How To Negotiate

(Note: this post attempts to outline the material covered in a 200 page book, a semester long class, and a 6 day seminar in 2500 words.  It can’t possibly cover everything, but it covers a lot.  I’ve tried to bold sentences to make it easier to skim.)

Many people think of skilled negotiators as those who score the best deals.  Those fabled people who manage to talk a salesman into letting go of a car for thousands less than what he paid for it, or who manage to get unbelievable concessions from their boss, wife, or adversary de jure.  The reason great negotiators are so lionized is because we have this idea that he can convince others to willingly make themselves worse off for his benefit.  Unfortunately, that’s not how it works.  Good negotiation isn’t getting people to accept your unreasonable demands: it’s getting people who otherwise wouldn’t to agree to a fair deal.

“If you enter an antique store to buy a sterling silver George IV tea set worth thousands of dollars and all you have is a one hundred-dollar bill, you should not expect skillful negotiation to overcome the difference.”

Distributive v. Integrative

Distributive bargaining is about how to distribute a fixed pie.  The seller takes the position that he wants $1000 for his car, and I take the position that I can only pay $500.  There’s a $500 pool of difference that needs to be distributed before a deal can be reached.  I need to come up $500, seller needs to come down $500, or some combination in between that adds up to $500.  One or both of us needs to change our position.  As we argue over positions, we tend to get locked into those positions and our egos tend to become identified with those positions.  Nothing good ever happened when somebody’s ego got involved.  You may charm the seller, regale him with stories that make him take pity on you, seduce him, whatever.  But, he’s either willing and able change his position or not.  There’s nothing else to it.

Integrative bargaining doesn’t believe in a fixed pie.  Integrative bargaining seeks to throw everything on the table, not just deal with some arbitrary pool of value the parties created with their extreme initial offers.  Integrative bargaining recognizes that behind every position is a multitude of interests that need satisfying.  The good negotiator coaxes those interests out of the other party and then figures out how to meet those interests.

But Distributive Bargaining is the Only Way!

Let’s go back to the sterling silver tea set from the quote above.  Most people would say the price on the tea set is non-negotiable.  At best, you might be able to knock a bit off, but it’s a distributive bargaining game: the store’s position is to get as much money as it can, and my position is to pay as little as possible.  That might be true some of the time.  But, how do I know if I don’t ask?  Maybe the owner needs some skill I can provide.  Maybe the store is flush with cash but needs some help getting its website set up, or help with an event, or marketing, or inventory control, or whatever.  You might very well be able to walk out the door with the tea set under your arm and the $100 bill in your pocket if you can satisfy the seller’s interests in some other way.

How to Win

We’ve already discussed Rule One: don’t bargain over positions.

Rule Two is to separate the people from the problem.  This first requires you to remember that the people you are bargaining with are people, even if they represent a corporate entity.  They have their own interests, both in the substance of the negotiation and in the relationship.  They have human faults like anger and ego and fear.  The problem with positional bargaining is that these people problems tend to get tangled up with the substantive problem.  The key to good negotiating is to separate the people problems from the substantive problem.

The seminal negotiation book, Getting To Yes, identifies three main people problems: those of perception, emotion, and communication.

Perception problems are important to understand because, in any dispute, the “truth” is irrelevant: the disagreement stems from the reality as each side perceives it.  You can’t solve a problem with integrative bargaining techniques if you don’t understand how the other side perceives the problem.  Put yourself in their shoes; if this is difficult for you, simply ask them how they feel about X, or why they concluded X.  Don’t ever deduce their intentions from your own fears.  Don’t blame them for your problem, even if they caused it.  Look for opportunities to act inconsistently with their perceptions.  You can often change someone’s perception of the situation by making sure they participate in the process, which gives them a stake in the outcome.  This also helps them save face with their principles or constituents: they might think they’ll be perceived as losers if they accept your terms, but think they’ll be perceived as victors if they get to propose or announce those very same terms.  Bottom line: figure out what’s driving their perception of the issue.

Emotion problems must be understood and controlled.  Unchecked emotions, especially anger, can quickly bring negotiations to an impasse or an end.  Keys to dealing with emotions include 1) recognizing and explicitly discussing them, which allows them to be disarmed; 2) not reacting to emotional outbursts, but instead recognizing and discussing them; and 3) offering symbolic gestures that indicate respect, such as an apology or a gift.

Communication problems are obviously problematic, but the first two are easily dealt with.  (1) Talk with the other side so as to be understood, not just to talk or to play to constituents or principles.  (2) Listen.  Don’t just think about what you’re going to say next.  (3) The third problem, misunderstanding, is more difficult.  The example given in Getting To Yes is that of U.N Secretary General Waldheim attempting to secure the release of American hostages from Iran by announcing himself as a mediator who had come to work out a compromise.  The problem was, in Persian, “mediator” meant “meddler” and “compromise” only had the meaning we give it when we say “his integrity was compromised”.  Within an hour of his announcement, his car was being stoned by angry Iranians.  Avoiding misunderstanding requires active listening and acknowledgment of what the other side says, in real time.  You also want to speak about yourself, and particularly your feelings, rather then about them and their actions.  It’s hard to challenge a statement about how you feel.

Attack the Problem

By overcoming these three people problems, you can then attack the substantive problem instead of the people.  To do this, you must use Rule Three: focus on interests, not positions.  To identify what the other side’s interests are, ask them why they took the position they did.  Ask why they didn’t choose another position.  The most powerful interests are basic human needs: security, economic well-being, a sense of belonging, recognition, and control over one’s life.  Think about how the situation might be affecting these basic interests and then ask about them.  State your own basic interests specifically and vividly: make them come alive.  Discuss interests before proposing solutions: if solutions come first, your real interests will be ignored or look like mere justifications for an arbitrary position.  Being hard on the problem, and your interests, allows you to be soft of the people, which makes everyone happier, and the environment more conducive to dealmaking.

Invent Solutions

Once you can identify what each party’s real interest is, it’s easy to come up with options that make each party better off.  Rule Four is to invent options in discrete steps: 1) brainstorm as many options as possible without attribution or evaluation; 2) develop the ideas by working out some details; 3) evaluate the ideas externally.  “Nothing is so harmful to inventing as a critical sense waiting to pounce on the drawbacks of any new idea.  Judgment hinders imagination.”

The evaluation stage is important because this is where bargaining on the merits begins.  You’ll want to eliminate options that wouldn’t ever be accepted.  Imagine how the other side would fare if it accepted each option.  Would it be crucified?  Then scratch that one.  You’ll also want to eliminate prejudicial options, even if the other party may irrationally accept them.  “An outcome in which the other side gets absolutely nothing is worse for you than one which leaves them mollified.  In almost every case, your satisfaction depends to a degree on making the other side sufficiently content with an agreement to want to live up to it.”

Rule Five is to search out solutions that are low cost to you but high benefit to them.  Maybe they care about taking credit, or announcing the settlement.  Things you don’t care about may be highly valuable to the other side.  Find those things.  You’ll also want to search out options that the other side could accept on precedent.  Have they made a decision or statement in the past that aligns with your proposal?  If so, point it out.  If they’ve done it in the past, point to that objective standard as to why they should go along this time as well.  It makes it much harder to say no.

Bargaining

Sometimes, you’ll be able to invent an option that everyone can instantly agree on.  Sometimes an agreement is possible because each side wants different things.  Often times though, there is a basic disagreement: you want the rent to be $400 a month and the landlord wants $800 a month.  What do you do when you’ve exhausted other creative solutions to bridge the gap?  Rule Six: Insist on using objective criteria.  Don’t start a battle of wills, manning positions and digging in.  Instead, bring standards of fairness, efficiency, or scientific merit, to bear on the problem.  Develop these objective criteria beforehand and provide alternative standards.  Some of these might be market value, precedent, scientific judgment, professional standards, efficiency, costs, what a court would decide, moral standards, equality, tradition, or reciprocity.  When you raise these, frame them as a joint search for fairness.  If the other side insists on their arbitrary position, ask them how they came to that number, or why they think it’s fair.  Most importantly, never yield to pressure.

Power Plays

This is especially true when the other side is more powerful.  Rule Seven: He who cares least, wins.  If walking away is an appealing choice, if they need you more than you need them, you’ve got power.  In negotiation-speak, this means having a strong BATNA, or Best Alternative To A Negotiated Agreement.  To develop a BATNA, list your conceivable alternatives, explore those alternatives and turn the best ones into practical alternatives, then choose the best practical alternative.  If the other side has the power, sometimes you can’t win.  In those cases, the best thing negotiation skills can do for you is prevent you from entering a bad deal and help you make the most of what you do have.  Two things to remember: 1) don’t set a bottom line.  It prevents you from thinking creatively.  Instead, set a trip wire: a number better than your BATNA, that, once tripped, reminds you to reexamine the whole situation. 2) if the other side’s BATNA is so strong they don’t even want to negotiate, think of ways to weaken itSuing them is one way that weakens their alternative (ignoring you).

Negotiating With Assholes

Sometimes you’ll deal with people who don’t want to play your mutually advantageous game, but want to man positions and exchange cannon fire.  Rule Eight: be relentlessly optimisticYou can change whatever game is being played simply by starting a new one.  There are a few tricks to changing the game: 1) assume every position they take is a genuine attempt to address the basic concerns of each side, so ask them how they think their position addresses those interests. 2) Discuss, hypothetically, what would happen if their position was accepted. 3) Ask what they would do they were in your situation. 5) Ask questions.  Remain uncomfortably silent if they give insufficient answers.  6) If these fail, try using the one-text approach where both sides simultaneously give input on a single draft a third part is preparing, with revisions being made until the draft is satisfactory to all parties.

Sometimes you’ll deal with people who play dirty.  Rule Nine: negotiate the rules of the game.  When someone deliberately deceives you, or tries to put you in stressful situations or makes personal attacks, or makes extreme or escalating demands, or just flat out refuses to negotiate, recognize the tactic, raise the issue explicitly, and question the tactic’s legitimacy and desirability.  Negotiate over it. Don’t get angry at the person employing the tactic.  Separate the people from the problem, focus on interests, invent options for mutual gain, insist on using objective criteria, and know your BATNA.  For example, explain that seating you in the low, slanted chair facing the sun is making you tired and uncomfortable, and that you can’t negotiate like that.  Ask if the other side will be sitting in that chair after halftime.  Ask if that serves either party’s interest.  Since it doesn’t, suggest some options for mutual gain and explain how they would be beneficial.  If that fails, insist on objective criteria.  If that fails, turn to your BATNA.

Conclusion

  1. Don’t bargain over positions
  2. Separate the people from the problem
  3. Focus on interests, not positions
  4. Invent options in discrete steps; don’t judge
  5. Search out solutions that are low-cost to you, high-benefit to them
  6. Insist on using objective criteria
  7. He who cares least wins
  8. Be relentlessly optimistic
  9. Negotiate the rules of the game

HT: This post owes a great debt to the seminal book Getting To Yes, both in terms of substance and form.  The book goes into far more depth than I could, providing great examples of just how this stuff works.  I would highly recommend giving it multiple reads if you want to become a better negotiator.

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