiate for a wider complexity of things that, if you look closely, often amounts to the same things we negotiated for as children. Negotiation is a basic and specific form of human communication, but we are not always aware that we do it. Here is a simple definition to clarify it:
A negotiation is an interactive communication procedure that can take place when we want something from someone else or when someone else wants something from us.
Your personal negotiation style is a critical component in the negotiation. If you aren’t sure of what your instincts will be and what your intuition will tell you in various situations, you will not find it easy to plan for effective strategies and solutions. Generally, if you’re nice, it will be very difficult to be an aggressive negotiator. You can do it, but not for long and not with much conviction. And if by nature you’re an aggressive negotiator, your instincts will be obvious no matter how hard you try to mask this character trait. In fact, even if you hate negotiations, you can still do well if you take this point on board and learn to handle it.
So before we begin the study of the art of negotiation, we have to take a good look at ourselves in the mirror. When in a negotiation, what is the most natural and relaxed way you can handle it? And how can you use these instincts as a strong foundation to build a set of valuable skills and strategies to accomplish your goal?
There are five key types of negotiation strategies. Let’s use a simple experiment to better understand them:
Imagine that you are one of ten people, all strangers, who are seated around a large conference table. Someone comes into the room and offers the following: “I will give a 1,000 Euro prize to the first two people who can persuade the person in front of them to stand up, walk around the table, and stand behind their chair”.
The first two people to get someone behind their chair will each get €1,000. The others get nothing. What’s your strategy? Close your eyes and consider your answer.
Done? Good. Each possible answer is associated with a generic type of negotiation strategy:
- One possible reaction is to do nothing at all, as you are suspicious of something or worried that you might look stupid if you run around the table. You could simply say, “Negotiation is not my thing, so I won’t do it unless I have to”. This is the avoidance strategy. Some people might not regard this as a negotiation strategy, but sometimes if you refuse to negotiate it will give you more power when it comes to the negotiations: this was the case with North Korea, which avoided any negotiations for years and developed its nuclear programme, which strengthened its position in negotiations.
- Probably the most obvious response would be to offer the person in front of you €500 if they come to stand behind your chair. This is the compromise strategy.
- The third answer is to simply stand up and run around behind the chair of the person opposite. This is the accommodation strategy. If you do so because your partner offered to share the money, you can always use this response later in any negotiations on money. But this scenario puts your trust totally in the hands of a complete stranger who you might never see again.
- The fourth answer is the competition strategy. The idea is to win the €1,000, as well as to decide how it will be shared. One option would be to offer a 50-50 split and afterward, you refuse to do so. Obviously, it’s unethical, but some people might do it. Let’s face it, there was nothing recorded so that a court could decide who promised what to whom. You might say that you have a broken leg and can’t move. Not all competitive strategies are as unethical as this; but this particular example is not great to accommodate both ethics and competitiveness within the same strategy.
- The fifth strategy, which is the most imaginative, is to jump out of your chair and scream: “Let’s all run around and stand behind each other’s chair! We will all win €1,000 each!”. If you do it quickly, it can work. This is the strategy of collaboration or troubleshooting. Rather than cut the pie in half, you try to make sure that everyone has a whole pie. Generally, it’s the most difficult strategy to put in place, because it means you need to work out the problem through proper analysis and complete transparency of all the issues, and then, with a brainstorming session, come up with the most appropriate solutions that reflect all of the various options.
We each have our own distinctive way to do things, though we can change that when required. The book offers a test to discover these personal traits.
In addition to these five negotiation techniques, there are two more basic approaches: cooperative and competitive. The archetypal negotiator portrayed in newspapers, movies and mass media is a competitive person who employs harsh tactics such as ultimatums, loud verbal outbursts or they thump their fists on the table, etc. This shouldn’t surprise us in light of how much coverage the media gives to drama and entertainment, but it’s not an accurate reflection of how a typical business negotiator goes about their work.
Two scientific studies carried out in the United States and the United Kingdom suggest; that the majority of people have a style of negotiation that is based on cooperation. Both studies also show that cooperative negotiators are generally more successful than competitive ones. In fact, the second study, which gauged the number of irritation factors per hour of negotiation – such as gratuitous insults, outright disagreement with suggestions from the other party and various other aggressive tactics – showed that a typical negotiator used an average of 10.8 irritation factors per hour, whilst a seasoned negotiator used an average of 2.3 per hour.
Also, the gender and cultural background of the people around the table will have a major influence on how they approach negotiations.
Research on American women shows that they are less likely to negotiate than men when it involves important issues such as salaries or promotions. In terms of their strategy, women are, in general, a bit more cooperative than men. For example, a study on the wage differences between men and women after they get an MBA (about $4,000 difference) shows that the key difference is that only 7% of women ask for more money after they receive the first offer, compared to 57% of men. Those who negotiated – male or female – received an average of $4,053 more than those who didn’t.
A further insight from this research is linked to stereotypes: since women generally appear to be more cooperative than men, both bring this stereotype to the negotiation table, highlight the discrepancy, and come out with what they expect.
Cultural differences can lead to serious problems when it comes to what can be understood and misunderstood when in discussions. When you negotiate with someone from a foreign country; you need to be as well informed as possible and always keep this knowledge in mind whilst in negotiations. There are books available that are entirely dedicated to this topic.
Other than the style of negotiation, gender and culture; there are 4 common practices to be found amongst the best negotiators:
- A dedication to preparation
- High expectations
- Patience to listen
- A high standard of personal ethics
These four practices are detailed in the book, in this order.
Chapter 2: The second foundation – Your objectives and expectations
In 1955, a small Japanese company, Sony Corporation, had a new product: a miniature transistor radio that cost $29.95. It sold well in Japan, but for Sony’s dynamic leader, Akio Morita, that wasn’t enough. He wanted to introduce his product to the world’s largest market: the United States.
Morita arrived in New York, and soon had interest from Bulova, one of the most respected electronics companies of the time. Bulova offered to buy 100,000 radios and sell them through its extensive distribution network in the USA. Morita was stunned by the magnitude of the order. At the price Bulova offered to pay, this single order alone was worth many times Sony’s value. It was the deal of the century.
However, the offer came with one condition: Sony would be an Original Equipment Manufacturer (OEM), which meant that it had to build the radios, but Bulova would sell them under its own name. This completely went against one of Morita’s most important long-term objectives: to establish Sony as an independent global brand, based on innovative and quality products.
He sent a telegram to his executive committee in Japan, to ask for guidance, and the committee responded with great enthusiasm that the issue with the brand should be put aside and the order accepted.
Morita took a week to reflect upon it, then responded to Bulova. He told them that he would like to agree a deal, but not under these conditions.
Bulova’s purchasing manager was dumbfounded by this response: his request was standard practice in this type of deal. He asked Morita why he turned it down, in light of the fact that their brand was well known and Sony’s wasn’t, and Morita replied that 50 years earlier no one knew of Bulova, just as presently no one knew of Sony. These were the initial steps for the next 50 years of his company. He promised him that in 50 years, Sony would be as well known as Bulova.
Soon after, Morita received a smaller order from another American distributor, who agreed to let Sony put its brand on its radios. As soon as the miniature radio was launched, it was an instant success. And these unique radios caught the public’s attention, along with the company that made them, Sony.
Morita’s decision to turn down Bulova’s lucrative offer was high-risk. But his stance in the negotiations was indicative of the strength of his vision for Sony. He had high expectations and believed in them.
As this story shows, the purpose often dictates the path that negotiation takes. And negotiation research confirms that whoever is prepared to invest time to achieve their ambitions will have much better results, and attain them with no risk to their reputation or relationships with others.
So to become a successful negotiator, you need to know where you want to go – and why. This means that you must define clear objectives that you can back up with facts. It also requires the time to transform your objectives from simple targets into realistic – and suitably ambitious – expectations.
What is the difference between a straightforward objective and something that has evolved into a genuine probability?
Basically one thing: attitude. Objectives are things that we work hard to achieve and that exceed what we have done previously. An expectation, by contrast, is a judgment in regard to things that we can and should be able to achieve.
A clear vision of the objective and optimism are essential to be able to create a successful process for the objective in mind. Above all, in order to be motivated, the objective needs to excite you and be achievable. Your tendency will be to regard suggestions that are beneath what you aim to achieve as a waste of time. And the intuitive part of your brain – the section that works and picks things up “without thought” as you go along with your life – will turn into a powerful ally and a problem-solver. You will be more attentive, persistent, and driven to succeed, and it will improve how you approach discussions and new ideas to achieve what you want. This focus on your objective will give you a distinct advantage over most people.
In addition, your clear vision will convey trust and commitment to the other side. It will transmit the message that you have high expectations of yourself and the negotiations. There’s probably no other factor that makes such a difference in negotiations as the calm sense of trust, confidence and commitment that emanates from people who know what they want and why.
Chapter 3: The third foundation – Authority and regulatory standards
In his 1932 book, the Halfway Sun, anthropologist R. F. Barton relates a remarkable story about a tribe in the Philippines:
A man from the Ifugao tribe borrowed two pigs from his neighbor. Two years later, the man who had lent the pigs asked that the debt be repaid. His son was about to get married, and he needed the pigs for a wedding gift. The two men argued over the number of pigs to be reimbursed.
This tribe had a “standard interest rate” to borrow the animals, which was to be reimbursed but also took into account the “natural growth rate” of the animals for the duration of the loan. The general rule was that a loan of two pigs over two years resulted in the repayment of four pigs.
This was standard practice. The problem here was how it was implemented. The lender was an aspirational man who wanted to have a lavish wedding and insisted that the borrower give him six pigs. He claimed that just over two years had gone by and that one of the pigs was a rarer and larger breed, and therefore had a higher rate of interest. The furious borrower responded that everyone knew that the correct number was four.
Angered by the greed of the lender, the borrower escalated the dispute up a level. All of a sudden he remembered that the lender’s grandfather had, years before, forgotten to refund a chicken he had borrowed. He claimed that the natural growth rate of a chicken was about equal to a pig. So he reduced his offer from four pigs to three – to reflect the value of the unpaid chicken debt. The lender’s response was that he would accept five pigs, but no less.
After much bargaining and many insults, the two families engaged the services of a respected elder to act as an intermediary.
Once the elder had started to investigate the problem, the lender’s son went to the borrower’s house to steal the most important item he owned. It was an ancestral gong, which the Ifugaos believed protected their homes from the spirits. This swiftly brought the negotiations to a halt.
Finally, the elder put forward this settlement: the lender would return the gong, for which the borrower would waive the chicken’s debt, and pay the lender the five pigs he demanded from him.
But there was one thing: the elder gave back three pigs to the lender but kept the other two for himself as payment. As a result of this clever solution, the borrower paid the interest rate requested by the lender (five), the lender received the pigs at the rate offered by the borrower (three) and the elder kept the difference as his price for a peaceful outcome.
What does this story teach us? These days not many of us will borrow or lend pigs. But like most people the world over, our inclination is to negotiate based on accepted rules and regulations. If one party deviates too widely from these guidelines, it may frustrate others and cause problems for itself. They will come across as unreasonable.
When children negotiate which of them can play with a toy, they apply standard rules like “First come, first served” or “It’s my turn”. When decision-makers discuss corporate strategy, they discuss their position with the use of standard criteria such as “profitability”, ” “quality control” and “efficiency”.
If you identify the expected rules and regulations that are applicable to a negotiation and prepare thoroughly so that your proposal includes them, it will give you a significant advantage, as it places you on firm ground to give a strong presentation of your objectives and to be able to back them up.
It will also enable you to prepare for the valid contrary points of view that the other side will raise: if the accepted rules and regulations can be interpreted in different ways, the interpretation that is presented in the best light will be the one that gets the most support.
Why are rules and regulations so important in negotiation? Because, when all is said and done, people like to be considered consistent and rational in the way they make their decisions. Most of us have complex “ways to reason” that are made up of multiple parts of our character. Because we like to preserve how we are perceived, we constrain and limit our responses so that they appear (at least in our own eyes) consistent with what we have done in the past. The chance of persuasion is higher when the approach is aligned with one we have already implemented.
Experienced negotiators are aware of this human need to come across as consistent and rational and try to use it to their advantage for as long as they can. Skillful manipulators try to put “pitfalls in place”, which means that get you to agree to an apparently innocent obligation and then they challenge you with the rational consequences of that obligation in that specific case – consequences that often turn out to be to your disadvantage. For example, they might ask: “Would you like to save some money? If you answer “Of course”, bam, you’re trapped! They will tell you “Our data on your monthly phone usage shows that you could save more than a hundred euros if you use our service.
Why don’t we start right away?”.
The logical answer would be “yes”. You have to come up with a new reason or justification to say “no”, and the telemarketing company has a ready-made answer for each one. Be careful not to fall into traps.
So, unless the issue is fairly trivial or one person is in a much stronger position, rules and regulations or verbal trickery will rarely win a negotiation against experienced negotiators. When the stakes are high, people don’t concede purely because of an inconsistent statement or that the other party has a strong case to present. They only agree to do so after careful consideration that it’s in their best interest and that it will further their objectives.
So a well-researched presentation that backs up your position is a good point to start from and it establishes your claim as valid and gets the other side interested. But it’s unusual that the presentation itself will result in a successful negotiation. Your proposal must also have synergies with the other side and how your levels of expectation have to convince the other side. In the end, there are only two things that determine the right price for something: what the buyer will pay, and what the seller will accept.
In the story of the two pigs, an important part of the negotiation was the theft of the ancestral gong.
Because this gong guarded the family from the spirits, it was very important to the family, so it was as if the lender’s son had taken a hostage. This led to the borrower’s desire to end the dispute as quickly as possible. However, the theft caused the lender to lose face in the Elder’s eyes. Both of these facts caused the borrower to agree to give five pigs, while the lender ended up with fewer pigs than if he had agreed to the commonly accepted offer.
Chapter 4: The 4th foundation – Relationships
Negotiation is about people – their objectives, needs and interests. Your ability to establish and manage personal alliances at the negotiation table is the fourth pillar of successful negotiation. Personal relationships enhance the level of trust between people, which reduces uncertainty and improves communication. For example, most people would not charge a close friend the same price as a corporate customer for a service they provide.
What is the secret to build and maintain trust in negotiation? A simple but powerful rule of human behaviour: the rule of reciprocity.
Psychological and anthropological research on the rule of reciprocity has confirmed its importance in many different situations be they big or small. People are more likely to send greetings cards to people who sent them cards first, to donate to charities that have helped them out, and to make concessions in a negotiation when the other party has made compromises for them.
When in negotiations or just in business discussions, we keep a detailed record of the concessions and compromises we have made, as we go along: “I have told you what it is that I would like. Now let’s hear about your needs”, or “I gave the last set of concessions. Now it’s your turn”.
Let’s examine an example from the past that helps us to understand the importance of reciprocity in negotiations:
Andrew Carnegie, the steel magnate of the late 19th century, told a story about the banker J. P. Morgan in his autobiogrpahy. In the financial panic of 1873, Carnegie found himself in a situation where he desperately needed cash to meet his commitments. With the realisation that a lucrative deal could be made, Morgan asked Carnegie if he had any interest to sell him his share of the partnership that they jointly owned.
In desperate need of money, Carnegie replied that he “would sell anything for money”. Morgan inquired about his price, and Carnegie replied that he would willingly sell his share for $60,000 – $50,000 to cover his share of the partnership’s cost, and $10,000 as profit. Morgan agreed, and the two men agreed the deal. Although this $60,000 was way below the millions they sometimes managed, it was a substantial amount in 1873 – today’s equivalent of hundreds of thousands of dollars.
The next day, Carnegie went to see Morgan to collect his money. To his surprise, Morgan gave him two cheques: one for $60,000 and an extra $10,000.
In order to answer the surprised look on Carnegie’s face, Morgan explained that after he analysed the partnership’s accounts he noticed that Carnegie was wrong about the share to be repaid – the costs were $60,000, not $50,000. So Morgan paid the $60,000 to repay the share, plus the additional $10,000 they had agreed the day before.
“Well, that’s very commendable of you,” said Carnegie, as he handed him the $10,000 cheque. “Will you please accept this $10,000, with my most sincere wishes?”
“No thanks,” Morgan says, “I can’t do that.” Carnegie kept the $70,000.
Because Morgan reimbursed Carnegie with $10,000, even though it was his own mistake, this made a deep impression on Carnegie.
In his autobiography, he writes that this made him determined that “Morgan, father or son, as well as their home, would never suffer whilst I was around. They can now count me as a loyal friend.”
Morgan had every legal right to only pay Carnegie the $60,000 they had agreed to, but he didn’t. Why? Because he spotted an opportunity to put his relationship with Carnegie on a special footing – something more than the conventional “every man for himself” business approach. The two men lived well beyond 1873, and their ability to depend on each other in their business affairs was paid back many times over, well in excess of the $10,000 they exchanged that day.
Reduced to its basic form, the rule of reciprocity in negotiation is brought down to a straightforward code of conduct, in three steps:
- You need to always be reliable and trustworthy yourself. If you can’t, don’t ask others to be so.
- Be true to those who are true to you.
- You should let others know when you feel you have been treated unfairly. Unfair treatment, if not pointed out or addressed, leads to exploitation – then resentment, and finally the breakdown of the relationship.
Researchers have repeatedly used a straightforward experiment that demonstrates how sensitive people are to the concepts of fairness and justice when they have to negotiate. It’s called the “ultimatum game”:
Imagine you are sat next to a stranger in a bar. Someone walks up and shows both of you a €100 bill. He is prepared to give it to you on condition that you agree on how to split it. The stranger sat next to you will offer a proposal, if you accept it, you both get to keep what has been proposed, if you refuse, nobody gets it. No discussions, you just have to accept or refuse.
If the stranger made you this offer: he keeps €98 and you keep €2. Would you accept?
Although €2 is better than nothing, most of the people who took part in the experiment turned down such a patently unfair offer. In fact, most people turned down proposals of up to 25 to 30%. Why? Because this split doesn’t represent a fair deal and if your answer is “no” the person who made the proposal will subsequently lose out. Okay, you forego some free money, but the other person loses more, which teaches them a lesson.
Now imagine that this game has a second round: whatever the outcome of the first round, the stranger again has to decide how to split €100 between the two of you. Let’s say that you accepted his proposal to keep €2, and he kept €98. What do you think his second round proposal will be? Probably the same split of €2 for you and €98 for him. But what if you turned down his first proposal? What would his second offer be? Something more than €2 – and maybe up to €50. The fact that you highlighted the injustice of the first proposal provided a reference that a fair and just process was needed and expected for the ones to follow (and all future rounds if there were to be any).
Now imagine that the stranger offers you €50. Practically everyone would say “yes” to this proposal, as it’s obviously a fair split of the money.
Finally, let’s say the stranger offers you €55, which basically is what J.P. Morgan did with Carnegie. Like Carnegie, you could make an offer to your new-found generous friend that he takes back €5 so that all was fair and square. But those aren’t the rules of the game, so you have to take the €55.
The likelihood is that you will start to reflect on the relationship with the other person differently. You “should” be indebted to this person. When Morgan saved Carnegie $10,000, Carnegie felt he was obliged to return this favour somehow or at some point. Nothing presented itself immediately, so he determined that Morgan was someone that he could trust and he would return the favour when and where it was needed.
The lesson to learn from the examples given is that just because you are in the position of power it does not mean that it’s wise to use it. In fact, it may be wiser to follow in Morgan’s footsteps and use the situation as a chance to establish a strong foundation for the relationship in the future.
However, take care to avoid these traps:
- Don’t dive in too quickly: Cooperative people believe that most people are the same as them, honest and fair. However, you’d be wise to take your time and build trust step by step. This can be helped if you are able to use your network to verify the other party’s reputation. If you can’t do that, dip your toe in the water before you dive into it.
- Reciprocity tricks. Just as there are traps based on compliance, some shady negotiators won’t think twice before they try to employ a few tricks based on reciprocity: they give a small concession, then ask you for a much bigger one. There may be a temptation to accept it even though it’s obviously unreasonable, because most people fall into the trap that reciprocity is something that’s generally based on a fair exchange rather than examine the contents of the exchange offered.
- If the stakes are high, you should negotiate with friends. Friends and couples are more likely to apply the rules of fairness when they divide a profit. In the €100 ultimatum game, they will usually divide it 50/50. But as many business partners who have gone their separate ways will know, very high stakes can bring the worst out in people, even if it’s a close friend or long-time partner. Let’s imagine that you played the ultimatum game with just one round of 10 million euros. The proposal is down to your friend. Do you think they might be tempted to only offer you a million euros and keep nine for themselves, because they believe you wouldn’t say “no” to this much money, and they tell themselves that your friendship isn’t worth 9 million euros? This isn’t a good side of human nature, but lots of people would do exactly that.
Chapter 5: The 5th foundation – The other side’s point of view
Effective negotiators display a very important personality trait: an ability to understand the situation from the other side’s point of view. To be a successful negotiator, you need to know how to enquire about and understand the other side’s viewpoint and what that might entail in order to accomplish your objectives. From there you need to be aware of the circumstances in which the other party might say “no” so that you are prepared to address their concerns as and when required. For the negotiation to be a success it’s really important to have a good understanding of what the other side wants, and this is not as easy as it sounds.
What makes it so hard to read someone else’s thoughts? There are three reasons:
- Practically everybody is affected by a shared human condition: we see the world from our perspective and consider our own interests.
- Even the most flexible people bring a rather competitive mindset to the negotiation table. There are, as the term suggests, different expectations around the table. This means a need to concentrate on the differences and to be able to process both sets of concerns in a rational and effective fashion. Research shows that most people believe that negotiations are centred around a fixed proportion of the pie. However, if common ground to please both sides can be established, it’s more likely that the pie will be even larger. This is the example cited at the start of this section, with a game that involves chairs, where the adoption of teamwork allows everyone the chance to win €1000.
- The way in which negotiations work often contradicts the notion to seek common interests once the talks have begun. Research shows that in tests carried out, people fail to identify common objectives 50% of the time. Much of this failure is down to the fact that both sides bluff and pretend to compromise to try and get what they want.
These three obstacles show the difficulty people face even to consider the other side’s interests during negotiations. Is the effort to establish common ground really worth all the effort? Apparently, yes, research seems to suggest, in spades.
For example, a study by Neil Rackham (author of SPIN Selling) and John Carlisle showed that the more experienced the negotiator, the more likely it is that their preparation will concentrate on possible areas of common interest between the two sides. This study covered 51 different negotiators, all very experienced, over 56 negotiations, then compared them to other negotiators rated as competent by their peers. The competent group AND the very experienced group spent more time to concentrate on the objectives rather than on efforts to make the pie bigger. But the very experienced negotiators spent four times longer with their preparations to research possible areas of shared or common ground – they spent 40% of their time on this compared to only 10% by the competent negotiators.
Another point of interest from this research was that neither group came from a higher level of education than the other: neither was made up of a large number with high academic qualifications. This illustrates that to be a competent negotiator is not down to education; it’s a matter of experience, judgment and vision. And research has confirmed that those who are more accurately able to judge other people’s interests achieve better results than those who only concentrate on their own objectives.
So what can be done to concentrate more effectively on the other party’s needs? These four steps will help you to do this:
1. Identify the decision-maker.
To understand what others need, the first thing you have to do is identify who is responsible for the final decision. All businesses and institutions have rules, objectives and requirements, but it’s only people that negotiate. The personality of the decision-maker, such as their position, confidence and their vested interests, will shape the negotiation.
2. Seek common ground: How can you help the other party to help you achieve your goals?
A great way to interpret what the other side’s point of view might be is to use “role reversal”. Let’s say you’re in negotiations with your boss for a promotion. In the role reversal, you take on the boss’s position. Then ask your spouse, colleague or friend to be you. After you have briefed the person who is “you” on the topic, you run through a mock interview about the promotion and what it might involve. As you sit in the boss’s chair, ask yourself: “What are the benefits that I can gain if I help this employee achieve their goals? When your role leads to a logical conclusion, write down why it makes sense to give you a promotion, from their point of view. Discuss your conclusions with your colleague. See if you can determine the boss’s thought process.
3. Identify interests that may cause conflict with possible deals: why could the other side refuse?
In negotiations, it’s best to start with what you have in common, but, before you enter these negotiations prepare for objections and other issues so that you have constructive responses ready to deal with them. In the role reversal, spend some time to question why the other party might say “no” to your proposal. The responses to this often reveal valid points that will help to get the deal signed.
4. Look for affordable options that address the other side’s problem but that also help you move towards your targets.
When you have identified some of the more obscure reasons why the other side may turn down an agreement, think about some affordable solutions to resolve the other side’s objections or concerns but that also help you to progress. In many cases, we hold a belief that the other side says “no” because they want the same thing as us – money, power, less risk, etc. The best negotiators seek to rise above these assumptions and to identify other, secondary, interests that are relevant so as to be able to move the negotiation forward.
An example of an affordable “out of the box” option is an agreement that was reached in the city of Oceanside, California, for the management of its waste. A young woman, Kelly Sarber, manager of a waste management company based in Arizona, was able to secure the contract with the city at $43 per tonne, $5 higher than that of her competitors. How? As a keen surfer, Kelly had noticed that the beaches of Oceanside, which attracted tourists and a were a major source of income from the real estate, were gradually but steadily being eroded. Her waste management business was in the Arizona desert, and what is so plentiful in a desert? That’s right, sand. Kelly managed to secure the contract at a higher price because she promised that once the trucks had taken the rubbish away, they would return filled with sand for Oceanside’s beaches.
Chapter 6: The 6th foundation – Leverage
Leverage: Every reason that the other side wants or needs an agreement is my leverage – provided I know those reasons.
Leverage gives you the power not just to come to an agreement, but to come to an agreement on your own terms. Research shows that, with leverage, even an average negotiator can complete a fairly successful deal whereas without leverage only an extremely experienced negotiator can achieve their aims. Let’s take a look at some examples of the power that leverage gives you:
1st Example: Weigh up the balance of what is required
Eastern Airlines, a big American airline, faced a major problem in the late 1970s. Their aircraft fleet was outdated and they needed to buy new planes. What was the problem? They were heavily in debt as a result of a recent acquisition and didn’t have the money to buy new planes. At that time, two American manufacturers, Boeing and McDonnell Douglas pretty much had a monopoly in the US market and they had no desire to make a deal with a customer whose future existence was in the balance.
However, a few months after they experienced this challenge, the CEO of Eastern Airlines was pleased to be able to announce that his company had placed an order for 50 aircraft at a cost of $1 billion. How did he manage to accomplish this?
Answer: The world’s third-largest manufacturer, Airbus, had a new aircraft – the Airbus A300 – ready for sale. But in the past year Airbus hadn’t managed to sell a single plane, and for years had tried to break into the American market, one of the biggest in the world, and they had been under the microscope of the major buyers in the aeronautic industry.
Frank Borman, the CEO of Eastern Airlines, put together an innovative agreement, by which they arranged to borrow funds from an American bank, two French banks, and Airbus itself. The French government also gave millions of dollars in subsidies towards export costs to support the deal. So, Airbus not only supplied the planes to Eastern Airlines but also the financial arrangements that were essential to buy them. Frank Borman managed to get the aircraft that he needed as he was prepared to look outside the normal supply chain to identify a seller who needed a buyer more desperately than he needed planes. He maximized his leverage as he managed to weigh up the balance of what was needed and swung it in his favor when they did the deal.
Example 2: Use the other side’s ego as a leverage
The entertainment business is littered with examples where the ego of those who are part of the discussion can be used as leverage as much as the company’s real objectives. One of the most famous producers in Hollywood’s, Peter Gruber, happened to negotiate one of his best deals at the very start of his career: he got a 20% share of the Casablanca record company (which represented Kiss, Donna Summer, Cher, The Village People, Parliament…) in exchange for 5% of the earnings from the film The Deep, a bad version of the movie Jaws. How was Guber able to arrange such a beneficial deal?
Like many based in Hollywood, Neil Bogart, the CEO of Casablanca, longed to be a “film magnate”. As one of his business partners said: “What Neil wanted more than anything was to get into the film business and he was prepared to pay anything to do that.” So, Bogart’s desire to have this Hollywood title gave Gruber all that he needed to get the deal signed off.
Example 3: Create a competitive edge
An American public electricity company – Houston Power & Lighting Company – paid $195 million annually to the Burlington Northern Railway Company to transport coal to its giant power plant. Janie Mitcham, the company’s purchasing manager, was fed up with the extortionate price and poor service provided, but what other options were there? Burlington Northern had the monopoly on rail access to the plant, as they had built and owned the track (Note: there is no state-owned railway in the USA and several companies share the market). And rail was the only way to transport the huge amounts of coal needed to run the plant. She unsuccessfully attempted to reduce the costs with pleas of fairness and the longevity of their work relationship together, but all she ever got in reply was a shrug of the shoulders.
But, she had an idea: she would build their own rail line to link up with those of the competitor railway company, Union Pacific, 15 kilometres away.
She mentioned this idea to Burlington Northern, who didn’t believe her: the estimated cost of the project was $24 million, and even Mitcham’s team was doubtful, they named it “Dream Rails”.
But she persisted. She got the green light from her bosses and started to build the track, now called “Janie’s Way”. It was no picnic. Burlington Northern sued, they had to move tons and tons of soil, work their way around cemeteries and homes, resolve residents’ complaints, etc. But eventually she managed to get the track built. Union Pacific made an offer to transport the coal at a cost that was 25% lower than Burlington Northern’s price. They soon recovered the construction costs of the track.
Mitcham knew that she was now in a position of strength. In fact, when Union Pacific had some delivery time problems, she put some business back with Burlington Northern, which soon resulted in a visit from Union Pacific representatives, an apology, and a commitment to do better.
So, because she was able to look at things from a different angle; Janie Mitcham boosted the power of the leverage that she could apply and solved the problems she had with the supply chain. And this allowed the company to establish itself in a strong position with both its old and new suppliers.
Part 2: The negotiation process
Chapter 7: Phase 1 – Develop your strategy
In this second part, we will examine how the six foundations can help you achieve your objectives as you work through the negotiation process phase by phase.
The way this section is structured highlights a simple but important fact: negotiation is a four-step process:
- Sharing information.
- Offers and compromises.
- The agreements undertaken.
Anthropologists and other scientists have seen and noted these four phases in negotiations which vary from small personal problems in rural Africa (see the example given in Part I, Chapter 1) to mergers and acquisitions of multinationals. However, different cultures can focus on one phase rather than another: negotiators in the industrialised West generally skim over the information sharing phase, eager to “put something on the table” while negotiators in Asia, Africa or South America are more comfortable with a more leisurely information sharing phase so as to build some trust before negotiations begin. Once the relationship has been established, the offer and compromise phase generally follows fairly soon thereafter.
The objective behind detailed preparation, even for simple negotiations, is to create a plan of action for a specific situation and the circumstances that may confront you. Generally, there are four types of negotiation situations, which are mainly determined by two factors:
- The perceived value of the future relationship between the two sides: to what extent each side will need each other’s help to accomplish their future objectives?
- Possible disputes outside of the issues at stake: to what extent does each side want the things on offer and in what proportion, such as money, power, space, in each particular deal?
The situation matrix below illustrates the four types of situations that result from the combination of the perceived importance of future relationships between the parties (high or low) and perceived conflicts outside of the relevant issues (high or low):
Therefore, the first part of your preparation will be to identify which of these four situations you find yourself in. Dependent on th is, different strategies will be needed to deal with each of these situations:
- I Quadrant: Rational concerns. Best strategies: Resolve issues or compromise.
- II Quadrant: Best strategies: Acknowledgement of other issues, Resolve issues or compromise.
- III Quadrant: Best strategies: Competition, Acknowledgement of other issues, Resolve issues or compromise.
- IV Quadrant: Tacit agreements. Best strategies: Acknowledgement of other issues, Resolve issues or compromise.
If you are personally happy to put these strategies in place, you will be able to manage the circumstances that arise. If they seem difficult or you aren’t at ease with them, it might be a smart idea to find someone to help you, which will be part of your preparation.
In general, cooperative people are well suited to negotiate in situations that involve unresolved deals and agreements. Competitive people are more likely to handle the actual deals that arise. Situations that involve both angles need to be dealt with fairly from each perspective.
When you have determined the right strategy, the third phase of preparation is to look at the situation from the perspective of the other side, as was described in Chapter 5 of the first part.
The fourth step is to decide how you want to convey your message. There are two important dimensions to this. First of all, will you communicate directly with the other side or via a representative? If you are a very compliant negotiator and have a tough opponent to deal with, you could hire a broker or lawyer to deal with them.
If you negotiate yourself, will it be done face-to-face, by phone, by email? And as intricate deals may well require a combination of all these methods, an experienced negotiator will have a strategy in place to deal with each one of the elements involved in the process.
The main methods of communication, the hardest first – face-to-face meetings are always more difficult to arrange when compared to an email:
- Face to face
- The mode of communication that gives the most “bandwidth” to all involved, which permits everyone to read between the lines of what is said, raise questions, gather all feedback and develop genuine relationships that mean the negotiations are much more effective.
- This mode still allows many of the advantages of a face-to-face meeting whilst it gives the option for people who are far away from each other to meet virtually.
- In this case, an essential part of the communication is lost – the body language – but at least you retain a route that allows you to listen to someone’s voice and intonations.
They have many benefits:
- Practical, when both sides are far apart.
- Give you the time to reflect upon what to do next.
- Provide a clear and balanced record of the discussions.
- Enable large amounts of data to be shared with ease.
- Help to overcome differences in the experience and management level of negotiators.
- Give you the option to instantly involve a broad group of people, as you can simultaneously send them to all the relevant parties.
Additionally, people who are inclined to avoid negotiations will prefer this method because it reduces the possibility of face-to-face confrontations or disagreements.
But it’s because electronic communication is so easy that we must be mindful of its flaws.
Research has validated these problems in numerous tests:
- Higher risk of deadlock. Without the tone of voice, facial expressions, pauses, body language, emails can be perceived as more aggressive, more “in your face” than the spoken word.
- Careless click. A more casual attitude and privacy, when sat at a screen, can cause us to drop our guard, and we overlook the fact that our message can easily be copied and sent to absolutely anyone. Whenever you write something, do it as though it were on a presentation board in an open-plan office.
- Research has revealed that the same problem can take much longer to sort out via email than face-to-face or over the phone. The more restricted the lines of communication are, the longer it takes for information to be properly interpreted and processed.
- Decisions made from afar. When all sides involved negotiate electronically, the tendency is to formulate decisions that tend to favor one side or the other.
If you have no choice but to negotiate via email; these three simple steps will provide you with some helpful safeguards:
- Think before you click. Never send a message when you are in a negative frame of mind.
- Use some casual language in the email. This eases the recipient into the content of the message: a ” Hi Francis” will read better than just “Francis”.
- In extended negotiations, maintain regular contact by phone, and, if possible, organize a few meetings.
On the basis of this information, you can determine the best method of communication throughout the whole process. Once you have concluded this fourth step, all that remains is to use the six Foundations discussed previously to prepare how you plan to handle the negotiation – the book offers a framework for this.
Chapter 8: Phase 2 – Sharing information
Do you remember the Arusha tribe who “speak to the mountains” and put forward their complaints and expectations, and the gift Jonavich gave to Smith when they began their merger and acquisition negotiations? We were introduced to them at the start of the first part of this series. Neither of the above can be considered as a negotiation in the conventional sense of the word.
Instead, these preliminary steps are part of a ritual that always precedes the actual negotiation and sometimes may influence the process: sharing information. A successful exchange process achieves many important goals, which are outlined here.
When we share information, we can test the other side’s willingness to partake in the principle of reciprocity. If this is met when information is shared, each side wins trust and confidence which will help throughout the arduous process of negotiation to ensure an agreement is reached.
Let’s look at the various aims of the information sharing phase:
1st objective: Build a good relationship
First of all, make sure that the mood and ambiance around the table feels relaxed – the rapport between the negotiators. The sharing of information hinges on successful interpersonal communication, and a good relationship makes this more achievable.
A long-established method to create a good rapport in a negotiation is to identify a common interest, a common purpose, or a shared passion – unrelated to the negotiation – which you share with the other person. Research shows that we tend to be more influenced by people who have something in common with us. As Robert Cialdini, who wrote Influence and Manipulation said; “No surprise that people prefer to say yes to a request when they know and like the requester”.
However, if you manage to establish a good rapport it won’t give one side a significant advantage over the other. If you feel that your counterpart wishes to eke out some concessions from you on the basis that they managed to establish a good rapport at the start then your alarm should go off. At this stage of the information exchange there is a fine line to tread. Clearly most of us are aware that in negotiations the other side wants something from us, so we need to be aware of techniques such as flattery and other such tactics that are employed to influence decisions that are made. Generally, blatant and manipulative techniques don’t work and may cause a loss in credibility.
2nd objective: Gather information on interests, concerns and perspectives
The second major task of the information sharing phase is to gain background information about the other side’s interests. Who are they? Why are they here? What is significant to them? Their plans for the negotiations? How do they perceive the current situation? Are they senior enough within their company to sign an agreement?
This phase allows us to evaluate the assumptions we made earlier with respect to the other side; and to convey our own core interests.
Research on successful negotiations consistently reveals the same fact about experienced negotiators; compared to an average negotiator they are more focused on what information they can get rather than what they give away. Let us examine the results of the research by Neil Rackham, author of SPIN Selling:
Information-gathering performance, as a percentage of all performance measures observed
Experienced negotiators ask twice as many questions as average negotiators. These questions have a purpose: they are designed to reveal explicit and pertinent facts (“What’s the delivery date?” or “How did you evaluate your proposal”). Then they check what the other side has understood (“When you say “ten days”, do you mean ten calendar days or ten working days?”). Then they will give a summary of what they believe has been agreed in the negotiations (“If I understood correctly, we agreed to pay you 90 days after delivery and you promised to deliver seven working days from the date on which you received the order – is that correct?”).
Lastly, they listen to the other side’s responses.
It seems simple. All you have to do is ask the other side what matters most to them and they will tell you, won’t they? Not really. In a negotiation, information – and especially information about what people want – is power. If the other negotiator is on the ball, they will attempt to extract your needs and preferences first before they reveal theirs.
The best way to manage the flow of information in relation to your needs is to understand that it is a strategic process and requires time. Rarely does it harm you to speak only when necessary. Open your ears before you open your mouth.
3rd objective: Identify priorities and leverage points
Your leverage in a negotiation is as much about perception as it is reality. If you are in possession of other useful alternatives or a good base from which to build; or if you can cope easily without the other side’s support; the information sharing phase is the right time to reveal this to the other side.
Here are four basic scenarios which you might find yourself in; dependent on the strength of your negotiation position (strong or weak) and the way you want to interact (hard-nosed or agreeable); and how best to react in each instance:
Chapter 9: Phase 3 – Initiate and engage in trade-offs
Now that you have established a measure of rapport, established the issues on which you wish to negotiate; and exchanged information about your respective positions and powers of negotiation; it is time to begin.
Of all the aspects involved in the whole process, researchers have devoted most of their time to the art of compromise and the deals that are made, which are both at the core of the negotiation process. Let’s examine the most important points of their research results:
Should you be the first to offer a proposal?
Most experts say you should never go first. Let’s illustrate why, through this example:
Beatles manager Brian Epstein negotiated what share of the profits The Beatles would receive from their first film; A Hard Day’s Night. Epstein had limited knowledge of the film business; and he launched into the negotiation with what he believed to be a high percentage: 7.5% of the film’s profits. The producers promptly answered “yes”. They had planned to give the Beatles up to 25% and were delighted with Epstein’s proposal. A Hard Day’s Night was a hit, and the Beatles made money – but a lot less than they could have done.
This story illustrates the risks involved if you put forward your proposal first. The expert advice would be to just keep your mouth shut and let the other negotiator quote their price. You can always adjust it if it goes over and above “fair and reasonable”.
This “never open” rule is easy to remember, but like many generalized approaches; it may not always be the best policy. How can you improve the process? The answer lies in the amount of information you happen to possess.
What is the key factor in Epstein’s case? He had no knowledge of the film industry. He did not know enough about the standard deals normally put in place or how to evaluate the profit percentages used in this market so that he could walk into the negotiations and be confident he would leave with the best deal possible. As a new kid on the block, he should have kept quiet and let the others talk. And this advice is true whenever you are unsure of the market value of what you have to buy or sell.
As long as you are knowledgeable about the scope of negotiations; then you gain a significant advantage if you open up proceedings. For one thing, if you suggest the first figure, it’s an opportunity to set realistic boundaries for the deal. Your initial gambit obliges the other party to reassess its objectives.
Then, researchers of social sciences and humanities discovered a psychological quirk that they called the ” anchor and adjustment effect “. This describes a human tendency to be affected by the first numbers within our field of vision. Thus, many people who look at this series of numbers 8x7x6x5x4x3x2x1 briefly feel that the total is high. However, when they see 1x2x3x4x5x6x7x8, they think it’s much lower. However, the two are identical, so why the difference in the estimates? Because we focus on the first three or four digits and extrapolate; that is, we take an anchor and adjust it to the whole.
In a negotiation, research suggests that people who hear high or low numbers as entry points are often influenced by these numbers and unconsciously adjust their expectations towards this number. Obviously, a completely improbable number can cause a strong negative reaction, so this should be used with caution.
Should I begin optimistically or realistically?
Okay, so you decided to open – or the other party opened the negotiation and it’s your turn. Should you do so optimistically with a punchy demand, or make a fair and reasonable offer?
If you have sufficient leverage, research suggests that you should open optimistically in Transaction-type negotiations (Quadrant III seen at the start of this article).
But what is it? This is the highest (or lowest) number for which there are grounds or an argument that allows you to put it forward. If you open with a ludicrous suggestion there are no grounds with which to back it up. In certain cultures such as South America or Africa; anything other than to start off with an optimistic proposal is a serious mistake.
Why does a bullish approach at the beginning of a Transaction work? Because it puts in place two well-documented advantages based on research: the principle of constraint and the rule of reciprocity. If I want you to pay €50 for something, and I start with €75 (backed up with relevant facts), my final acceptance of €50 will seem a much better deal than if I had started at €55 and dropped to 50. Added to this, the fact that I offered a compromise, “lowered” my price, the principle of reciprocity will encourage you to increase your purchase price, perhaps to match my desired figure of €50.
What compromise strategy will work best?
If your inclination is to be fair from the start, it makes sense to give yourself room to make compromises when you are in negotiations. In fact, research confirms that people who are granted concessions often leave the negotiation process with a better sense of a “deal” than someone who was just offered a one-time, fair and “honest” price. They feel better even though the price they end up with is even more than they would initially have wanted to pay.
Concessions are the language of cooperation. They let the other negotiator know for certain, through actions; that you recognize that their expectations have a good basis; and there is a need to sacrifice something that benefits you, in order to reach a united decision.
The table below provides a summary of the opening and compromise strategies that you should consider for each quadrant:
Chapter 10: Phase 4 – Get closure and the deal signed
Close the deal
The closure of a deal can be smooth and simple, or severely stressful. Those who like to negotiate savor the fast-paced tactics that can be applied at this stage. Those who are not comfortable with negotiations sometimes feel uneasy with help or when under pressure. There are two important psychological factors that can influence you; when you close a deal, and you need to be aware of them.
One of the most powerful and basic psychological factors is the scarcity principle; defined by Robert Cialdini in Influence and Manipulation. This effect relates to the human tendency to want something more when we believe that the supply is limited and on the decline. So our capacity to get what we want from a deal often depends on the other side’s perception of what we have to lose if we don’t conclude the deal. If we can demonstrate that we have other great alternatives and that we are prepared to leave the table without a deal; it bolsters our position because it makes our offer on the proposed deal seem like one they won’t find elsewhere: it comes with a time limit, and can be revoked – with no harm done to us – at any time.
You can and should use the principle of scarcity right from the start of the negotiation.
If you can save it until the end though, that’s when it will be most effective. Without a better offer, all you can do is bluff; but the best case scenario is to create other alternatives; as shown and explained superbly by David A. Lan and James K. Sebenius in 3D Negotiation. This allows you to set a deadline for negotiations, or means you can walk away from the table to reinforce your position; in the hope that the other party will stop you before you have left the room.
However, use this approach with care. The scarcity effect triggers emotional reactions, not rational ones. Manipulative negotiators use it to speed up, or even cause panic, in a situation that would otherwise be fine. At times they tell the truth – they actually have many different proposals; demands, and a specific timeframe – and at other times they bluff; with the hope that you will press the panic button and close the deal. It is always down to your judgment; informed by an appreciation of the other side’s leverage strength; that will help to tip the scales in the important moments when you decide to either concede; or resist the urge to hit the panic button.
The second psychological factor is engagement, and even over-engagement in the negotiation process. It is also a factor described in Influence and Manipulation. Imagine that you are in an amusement park and you join the queue for a fun ride that you have heard about. After just a few minutes, a park employee tells everyone that it will be an hour and a half wait. What do you do? Do you wait in the queue or go and do something else?
Now put yourself in the same situation, but the announcement is made after you have queued for 45 minutes. So you still have 45 minutes more to wait. Do you stay in the queue or go and do something else?
Research suggests that people are more likely to leave in the first scenario rather than the second; even though the time spent in the queue would be the same for both. Why? Because in the second case you have spent 45 minutes that would be “wasted” if you leave, whilst in the first you only “waste” a few minutes.
The same thing applies in negotiations: if we spend a significant and continued amount of time, energy and other resources in a negotiation process, we feel more and more compelled to come to an agreement. This may happen naturally, even when the other side is sincere in its actions. But adversaries who are manipulative in their approach can pull the following trick: they set their trap shortly before the agreement is reached, with a last-minute request with much regret, but “it is essential” for their agreement. “We have got all this way,” they say, “Let’s not waste all that time and effort”. Rather than risk that the negotiations end in failure; there may be the temptation to agree to part of what they want so that the deal can be salvaged.
Be careful about this.
If, after we had waited for an hour and a half in the queue; we were told that the ride was now more expensive; we would be furious. You should approach any last-minute requests in a negotiation in the same way. The least that you need to do in return is to insist on a similar concession.
These two factors are often applied in situations that involve customers and companies; but these are clearly the exceptions that prove the rule; when compared to the negotiations we carry out on a daily basis. These factors are particularly relevant to Transactions (Quadrant 3); i.e. when the stakes are high and the significance of future relationships between the two sides are low. Bear in mind though that the “softer” tactics to finalise a deal are the most important; when a good relationship is at stake. The last thing we should do with people we would like to work with is to say to them; to take what we have offered or leave it, and then walk out.
In genuine Relationship situations (Quadrant 2); closure is straightforward: your objective is to give the other side reassurance of your good intentions. Adaptation is therefore a very necessary skill.
In cases where decisions are in the balance (Quadrant 1); the stakes are high and the future relationships are important, the closure of a negotiation is more complex. You want the other side to feel gratified; but you also want to achieve your objectives and gain significant benefits from the deal.
The most common closure tactic used in this context is to split the pie in half; agree on a number that splits either side’s demands down the middle. Even if a negotiation has gone back and forth for a while; there always comes a moment when one side proposes to cut the pie; in half based on the last offer from each side.
Why is it such a common occurence to cut the pie in half? First off, it appeals to our sense of fairness and reciprocity; and creates a good foundation for the future of that relationship. It’s also straightforward and easy to understand. It doesn’t need an explanation or cause any complaints. The other side gets it. Lastly, it’s a quick way to get things done.
It’s used so often that to refuse it can come across as rude and irrational, regardless of the situation. However, it gives undue credit to a sound strategy: there are at least two instances when it should be avoided.
The first is when the middle ground suggested is not equally balanced for both sides. So, if you have made a fair and realistic first offer; and the other side has made a tough and competitive one; the middle ground between these two offers will probably be more advantageous to the other side.
Finally, when a lot of money or an important policy is in the balance; if you are too eager to propose to split things in half you could miss out on the chance; to put other more innovative alternatives in place.
The agreed undertakings
The objective of the negotiations is to secure a commitment, not just an agreement. Sometimes just a handshake will do; especially if both sides have worked together for a long time and trust each other. Generally, the more complex aspects that make up the deal, such as contracts; public ceremonies and formal sanctions, are also called for.
The different types of negotiation require different levels of commitment. If you agree to baby-sit for your neighbour, your agreement is the only thing that is relevant to everyone. Your rapport with your neighbour ensures that the agreement is safe. But a multi-billion M&A usually involves legal contracts, teams of consultants, lawyers, and accountants, and an official conclusion to the negotiations. As there is a lot more at stake and less trust involved, everyone has to be more careful.
A variety of options are available:
In Western society, it’s usually a handshake. In certain communities, your word and handshake are taken very seriously. Failure to honour commitments can lead you to lose face and a loss of status within that community.
When the stakes are high, the ritual of social events can increase. There may be announcements made, either to a broad range of individuals or the entire group; to substantiate the undertakings agreed by each side.
Accountability arises when the reputation of the person or company is at stake. A contract is an effective way to increase the commitment and accountability of a person or company; and that is why it’s a widely-used method to implement a deal. Legally, a written contract is mandatory in most cases. Without one it’s impossible to bring legal proceedings before the courts should the agreement be breached.
In the case of certain deals, no promise, legal or otherwise; is reliable enough to guarantee the complete reliability of an agreement. In such situations, it is often both prudent and productive to conduct a simultaneous exchange. For example, in a car purchase, both sides will simultaneously swap the car for the money agreed.
Chapter 11: Negotiate with the Devil – Ethics of Negotiation
Ethical dilemmas are the central focus for many negotiations. We cannot ignore the fact that deception is part of the make-up of negotiations. And we cannot ignore the importance that people give to the integrity of those with whom they negotiate. If you are seen to slip-up once on a single ethical issue, then your credibility will be destroyed; not only for this negotiation, but for long after. Very successful negotiators take the issue of personal integrity extremely seriously. Less successful ones don’t.
What can be done to balance these contradictory issues? The book presents three approaches to consider these ethical issues: the Poker method, the Idealist method, and the Pragmatic method. G. Richard Sell believes that it is better to tell the truth whenever possible. He may sometimes lose leverage as a result of his beliefs; but it makes him feel better and he keeps his self-respect in return.
How you deal with the ethical side of things is obviously up to you. The author’s only expectation is the one he mentioned in Chapter 1; negotiators who value their personal integrity can be expected to act consistently; guided by the core of their personal values with which they can explain and, if needed, justify themselves.
Conclusions about the book “Bargaining for Advantage”
Pretty dense, with lots of small print, printed on cheap paper; with almost no diagrams, this book is similar to thousands of others and is a typical book of its kind; which focuses on the content rather than how it is presented. Compared to beautifully designed books, their layout; the clever use of colours and images such as The Sales Bible, The Simplicity Survival Handbook or The Creative Habit; it can sometimes come across as rather dry and unpalatable. Fortunately, the contents make it a worthwhile read, because; as you may have noticed when you read this article, this book is a veritable bible of negotiation; which provides you with a comprehensive theoretical framework to understand all of the issues, along with many examples; stories, anecdotes, perspectives and other skills for all phases of a negotiation.
It provides us with six solid foundations to base our negotiations on; and then analyses each of the four phases identified by the author and, in each of them; deals with the most frequently asked questions and problems. Added to that, the chapter on ethics (the summary here barely covers the subject) is a great way to encourage us to think about self-respect; and the two appendices that go with it are a really useful addition; the first is a test to identify our negotiation skills; and the second a plan of how to best put them into practice.
Companion to 3D Negotiation
“Bargaining for Advantage” is also a great companion to 3D Negotiation; because it concentrates on the tactical aspect while the latter focuses on the strategic aspect. These two books, combined with a lot of practice and experimentation; will provide you with a significant advantage in any major negotiations you may have to undertake.
In terms of flaws, besides its typically traditional style, something really surprised me; I was disappointed that the author generally just stated; “the research shows that” or “the researchers found that” with no mention of the sources. However, all of these sources are actually mentioned: at the end of the book all of the credits are listed; but there’s nothing in the main text to show this – no numbers, or asterisks, nothing at all. That’s unusual. It’s something that I have never seen before. To check the credits, we have to look at the final section of the book; to find out if any credits related to the page we have just read actually exist. In other words, it’s totally impractical.
Apart from that little detail, you can do it with your eyes closed. This book is a gold mine and will provide you with a theoretical and practical array of tools to thoroughly prepare yourself for all of your future negotiations.
- A really practical strategic handbook
- Backed up with extensive scientific research (which must, however, be tracked down in the index!).
- A test to assess your skills as a negotiator
- Small print, few graphics, cheap paper
- A bit dreary.
- No source credits within the main text!
My rating :
Have you read “Bargaining for Advantage”? How do you rate it?