Three Approaches to Resolving Disputes: Interests, Rights, and Power
FIGURE 1 | Interrelationships among Interests, Rights, and Power
Interests
Rights Power
Lumping It and Avoidance Not all disputes end with a resolution. Often one or more parties simply decide to withdraw from the dispute. Withdrawal takes two forms. One party may decide to “lump it,” dropping her claim or giving in to the other’s claim because she believes pursuing the dispute is not in her interest, or because she concludes she does not have the power to resolve it to her satisfaction. The miner would have been lumping his claim if he had said to himself, “I strongly disagree with management’s decision not to reimburse me for my boots, but I’m not going to do anything about it.” A second form of withdrawal is avoidance. One party (or both) may decide to withdraw from the relationship, or at least to curtail it significantly.10 Examples of avoidance include quitting the organization, divorce, leaving the neighborhood, and staying out of the other person’s way. Both avoidance and lumping it may occur in conjunction with particular dispute resolution procedures. Many power contests involve threatening avoidance—such as threatening divorce—or actually engaging in it temporarily to impose costs on the other side—such as in a strike or breaking off of diplomatic relations. Many power contests end with the loser lumping her claim or her objection to the other’s claim. Others end with the loser engaging in avoidance: leaving or keeping her distance from the winner. Similarly, much negotiation ends with one side deciding to lump it instead of pursuing the claim. Or, rather than take a dispute to court or engage in coercive actions, one party (or both) may decide to break off the relationship altogether. This is common in social contexts where the disputant perceives satisfactory alternatives to the relationship. Lumping it and avoidance may also occur before a claim has been made, thus forestalling a dispute. Faced with the problem of stolen boots, the miner might have decided to lump it and not make a claim for the boots. More drastically, in a fit of exasperation, he might have walked off the job and never returned.
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Which Approach Is “Best”? When the miner superintendent described the boots dispute to us, he expressed a preference for how to resolve disputes. In our language, he was saying that on the whole it was better to try to reconcile interests than to focus on who was right or who was more powerful. But what does “better” mean? And in what sense, if any, was he correct in believing that focusing attention on interests is better? What “Better” Means: Four Possible Criteria The different approaches to the resolution of disputes—interests, rights, and power— generate different costs and benefits. We focus on four criteria in comparing them: transaction costs, satisfaction with outcomes, effect on the relationship, and recurrence of disputes.11 Transaction Costs For the mine superintendent, “better” meant resolving disputes with-
out strikes. More generally, he wanted to minimize the costs of disputing—what may be called the transaction costs. The most obvious costs of striking were economic. The management payroll and the overhead costs had to be met while the mine stood idle. Sometimes, strikes led to violence and the destruction of company property. The miners, too, incurred costs—lost wages. Then there were the lost opportunities for the company: a series of strikes could lead to the loss of a valuable sales contract. In a family argument, the costs would include the frustrating hours spent disputing, the frayed nerves and tension headaches, and the missed opportunities to do more enjoyable or useful tasks. All dispute resolution procedures carry transaction costs: the time, money, and emotional energy expended in disputing; the resources consumed and destroyed; and the opportunities lost.12 Another way to evaluate different approaches to dispute resolution is by the parties’ mutual satisfaction with the result. The outcome of the strike could not have been wholly satisfactory to the miner—he did not receive new boots—but he did succeed in venting his frustration and taking his revenge. A disputant’s satisfaction depends largely on how much the resolution fulfills the interests that led her to make or reject the claim in the first place. Satisfaction may also depend on whether the disputant believes that the resolution is fair. Even if an agreement does not wholly fulfill her interests, a disputant may draw some satisfaction from the resolution’s fairness. Satisfaction depends not only on the perceived fairness of the resolution, but also on the perceived fairness of the dispute resolution procedure. Judgments about fairness turn on several factors: how much opportunity a disputant had to express himself; whether he had control over accepting or rejecting the settlement; how much he was able to participate in shaping the settlement; and whether he believes that the third party, if there was one, acted fairly.13
Satisfaction with Outcomes
Effect on the Relationship A third criterion is the long-term effect on the parties’ relationship. The approach taken to resolve a dispute may affect the parties’ ability to work together on a day-to-day basis. Constant quarrels with threats of divorce may seriously weaken a marriage. In contrast, marital counseling in which the disputing partners learn to focus on interests in order to resolve disputes may strengthen a marriage.
Three Approaches to Resolving Disputes: Interests, Rights, and Power
The final criterion is whether a particular approach produces durable resolutions. The simplest form of recurrence is when a resolution fails to stick. For example, a dispute between father and teenage son over curfew appears resolved but breaks out again and again. A subtler form of recurrence takes place when a resolution is reached in a particular dispute, but the resolution fails to prevent the same dispute from arising between one of the disputants and someone else, or conceivably between two different parties in the same community. For instance, a man guilty of sexually harassing an employee reaches an agreement with his victim that is satisfactory to her, but he continues to harass other women employees. Or he stops, but other men continue to harass women employees in the same organization.
Recurrence
The Relationship among the Four Criteria These four different criteria are interrelated. Dissatisfaction with outcomes may produce strain on the relationship, which contributes to the recurrence of disputes, which in turn increases transaction costs. Because the different costs typically increase and decrease together, it is convenient to refer to all four together as the costs of disputing. When we refer to a particular approach as high-cost or low-cost, we mean not just transaction costs but also dissatisfaction with outcomes, strain on the relationship, and recurrence of disputes. Sometimes one cost can be reduced only by increasing another, particularly in the short term. If father and son sit down to discuss their conflicting interests concerning curfew, the short-term transaction costs in terms of time and energy may be high. Still, these costs may be more than offset by the benefits of a successful negotiation—an improved relationship and the cessation of curfew violations.
Which Approach Is Least Costly? Now that we have defined “better” in terms of the four types of costs, the question remains whether the mine superintendent was right in supposing that focusing on interests is better. A second question is also important: when an interests-based approach fails, is it less costly to focus on rights or on power? Interests versus Rights or Power A focus on interests can resolve the problem underly-
ing the dispute more effectively than can a focus on rights or power. An example is a grievance filed against a mine foreman for doing work that contractually only a miner is authorized to do. Often the real problem is something else—a miner who feels unfairly assigned to an unpleasant task may file a grievance only to strike back at his foreman. Clearly, focusing on what the contract says about foremen working will not deal with this underlying problem. Nor will striking to protest foremen working. But if the foreman and miner can negotiate about the miner’s future work tasks, the dispute may be resolved to the satisfaction of both. Just as an interests-based approach can help uncover hidden problems, it can help the parties identify which issues are of greater concern to one than to the other. By trading off issues of lesser concern for those of greater concern, both parties can gain from the resolution of the dispute.14 Consider, for example, a union and employer negotiating over two issues: additional vacation time and flexibility of work assignments. Although the union does not like the idea of assignment flexibility, its clear priority is additional
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vacation. Although the employer does not like the idea of additional vacation, he cares more about gaining flexibility in assigning work. An agreement that gives the union the vacation days it seeks and the employer the flexibility in making work assignments would likely be satisfactory to both. Such joint gain is more likely to be realized if the parties focus on each side’s interests. Focusing on who is right, as in litigation, or on who is more powerful, as in a strike, usually leaves at least one party perceiving itself as the loser. Reconciling interests thus tends to generate a higher level of mutual satisfaction with outcomes than determining rights or power.15 If the parties are more satisfied, their relationship benefits and the dispute is less likely to recur. Determining who is right or who is more powerful, with the emphasis on winning and losing, typically makes the relationship more adversarial and strained. Moreover, the loser frequently does not give up, but appeals to a higher court or plots revenge. To be sure, reconciling interests can sometimes take a long time, especially when there are many parties to the dispute. Generally, however, these costs pale in comparison with the transaction costs of rights and power contests such as trials, hostile corporate takeovers, or wars. In sum, focusing on interests, compared to focusing on rights or power, tends to produce higher satisfaction with outcomes, better working relationships, and less recurrence, and may also incur lower transaction costs. As a rough generalization, then, an interests approach is less costly than a rights or power approach. Rights versus Power Although determining who is right or who is more powerful can strain the relationship, deferring to a fair standard usually takes less of a toll than giving in to a threat. In a dispute between a father and teenager over curfew, a discussion of independent standards such as the curfews of other teenagers is likely to strain the relationship less than an exchange of threats. Determining rights or power frequently becomes a contest—a competition among the parties to determine who will prevail. They may compete with words to persuade a thirdparty decision maker of the merits of their case, as in adjudication; or they may compete with actions intended to show the other who is more powerful, as in a proxy fight. Rights contests differ from power contests chiefly in their transaction costs. A power contest typically costs more in resources consumed and opportunities lost. Strikes cost more than arbitration. Violence costs more than litigation. The high transaction costs stem not only from the efforts invested in the fight but also from the destruction of each side’s resources. Destroying the opposition may be the very object of a power contest. Moreover, power contests often create new injuries and new disputes along with anger, distrust, and a desire for revenge. Power contests, then, typically damage the relationship more and lead to greater recurrence of disputes than do rights contests. In general, a rights approach is less costly than a power approach.
Proposition To sum up, we argue that, in general, reconciling interests is less costly than determining who is right, which in turn is less costly than determining who is more powerful. This proposition does not mean that focusing on interests is invariably better than focusing on rights and power, but simply means that it tends to result in lower transaction costs,
Three Approaches to Resolving Disputes: Interests, Rights, and Power
greater satisfaction with outcomes, less strain on the relationship, and less recurrence of disputes.
Focusing on Interests Is Not Enough Despite these general advantages, resolving all disputes by reconciling interests alone is neither possible nor desirable. It is useful to consider why. When Determining Rights or Power Is Necessary In some instances, interests-based negotiation cannot occur unless rights or power procedures are first employed to bring a recalcitrant party to the negotiating table. An environmental group, for example, may file a lawsuit against a developer to bring about a negotiation. A community group may organize a demonstration on the steps of the town hall to get the mayor to discuss its interests in improving garbage collection service. In other disputes, the parties cannot reach agreement on the basis of interests because their perceptions of who is right or who is more powerful are so different that they cannot establish a range in which to negotiate. A rights procedure may be needed to clarify the rights boundary within which a negotiated resolution can be sought. If a discharged employee and her employer (as well as their lawyers) have very different estimations about whether a court would award damages to the employee, it will be difficult for them to negotiate a settlement. Nonbinding arbitration may clarify the parties’ rights and allow them to negotiate a resolution. Just as uncertainty about the rights of the parties will sometimes make negotiation difficult, so too will uncertainty about their relative power. When one party in an ongoing relationship wants to demonstrate that the balance of power has shifted in its favor, it may find that only a power contest will adequately make the point. It is a truism among labor relations practitioners that a conflict-ridden union–management relationship often settles down after a lengthy strike. The strike reduces uncertainty about the relative power of the parties that had made each party unwilling to concede. Such long-term benefits sometimes justify the high transaction costs of a power contest. In some disputes, the interests are so opposed that agreement is not possible. Focusing on interests cannot resolve a dispute between a right-to-life group and an abortion clinic over whether the clinic will continue to exist. Resolution will likely be possible only through a rights contest, such as a trial, or a power contest, such as a demonstration or a legislative battle. When Are Rights or Power Procedures Desirable? Although reconciling interests is generally less costly than determining rights, only adjudication can authoritatively resolve questions of public importance. If the 1954 Supreme Court case, Brown v. Board of Education (347 U.S. 483), outlawing racial segregation in public schools, had been resolved by negotiation rather than by adjudication, the immediate result might have been the same—the black plaintiff would have attended an allwhite Topeka, Kansas, public school. The societal impact, however, would have been far less significant. As it was, Brown laid the groundwork for the elimination of racial
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segregation in all of American public life. In at least some cases, then, rights-based court procedures are preferable, from a societal perspective, to resolution through interestsbased negotiation.16 Some people assert that a powerful party is ill-advised to focus on interests when dealing regularly with a weaker party. But even if one party is more powerful, the costs of imposing one’s will can be high. Threats must be backed up with actions from time to time. The weaker party may fail to fully comply with a resolution based on power, thus requiring the more powerful party to engage in expensive policing. The weaker party may also take revenge—in small ways, perhaps, but nonetheless a nuisance. And revenge may be quite costly to the more powerful if the power balance ever shifts, as it can quite unexpectedly, or if the weaker party’s cooperation is ever needed in another domain. Thus, for a more powerful party, a focus on interests, within the bounds set by power, may be more desirable than would appear at first glance. Low-Cost Ways to Determine Rights and Power Because focusing on rights and power plays an important role in effective dispute resolution, differentiating rights and power procedures on the basis of costs is useful. We distinguish three types of rights and power procedures: negotiation, low-cost contests, and high-cost contests. Rights-based negotiation is typically less costly than a rights contest such as court or arbitration. Similarly, power-based negotiation, marked by threats, typically costs less than a power contest in which those threats are carried out. Different kinds of contests incur different costs. If arbitration dispenses with procedures typical of a court trial (extensive discovery, procedural motions, and lengthy briefs), it can be much cheaper than going to court. In a fight, shouting is less costly than physical assault. A strike in which workers refuse only overtime work is less costly than a full strike.
The Goal: An Interests-Oriented Dispute Resolution System Not all disputes can be—or should be—resolved by reconciling interests. Rights and power procedures can sometimes accomplish what interests-based procedures cannot. The problem is that rights and power procedures are often used where they are not necessary. A procedure that should be the last resort too often becomes the first resort. The goal, then, is a dispute resolution system that looks like the pyramid on the right in Figure 2: most disputes are resolved through reconciling interests, some through determining who is right, and the fewest through determining who is more powerful. By contrast, a distressed dispute resolution system would look like the inverted pyramid on the left in Figure 2. Comparatively few disputes are resolved through reconciling interests, while many are resolved through determining rights and power. The challenge for the systems designer is to turn the pyramid right side up by designing a system that promotes the reconciling of interests but also provides low-cost ways to determine rights or power for those disputes that cannot or should not be resolved by focusing on interests alone.
Three Approaches to Resolving Disputes: Interests, Rights, and Power
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FIGURE 2 | Moving from a Distressed to an Effective Dispute Resolution System
Power Power Rights Interests
Rights
Interests Distressed System
Effective System
Endnotes 1. In order to steer between the Scylla of sexist language and the Charybdis of awkward writing, we have chosen to alternate the use of masculine and feminine pronouns. 2. This definition is taken from W. L. F. Felstiner, R. L. Abel, and A. Sarat, “The Emergence and Transformation of Disputes: Naming, Blaming, Claiming,” Law and Society Review 15 (1980–81), pp. 631–54. The article contains an interesting discussion of disputes and how they emerge. 3. See W. L. F. Felstiner, R. L. Abel, and A. Sarat, “The Emergence and Transformation of Disputes: Naming, Blaming, Claiming.” 4. In speaking of resolving disputes, rather than processing, managing, or handling disputes, we do not suggest that resolution will necessarily bring an end to the fundamental conflict underlying the dispute. Nor do we mean that a dispute once resolved will stay resolved. Indeed, one of our criteria for contrasting approaches to dispute resolution is the frequency with which disputes recur after they appear to have been resolved. See S. E. Merry, “Disputing Without Culture,” Harvard Law Review 100 (1987), pp. 2057–73; A. Sarat, “The ‘New Formalism’ in Disputing and Dispute Processing,” Law and Society Review 21 (1988), pp. 695–715. 5. For an extensive discussion of interests-based negotiation, see R. Fisher and W. L. Ury, Getting to Yes (Boston: Houghton Mifflin, 1981). See also D. A. Lax and J. K. Sebenius, The Manager as Negotiator (New York: Free Press, 1986). 6. S. B. Goldberg and F. E. A. Sander, “Saying You’re Sorry,” Negotiation Journal 3 (1987), pp. 221–24.
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7. We recognize that in defining rights to include both legal entitlements and generally accepted standards of fairness, we are stretching that term beyond its commonly understood meaning. Our reason for doing so is that a procedure that uses either legal entitlements or generally accepted standards of fairness as a basis for dispute resolution will focus on the disputants’ entitlements under normative standards, rather than on their underlying interests. This is true of adjudication, which deals with legal rights; it is equally true of rights-based negotiation, which may deal with either legal rights or generally accepted standards. Since, as we shall show, procedures that focus on normative standards are more costly than those that focus on interests, and since our central concern is with cutting costs as well as realizing benefits, we find it useful to cluster together legal rights and other normative standards, as well as procedures based on either. 8. A court procedure may determine not only who is right but also who is more powerful, since behind a court decision lies the coercive power of the state. Legal rights have power behind them. Still, we consider adjudication a rights procedure, since its overt focus is determining who is right, not who is more powerful. Even though rights, particularly legal rights, do provide power, a procedure that focuses on rights as a means of dispute resolution is less costly than a procedure that focuses on power. A rights-based contest, such as adjudication, which focuses on which disputant ought to prevail under normative standards, will be less costly than a power-based strike, boycott, or war, which focuses on which disputant can hurt the other more. Similarly, a negotiation that focuses on normative criteria for dispute resolution will be less costly than a negotiation that focuses on the disputants’ relative capacity to injure each other. Hence, from our cost perspective, it is appropriate to distinguish procedures that focus on rights from those that focus on power. 9. R. M. Emerson, “Power-Dependence Relations,” American Sociological Review 27 (1962), pp. 31–41. 10. A. O. Hirschman, Exit, Voice, and Loyalty: Responses to Declines in Firms, Organizations, and States (Cambridge, MA: Harvard University Press, 1970). Exit corresponds with avoidance, loyalty with lumping it. Voice, as we shall discuss later, is most likely to be realized in interests-based procedures such as problem-solving negotiation and mediation. 11. A fifth evaluative criterion is procedural justice, which is perceived satisfaction with the fairness of a dispute resolution procedure. Research has shown that disputants prefer third-party procedures that provide opportunities for outcome control and voice. See E. A. Lind and T. R. Tyler, The Social Psychology of Procedural Justice (New York: Plenum, 1988); and J. M. Brett, “Commentary on Procedural Justice Papers,” in R. J. Lewicki, B. H. Sheppard, and M. H. Bazerman (eds.), Research on Negotiations in Organizations (Greenwich, CT: JAI Press, 1986), pp. 81–90. We do not include procedural justice as a separate evaluation criterion for two reasons. First, unlike transaction costs, satisfaction with outcome, effect on the relationship, and recurrence, procedural justice is meaningful only at the level of a single procedure for a single dispute. It neither generalizes across the multiple procedures that may be used in the resolution of a single dispute nor generalizes across disputes to construct a systems-level cost. The other costs will do both. For example, it is possible to measure the disputants’ satisfaction with the outcome of a dispute, regardless of how many different procedures were used to resolve that dispute. Likewise, it is possible to measure satisfaction with outcomes in a system that handles
Three Approaches to Resolving Disputes: Interests, Rights, and Power
many disputes by asking many disputants about their feelings. Second, while procedural justice and distributive justice (satisfaction with fairness of outcomes) are distinct concepts, they are typically highly correlated. See E. A. Lind and T. R. Tyler, The Social Psychology of Procedural Justice. 12. O. E. Williamson, “Transaction Cost Economics: The Governance of Contractual Relations,” Journal of Law and Economics 22 (1979), pp. 233–61; and J. M. Brett and J. K. Rognes, “Intergroup Relations in Organizations,” in P. S. Goodman and Associates, Designing Effective Work Groups (San Francisco: Jossey-Bass, 1986), pp. 202–36. 13. For a summary of the evidence of a relationship between procedural and distributive justice— that is, satisfaction with process and with outcome—see E. A. Lind and T. R. Tyler, The Social Psychology of Procedural Justice. Lind and Tyler also summarize the evidence showing a relationship between voice and satisfaction with the process. For evidence of the effect of participation in shaping the ultimate resolution beyond simply being able to accept or reject a third party’s advice, see J. M. Brett and D. L. Shapiro, “Procedural Justice: A Test of Competing Theories and Implications for Managerial Decision Making,” unpublished manuscript. 14. D. A. Lax and J. K. Sebenius, The Manager as Negotiator. 15. The empirical research supporting this statement compares mediation to arbitration or adjudication. Claimants prefer mediation to arbitration in a variety of settings: labor-management (J. M. Brett and S. B. Goldberg, “Grievance Mediation in the Coal Industry: A Field Experiment,” Industrial and Labor Relations Review 37 (1983), pp. 49–69), small claims disputes (C. A. McEwen and R. J. Maiman, “Small Claims Mediation in Maine: An Empirical Assessment,” Maine Law Review 33 (1981), pp. 237–68), and divorce (J. Pearson, “An Evaluation of Alternatives to Court Adjudication,” Justice System Journal 7 (1982), pp. 420–44). 16. Some commentators argue that court procedures are always preferable to a negotiated settlement when issues of public importance are involved in a dispute (see, for example, O. M. Fiss, “Against Settlement,” Yale Law Journal 93 (1984), pp. 1073–90), and all agree that disputants should not be pressured into the settlement of such disputes. The extent to which parties should be encouraged to resolve disputes affecting a public interest is, however, not at all clear. See H. T. Edwards, “Alternative Dispute Resolution: Panacea or Anathema?” Harvard Law Review 99 (1986), pp. 668–84.
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Reading 1.2
Selecting a Strategy Roy J. Lewicki Alexander Hiam Karen W. Olander
After you have analyzed your own position and that of the other party and have looked at the contextual issues of the negotiation, you are ready to select a strategy to use in negotiating with the other party. This lengthy preparation allows you to negotiate strategically, adopting a style and plan that are best suited to the situation. As we have noted before, most people skip this preparation; as a result, they negotiate blind. The right strategy greatly improves your odds of a successful outcome. In this [reading], we will look at five basic strategies that can be used for negotiation. Each strategy applies to a particular set of circumstances and has its own advantages and disadvantages. If you have done your homework, you will be well prepared for selecting the appropriate strategy or combination of strategies for a particular negotiation situation. Note that we say combination of strategies. Most negotiations involve a mixture of issues, and each may be best handled with a different strategy. There is usually no single “best” strategy. Variations in the positions of the parties and the context of the negotiation will affect each negotiation differently. And as negotiations continue over time, each side will make adjustments that may call for shifts or changes of strategy by the other side.
Key Factors That Determine the Types of Strategies The five basic types of negotiating strategies depend on your combination of preferences for two basic concerns: the relationship with the other negotiator and the outcome of the negotiation itself. The strength or importance of each of these two concerns, and their relative priority, should direct the selection of the optimal negotiation strategy. The other party may select a strategy in a similar manner. If they do not, you will want to give serious consideration as to whether you should share this strategic negotiating model with them. Your chances of a good outcome are often better if both parties agree to play by the same rules. The interaction of the two parties’ choices will further influence the negotiation process that actually occurs, and this will have dramatic impact on the outcomes. We will now describe each of these concerns. Relationship Concerns First, how important is your past and future relationship with the other party? How have the two of you gotten along in the past, and how important is it for the two of you to get along, work together, and like each other in the future? Perhaps it is very important. Perhaps it does not matter at all. Perhaps it is somewhere between these extremes. If maintaining Source: “Selecting a Strategy,” from Think Before You Speak: A Complete Guide to Strategic Negotiation, by Roy J. Lewicki, Alexander Hiam, and Karen W. Olander, 1996, pp. 54–75. New York: John Wiley & Sons, Inc. Used with permission. 14
Selecting a Strategy
a good relationship with the other party is important to you, then you should negotiate differently than if the relationship is unimportant, or if it is unlikely that you can repair the relationship. The importance of the relationship between the two parties will be affected by a number of factors: (1) whether there is a relationship at all; (2) whether that relationship is generally positive or negative (whether the two of you have gotten along well or poorly in the past); (3) whether a future relationship is desirable; (4) the length of the relationship and its history, if one exists; (5) the level of and commitment to the relationship; (6) the degree of interdependence in the relationship; and (7) the amount and extent of free, open communication between the parties. For example, if you are negotiating the purchase of a new car, you may never have met the salesperson before and may not expect to have a continuing relationship. Therefore, your relationship concerns are low. However, if your business uses a fleet of cars and you expect to work with this person on deals in the future, your relationship concerns are high, and this will affect negotiations. Or if you are buying the car from your neighbor, and want to continue to have a good relationship with that person, you may negotiate differently than if you are buying it from a stranger. In the case of a party with whom you have an ongoing relationship, it may be congenial, or it may be antagonistic if earlier negotiations have been hostile. If it is a congenial relationship, you may wish to keep it that way, and avoid escalating emotions. If the relationship has a history of hostility, you may prefer not to negotiate, or you may want to lower the emotional level in the negotiations. This is important if you expect the relationship to continue in the future. Outcome Concerns The second factor affecting negotiating strategy is the importance of the outcome of the negotiation. How important is it for you to achieve a good outcome in this negotiation? Do you need to win on all points to gain the advantage? Or is the outcome of only moderate importance? Or does the outcome not really matter in this negotiation? For example, let us return to the car-buying example. If you are buying a car from a dealer, price may be the most important factor, and you may have absolutely no interest at all in the relationship. If you are buying the car from your neighbor, and you want to keep a good relationship with your neighbor, then you might not press as hard to get a good price. Finally, if you are buying the car from your mother simply so that she doesn’t have to worry about it any more, you probably are most concerned about the relationship and care very little about the outcome. The important message is that the priority of each of the two negotiating concerns, relationship and outcome, will direct the strategy you choose to use for a particular negotiation. The relationship may be your top priority, especially if there is a relationship history and you want to maintain the relationship. In contrast, in many other negotiations, the outcome is the most important factor, as in the example of buying a car. Or relationship and outcome may both be important. This will require working together with the other party in some fashion to effect a result. If the relationship concerns have a strong influence on the matter at hand, and you decide to emphasize them over the outcome, then you will select a different strategy than you would select where the outcome is more important.
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FIGURE 1 | Negotiation Strategies High Accommodating Lose to win
Collaborative Win–win
Compromise Split the difference
Importance of Relationship
Avoiding Lose–lose
Competitive Win at all cost Win–lose
Low Low
Importance of Outcome
High
If we show the relationship and outcome concerns on a graph, with high and low priorities for each represented, it looks like Figure 1. The vertical axis represents your degree of concern for the relationship, and the horizontal axis represents your degree of concern for the outcome. When we look at the various quadrants created by different levels of concern for relationship and outcome, five distinctly different strategies emerge: 1.
2.
3.
4.
Avoiding (lose–lose): This strategy is shown in the lower left of the diagram. In this strategy, the priorities for both the relationship and the outcome are low. Neither aspect of the negotiation is important enough for you to pursue the conflict further. You implement this strategy by withdrawing from active negotiation, or by avoiding negotiation entirely. Accommodating (lose to win): This strategy is represented in the upper left of the diagram, where the importance of the relationship is high and the importance of the outcome is low. In this situation, you “back off” your concern for the outcome to preserve the relationship; you intentionally “lose” on the outcome dimension in order to “win” on the relationship dimension. Competitive (win–lose): The lower right of the diagram represents high concern for the outcome and low concern for the relationship. You use this strategy if you want to win at all cost, and have no concern about the future state of the relationship. Collaborative (win–win):1 The upper right part of the diagram defines a strategy where there is a high priority for both the relationship and the outcome. In this strategy, the parties attempt to maximize their outcomes while preserving or enhancing the relationship. This result is most likely when both parties can find a resolution that meets the needs of each.
Selecting a Strategy
5.
Compromising (split the difference): In the middle is an area we will call a compromising, or “satisficing,” strategy. It represents a combination approach that is used in a variety of situations. For example, it is often used when the parties cannot achieve good collaboration, but still want to achieve some outcomes and/or preserve the relationship. Thus, for example, if the parties cannot achieve good collaboration but do not want to pursue the outcome and abandon the concern for the relationship (or vice versa), then a compromising strategy can be effective. It is also often used when the parties are under time pressure and need to come to a resolution quickly. Each party will give in somewhat to find a common ground.
These brief descriptions are ideal or “pure” negotiating situations where there may be only one issue at stake. In contrast, most real-life negotiation situations are frequently complex, and thus are often best addressed by using a mix of strategies. Remember, too, that the other party will be formulating a negotiating strategy. You will find your analysis of the other party helpful when you are selecting the appropriate strategy for a particular situation, because you may want to adjust your strategy choice based on what you expect the other to do. If the parties are able to agree on one strategy, negotiations will be easier. In real-life situations, however, each party may start with a different strategy. We now look at the five basic negotiating strategies in detail. Although you may be inclined to use one particular strategy, it is a good idea to study the components of each strategy carefully. In this way, you can be prepared for the other party’s moves, if they use a different strategy than you anticipated.
Avoiding Strategy (Lose–Lose) The avoiding strategy is used infrequently, but has merit in certain situations. Our nickname of this strategy is actually a misnomer, since an active choice of an avoiding strategy is not necessarily a “loss” on either the relationship or the outcome. However, since we tend to refer to the more active pursuits of relationship and outcomes as “winning,” we will call the avoiding strategy a “loss” in terms of the outcome and the relationship. Why would one choose an avoiding strategy? Because negotiations can be costly (in time, money, and relationships) and there are many cases where negotiators would have been better off to drop the matter entirely! The person employing an avoiding strategy basically sees negotiation as a waste of time—or not worth pursuing. This person may feel that his or her needs can be met without negotiating. In addition, this person may decide that the outcome has very low value and that the relationship is not important enough to develop through the negotiation. As a result, the party reasons that neither the relationship nor the outcome is sufficiently important (at least compared with the costs) and so takes no action or simply refuses to negotiate. If the “avoider” refuses to negotiate when the other party wants to, this may have a negative effect on the relationship. Even when the outcome is unimportant, many people will prefer to avoid angering the other party. A more moderate method of avoidance may be to not raise any objections to the proceedings, or simply to not show up. If the other party insists on negotiations, and it is important to preserve the relationship, then you might switch to an accommodating strategy.
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The avoiding strategy also is a possibility when a party can pursue a very strong alternative outcome. If a strong alternative is available, the person may choose not to negotiate. For example, if you are looking at two different houses to buy, and both meet your needs, you may choose not to negotiate with one seller because you feel the price is too high and the person is inflexible. So you simply select your alternative and pursue an avoiding strategy in the first negotiation. Alternatives can provide you with bargaining power in other situations, as we will see. If you have no alternatives, or only weak ones, you may also choose not to negotiate. We will discuss alternatives in more depth later.
Accommodating Strategy (Lose to Win) An accommodating strategy is used when the relationship is more important than the outcome of the negotiation. The person using this strategy may prefer to primarily concentrate on building or strengthening a relationship. Since other people are usually happy when we give them what they want, we may simply choose to avoid focusing on the outcome and give it to the other side, thus making them happy. A second reason is that we may want something else in the future. Since many social relationships are built on rather informal expectations and rules of exchange,2 giving something away now may create the expectation that they need to give us what we want later on. So we give them their preferences now to obtain a better future outcome. A short-term loss is exchanged for a long-term gain. For example, in a manager–employee relationship, the employee may want to establish a good relationship with the boss now to have a good evaluation, a raise, or a better position in the future. The employee may choose an accommodating strategy and not push for a salary increase now, at her three-month review, if it is expected that this will put her in a better position for a raise at the six-month review. The accommodating strategy may be used to encourage a more interdependent relationship, to increase support and assistance from the other, or even to cool off hostile feelings if there is tension in the relationship. If the relationship is ongoing, then it may be particularly appropriate to “back down” now, to keep communication lines open and not pressure the opponent to give in on something that they do not want to discuss. In most cases, this strategy is short term—it is expected that accommodation now will create a better opportunity to achieve outcome goals in the future. For example, a manager might not urge an employee to take on an extra task right now if the employee is overloaded with projects and the manager can find another person to complete the task, especially if the manager knows that a big project is coming next week, and everyone is going to have to put in overtime. In a long-term negotiation or over a series of negotiations, it may happen that one side constantly gives in. This precedent may be noted by the other side and seen as accommodating behavior (which it is). It should not be construed as an invitation to the other party to be competitive. But sometimes it is. If this happens to you, the other party will begin to compete and take advantage of your guard being down. You will need to learn how to use damage control and reconnection strategies to overcome these problems. The accommodating strategy is not usually considered a formal strategy in negotiation. Many negotiation books do not even mention accommodation as a viable strategy; however,
Selecting a Strategy
most of these books also are based on “high outcome concern” strategies (competing or collaborating) and spend less time on specific strategies to improve or strengthen the relationship. There are two important times to consider an accommodating strategy: first, if the outcome is not very important to you, or pursuing the outcome is likely to create too much tension and animosity, and second, if your primary objective is to improve the relationship. In addition, you might decide to switch to an accommodating strategy during negotiations, particularly when they reach a point where you no longer wish to press for a resolution.
Competitive Strategy (Win–Lose) When many people think of negotiation and bargaining, this is the strategy they think of. The competitive strategy is used frequently, so it is important to understand how it works, even if you do not plan to use it yourself. In a competitive strategy, the outcome of the negotiation is more important than the relationship. Because the outcomes (resources, gains, profits, etc.) are seen as finite and limited in amount or size, the person engaging in a competitive strategy wants to get as much of those outcomes as possible. (We will use the term competition to denote the person using the competitive strategy.) We call this strategy win to lose because it is likely that while competitors may gain on the outcome, they strain and endanger the relationship between the parties. The thinking and goals in this strategy are short term: to maximize the magnitude of the outcome right now, and to not care about either the long-term consequences of this strategy or the relationship. The relationship with the other party does not matter, for one of several reasons: (1) this may be a one-time negotiation with no future relationship; (2) the future relationship may not be important; (3) the relationship exists, but was poor to begin with; or (4) the other party may have a reputation for hard bargaining or dishonesty, and this strategy is adopted for defensive reasons. At any rate, this strategy is undertaken with the assumption that the future relationship with the other party is unimportant, but the specific outcome is important. The competitive strategy tends to emphasize the differences between the parties, promoting a “we/they” attitude. Thus the relationship during negotiation in a competitive situation will be characterized by lack of trust and even by conflict. This contrasts with the collaborative strategy in which differences are minimized and similarities emphasized. The goal in the competitive strategy is to get the other party to give in, and thus to satisfy the competitor’s needs now. It is based on the “I win, you lose” concept. The competitor will do anything to accomplish the objectives and obtain as much of the pie as possible. This can include a variety of behaviors, including hardball tactics. Critical Factors in a Competitive Strategy A Well-Defined Bargaining Range In a competitive strategy, each side has a bargaining range, which consists of a starting point, a target, and an ending point or walkaway. Bargaining occurs because the bargaining range for each party is different. During bargaining, you attempt to bring the two ranges into overlap so that each party is satisfied. The starting point is announced or inferred as the negotiations begin. Starting points will be different for the two parties. In new car negotiations, for example, the buyer will have a lower starting point, the seller, a higher one. Usually the buyer makes gradual
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concessions upward, while the seller will make gradual concessions downward, with the expectation that the two will be able to meet somewhere in the middle. In labor negotiations, labor is usually expected to ask “high” and management to offer “low,” again with the expectation that concessions on each side will result in finding a meeting ground. Both parties will have a walkaway point, which is the cutoff point, beyond which they will not go. The walkaway point of the other party is usually not known, and is not stated. In fact, they will actively try to keep you from learning their walkaway point, because if you knew it, you would offer them something slightly above it and expect that they would agree! If talks break off because this point has been reached, then you may surmise that the walkaway point of the other party was probably close to, or at, the last offer that the other side made. If this point is not reached, and the parties agree to a resolution, this point may never be known. As long as the bargaining range for one party in some way overlaps with that of the other party, then there is room for bargaining. (By overlap, we mean that the most the buyer is willing to offer is above the least the seller is willing to accept.) If the ranges do not overlap (and this may not be known at the beginning of the negotiations), then there may be no successful negotiation. The parties will need to decide whether to adjust their bargaining ranges, or to end negotiations. A Good Alternative An alternative or BATNA3 (best alternative to a negotiated agreement) is an option that can be pursued if the current negotiation fails. It is an outcome outside the scope of the negotiation with this other party, and can be pursued if it appears more attractive than any potential outcome from this negotiation. Alternatives are good to have because they can be weighed against the value of any particular outcome from this negotiation, to decide which is most advantageous. Not only is an alternative an evaluative tool, it is also a power tool that can be introduced into negotiations in the manner of “I have this alternative that is equally good and costs less. Can you improve on what I will get if I pursue my alternative?” Alternatives interact with walkaway points to influence the choices you make. For example, say you currently make $25,000 in your job and you are job hunting. You decide that you want to find a job making at least $30,000. What do you do if you find a job you like, but it pays only $28,000? Do you take it or not? If there are no other such jobs available (no alternatives) because the economy is sluggish, then you might take the $28,000 job. However, if many alternative jobs are available for the taking, then you may hold out for a higher salary. On the other hand, suppose you lose your $25,000 job and you are offered $24,000 for another similar job. Will you take it? Perhaps under these circumstances, you will be more likely to do so. In any negotiation, it is wise to be well-informed of your alternatives and, wherever possible, to use them to your advantage. Tactics The competitive strategy is also characterized by a number of tactics calculated to enhance the competitor’s position and place the other party at a disadvantage. These include behavioral tactics such as bluffing, being aggressive, and threatening, which can give the competitor power over the other party. While these tactics work sometimes, they also have the problem that they can potentially backfire on the person using them, so they must be employed carefully.
Selecting a Strategy
Results and Drawbacks of Using a Competitive Strategy The competitive strategy can be successful, in spite of being one-sided. People using this strategy usually come away from a negotiation with the belief that they obtained the best that they could. Negotiations that rely on a competitive strategy can be costly and time-consuming, especially if each party holds out for all its demands. Much time is spent researching, pressuring, and “psyching out” the other party. Further time is consumed making moves and countermoves, trying to figure out what the other party will do. Competitive strategies are often compared with strategies used in chess, military warfare, and other tactical, competitive battles. The time spent in these activities is very different from alternative uses of that time; for example, in the collaborative model, this same time could be spent on mutual exploration of issues, sharing of information, and an attempt to find mutually acceptable solutions. Time and goodwill may also be lost if the competitor anticipates that the other party will be competitive and prepares a competitive strategy. If the other party had not intended to be competitive, they may switch strategies when they discover that you have decided to be competitive, thus escalating emotions and increasing conflict. Not only do you lose time, but you may have alienated the other party, hurt the relationship, and toughened them so that they are now willing to give you far less than they might have on the outcome dimension. A major problem with the competitive strategy is that it is frequently used by inexperienced or untrained negotiators who believe that competition is the only viable strategy. They may be missing opportunities by automatically selecting the competitive strategy. It is important to select a strategy only after thorough investigation of the issues, an understanding of what strategy the other party is likely to pursue, and some clear decisions about the relative importance of the outcomes and the relationship with the other party. Likewise, it is possible to underestimate the other parties in a competitive situation. Remember that they, too, have adopted the mission to win at all costs. When using a competitive strategy, we tend to underestimate the strength, wisdom, planning, and effectiveness of the other party and assume that even though they are preparing to be competitive too, we can beat them at their game! If you do not pay close attention to their behavioral and verbal clues, you may set yourself up for manipulation by the other party. Finally, we need to beware of something called the self-fulfilling prophecy. A selffulfilling prophecy is something we believe so strongly that we actually make it come true. It often happens in negotiation when one party expects the other to behave in a particular way, and as a result, actually makes the party behave that way. This tends to come true if the other party is using the competitive strategy because they think you are. Anticipating that the other is going to be competitive, we prepare to be competitive ourselves. The cues we give off in this preparation—our language, tone of voice, gestures, and behaviors—let the other party believe that we intend to be competitive. So they behave competitively, which only assures us that our initial assumptions were right.
The Collaborative Strategy (Win–Win) A collaborative strategy is one in which both parties consider the relationship and the outcome to be equally important. This strategy is also referred to as cooperative or win–win.4 In a collaborative strategy, the parties to the negotiation either begin with compatible goals
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or are willing to search for ways to pursue their goals so that both can gain. This is in sharp contrast to the competitive strategy, in which the parties believe their goals are mutually exclusive, and only one side can win. The relationship between the parties is very likely an ongoing one, with some established history of give-and-take, so that the parties trust each other and know that they can work together. In addition, collaborative strategies are often initiated when the parties know that they want to establish long-term goals for particular outcomes and for the relationship. For example, many local governments are finding that they simply cannot sustain the operating costs of the past, especially in view of the voters’ unwillingness to accept higher taxes. Knowing that city budgets have to be cut, departments need to work collaboratively, with each department taking a cut, and try to find creative ways to help each other stay in the black or at least minimize the red. To make this strategy work, both parties to the negotiation must be willing to use the collaborative strategy; if only one side employs it, and the other uses a different one, the chances are that both parties cannot achieve both an optimal outcome and preserve or enhance their working relationship. A collaborative strategy is particularly appropriate within an organization, when two parties have common ground, or in situations where two parties have the same customers, same clients, same suppliers, or same service personnel. In any of these cases, the parties have or want to establish a working relationship, and to keep it working smoothly. For a collaborative strategy to work, there must be a high degree of trust, openness, and cooperation. The parties look for common needs and goals and engage in mutually supportive behavior to obtain them. Both parties realize that they are interdependent and that their cooperative effort can solve the problems and meet the needs of both sides. In collaboration, communication between parties is open and accurate. This contrasts greatly with the competitive strategy, in which the negotiators have a high level of distrust and guard information carefully to prevent the other side from obtaining the advantage. The parties in a collaborative endeavor have support from their constituencies. The constituencies trust the parties to find common ground and support them in doing so. Doing so may mean not achieving absolutely everything the constituency wanted on the substantive issues, and the constituency has to accept this as valid. In contrast, in the competitive strategy, the constituencies usually push the negotiator to get everything he or she can, regardless of the future of the relationship. Collaborating parties respect deadlines and are willing to renegotiate the time frame if necessary to achieve their goals. Contrast this with the competitive strategy, where time is used as an obstacle or as a power ploy to accomplish one’s own ends. The collaborative strategy is hard work, but the results can be rewarding. It takes extra time and creativity to build trust and to find win–win solutions. But the outcome and relationship results are usually better for both parties. Keys to Successful Collaboration The collaborative strategy has traditionally been underutilized, because most people do not understand the fine points of the strategy and because it is less familiar than the competitive strategy. Many negotiations are based on the competitive model, which is the way most
Selecting a Strategy
people view negotiation—as a competitive situation where one is better off being suspicious of the other, and the fundamental object is to get all the goodies. Of key importance in a collaborative strategy is commitment. Both parties need to be committed to (1) understanding the other party’s needs and objectives; (2) providing a free flow of information, both ways; and (3) finding the best solution(s) to meet the needs of both sides.5 Understanding the other party’s goals and needs is critical to the collaborative strategy. We suggested that this is important in competitive strategy as well, but for very different reasons. In a competitive strategy, you may know or think you know what the other party wants; but your objective in learning this is to facilitate your own strategy development, and also to strategize how to beat the other side by doing better than them or denying them what they want to achieve. In a collaborative strategy, your objective is to understand their goals and needs so that you can work with them to achieve their goals as well as your own. Good collaboration frequently requires not only understanding their stated objectives, but their underlying needs—why they want what they want. In the collaborative strategy, both parties must be willing to ask questions and listen carefully to the answers, to learn about the other’s needs. Second, to provide a free flow of information, both parties must be willing to volunteer information. The information has to be as accurate and as comprehensive as possible. Both sides need to understand the issues, the problems, the priorities, and the goals of the other. They need to fully understand the important context factors in the negotiation. Compare this with the competitive strategy, in which information is closely guarded, or, if shared, often distorted. Finally, having listened closely to each other, the parties can then work toward achieving mutual goals that will satisfy both parties. To do this, the parties will need to minimize their differences and emphasize their similarities. They will need to focus on the issues and work at keeping personalities out of the discussions. Collaborative goals differ from competitive goals. In competition, the goal is obtaining the largest share of the pie, at any cost, without giving away any information or conceding on any issue. In collaboration, each party must be willing to redefine its perspective in light of the collaboration, knowing that the whole can be greater than the sum of the parts. In this light, having a strong knowledge of the problem area is a definite advantage. While a lack of information can be overcome, starting out with the knowledge is definitely an asset. To achieve success, each party from the beginning must send signals to the other that will help build trust between and among those negotiating. Obstacles to the Collaborative Strategy Both parties to a negotiation must be willing to collaborate if this strategy is to be successful. It will be difficult, if not impossible, to employ collaborative strategy under the following circumstances: • • •
One party does not see the situation as having the potential for collaboration. One party is motivated only to accomplish its own ends. One party has historically been competitive; this behavior may be hard to change.
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• • • • •
One party expects the other to be competitive and prepares for negotiation based on this expectation. One party wants to be competitive and rationalizes this behavior. One party may be accountable to a constituency that prefers the competitive strategy. One party is not willing to take the time to search for collaborative items. The negotiation or bargaining mix may include both competitive and collaborative issues. (Sometimes, the two parties can collaborate on collaborative issues and compete on competitive issues. Our experience, however, is that competitive processes tend to drive out collaborative processes, making collaboration harder to achieve.)
Most of the foregoing obstacles reflect a conflict between the parties’ preferences for strategy. It may be possible to get the other party to take a different stance if it appears to be desirable in light of the information. Communication is of major importance when you are trying to establish a collaborative relationship.
Compromising Strategy Ultimately, most negotiating situations are mixed; some bargaining elements are competitive in nature, and others can be approached collaboratively. There are times when the relationship is only somewhat important, and the outcomes are only somewhat important. This is where the fifth strategy comes in. The compromising strategy may be thought of as an “adequate for most occasions” approach to negotiation. In this strategy, each side will have to modify its priorities for the relationship and for the preferred outcome(s). In both cases, the parties are making a decision that compromising is preferred because, on the one hand, both parties gain something (an advantage over accommodation or competition), both parties gain something (as opposed to nothing—an advantage over avoiding), and yet compromising does not require all the intentional effort required for collaboration. For example, if a manufacturing facility has a mandate to contain costs, the union and the factory representatives (whose relationship is usually competitive) will want to find an acceptable way to achieve this. The union will want to avoid layoffs. The company may propose a wage freeze. So the two parties may agree on a small wage increase offset by a decrease of the labor pool by attrition rather than layoffs; this is a compromise. While negotiators usually don’t start off planning a compromise (particularly if a competitive or collaborative strategy is possible), compromising is often seen as an acceptable “second choice.” There are three major reasons to choose a compromising strategy (particularly as a “default” alternative to other strategies): 1.
A true collaborative strategy does not seem to be possible. One or both parties don’t believe that true win–win can be achieved because it is simply too complex or too difficult. Or the relationship may already be too strained for the parties to work together in a manner that fosters and supports good collaboration.
Selecting a Strategy
2.
3.
The parties are short of time or other critical resources necessary to get to collaboration. Compromising is usually quick and efficient. While it may be suboptimal on the quality of the outcomes achieved, the trade-off between achieving a great outcome and the time required to do it may force one to pick time over quality. Both parties gain something (or don’t lose anything) on both dimensions. As opposed to pursuing a competitive strategy (and maximizing outcomes at the expense of the relationship) or an accommodating strategy (and sacrificing outcomes for the relationship), compromising assures some gain on both the outcome and relationship dimensions.
When to Choose Which Strategy Now that we have reviewed the five basic strategies, we come to an important part of this [reading]: how to decide which strategy you should use for a negotiation. There are two key factors to consider: 1. 2.
How important is the outcome to be gained from this negotiation? How important is the past, present, and future relationship with the opponent? The following paragraphs describe ways to decide about these two questions and other factors to consider in answering them.
Situation Look at the situation and try to figure out which strategy might be best in those circumstances. Do I care a lot about the outcomes in this situation? If I do, am I willing to sacrifice my relationship with the other person? Or, conversely, is the relationship so important that I am unwilling to endanger it by pursuing the outcome? Alternatively, consider the conditions under which each strategy is most effective (see Figure 1 earlier in this reading). Which of these conditions apply to the present situation? Remember that each strategy has both advantages and disadvantages. One strategy is more or less appropriate depending on the type of conflict and the situation. Preferences Analyze your personal preferences for the various strategies. You will probably be more successful using a strategy that feels comfortable. Research has shown that people in conflict have distinct preferences for employing certain strategies in conflict situations.6 These preferences lead individuals to develop distinct styles with which they approach many situations. Based on past experience and history, some people have strong biases toward being competitive, collaborative, compromising, accommodating, or avoiding in conflict situations. The stronger your preference for a particular conflict management strategy (style), the more often you will choose it, the more “biased” you become in seeing it as an advantageous strategy, and the more likely you will be to see that strategy (style) as appropriate in a variety of situations. Thus, if you normally respond to conflict (and negotiation) situations in a competitive manner, then you are more likely to see the competitive strategy
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as widely appropriate—even when it may not be. Similarly, the less likely you are to avoid conflict, the more likely it is that you will not choose the avoiding strategy—even when it may be the most appropriate thing to do. Therefore, understanding your preferences and “biases” is critical, because they will affect your tendency to overselect or underselect strategies in particular situations. Your preferences for a particular strategy are also influenced by subtle issues such as your values and principles. These may be harder, in some ways, to define than your goals, priorities, or limits. But how you evaluate the following will have a great impact on your willingness to use (or not use) certain strategies: • • • •
How much do you value truth, integrity, manners, courtesy? Is respect an important issue for you? How important is fair play? (And, for that matter, how do you define fair?) How much of your ego is involved in this—your reputation, your image? How concerned are you about how you will see yourself—or others will see you—if you get what you want, or don’t get what you want?
Experience Next, consider your experience using the various strategies. The more experience you have, the better you become at using that strategy—and, probably, the more likely you are to use it. Experience is one of the key factors that work to shape your preferences. Style Think about your own style as it interacts with the other party’s style, and consider the possible consequences. What will be the effect of such a combination? For example, two competitive parties might have more conflict in their negotiation than a competitive party negotiating with a party that usually yields. While it would be too complex to explore all the possible interactions between each of your five possible styles and the styles of the other in detail, we have summarized the possible combinations in Table 1. (Some of the cells in the left side are blank because the information is contained in the “matching cell” on the right side.) Perceptions and Past Experience Consider your perceptions and past experience with the other party. How you feel about the other party, and what you want to have happen in that relationship in the future, will drive your strategy. How well do you like each other? How much do you communicate? How much do you need to work with the other party in the future because you are dependent on what they can do for you? How much do you trust them? Your level of trust with the other party will be based on your past experience with them, and on the history and results of other negotiations they have conducted with you or with other parties in the past.
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Compromising
Collaborating
Competing
Accommodating
Avoiding
Both parties avoid pursuing their goals on the issues, and do not take any action to endanger the relationship.
Avoiding
Both parties avoid pursuing their goals on the issues, give in to the others goals, and try to smooth over relationship concerns.
Accommodator shows strong concern for the avoider, particularly the relationship; avoider attempts to minimize interaction.
Accommodating
Both parties pursue their goals on the issues and ignore any concern for the relationship; create conflict, mistrust, hostility.
Competitor pursues own goals on the issues, while the accommodator tries to make the competitor happy. Competitor usually wins big.
Competitor will dominate or avoider will escape. Avoider attempts to minimize interaction, while competitor tries to “engage.”
Competing
TABLE 1 | Likely Interactions between Negotiators of Different Styles
Both parties pursue their goals on the issues, show strong concern for the others’ goals and sustaining trust, openness, and a good relationship.
Collaborator shows strong concern for both issues and relationship, while competitor only pursues issues. Competitor usually “wins” and both parties become competitive.
Collaborator shows strong concern for both issues and relationship; accommodator tries to make the collaborator happy. Relationship should be very strong, but the collaborator may achieve better outcomes.
Collaborator shows strong concern for both issues and the relationship while avoider tries to escape. Collaborator may give up.
Collaborating
Both parties pursue their goals on the issues in a limited way and attempt to “do no harm” to the relationship.
Compromiser shows some concern. Collaborator shows strong concern for both issues and the relationship. Minimally, good compromise or better.
Compromiser shows some concern for both issues and relationship, while competitor only pursues issues. Competitor usually “wins” and both parties become competitive.
Compromiser shows some concern for both issues and relationship; accommodator tries to make the compromiser happy. Relationship will improve, compromiser may entice the accommodator to pursue some issue focus.
Compromiser shows some concern for both issues and relationship; avoider tries to escape. Compromiser may give up or avoider may engage.
Compromising
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Section One Negotiation Fundamentals
Other Factors Finally, there are other factors that may affect the selection of strategy but that might be less in your control. Nevertheless they should be part of the planning process. These reflect the following situational or context issues: •
• • •
Is this negotiation voluntary or imposed? Are both parties going into it willingly, or has it been assigned by a manager or some other constituency whose voice and support are influential? Is the situation highly structured? Are there rules, laws, and management mandates that will direct the negotiation? Is the agenda already established? (Can it be changed if necessary?) Finally, realize that the setting plays an important part in the proceedings and in the results. Consider not only the physical environment but elements of the psychological setting, including the players, both individuals and groups; their cultures and behavior; and established norms, standards, and processes.
Can You Make a “No Strategy” Choice? Some people whom we have taught in negotiation have argued that it is possible to adopt no strategy: You refuse to make an explicit strategic choice, and “let the chips fall” to determine what you will do next. This allows you “maximum flexibility” to adjust your approach based on what your opponent does first, or as the proceedings change. This approach has some distinct advantages. You get a chance to find out how your opponent wants to negotiate first, which may tell you a lot about your opponent. It also keeps you from making a commitment to a strategy that may not work or get completed— for example, to be accommodative while the other is being competitive? However, a “no strategy” choice is often the lazy negotiator’s way of avoiding a key part of the planning and preparation process. We do not think this is a good choice! While a “no strategy” choice may give you some negotiating leeway, it could also put you in a precarious position if you have not planned well. The result will be that the opposition gains an advantage over you before you realize what is going on! If you know that you care about the relationship, or the outcome, or both (or neither), select a strategy and begin to plan around it. If you are proactive about strategy choice, you are much more likely to get what you want than if you wait for the other to initiate action. As we have pointed out, you can always adapt your strategy later as necessary.
Moving Forward As with planning a trip, it is wise to know where you want to go and how to get there. It is important to have a well-developed plan that includes specific moves and countermoves. Your game plan can be modified as needed. Modifications will be based on what the other party says and does. Plans start with a strategy.
Selecting a Strategy
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Endnotes 1.
G. T. Savage, J. D. Blair, and R. L. Sorenson, “Consider Both Relationships and Substance When Negotiating Strategically,” Academy of Management Executive 3, no. 1 (1989), pp. 37–48.
2.
G. C. Homans, Social Behavior: Its Elementary Forms (New York: Harcourt, Brace & World, 1961).
3.
R. Fisher and W. Ury, Getting to Yes (Boston: Houghton Mifflin, 1981); R. Fisher, W. Ury, and B. Patton, Getting to Yes: Negotiating Agreement without Giving In, 2nd ed. (New York: Penguin Books, 1991).
4.
R. E. Walton and R. B. McKersie, A Behavioral Theory of Labor Negotiations: An Analysis of a Social Interaction System (New York: McGraw-Hill, 1965); A. C. Filley, Interpersonal Conflict Resolution (Glenview, IL: Scott Foresman, 1975); R. Fisher, W. Ury, and B. Patton, Getting to Yes: Negotiating Agreement without Giving In; D. G. Pruitt, Negotiation Behavior (New York: Academic Press, 1981); D. G. Pruitt, “Strategic Choice in Negotiation,” American Behavioral Scientist 27 (1983), pp. 167–94; P. J. D. Carnevale and D. G. Pruitt, “Negotiation and Mediation,” in Annual Review of Psychology, M. Rosenberg and I. Porter (eds.), Vol. 43 (Palo Alto, CA: Annual Reviews, Inc., 1992), pp. 531–82; D. G. Pruitt and P. J. D. Carnevale, Negotiation in Social Conflict (Pacific Grove, CA: Brooks-Cole, 1993).
5.
Fisher and Ury, Getting to Yes.
6.
K. Thomas and R. Killman, The Conflict Mode Inventory (Tuxedo Park, NY: XICOM, 1974).
Reading 1.3
Balancing Act: How to Manage Negotiation Tensions Susan Hackley
“The more aware you are of the tensions underlying a negotiation, the greater your chances of success.”
Judith Lawson dreaded her upcoming meeting with the mayor. As head of the city’s environmental department, she had promised her staff that she would confront the mayor with their complaints. Unless her office was given the budget to implement proposals to improve air quality and deal with polluters, several key members of her staff planned to quit. Furthermore, they would have no qualms about airing their grievances publicly. Lawson knew this would be a tough negotiation, for several reasons. The mayor would be understandably upset that a high-profile department was threatening mutiny. Lawson wanted to represent her staff aggressively, but she also worried that too assertive a stance might incline the mayor to “shoot the messenger”—which her career couldn’t afford. What made Lawson’s task so complicated was that it required her to manage three tensions simultaneously. 1. 2. 3.
The tension between creating and distributing value. The tension between empathy and assertiveness. The tension between principals and agents.
These three tensions are “inherent in negotiation, whether the goal is to make a deal or settle a dispute,” write Robert H. Mnookin, Scott R. Peppet, and Andrew S. Tulumello in Beyond Winning: Negotiating to Create Value in Deals and Disputes (Belknap, 2000). Managing them is vital for successful negotiations.
Distributing Value versus Creating It Some negotiations are purely distributive—the task is to divide a fixed amount of value. When haggling over the price of a suit, you can try to affect the distribution of value (who gets how much), but you’re unlikely to create new value. Other negotiations are potentially value creating: they offer the opportunity to create value by expanding the universe of what is being negotiated. For example, a celebrity might get a suit for free by agreeing to wear it to a well-publicized event. In a trade negotiation, political face-saving tactics may be as important as the tariffs being decided.
Source: “Balancing Act: How to Manage Negotiation Tensions” by Susan Hackley from the Program on Negotiation newsletter at the Harvard Law School (www.pon.harvard.edu), February 2005, pp. 3–5. Used with permission. 30
Balancing Act: How to Manage Negotiation Tensions
Skillful negotiators make sure they get their fair share while exploring ways to “enlarge the pie,” to use a popular negotiation metaphor. If you bargain in a job negotiation for a higher salary but miss opportunities to discuss stock options, merit bonuses, or a more generous retirement package, you may end up with a relatively poor deal. At the same time, you need to protect your core distributive interests, being careful not to share too much information (you’re desperate for the job) or give away too much value (you’d take half the salary offered). Judith Lawson knew there would be value-creating opportunities in her meeting with the mayor. If citizens perceived that the city was handling environmental problems more effectively, both the mayor and the environmental department would score a public relations victory. Moreover, it would be in the mayor’s interest not to incur the disruption of a protracted dispute with his environmental department. Lawson also recognized the distributive issues at stake. What additional resources could the mayor give her department? How much time would he be willing to spend on their concerns and projects?
Empathy versus Assertiveness In many negotiations, you may find it difficult to truly understand the other side’s viewpoint. If you’re angry with a supplier who sent you shoddy goods, you won’t want to hear his sob story about the poor raw materials with which he had to work. Yet a little empathy could inspire you to help him find ways to solve his problem and, in turn, ensure betterquality goods. Asking open-ended questions, listening closely, and demonstrating an understanding of the other side’s position will not only allow you to explain your own perspective but may also give you new and useful information. On the other hand, you don’t want to be overly swayed by another’s story. Being assertive means being able to express your own interests with confidence and clarity. Skilled negotiators have learned how to be assertive and empathetic. They make it clear what they want and need, and they also are genuinely curious to discover what the other side wants and needs. Lawson was tired of the mayor’s excuses for undercutting her department’s initiatives, yet she knew she needed to see the situation from his point of view. Once their meeting got under way, she learned to her surprise that the mayor had greater sympathy for her requests than she’d expected and that he felt frustrated and hamstrung by the city council’s budget decisions. He had avoided engaging with her department because he felt helpless. This new knowledge made it easier for Lawson to engage in creative problem solving that answered her needs as well as the mayor’s. What about demonstrating to the council how better air quality would elevate the city’s reputation as a desirable place to live, which, in turn, would improve real estate values, public health, and economic development?
Being a Principal versus Serving as an Agent In her negotiations with the mayor, Lawson was acting as an agent for the members of her department, who depended on her to represent their grievances fairly and effectively. As a principal in the negotiation, Lawson also had personal interests that were not perfectly
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Ten Hard-Bargaining Tactics Don’t be caught unprepared by hard bargainers, warn Mnookin, Peppet, and Tulumello in Beyond Winning. Here is their top 10 list of common tactics to watch out for: 1. Extreme claims followed by small, slow concessions. Don’t let a strong demand “anchor” your expectations. Be clear going in about your own demands, alternatives, and bottom line—and don’t be rattled by an aggressive opponent. 2. Commitment tactics. Your opponent may say that his hands are tied or that he has only limited discretion in negotiating. Make sure that these commitment tactics are for real. 3. Take-it-or-leave-it offers. This game of chicken can be countered by making another offer. But watch out: if both parties play this game, you may not get a deal. 4. Inviting unreciprocated offers. When you make an offer, wait for a counteroffer before reducing your demands. Don’t bid against yourself. 5. Trying to make you flinch. Your opponent keeps making demands, waiting for you to reach your breaking point. Don’t fall for it. 6. Personal insults and feather ruffling. These personal attacks can feed on your insecurities and make you vulnerable. Grow a thick skin. 7. Bluffing, puffing, and lying. Exaggerating and misrepresenting facts can throw you off-guard. Be polite but skeptical. 8. Threats and warnings. Recognizing threats and oblique warnings as the tactics they are can help you stand up to them. 9. Belittling your alternatives. Have a firm sense of your best alternative to a negotiated agreement (BATNA), and don’t let your opponent shake your resolve. 10. Good cop, bad cop. One of your opponents is reasonable; the other is tough. Realize that they are working together, and get your own bad cop if you need one.
aligned with those of her staff, including concerns for her career and her professional relationship with the mayor. Lawyers represent clients. Money managers give investment advice. Labor leaders negotiate on behalf of unions, and real estate agents represent sellers and buyers. People “constantly delegate authority to others so they may act in our place” as agents, note Mnookin, Peppet, and Tulumello. Unfortunately the principal-agent relationship is “rife with potential conflicts.” Looking for differences in incentives is an important part of preparing for a negotiation. A victim in a car accident suing for damages needs to examine her lawyer’s interests. Does he have a financial incentive to either settle the case early or prolong it unnecessarily? One way to manage the principal-agent tension is to acknowledge it up front and treat it as a “shared problem.” Before her meeting with the mayor, Lawson and her staff agreed that she would not have authority to make commitments without their approval. What if
Balancing Act: How to Manage Negotiation Tensions
the mayor offered her a promotion without addressing her department’s needs? Lawson resolved not to be swayed by bribes, while her staff promised to back her up should the mayor make punitive moves. Recognizing that the “use of agents complicates bargaining by creating a web of relationships in which a variety of actors interact” helped Lawson and her team prepare for the negotiation.
Awareness Is Power Beyond Winning’s authors believe you’ll be more likely to succeed if you learn to recognize the three tensions that can exist in negotiations. Overlook them, and you may fail to come to agreement, even when an agreement would be better for both sides. Sometimes the other side is reasonable, and you can still miss opportunities to create value. You might not pursue the necessary in-depth conversation or, if you do, you might not listen well enough to your counterpart. Another pitfall: not working hard enough to establish the strong relationship that would lead to the give-and-take that results in better deals. When the other side isn’t reasonable, it’s that much harder to reach agreement. A divorcing couple may find it impossible to listen and empathize with each other, engaging instead in scorched-earth litigation that depletes the very financial resources in dispute. Beware of tough negotiators, who may employ a variety of strategies ranging from the unpleasant to the unethical. (See the sidebar “Ten Hard-Bargaining Tactics” earlier in this reading.) “Making the right moves or using good technique will not cause these tensions to disappear,” observe Mnookin, Peppet, and Tulumello. “They are present in most negotiations, from beginning to end, and should be consciously and thoughtfully considered.” Learn to seek additional sources of value while also ensuring you get your fair share. Empathize with the other side and assert your own interests convincingly. And when you’re employing an agent or acting as one yourself, be aware that your interests may not all be shared.
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Reading 1.4
The Negotiation Checklist Tony Simons Thomas M. Tripp
Preparation increases your chance of success, whether in combat, sports, or negotiations. The well-prepared negotiator knows the playing field and the players, is seldom surprised, and can promptly capitalize on opportunities. This [reading] offers a tool for use in effectively negotiating important transactions and disputes. Making deals is a key part of being effective in business. Managers and executives negotiate constantly over issues as varied as hiring decisions and purchases, corporate resource allocations, and labor contracts. One could argue that the American system of government is based on an ongoing process of negotiation, which is sometimes successful and sometimes not. The “negotiation checklist” that we present in this [reading] is a systematic way to make sure you are well prepared before you walk into your next negotiation. It is based on proven principles of negotiation that are taught at several of North America’s top business schools. The techniques we describe apply whether you are getting ready for a labor negotiation, a negotiation with a supplier, or a negotiation with a customer. This checklist is not a formula for easy success in negotiations. Rather, it is a methodical approach that requires significant work. The amount of time and effort you spend answering the questions should depend on the importance of the negotiation and on the resources you have available. The payoff for your efforts emerges from the confidence and information that you gain from preparation.
The Negotiation Checklist The negotiation checklist (in the accompanying box) is a guide for thinking about an important, upcoming negotiation. The pages that follow describe and explain the items on the list. A. About You 1. What Is Your Overall Goal? Start with the big picture. What basic need will an agree-
ment address? Why are you talking to this person or this company? What do you hope to accomplish? Understanding your main goal helps put all the other aspects of the negotiation into perspective. Most people begin and end their negotiation planning by determining their overall goal. We suggest that it is just the beginning. What specific issues must be negotiated for the final outcome or agreement to meet your overall goal? For example, if the overall goal is to book a successful convention, what assurances, services, and constraints will be involved?
2. What Are the Issues?
Source: “The Negotiation Checklist,” by Tony Simons and Thomas M. Tripp, from Cornell Hotel & Restaurant Administrative Quarterly 38, no. 1, February 1997. Used with Permission. 34
The Negotiation Checklist
Negotiation Checklist: A systematic way to ensure you are well prepared before your next negotiation ✓ Item accomplished ❑ A. About You ❑ 1. What is your overall goal? ❑ 2. What are the issues? ❑ 3. How important is each issue to you? Develop a scoring system for evaluating offers: ❑ (a) List all of the issues of importance from step 2. ❑ (b) Rank-order all of the issues. ❑ (c) Assign points to all the issues (assign weighted values based on a total of 100 points). ❑ (d) List the range of possible settlements for each issue. Your assessments of realistic, low, and high expectations should be grounded in industry norms and your best-case expectation. ❑ (e) Assign points to the possible outcomes that you identified for each issue. ❑ (f ) Double-check the accuracy of your scoring system. ❑ (g) Use the scoring system to evaluate any offer that is on the table. ❑ 4. What is your “best alternative to a negotiated agreement” (BATNA)? ❑ 5. What is your resistance point (i.e., the worst agreement you are willing to accept before ending negotiations)? If your BATNA is vague, consider identifying the minimum terms you can possibly accept and beyond which you must recess to gather more information. B. About the Other Side ❑ 1. How important is each issue to them (plus any new issues they added)? ❑ 2. What is their best alternative to negotiated agreement? ❑ 3. What is their resistance point? ❑ 4. Based on questions B.1, B.2, and B.3, what is your target? C. The Situation ❑ 1. What deadlines exist? Who is more impatient? ❑ 2. What fairness norms or reference points apply? ❑ 3. What topics or questions do you want to avoid? How will you respond if they ask anyway? D. The Relationship between the Parties ❑ 1. Will negotiations be repetitive? If so, what are the future consequences of each strategy, tactic, or action you are considering? ❑ 2. ❑ (a) Can you trust the other party? What do you know about them? ❑ (b) Does the other party trust you? ❑ 3. What do you know of the other party’s styles and tactics? ❑ 4. What are the limits to the other party’s authority? ❑ 5. Consult in advance with the other party about the agenda.
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Section One Negotiation Fundamentals
Price may be an obvious component, but it is worthwhile to consider other items, too— items that might make the agreement much more attractive both to yourself and to the other side. Delivery schedules, duration of contract, product or service upgrades, cancellation clauses, contingency plans, transportation services, complimentary room nights, and many other options all have some value to those negotiating a contract. Such side issues may be researched and introduced as part of a food contract, conference booking, or union contract that you are preparing to negotiate. Consider also whether any of the issues you have considered might be broken down into multiple components or subissues. For the conference-booking negotiation, for example, you might normally consider the room-block guarantee as a single item (i.e., so many rooms reserved until such-and-such a date). In fact, breaking the room reservations down by percentages and multiple deadlines (e.g., 50 percent by one date, 75 percent by another date) might open avenues for mutually beneficial arrangements. You should anticipate as many issues as possible for the negotiation. By doing so, you will be better informed and thus feel comfortable and confident when negotiating. Also, the more issues you can introduce, the more likely it becomes that creative solutions will arise, as those are often built by packaging or trading off multiple issues. Creative solutions often make it easier to discover an agreement that both parties like. By adding items to the negotiations agenda, you increase your chance of discovering some issues that you value more than the other party, and discovering other issues that the other party values more than you. Trading off such differently valued issues dramatically increases the value of the agreement to you without costing the other party. Moreover, if you know what issues the other party highly values that you value less, you can use those issues to get concessions on issues that are important to you. Imagine that you are a food and beverage director of a hotel seeking a dry-goods supplier and that you have written a request for bids from potential vendors. You have considered your storage capacity and specified every-other-week delivery in your request for bids. Now suppose you receive a bid from Alpha Dry Goods, which has another customer in town to whom they deliver once every three weeks. Alpha’s quote for biweekly delivery might be mediocre, but it turns out that they could save you substantial money on triweekly delivery. They could save you so much money, in fact, that you consider changing your storage arrangement to accommodate their every-three-weeks delivery schedule. If you had been unwilling to negotiate the delivery schedule, you might never have discovered that opportunity. By adding delivery schedule to the agenda, you were able to discover an issue that improved the business potential for both parties. In this example, you are able to secure a lower overall price in return for a concession on delivery schedule. In general, the more issues you can put on the table (within reason), the better off you are.1 Another reason to consider and discuss many issues in a negotiation is that it minimizes the chance of misunderstandings in the final contract. For any issue that is not discussed, the parties risk the possibility of making different assumptions. For example, the “standard frills” that accompany a banquet may not be known by the person purchasing the banquet.
The Negotiation Checklist
Once you agree that it’s a good idea to discuss many issues, how should you determine how many and which ones? For starters, check with your executive committee or association members. Draw also on outside resources. For example, call some friends and colleagues who have conducted similar negotiations and ask them about what issues they put on the table. Library research and obtaining experts’ opinions may be helpful, too. Lawyers can be a marvelous source of ideas about which issues to place on the table, especially for a labor negotiation. Be prepared to include all reasonable and relevant issues that are important to you, even if they are not important to the other party. You can also call the people with whom you plan to negotiate to ask them what issues they expect to discuss and to share your plans. This kind of conversation will begin the negotiation as a cooperative process and should minimize any delays caused by either negotiator’s needing to collect additional information, to get authority, or to figure out the value of issues they had not previously considered. As we discuss later, surprise is usually not conducive to effective negotiations. Now that you have listed all the different issues that might be negotiated, you need to develop as precise a picture as possible of their relative importance. Which issues are most important to you and which are not particularly important? Knowing the answer to that question will help you answer the next: On which issues should you stand firm and on which issues can you afford to concede? In other words, what issues might you be willing to trade away? Setting such priorities can be a complex task. To deal with the complexity of rating the importance of individual issues, we suggest you develop a system to keep track of all the issues without losing sight of the big picture. Many different kinds of systems are possible. The key requirement is that you list and prioritize issues so that no issue is left out when you structure and compare potential agreements. The system you use must allow you to readily determine how well each possible agreement addresses every issue. We offer one such scoring system for your use, as described next.2 We suggest developing a table that lists every issue in the negotiation. For each issue the table should list the possible range of settlements.3 You will then assign points to each issue to reflect its relative priority and to every possible settlement of each issue to reflect the relative desirability of resolving the issue in that way. Such a table allows you to assess the value of any proposed agreement by adding up the points it generates. You can then accurately and quickly determine which of several complex agreements you prefer. Moreover, it can help you keep the big picture in mind as you discuss the details of your agreement. We describe additional benefits in the next few pages. The first part of Exhibit 1 shows an example of a scoring system that a conference organizer might use to negotiate with a hotel representative. In that example, the issues on the negotiation table are the duration of the room-block reservation, the room rate to be charged, the number of complimentary rooms to be provided, and the late-cancellation policy.4 The maximum number of points possible here is 100. (If the conference organizer gets 100 percent of what she wants, then she gets 100 points; if she gets none of the issues that are important to her, then she gets 0 points.) The organizer has said that keeping the specially priced block of rooms available to last-minute registrants up until the week 3. How Important Is Each Issue to You?
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38 25 pts. 20 pts. 15 pts. 10 pts. 5 pts. 0 pts.
20 pts. 15 pts. 10 pts. 5 pts. 0 pts.
Maximum value: 25 points $95 per person single, $70 per person double $105 per person single, $80 per person double $115 per person single, $90 per person double $125 per person single, $100 per person double $135 per person single, $100 per person double $145 per person single, $110 per person double
Issue 3: Number of Complimentary Room Nights Maximum value: 20 points 3 room nights per 100 booked 2 room nights per 100 booked 1 room night per 75 booked 1 room night per 100 booked 1 room night per 150 booked
Issue 2: Room Rate
To construct your own scoring system, we recommend that you use the following steps: (a) List all issues of importance for the negotiation, from step 2 in the Negotiation Checklist. (b) Rank-order all issues according to their value to you. Which is the most important? Next? Last? (c) Assign points to the issues. The highest-ranked issue gets the most points and the lowest-ranked issue gets the fewest points. The sum of maximum points across all issues should be 100. The purpose of this step is to improve upon the simple rank ordering in step b by reflecting the size of the difference between adjacently ranked issues (i.e., how much more important the first issue is than the second, the second issue than the third, and so forth). At 40 points, room-block reservation is worth almost twice as much as the next most important issue, room rate. The number of complimentary rooms and room-cancellation policy are slightly less important than room rate. (d) List the range of possible settlements for each issue. Identify these ranges using industry or local norms or your best assessments of realistic, high, and low expectations. It may be the case that the longest block-reservation policy in the industry is 30 days. This figure establishes a realistic low boundary. Since a seven-day-out guarantee for block reservation is possible but rare, it establishes a challenging high boundary to which one can aspire.
Issue 1: Block Reservation Maximum value: 40 points Rooms reserved until 7 days before conference Rooms reserved until 10 days before conference Rooms reserved until 14 days before conference Rooms reserved until 21 days before conference Rooms reserved until 30 days before conference Rooms reserved until 31 days before conference 40 pts. 37 pts. 35 pts. 15 pts. 5 pts. 0 pts.
Exhibit explanation: Develop a scoring system for evaluating offers.
The example shown is a scoring system such as a conference organizer might use.
EXHIBIT 1 | Creating a Scoring System
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No penalty up to 14 days before conference No penalty up to 18 days before conference No penalty up to 22 days before conference No penalty up to 26 days before conference
Issue 4: Late Cancellations Maximum value: 15 points 15 pts. 9 pts. 3 pts. 0 pts.
Assign points to the possible outcomes that you identified for each issue. Give the maximum number of points to your preferred settlement for that issue, and assign zero points to any settlement that is least acceptable. Now rank and assign points to the possible settlements in between the best and the worst. Consider that the point values might increase dramatically between certain adjacent pairs of settlements in the range, or might just barely increase. The most important thing to remember about assigning points is that the assignment should reflect what is important to you. (f) Double-check your scoring system. In completing steps a through e you undoubtedly will make a few capricious choices based on “gut feeling.” For example, you may be so focused on the room-block issue that the points assigned to the other issues could be changed by five points either way without affecting your stance. The point is to make sure your scoring system accurately reflects the important issues and highlights the critical plateaus. To check your numbers, compose three to five completely different hypothetical agreements. Each agreement should emphasize different issues. For example, one agreement might offer a cheap room rate but a short no-penalty cancellation period, while another agreement offers high room rates but a long no-penalty cancellation period. Compare the different agreements on the basis of points and intuitive value. The prospective agreement that has the best “gut feel” should also have the most points. If not, you need to tinker with the values you assigned in steps a through e or reconsider your priorities. (g) Use the scoring system to assess any offer that is on the table. You should work toward obtaining the highestscoring agreement that the other party allows.
(e)
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Section One Negotiation Fundamentals
before the conference is very important. Room rate is somewhat less critical, she says, but is still important. Complimentary rooms and the cancellation policy are also valued by her, but are less weighty than are the first two. Note that it is not critical for all the increments within an issue to be valued equally. The jump from a 21-day-out block reservation to a 14-day-out reservation, for example, is worth 20 points to the conference organizer, while the four-day jump from 14 days to 10 days is worth only two points. Such a difference in value carries an important message. The organizer is saying that it is very important to have at least a 14-day-out block reservation, and that any improvement over that would be nice but is not critical. Constructing a detailed and accurate scoring system can mean considerable work (see the second column of Exhibit 1). However, the task can be worth the effort for several reasons. First, it allows you to compare any package of settlements that may make up an agreement. With large numbers of issues, it quickly becomes difficult to compare different packages without some kind of scoring system. Second, having a scoring system can keep you analytically focused while keeping your emotions in check. If you force yourself to evaluate each proposal using a predetermined scoring system, you are less likely to lose sight of your original interest during the heat of the actual negotiations. Resist the temptation to revise your scoring system in mid-negotiation.5 Third, a scoring system is a useful communication tool that gives you a format for soliciting detailed information about the priorities and goals of your boss, your company, or your constituency. Building an accurate scoring system can become the topic of prenegotiation meetings that will improve your chances of pleasing the people you represent. Before you begin a negotiation, you need to have a backup plan in case you fail to reach an agreement with the other party. Negotiation scholars refer to this backup plan as the best alternative to a negotiated agreement, or BATNA for short. Are you, for instance, negotiating with the only supplier in town, or do you already have several attractive bids in your pocket? Alternatives make all the difference. Each side’s BATNA is a key factor in determining negotiation power. The better your BATNA, the better an offer the other party must make to interest you in reaching an agreement. Your BATNA—what you get if you leave the table without an agreement— determines your willingness to accept an impasse, which in turn tells you how hard you can press for a favorable agreement. You can negotiate hard for a job if you already have a few offers in your pocket. The better your BATNA, the more you can demand. Having a clear BATNA helps protect you from accepting a deal that you would be better off not taking. Often people get caught up in the negotiation process and accept a contract they should have rejected. Knowing your BATNA can keep you from accepting an agreement that would make you worse off than you were before you started negotiating. Having identified your BATNA, calculate its value based on the scoring system you developed for step 3. That is, if the other party were to make an offer that was identical to your BATNA, how many points would that offer achieve under your scoring system? Use that score as a reference point to identify those agreements that are worth less to you than your BATNA.
4. What Is Your BATNA?
The Negotiation Checklist
Even if it is difficult to assign a score to your BATNA because it is qualitatively different from the deal under negotiation or because it involves risk or uncertainty, you should nevertheless assign it a rough score for comparison purposes. Your resistance point is the worst agreement you are willing to accept before ending negotiations and resorting to your BATNA. The resistance point is the point at which you decide to walk away from the table for good, and the BATNA is where you’re headed when you take that walk. You should choose your resistance point based primarily on how good your BATNA is. If your BATNA is great, you shouldn’t accept anything less than a great offer; if your BATNA is poor, you may have to be willing to accept a meager final offer. Don’t forget to factor into your resistance point the switching cost and the risk of the unknown that you would be taking if your BATNA involves changing suppliers. To illustrate the effect of switching costs, put yourself in the “buying” position of the conference organizer described in Exhibit 1. Suppose the hotel you used last year has already offered to book your conference for $100 a night single occupancy, with a 10-day-out block-reservation clause. If another hotel wants your business, you need to determine your BATNA and decide the margin by which the new hotel must beat the existing agreement— say, five dollars a night—to justify the risk of switching. Conversely, if you are the hotel sales representative in this deal, you have to determine the risks you accept for this new business—namely, that the association might fail to deliver the promised room-nights and the opportunity cost of displacing any existing business. Your BATNA as a hotel sales representative is the probability of your booking the rooms that the conference would otherwise occupy at a given rate, adjusted by the effort (labor and expenses) it will take to book them. The resistance point is meant to encompass all the issues at the same time rather than each issue independently. If you set a resistance point for each issue under consideration, you sacrifice your strategic flexibility. Your BATNA might include a room rate of, say, $100 a night. If you set a resistance point for room rate, rather than for the agreement as a whole, then you might walk away from what is, in fact, an attractive offer—for example, a $105 per night rate that includes more amenities and a better booking policy than your BATNA. So there should be just one resistance point and not a collection of them. The resistance point should be set just slightly better than your BATNA. Numerically, it will be the sum of the points from your scoring system that represents your minimum requirements for all the issues being negotiated. Being aware of the resistance point is useful in negotiations. It converts a good BATNA into a powerful negotiating stance. Unless you have previously decided how far you can be pushed, you are vulnerable to being pushed below your BATNA, and thereby may accept an agreement that is worse for you than no agreement at all. The more precise your resistance point, the better. It may seem awkward to apply a precise resistance point, particularly if your BATNA is vague or not strong. In such circumstances, you might consider setting a “tripwire” or a temporary resistance point. Set it slightly above your actual resistance point; the tripwire then gives you the chance to suspend negotiations for further consultation with your team. For example, imagine that you are booking the conference as discussed earlier. Your members
5. What Is Your Resistance Point?
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Section One Negotiation Fundamentals
have expressed a slight preference for exploring new places, and so you are negotiating with a new hotel. You are willing to pay more for a new location, but you are not sure exactly how much more your membership will accept. You know that members will balk at an exorbitant room rate. Your BATNA is to stay at the same hotel as last year and face an uncertain amount of members’ disappointment. To deal with the uncertainty, you can set a tripwire. If you are comfortable signing a contract that entails a $10-a-night increase, but if you are unable to secure a rate that low or better, the tripwire tells you that you should check with your membership before you make a commitment. You have, in effect, built a “safety zone” around an uncertain BATNA. B. About the Other Side Good negotiators seek to understand the other party’s needs and limits almost as well as they know their own. Such negotiators might be able to accomplish this understanding before the negotiations begin, or early in the negotiation process. Obviously, the final agreement will reflect not only your own preferences and BATNA, but the other party’s as well. Thus, it is useful to ask the same questions about the other party as you ask about yourself. 1. How Important Is Each Issue to Them (Plus Any New Issues They Added)? Consider
and attempt to estimate the other party’s priorities. What trade-offs can you offer that enhance the agreement’s value for both sides, or that might be neutral for the other side but a boon for you? If your counterpart had a scoring system like yours, what do you think it would look like? Call people who might have information or insight into the other party’s priorities. Build a scoring system like your own that estimates their priorities, and use it to design some potential trade-offs. As the negotiation proceeds, try to test, correct, and complete your picture of the other party’s scoring system. Try to fill out your understanding of what that scoring system might look like if one existed. Gather more information during the negotiations by asking direct questions about priorities, and also by judging the other negotiator’s responses to your different offers and proposed trade-offs. You might also want to probe whether there are any issues about which the other side will completely refuse to negotiate. Such a refusal might simply be a ploy, or it might be a genuine constraint on the way it does business. 2. What Is the Other Side’s BATNA? What are your counterpart’s alternatives to doing
business with you? How much do you think she or he values those alternatives? How badly does this company want to do business with you? Realize that the other party will probably accept an agreement only if it improves on her or his BATNA. The other side’s BATNA contains key information about how far you can push those negotiators before they walk away. If you are selling, the buyers’ BATNA should determine the maximum price they would be willing to pay for your services or product. If you are buying, it should determine the lowest price at which they will sell. If you are booking a hotel conference in Hawaii in December, the hotel representative, who has a waiting list of customers, has a much stronger BATNA than the same representative has in July. If you are absolutely certain of the other side’s BATNA, and if you propose an agreement that is
The Negotiation Checklist
just a little more attractive than the other side’s BATNA, then those negotiators might accept your proposal. Given your assessment of the other party’s BATNA, you can estimate the least favorable deal for which the other party might settle. We say “might” because the other party may not have considered his or her resistance point. We have found, though, that it is wise to assume the other party is well prepared. If you know the other party’s resistance point, as noted earlier, you can push for an agreement that barely exceeds it. This kind of lowball deal is often better for you than an “equitable” deal, though not always. If you are the type of negotiator who prefers amiable negotiation tactics over lowballing, then you still may want to know the other side’s resistance point for two reasons. First, the other party may try to lowball you. Knowing the party’s resistance point will give you the information and confidence to counter a lowball tactic. Second, many negotiators consider a fair deal to be one that falls halfway between the two parties’ resistance points. To find the halfway point, you need to know both resistance points. Since experienced negotiators consider their true resistance point to be confidential information, you will most likely have to make a best guess about how far you can push the other party before seriously risking impasse or generating ill will. Openly asking for the other party’s resistance point carries risks. The other party might lie and therefore be forced to take an uncompromising stance to avoid disclosing that misrepresentation. Or if the other party honestly reveals his or her resistance point to you, that negotiator may expect you to reveal your resistance point, too. At this point, you have two choices. One, you reveal your resistance point and open yourself to being lowballed or, at best, to being offered an agreement that reaches no farther than the halfway point between the two resistance points. Two, if you don’t reveal your resistance point, you may violate the norm of reciprocity.
3. What Is the Other Side’s Resistance Point, if Any?
You set your target based on what you know about the other side. By this point, you should know what is the least favorable agreement that you will accept, and you have estimated the other side’s least favorable, acceptable agreement. Now consider the most favorable agreement for you. This is your upper limit—the top of your range. If you focus primarily on your resistance point, which is the bottom of your range, you are unlikely to secure an agreement that is far superior to that resistance point. To properly set your target, you must consider the bargaining zone, and to do that you have to sum up the other side’s situation. The bargaining zone is the range between the two parties’ resistance points, comprising the range of mutually acceptable agreements. 4. What Is Your Target?
C. The Situation By this point you have drawn up a fairly accurate picture of the issues and the priorities that constitute the negotiations. Here are some additional contextual factors to consider to help you maximize your advantages and minimize your risk of making mistakes. The negotiator who feels a greater sense of urgency will often make rapid concessions in an effort to secure a deal quickly.
1. What Deadlines Exist? Who Is More Impatient?
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Many Western cultures have a quick-paced approach to negotiations. When paired with negotiators from cultures that negotiate deliberately (e.g., Japan, India), quick negotiators risk getting unfavorable agreements. A good way to slow down your pace is to avoid negotiating under a close deadline. Flexibility with regard to time can be a negotiating strength. 2. What Fairness Norms or Reference Points Apply? Negotiations often involve a discussion of what might constitute a “fair deal.” In fact, some experts recommend the approach of always negotiating over the “principle” or standard that you will use to assess fairness before getting down to details and numbers. The abstract discussion may be less threatening or emotionally charged than the details, and may result in a more cooperative tone and outcome for the negotiation. Recognize, however, that there are many valid ways to determine fairness, and each negotiator will often choose the fairness norm that most favors his or her position. Both parties know that the other is doing this; just the same, each party expects the other to justify an offer as fair by showing how an offer complies with some fairness norm. Because offers that are unaccompanied by a fairness argument will rarely be accepted, you should consider alternative norms of fairness for each negotiation. Ask yourself, which ones justify your demands and which ones defeat them? Which ones best reflect your conscience? An associate of one of the authors, for example, faced a salary negotiation upon considering a new job. The potential employer stated an intent to pay “market value” and thought it fair to define market value as the salary that other starting local faculty members were paid. The job seeker, on the other hand, judged that as unfair and argued that market value should be defined as the salary paid to starting management faculty members at comparable nationally ranked universities. The candidate thereby successfully redefined “market value” by describing the salaries drawn by other graduates of his program who took management faculty jobs. Since the employer had already agreed to pay market value, the employer found itself making concessions to do the fair thing of acting consistently with its own stated principles. That example shows how a negotiation often hinges on a discussion of fairness. Prepare for each negotiation by considering alternative norms of fairness. 3. What Topics or Questions Do You Want to Avoid? How Will You Respond If the Other Side Asks Anyway? You might find yourself in a position where there is some-
thing that you do not want the other negotiator to know. Your BATNA may be weak, for instance. Good negotiators plan in advance how to respond to questions they do not want to answer. Prepare an answer that is in no way dishonest but does not expose your weaknesses. Preparation means rehearsing your answer until you can deliver it smoothly, just as if you were practicing for a play. If you do not prepare and practice your answers to dreaded questions, then you risk an awkward pause or gesture that will tip off the other negotiator to a potential weakness. Awkward gestures might even cause the other party to believe you are lying when you are not. We suggest preparation so that you avoid looking like a liar when you tell the truth but choose not to reveal confidential information. If there are things you do not want to discuss, prepare your deflections in advance and polish them until they are seamless.
The Negotiation Checklist
D. The Relationship between the Parties 1. Are the Negotiations Part of a Continuing Series? If So, What Are the Future Consequences of Each Strategy, Tactic, or Action You Are Considering? Consider
whether you expect or want to continue a business relationship with the party across the table. If the answer is yes, then you probably want to be careful about using negotiation tactics that the other side might perceive as bullying, insulting, or manipulative. Extracting those last few additional concessions out of the other party is usually not worth the loss of goodwill. The fact that you plan to do business with the other party in the future offers a few freedoms as well as restrictions. The trust and goodwill that you develop in the current deal may have a payoff for the next time. Also, if you can safely assume that the other party wants a relationship with you, then you can worry less about their negotiating in bad faith. Trust facilitates successful negotiations much more than does paranoia. Call around to inquire how this company conducts negotiation. How much you trust the other party will influence your negotiation style. To find the trade-offs and creative solutions that ensure that everyone gets a fair deal, you have to share information about your needs and priorities. Unfortunately, though, sharing your information makes you vulnerable to an unscrupulous negotiator across the table. Untrustworthy opponents can ascertain your priorities before you know theirs and use this knowledge to gain maximum concessions from you. They might also lie about their own priorities. The extent to which you trust the other party should determine your approach to sharing and collecting information. A series of small information “trades” is a good way to build mutual trust without opening either side to exploitation. A second approach to gathering data when you do not trust or know the other party well is to offer multiple proposals and see which ones the other side prefers. Be careful in this approach, however, as you must be willing to live with all the proposals you offer. It is considered a breach of faith if you propose an offer (for any reason) but have no intention of carrying through with the deal even if the other party says OK. If you already know and trust the other party, your task is much easier. In such cases negotiations can involve an extensive exchange of information about interests and priorities.
2. Can You Trust the Other Party? What Do You Know about Them?
3. What Do You Know of the Other Party’s Styles and Tactics? Different negotiators
have different personal or cultural preferences. You are likely to secure the best deal and have the most positive interaction if you learn about their style in advance and try to accommodate it. We have observed three types of negotiators. One type prefers to ease into the issue at hand after some personal contact. Once that negotiator is at ease with you as a person, she or he will be comfortable revealing information afterward. Another type of negotiator prefers a direct approach and eschews disclosure and creative problem solving. Such a negotiator requires a competitive approach to the interaction. The third type of negotiator enters the process having carefully computed and decided what is the best deal—and makes that offer up front and announces that it is nonnegotiable.
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Having already made up his or her mind about what the agreement must be, this negotiator will likely become impatient and annoyed at any attempt at give-and-take. If you know that the person you face prefers to do business this way, recognize that it is probably not a ploy. Simply assess the offer to see if it beats your BATNA. If it does, take it. If it does not, then politely refuse. Some negotiators use either of two common gambits. One is to return from a break with a request for just one more concession that can seal the deal. This tactic, known as “taking a second bite of the apple,” is common among car dealers. The appropriate response is to suggest that if the other party would like to reopen negotiations, you are willing to reopen them, too—but on all the issues, not just one. “Good cop, bad cop” is a tactic whereby the person with whom you negotiate plays the role of “wanting” to meet all your needs, but “demands” are being made by someone who is higher up and usually absent from the actual negotiation (e.g., the sales manager). One response to this approach is to take a break to reassess the other side’s stance compared to your tripwire. Another is to insist on speaking directly with the final decision maker. 4. What Are the Limits to the Other Party’s Authority? Establish early the level of authority held by your counterpart. Most negotiators, unless they are the CEOs of their companies, are authorized to negotiate only certain specified issues and within certain ranges. Determine whether you are negotiating with the right person, or whether far more latitude in generating resolutions might be available if you negotiated with someone else.
As we stated earlier, consider calling the other party beforehand to share what issues you plan to discuss and to ask what issues the other party might raise. In general, holding back information is counterproductive, and introducing unexpected issues generally delays the proceedings. Although good negotiators often get creative in their approach to the issues, this creativity must be well grounded in an understanding of the issues and of both parties’ priorities. A well-prepared negotiator has considered these factors in depth, and has also considered the past and future context of the business relationship between the parties. It has been said that no plan survives contact with the enemy—but it remains true that the shrewd general will have memorized the terrain and analyzed the strengths and weaknesses of both sides before an engagement. Fortune favors the prepared mind.
5. Consult in Advance with the Other Party about the Agenda.
The Negotiation Checklist
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Endnotes 1.
There is some risk of overwhelming oneself—and one’s negotiation partner—with too many issues. We suggest a combination of moderation in adding issues with an effective system of note taking and organization.
2.
Any method that serves as a mnemonic device to track and evaluate multiple issues and deals may work. The one we describe is one that has received much attention in negotiation courses and research. See D. A. Lax and J. K. Sebenius, The Manager as Negotiator (New York: Free Press, 1986).
3.
Several negotiation sessions may take place before you can identify all the issues and the range of possible resolutions for those issues. However, we recommend that you list in advance as many issues as you know about and then update the table between negotiation sessions to include additional issues and settlements.
4.
Note that we have simplified the issues of such a negotiation for expository purposes. Additional issues might include cancellation clauses, airport transportation, continental breakfasts, function space, additional events or amenities, and so on.
5.
In the interest of maintaining your original goals, do not adjust your scoring system while in the middle of discussion with the other party. During negotiations you may hear things that suggest your original preferences and priorities may be in error. Such new information might be valid, or it might simply be the other negotiator’s effort to mislead you. There are a bad way and a good way to deal with the uncertainty such rhetoric may cause you. The bad way is to lose confidence in the accuracy of your scoring system, throw it out, and continue to negotiate. The good way is to take a break and verify the information as both true and relevant to your preferences. If it is, during that break adjust your scoring system to reflect the new information and restart negotiations with the new scoring system.
Reading 1.5
Effective Negotiating Techniques: From Selecting Strategies to Side-Stepping Impasses and Assumptions Gerard I. Nierenberg Henry H. Calero
“It’s not what you do that works; it’s how you do it!”
After many years of our combined negotiating experiences, and hundreds of seminars conducted worldwide that were attended by thousands of negotiators, we are thoroughly convinced that the above expression sums up our thoughts concerning whatever strategies or tactics you may choose to use when negotiating. Every high-school football player is told by his coach, many times before the game on Friday night or Saturday afternoon, “No matter how much we have worked on our game plan this week, the most important factor is how well you execute it!” And it is exactly the same for every negotiation you will ever spend time developing techniques for. Whatever success you will achieve is directly related to how well you handled and executed the many things planned. Once you have your goals set, it is time to select techniques. This [reading] discusses some of the most effective techniques out there. It also offers quite a few ways to handle an impasse if those techniques aren’t getting you very far. Finally, this [reading] covers the dangers of hidden assumptions, because assumptions might be the very reason why generally effective techniques aren’t producing progress.
Studying Strategies and Tactics Now it’s time to turn to a number of time-tested negotiating techniques that if chosen wisely can really work for you and your team. The ones we discuss are extremely varied. We hope you find yourself motivated to try a few new ones, as negotiators who are willing to take risks and tackle the unfamiliar tend to be more creative and more successful. Forbearance Sometimes forbearance, referred to as “waiting in haste,” requires a great amount of patience in order to work well. And age is a great teacher. Seldom will you see this strategy used by young negotiators who are in a hurry to get things done as quickly as possible. The circumstances and elements involved in the use of this strategy are capable of provoking anger, frustration, and impetuous action. But when used properly, the rewards are great. Someone who practices forbearance holds his tongue despite temptation to react. Sometimes one party will intentionally provoke the other in order to distract that team or Source: “Effective Negotiating Techniques—From Selecting Strategies to Side-Stepping Impasses and Assumptions,” from The New Art of Negotiating: How to Close Any Deal, by Gerard I. Nierenberg and Henry H. Calero, 2009, pp. 99–134. Garden City Park, NY: Square One Publishers. Used with permission. 48
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throw it off kilter. Quite differently, sometimes a party will enthusiastically offer to fulfill 90 percent of the other party’s requests in hopes that the opposition will be charmed by the thought of resolution and go for a settlement. Forbearance is a great response in either case, for it involves a patient, self-controlled withholding of reaction until further thought can be given to the situation. Forbearance is effectively used by the Quakers, a religious organization, during meetings when they are divided in reaching agreement. At such times, they will declare a period of silence before continuing. And afterwards, if the matter is still unsettled and a division still exists, the clerk postpones the question and assigns it to be discussed at another meeting. As you are probably thinking, this process might possibly continue for a longer duration than planned. However, what it does achieve is acknowledgement of direct conflict and disagreement, as well as the hopes for eventual resolution. Former President Franklin Roosevelt enjoyed telling a story about the Chinese use of forbearance based on 4,000 years of civilization. Two workers were arguing in the middle of a crowd of people. A foreigner expressed surprise that no blows were struck. His Chinese friend explained, “The man who strikes first admits that he no longer has any more ideas!” Silence Silence is powerful. During our seminars, we ask attendees to share what strategies and tactics they prefer. Looking back on all the information we have received from them, the most often mentioned response is silence. There’s something about silence that demonstrates self-control, confidence, discipline, and calm. And if you can appear to be gifted with those characteristics, you will be considered a gifted negotiator. An attendee once said, “What has worked very well with us for many years is to say as little as possible and force the other side to convince and sell to us!” Indeed, one of the greatest mistakes often made is talking too much. Most successful negotiators are not only great speakers but also great listeners. They know that in order to persuade others and ultimately sell ideas, concepts, and things, there must be a healthy balance of talk and silence. Whether we’re revealing too much or grating against the other party’s nerves by being too verbose, words can sometimes become our worst enemies. So successful negotiators know that silence is just as important as talking. In order for silence to work, the negotiator has to know when to stop talking and when to start talking. He must not undermine his position with too many words, but he also must not undermine it with too much aloofness. This is especially important when he has already achieved his objective and the thought is that he can possibly get “a little bit more.” In such cases, the wisdom of Benjamin Disraeli should be considered: “Next to knowing when to seize an advantage, the most important thing in life is to know when to forego an advantage.” Negotiators who understand this will seldom lose what they have gained. Surprise This strategy involves a sudden shift in whatever course you may have taken. It is swift, drastic, and even emotionally dramatic. However, it doesn’t have to involve a loud, high energy shift. The surprise actually can simply be lowering the tone of your voice and
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speaking much more slowly, with greater word emphasis. The idea is to make yourself less predictable so that the other party doesn’t get too confident in their assumptions and demands. Hank recalls someone he worked for in the aerospace industry who normally spoke loudly and rapidly. When this man was “dressing someone down” and very, very angry, instead of booming even more loudly, he would speak slowly and lower his voice. This would surprise the other party—throw them off. The other side was geared up to fight, yet this man would catch them off guard and calmly pressure them. So when someone pushes your emotional “hot buttons” in the hopes of making you lose control, why not surprise him? When he attempts to get you angry, react like a judo expert. Don’t oppose him, but work with him, using his energy to your advantage. It is possible to disarm even the most hostile individual in a negotiation with a faint smile on your face and a lowering of your voice. Fait Accompli In some situations this technique may be risky because it forces you to act and then to wait and see what the response may be. In other words, fait accompli involves offering or declining something—whatever the case may be—in the hopes that the other party will react desirably to your move. It would be wise to first appraise what the consequences might be if it should fail. This technique could also be called “taking a chance.” An interesting illustration of the unsuccessful use of the strategy was the attack by England, France, and Israel upon Egypt during the Suez Crisis. They acted without prior consultation with the United States and hoped to present the world with a “fait accompli,” or accomplished fact. To those countries’ dismay, the United States intervened and forced them to abandon the attack and withdraw. The example proves that fait accompli is risky, and if the climate isn’t right, it could cause much embarrassment. So use this technique prudently. Apparent Withdrawal Whenever this strategy is used there is mixture of forbearance, self-discipline, and deception involved. The strategy is an attempt to convince the other person that you have withdrawn, when actually you haven’t. The hope is that the other team will scramble to keep you in the negotiations. Jerry used this approach once in litigation with the Rent Commission of the City of New York. The Commission determined that a hearing be scheduled, but that hearing would ultimately prove to be detrimental to Jerry’s client, a landlord. The Commission agreed with Jerry’s claim that his client would be disadvantaged. When the issue was taken to the supreme court in the state, the court suggested to the Rent Commission that it should postpone the hearing. In spite of the request of the court, the Rent Commission went ahead with the hearing. Jerry attended the hearing, but before it began, he had the official stenographer take down a statement for the record in which he warned everyone in attendance that the hearing was being held against the wishes of the supreme court. In addition, Jerry also advised them that he would see to it that the court was informed about the hearing. And then, once he
Effective Negotiating Techniques
had advised them, he walked out of the room putting “the icing” on his apparent withdrawal strategy. What the hearing officer of the Rent Commission didn’t realize was that an associate of Jerry’s remained in the hearing room, seated with a group of witnesses that had been called. Prior to the hearing, Jerry and his associate had decided that the associate would take over in the event that the Rent Commission chose to go ahead with the hearing. His strategy worked perfectly because the individual in charge of the hearing was unsure of how to proceed. After some thought, he called the Rent Commission for advice, and he was told to adjourn the meeting. As a result of this, afterwards the Commission was persuaded that landlords are members of the community, and therefore, no one can be victimized without causing harm to everyone. Reversal “You can go forward by going backward.” When using this strategy, you act in opposition to what may be considered to be the popular trend or goal. Let’s look at a financially based example. Bernard Baruch once said that people who make money in the stock market are those who are the first in and the first out. By this he meant that successful investors usually buy when everyone is pessimistic and sell when the prevailing atmosphere is optimistic. Sounds backwards, right? But it works. The strategy of reversal may sound easy to execute, but in reality it is extremely difficult. Timing has to be perfect. Technically, the power dynamics must shift for reversal to work. The skilled negotiator knows when that’s possible and when it’s not. Were this approach not so difficult, we would all immediately take advantage of it and become successful at our goals, whether for wealth, prestige, or the like. Interestingly enough, modern methods of communication have caused a reverse in many traditional negotiating roles. So this technique sometimes happens automatically. For example, Jerry once had occasion to accompany a coffee buyer on a trip to the Amazon jungle. During the trip, Jerry asked the individual if he had a special method of negotiating when purchasing coffee in that part of the world. The man laughed at Jerry and replied, “The most remote tribes in the Amazon that gather coffee beans have shortwave radios. And they get the latest prices from the New York Coffee Exchange. They then add the cost of transportation, allow a small handling charge, and tell the buyer the price he has to pay.” One would think the tribes would be concerned with compromising in order to make a sale, but they figured out how to be on top when it came to power dynamics. They performed a reversal of power. Probing/Testing Perhaps the most common tactic is one in which a person attempts to acquire additional information. Questions that pose hypotheticals, pry for more details, and seek deeper clarification are the stuff that probing/testing is made of. This strategy can help you to identify the other party’s goals, areas of possible compromise, and limits. The trick is not to make yourself sound too unstable, and not to inflame the other party by digging too deeply. This, perhaps, is one of the most important tactics when used properly, because in many instances, it narrows the distance between the negotiators.
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There are many expressions that verbally pave the way for the use of probing/testing. Consider several examples: “In order to better understand . . .”; “What if . . .”; “In the event of . . .” All of these phrases seek a response that will give the inquirer a broader vision of what the other party wants, needs, is looking for, is willing to compromise on, plus many other matters. The most important thing to keep in mind when preparing to use any of these expressions is that the words you use don’t intimidate, undermine, criticize, offend, or cause the other party any discomfort or anger that, in turn, makes them defensive. Setting Limits Setting limits is when someone states he will negotiate only under certain conditions, in a certain location, at a certain time, or in a certain manner. It could also be when a party limits the venue of the negotiation so that they communicate only through their attorney, agent, or some other third party. In history, the French culture has become famous for using time limit in their overall strategy. But it also happens every day in, for example, the food service industry—when someone introduces restrictions on the menu, that’s a form of limits! This technique can really challenge the power dynamics of a negotiation. And it can be done verbally or nonverbally. You might be wondering how the latter works. A nonverbal type of setting limits, known as a “silent barter,” is conducted by some tribes in Central Africa. They are engaged in a unique method of negotiating. Whenever a tribe desires to exchange its goods with those of another tribe, the first group leaves the goods on the bank of a river. The other tribe is expected to take the goods and leave their own goods, considered of equal value, in order to end the negotiation. However, if the second party is not satisfied with the goods, then the goods are simply left on the bank. The first tribe must add to their offerings or else the transaction has ended. The fact that the second tribe will walk away if displeased with the final amount of goods left is an example of setting limits. Feinting Feinting is best summed up by a simple phrase: “Look to the right, go to the left.” The three elements involved in most negotiations are concealment, disclosure, and diversion. Feinting is the diversion part, and it occurs whenever someone attempts to divert the other party’s attention toward some other issue or matter. In many circumstances, you would use feinting at a time when the other party is getting close to the main source or something that is very important or sensitive to you. Yet feinting can also be used to promote a false impression. Perhaps you want to convince another person that you have greater knowledge or more information on a subject than you actually have. You would distract them away from what you don’t know and suggest that you are more knowledgeable in certain areas than you are. In some negotiations, feinting can be accomplished by a conscious “slip of the tongue,” especially when used by someone who is acting as an agent or third person in the transaction. That agent could use such expressions as, “I’m not at liberty to . . .,” or “I wish I could tell you more, but . . .” Then he would go on pretending he’s actually getting close to revealing something he shouldn’t. Such phrases are excellent hooks that
Effective Negotiating Techniques
grab immediate attention from those who want to get more information and get to the bottom of matters. Association Those who have grown up in large families and are one of the younger members will easily be able to remember how many times their parents negotiated with them using association. This technique is applied effectively when parents present older brothers and sisters as examples of certain types of conduct and behavior. It is a means of getting a younger child to follow in those footsteps. So a parent might say, “Don’t you see how well studying has worked out for David? He just got into one of the best colleges in the nation!” Then the younger sibling, wanting to mimic the older one, will work hard to meet those expectations. In a negotiation, this tactic is used when a party advises you that a group, company, association, or other party whom you know and respect well has previously done business with them. Association is a powerful magnet not only in drawing attention to what is said but also in influencing others. And no other industry understands such power better than the advertising community. They pay millions of dollars to well-known personalities who positively advertise their products. Consumers associate the product with the celebrity and believe that if they buy and use the product, they will be as attractive or successful as that celebrity. Disassociation Disassociation is the opposite of association. It is not only used in politics but also in business. It’s pretty straightforward: one party tries to belittle, discourage, or ruin another party by linking them with someone or something undesirable. In some negotiations, a company comes under scrutiny simply because other firms who manufacture the same or a similar product are under investigation. That first company needs immediately to distance itself from those organizations. Disassociation will be the first tactic out of the bag when the negotiation begins. The first party must assure the other side that “we are the good guys.” Crossroads Visualize a crossroads—several paths intersect, entwine, or entangle. When someone uses this tactic, she or he introduces several matters or issues into the discussion for purposes of getting concessions on one and paving the way or gaining ground on another. Using this method, approaching the other party from several directions, actually forces that other side to see a myriad of issues and concentrate on one of them. In order to feel like they are making progress, that other party will tackle one issue and get the negotiation ball rolling. Then they are more vulnerable and open to others you have placed on the table. Blanket When a person uses the blanket technique, he or she tries to hit the other party with as many issues as possible, believing that some of them will stick and be resolved. The principle theory in blanketing is, if you cover a wide enough area, you’re bound to be
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successful somewhere. It’s like using a shotgun and aiming at a large area, instead of using a rifle and aiming at a much smaller target. Jerry likes to use the example of a young man who would always select a seat at a movie theatre next to a beautiful woman. In the event you are wondering how he did it in a darkened theatre, the man would choose his seat while the lights were on, before the movie started. As soon as it was dark, he would lean toward the woman and ask for a kiss. There were many times when he received a slap on the face, and many other times the lady would simply get up and select another seat. However, there were also those times when he found someone who was in an equally romantic and daring mood. During those rare finds, the guy was successful at getting a kiss from a pretty girl. Randomizing Randomizing involves picking a sample and assuming that it represents the whole. This is the negotiating method used by someone who is trying to sell a food product in a supermarket or on the sidewalk. The seller offers something to eat for free to those who are passing by. Then, after tasting it, the prospective buyer may be motivated to buy a bagful. However, the sample might have been a particularly sweet or fresh batch. When the consumer gets home and tastes the bagged product, he might find that it is not as good as the morsel he was given by the seller. There are some negotiations in which the party who is selling products actually brings merchandise, films, or other material for the purpose of convincing the buyer of the quality and performance of his product. The “random” sampling of merchandise will present well. It is an age-old method of closing a deal in business negotiations by letting the other party use the product free of charge. Bracketing The term bracketing is actually an old artillery term referring to when a shell is fired in order to register the guns in an artillery battalion. Since Hank was in combat during the Korean War and his responsibility was in “fire direction,” he knows a great deal about this technique. It is extremely valuable when negotiating because it not only establishes the upper and lower ranges you are dealing with but also the specific areas at which to “aim your guns.” Bracketing directs you toward where it is best to concentrate. It shows you where the majority of troops and equipment are located, so to speak. In other words, it isolates where your best chances for negotiations are. Salami By taking one slice at a time, you can end up with the whole salami. That’s the philosophy behind this next approach. The salami technique works exceptionally well in negotiations that involve multiple elements of cost, such as with cases concerning construction. You negotiate not only the overall cost of the project, but such things as design, materials, labor, subcontracts, and more. When Hank was negotiating major weapons contracts with subcontractors in the aerospace industry, this was a major tactic used. Little by little, you gather your information and form a deal.
Effective Negotiating Techniques
Quick Close The quick close is sometimes saved for when a stalemate must be managed. It is applicable to a situation that seems to be going nowhere, when something has to be done quickly. The quick close occurs when compromising measures are necessary, and so a negotiator will say, “Let’s split the difference and get this contract signed,” or, “We’re willing to meet you halfway.” During our seminars, we have asked attendees if this tactic had worked well for them. The overwhelming response from them has been positive. They claim this tactic remains part of their negotiating techniques. Usually, by the time the quick close is used, both parties are ready to resolve issues; neither is threatening to walk away. And there is usually an urgency involved because of time or financial constraints. The Agent of Limited Authority We will close this long list of effective negotiating techniques with a tactic that allows you to send someone else into the fray. It’s for a situation in which you might wish to use an agent rather than to handle it personally because that agent can play the old “I’m not at liberty to make that concession” approach. Thus, he is called the agent of limited authority. If you are a senior member of the negotiating team, the company, the firm, or whatever applies, you probably cannot claim to have your hands tied in too many knots. But an agent of lesser authority cannot be pinned down to anything much because he is locked into an agent-principal relationship and understandably required to respect that relationship. During negotiations, the agent will make it clear that he is unable to make a firm or final decision without acceptance by the principal. Meanwhile, you can gather a great amount of information concerning what the other party is looking for. This technique also buys you time to really think about what is being proposed. These benefits will greatly assist you when the time comes to make a final decision or judgment. We have covered eighteen different techniques that are commonly used in negotiations. Believe it or not, there are numerous others—too many to cover all of them here. The ones discussed above are intended to generate some new possibilities in your negotiation repertoire. But always remember to choose strategies that work well with your particular personality and presentation style. You do not want to use a strategy that will appear awkward or disingenuous.
Overcoming an Impasse The best way to prepare yourself for an impasse is to have knowledge of more than three or four resolving tactics. Gather as many approaches as you can, so that you won’t be at a loss when the “old faithful” don’t work. When we originally covered this subject in our seminars, we used to discuss approximately six to nine different methods of breaking an impasse. Then we would open up the program to all the attendees and invite them to share with us any other suggestions. As a result, we enlarged our list of how to deal with an impasse. When you have completed reading them, perhaps you can add a few more to the list.
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Take a Break Take a break or caucus for a few minutes—or longer. If you are part of a team, use the time to discuss matters and brainstorm with the other team members. If you are working alone, get up from the table and walk around the room, look out the window, or simply go to the water fountain or the bathroom down the hall. Such periods of reassessment can often generate new ideas and fresh insights. We believe it is very important during your recess not to talk about throwing in the towel and walking away. Always save that as the very last resort and action. Such negative thinking has a habit of becoming contagious and can destroy productive and creative thinking. Recap What Has Occurred Together, both your party and the other party should review and discuss what has been agreed upon so far, or what exactly is causing disagreement. Also, discuss the agreementsin-principle that were reached over the course of the negotiation thus far, as well as common interests. Sometimes you will discover that the results you have mutually achieved are more significant than perhaps realized. This will spark you on to further resolution. And whenever you talk about something positive, it reflects that the time spent has not been wasted. Decide What Will Be Lost Mutually clearly find the answer to the question, “What will be lost if we call it quits at this point?” There are times during an impasse when both sides temporarily forget the negative side of not reaching a settlement. Terminating the negotiation is an outcome that will be detrimental to all concerned. This is a time when it is important to discuss the “minuses” of not resolving the issues. Hank recalls a negotiation in which he described a possible negative outcome if the two sides were not to reach a settlement. The visualization of failure that he provided actually triggered new resolve in the other party. Someone interrupted him and stated, “Your crystal ball is cloudy. And I’ll clear it up for you.” And then that person proceeded to speak in a much more positive manner. The tide was turned and negotiations continued. Thus we have discovered that, in some instances, when a person creates a negative image, another individual often tries to make it look less detrimental. Perhaps this occurs because most of us carry around a positive self-image. And whenever it is challenged, we psychologically rise to the occasion to make it less negative. We’re not suggesting you harp on the dark side of matters throughout your negotiations, but at certain times, a little talk of the “doom” that might follow if the impasse continues can actually inspire a break in the impasse. Express How You Feel When you communicate your feelings, you present yourself as very relatable. Others will acknowledge that you have let your guard down and then possibly do the same. This tactic may uncover and reveal that the other side feels exactly the same way. Even if you
Effective Negotiating Techniques
haven’t reached agreement on any issue, at least you can admit that you have similar emotions. Once you have honestly expressed how frustrated you feel about the impasse and hopefully heard the return frustration from the other party, take a deep breath and say, “Since it appears that we both feel the same way, let’s do something about it!” Make the statement nonverbally convincing by moving your upper body forward and rubbing your palms together in a gesture of expectation. You will appear to be a team player for both sides, amiable and optimistic. Change the Subject Although this sounds like you are throwing a red herring into the mix, introduce another issue, view, or approach. Don’t belabor the subject that has gotten both of you tied up in knots. Whenever you do this, you’re not sweeping the topic under the table; you’re simply setting it aside for a while. If the other side refuses to change subjects, explain that moving to other issues does not mean you are forgetting the unresolved ones. Instead, you believe that the “cooling” effect of switching to other matters can be very effective. Attempt to Secure an Agreement-in-Principle We define agreements-in-principle as mutual goals to which the parties commit themselves, such as the agreement not to walk away without some sort of resolution, or not to drag the negotiations on beyond two weeks. There are some agreements-in-principle that are rather simple to get because they formulate the fundamental reason why the two sides are negotiating. They may be stated as, “We agree we have to work out some kind of compromise in order to . . .,” or “We’re both here to negotiate whatever differences exist . . .,” and also, “We both are aware we need each other, therefore we have to . . .” Such statements pave the way for getting agreements-in-principle, regardless of how flimsy they may be. Needs are the cornerstones of why we negotiate. Sometimes parties’ needs differ, and sometimes they don’t. But usually you can find something in common with the other side. Always rely on those needs that you both have. In the long run, finding common ground won’t let you down. Try Bridge-Issue Agreements In many negotiations there are innocuous issues that are of little importance and can be easily agreed to. These rather benign issues are also sometimes used in breaking a situation that is deadlocked. No one understands this better than a marriage counselor acting as a third party in negotiating differences in a troubled marriage. Such a counselor would work on establishing common basic agreements from the couple on relatively minor issues in their union. Once he has accomplished that, he will then move on to tacking other, more sensitive issues. A good example can be found in a labor dispute in which the union demands were as follows: (1) a 17 percent increase in pay; (2) greater retirement benefits; (3) more voice in management decisions that affect workers; (4) changes in the grievance procedures; and (5) changes in the color (black) of the uniforms worn by employees because it was too depressing. In this negotiation, it would be wise for management to use the last demand as
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the bridge-issue. Once establishing an agreement on it, a more relaxed and less defensive attitude might exist in discussing and negotiating the other issues. Discuss What Alternatives Remain The effect of redirecting the discussion from an impasse to what alternatives remain may switch the negotiation from a negative to a positive course. And if the response is that there are no other alternatives, don’t let it bother you. Get creative! In a buy-sell situation in which you are the seller, discouragement makes it very easy for the buyer to say goodbye. Developing creative alternatives is what separates the successful negotiator from those with much lower batting averages. We have a colleague who loves telling others in such situations, “There are always other alternatives. We just haven’t found them yet!” And he uses emphasis on the word “yet.” Make an Important Disclosure In most negotiations, each party knows something the other one doesn’t know. And some of this knowledge is more important than the rest. Therefore, in some sense, negotiating is a process of, “What do you know that I don’t know?” Whenever important disclosures are made, they are usually received with enthusiasm. In an impasse, disclosing something of importance that will benefit the other party is like a peace offering. It usually breaks through the bottleneck. But a word of caution is necessary: should you disclose something of major importance, always do it incrementally, instead of blurting it out all at once. Make the other party work to get the information, don’t merely “spill your guts.” The more they work at squeezing all the information out of you, the more they will have a tendency to believe it is the truth, and nothing but the truth. You will also, therefore, have opened up the doors of communication, convincing them that if they keep working at this negotiation, their time and efforts will be worth it. Ask a Hypothetical Question Asking a “what if” question may be very effective when used at the appropriate moment in your negotiation. And if you choose to do this, don’t allow the words you use to get you into hot water by saying something that may possibly be misinterpreted. During your preparation, give some thought as to how hypothetical questions should be worded in order not to be misunderstood. We have seen instances in which the words were carelessly spoken and the listener heard something that was different. Remember again, the message is always in the receiver’s ear, not in the sender’s mouth. But an effective hypothetical question can extend the range of vision, helping the negotiators to see the bigger picture and work for resolution. Ask for or Offer Empathy When negotiating, we’ve all heard expressions like, “I know exactly how you feel,” “I’ve been in your shoes,” or “I see your position, but . . .” There are times when showing empathy toward others is beneficial. When your hands are tied by individuals or conditions, words of empathy are truly heartening. When others can understand the limits that have been imposed on you, they are more likely to be empathic. So don’t be afraid to ask for
Effective Negotiating Techniques
such understanding. Perhaps you could say, “If I could ask you to step into my shoes for a moment and see things from my position, together we might be able to find another way to handle this situation.” Asking for empathy is especially effective in a situation in which you are acting as an agent for a principle and unable to make a total settlement without your principle’s concurrence. It is also important to remember to offer empathy once in a while. It is possible that when you display empathetic responses towards others, some individuals will take it as sign of weakness and attempt to squeeze you in order to get as much as they can. If they try, you should certainly pull back and explain that your intention was to be responsibly open-minded, not taken advantage of. But the other party might also appreciate your willingness to see things their way. Emphasize the fact that you are trying to see the situation from all angles. They might very much respect your fairness and respond to you in a like manner. Don’t forget that the negotiating process is giving and getting, getting and giving, hopefully in equal measure! Try Using a Quick Close In some negotiations, the impasse has occurred for a very simple reason. One or both sides have been jockeying for position and the negotiation has reached a point at which the players intuitively sense a “quick close” offer may work. This approach has already been defined as a negotiation technique earlier in this reading; see the section “Quick Close” a few pages back. However, it is worth mentioning as a possible route to break an impasse as well. When a quick close is timed correctly, a phrase such as, “Will you take $49,000 for it, and that way we can finish today?” or “What do you say we settle this at $25,400 and both get back to work?” can bring closure to a trying negotiation. As so often occurs in life, three things are likely to happen. First, the other party may readily accept the close and then shake your hand, cementing the deal. Second, they may reject the offer and call it quits. Third, they might counter with another figure. Regardless of what happens, the impasse has been broken. Diagram Differences A seminar attendee once told us that she disliked negotiating at locations that didn’t have a blackboard or a flipchart in the room. And the main reason for this was because she felt using visual aids for purposes of illustrating differences was extremely important in breaking deadlock and differences. She firmly believed that visualization is a key to opening up closed doors when communicating with others. So she would literally make a list of the points of disagreement, and then work through them. And we agree with her. When something is illustrated, the narrowness of differences between two parties becomes apparent. As that old expression states, “Seeing is believing!” Whenever narrow differences are seen instead of heard, it seems to have a completely different compromising effect on people. Give Something to Get Something A surefire tactic that will overcome an impasse is making a compromise offer. Perhaps one of the most frequently asked questions by workshop attendees is, “When do I make a compromise?” That question may be answered by looking at the many different reasons for
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making compromises. And the reason we put in last place is that you feel compelled or forced to do it. That brings to mind the words of Winston Churchill when describing an appeaser: “Someone who feeds a crocodile, hoping it will eat him last!” The word compromise culturally seems to convey a more negative than positive image. Perhaps most of us grow up with this negative conception because when we were young, an adult told us, “Never compromise!” Apparently they didn’t have the wisdom to realize that life is a long process of negotiating with others, and in order to satisfy our own and others’ needs, we must compromise! The art of negotiating consists of knowing how, why, where, to whom, and when to make concessions. Bring Up Future Needs In most negotiations, present needs are the most important and critical in discussions, despite the fact that the same needs often existed yesterday, and will tomorrow. All of our needs fall into one or all three of those categories. However, during negotiations, present needs always seem to take center stage. Have you ever considered trying the approach of pointing out how you can help the future of the other party if they work on a deal with you now? In some negotiations, individuals are truly unaware of future needs they may have unless you open their eyes and mind to them. Most of us are locked into what needs are pulling at us today, but tomorrow’s needs are equally important. Breaking an impasse by bringing up the possibility that you’ll be in position to satisfy their future needs, if required, is a great bargaining chip. Discuss Good Association An impasse may sometimes be handled by talking about all the favorable and productive dealings the two sides have shared. Bring up all of those “remember when’s.” Can you retrieve a desperate and difficult time you both faced that was overcome by your mutual cooperative efforts? Every personal or business relationship you have in life is full of such experiences. And turning to that page of the scrapbook, so to speak, can and may be used effectively during times of stress, conflict, or other difficulties. It’s the “we’ve gotten through this before” approach. Also, it is worthwhile remembering that trust and goodwill are not mere words to negotiators. They are the backbone and cornerstone of the negotiating process. Therefore, when facing an impasse, returning to them and reflecting on past periods of trust and goodwill may bridge present differences. Change Locations In some instances, simply changing locations might help overcome the impasse and save your negotiation. Getting out of the conference room or office and walking to the manufacturing area, touring the accounting department, or looking at engineering drawings may influence attitudes. Even simply standing up by the coffee machine may do it. Consider the fact that negotiations conducted while standing up don’t last as long as those when seated!
Effective Negotiating Techniques
Call It Quits We have saved this alternative for last simply because it should only be employed as the last resort. It doesn’t take much creativity to stand up and leave when things aren’t going well for you. And if you choose to do it, remember you may have to “eat crow” at a later time. Walking out may require you to come back and later apologize or ask forgiveness. So unless you’re sure your departure will jolt the other party and change their attitude concerning making a compromise, it’s probably in your best interest not to do it. There is no other time during a negotiation when you must become more creative than when the process has reached a stalemate—when it’s going nowhere, when both sides are deadlocked. That’s usually the point when you believe you have two options, which are to “punt the ball” or to “run like hell” for the nearest exit. Yet that’s also a time for realizing that you have a great number of creative alternatives for purposes of breaking the impasse and continuing to earnestly negotiate. We hope that our suggestions have inspired you to keep trying and to venture outside of your comfort zone if the old familiar tactics just aren’t making headway for you.
Avoiding the Pitfall of Hidden Assumptions As we near the end of this [reading] on effective things to do in the negotiation process, we have to include a discussion of something not to do. Most people rely on assumptions when trying to make a decision, resolve an issue, or argue a point. The problem is that the majority of people never examine their assumptions, let alone test them to see if they are worth maintaining. Whoever first wrote or said, “When we assume, we make an ‘ass’ out of ‘u’ and ‘me,’” was a very wise person. Interestingly, there are very few additional quotations that have been written on the word assume and its effect on our lives. Dictionaries hold multiple definitions for the word, but the one that most directly pertains to negotiating involves the idea that when we assume something, we take it for granted that a projected circumstance is true or that a projected outcome will occur. For a long time, we thought that the words assume and believe were very similar and should be synonyms. Yet when used in conversation, the word assume seems weaker in conviction than the word believe; the latter seems to have a much stronger basis than the former. Starting from a very early age, we begin to make assumptions and develop beliefs; it is a process that continues throughout life. In fact, we must accept that assuming and believing are part of human nature. And human nature is definitely present at the negotiating table. Therefore, since we’re going to continue making assumptions, there are two things we can do. The first is to become aware that we’re making them. And the second thing is to test them, to see if they are true or false. Let’s learn just how to do that. A More Thorough Definition of Assumptions Some assumptions are relatively simple. For example, we hand a store clerk our money and expect her to give us our merchandise and sometimes also change in return. Whenever we mail a check along with a subscription to a magazine, we expect to subsequently receive that publication. And a traveler who boards an airliner destined for Chicago
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assumes it will land at O’Hare Airport or Midway Airport, as the case may be—or at a more convenient airport in the event of any emergency. But assumptions brought to negotiations are different. Every assumption made before, during, or after a negotiation may turn out to be a serious mental error that will later keep us awake at night. Furthermore, all of our assumptions are fundamentally based on perception. And to make matters worse, humans don’t see everything they look at. “Looking” is two-dimensional, while “seeing” is three-dimensional. During our seminars on negotiating we used to prove this point very easily by asking the attendees how many of them had ever seen a rainbow. Usually, all or most of them would raise their hands. And then we would ask who, of those who had seen a rainbow before, was absolutely sure of how many colors they perceived (saw). After this question, the number of raised hands considerably lessened. Of those whose hands still remained raised, approximately only one-half answered accurately, stating they saw five colors. Finally, we asked how many knew the exact color sequence of a rainbow, from the inside out. In all the years we asked this question, we never had a single attendee give us the correct color sequence. Then we would drive our point home on the difference between “looking” and “seeing.” We would inform them, “You have looked at a rainbow, but you have never actually seen one. If you had, you would have observed that the color sequence is violet, blue, orange, yellow, and red.” (By the way, if you want to remember this little bit of trivia, think of the letter “V,” followed by the word “boy,” and then the letter “R.”) There are times when making an assumption and later finding out that it was false causes no harm because it wasn’t serious. However, there are also times in life when the consequences are very grave. In the medical profession, a doctor’s worst nightmare is if his “anchor” judgment is wrong in an emergency. The medical term anchor refers to a quick, snap diagnosis the doctor makes the first time he examines you. Based on his initial assumption, he will then pursue testing and/or treat you accordingly. As negotiators, we are not in life-or-death types of situations like medical doctors are. Yet the false assumptions we make and perpetuate can and do eventually lead to serious consequences. It is true that assumptions are a valid and important part of negotiations. But we must be extra careful not to make them unnecessarily. Unfortunately, there are many who don’t realize a large part of our beliefs are based on unconscious, hidden assumptions that are biased. Hidden assumptions are not subject to rational verification, as other assumptions might be. If we make an open assumption that a certain chair will support our weight and it does, then our assumption was correct. If it doesn’t, we take a “pratfall” and land on our behind. In such a case, we get an immediate verification that our assumption was either right or wrong. And if wrong, it is easy to laugh off—no big deal, just select another, stronger chair to sit on. There is absolutely nothing wrong with making the assumption that most chairs will hold your weight. But a problem does arise when we think and behave as if an assumption that judges people is absolutely a proven fact. In our seminars we deal with assumptions. We hold up a pencil and ask the attendees to describe and write down what they see. Everyone thinks it’s a normal pencil they’re seeing. However, they are surprised when we bend the pencil and they see it’s an artificial rubber pencil bought at a novelty store.
Effective Negotiating Techniques
What’s the point in discussing hidden assumptions? Well, if we become sensitive to the fact that we all make assumptions and act accordingly, we can be prepared for the unexpected and are less likely to dogmatically defend our positions if we are proven to be wrong. Evaluations of Assumptions The assumptions we make are a vital part of our human communication system. We use them continuously in sorting out and trying to make sense of the millions of ambiguous mental stimuli that confront us. We receive a communication, quickly interpret it, and make a first guess—an assumption that we stay with until it is disproved. As the Gestalt school of psychology puts it, to probe a hole we first use a stick to see how far it takes us. We might paraphrase this and say that to understand the world by probing, we use assumptions until they are disproved. It must be remembered that simple assumptions are easy to refute. However, hidden ones are very difficult to recognize and refute or correct. Yet during a negotiation there are ways of testing the assumptions you’ve made. One of them is by asking questions. For example, you’ve made the assumption that the person with whom you’re negotiating has the authority to settle and make a deal with you. All the inductive and deductive information you’ve received and perceived, verbally and nonverbally, indicates this. But, early in the discussion, you should ask: “In the event you find our terms and conditions acceptable, are you willing to sign the contract today so we can get started on your project?” This question will normally receive one of three responses: “Yes,” “No,” or “It all depends.” Then you will receive additional information that tells you if the assumption is correct or not. Another method of testing assumptions you’ve made is by using hypothetical situations. For example, imagine that you are negotiating with a firm that may be protected by some recently legislated environmental laws. In your negotiation, you’re dealing with several issues that require knowledge concerning prospective problems—the type of issues your corporate attorneys believe will require escape clauses. You have assumed that any subsequent changes calling for your company’s implementation will be separately negotiated. Furthermore, you have assumed that your firm will be reimbursed for any such expenses incurred, which are over and above what you are presently negotiating. You can then test your assumption by creating a hypothetical situation in which a worst case scenario becomes a reality. And then you ask questions relative to who will be responsible for the expenses. In this scenario, you will not only discuss any changes, but also, how soon you will know about them, and how long it will take to implement them. Sometimes you can also use the old standby, “What if . . .” It is especially useful in negotiating construction contracts that may later be affected by federal, state, or local building codes. In many instances, the firm responsible for the construction assumes that any such incurred charges will be borne by the customer or buyer. You need to know how such a situation would be managed. So ask, “What if electrical codes change and the building has to be retrofitted?” During the course of a negotiation, you seldom are privy to seeing the “boiler plate” clauses in a prospective customer’s contracts. Even if you have many years of experience, don’t assume that you know exactly what the small print on a document covers.
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And a final method of testing assumptions is accomplished by listening carefully to what is said, what is implied, and most important, what is not said. This requires full-time attention throughout the negotiation, not simply at the beginning as so many negotiators think. For this reason, we strongly recommend that in a team-type negotiation, one person be assigned the specific task of being the listener. And don’t give the assignment to the person who will be the scribe. If you do, you will regret it because an individual cannot take adequate notes and listen carefully at the same time. The scribe records what is said, while the listener hears things between the lines.
Reading 1.6
Closing Your Business Negotiations Claude Cellich
Bringing business negotiations to a close requires special skills and techniques. As no two negotiation situations are alike, it is not possible to recommend any one approach. Negotiators must use their own judgment in selecting the most appropriate method. A wide range of techniques exist from which to select. The choice will depend on the existing relationship between the parties, the objectives of the negotiations, the cultural environment, the negotiating styles of the participants, the state of discussions, and whether the talks concern new business opportunities or the extension of existing contracts. A description of the better known techniques is given below.
Most Common Techniques The most frequently used methods for closing negotiations can be referred to as the alternative, assumption, concession, incremental, linkage, prompting, summarizing, splitting the difference, trial, and the ultimatum/or else techniques.
Selected Closing Techniques Most Commonly Used: • • •
Concession Summarizing Splitting the difference
Others: • • • • • •
Alternative Assumption Incremental Linkage Prompting Ultimatum
Alternative Also known as the “either/or close” technique, in this approach one party makes a final offer consisting of a choice for the other side. For example, one party is willing to lower its commission rate if the other agrees to deliver the goods to the warehouse at its own cost. Source: “Closing Your Business Negotiations,” by Claude Cellich, from International Trade Forum, no. 1, January 1997, pp. 14–19. Used with permission. 65
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Assumption With this method the negotiator assumes that the other side is ready to agree and proceed with detailed discussions of delivery dates, payment schedules, and so forth. This is a technique used frequently by sellers to rush buyers into agreement. It is a useful approach when the initiating party has more than one option to offer to the other side. Concession This technique is characterized by the negotiator keeping a few concessions in reserve until the end to encourage the other party to come to an agreement. It is particularly effective in situations in which concessions are expected as a sign of goodwill before final agreement is given. These last-minute concessions should not be overly generous; they should however be significant enough to encourage the other party to finalize the talks. Incremental Another approach is for the negotiator to propose agreement on a particular issue and then proceed to settle others until accord is reached on all pending matters. This method is used when the negotiation process follows an orderly sequence of settling one issue after another. Linkage Linking a requested concession to another concession in return is still a different approach. Linkage is usually most effective when both sides have already agreed on the outstanding issues and need to settle remaining ones prior to reaching consensus. Prompting Prompting is used to reach immediate agreement by making a final offer with special benefits only if accepted immediately. For example, this may consist of overcoming all objections and offering special incentives, e.g., free installation and maintenance, no price increase for next year’s deliveries, and free training, if the other party agrees to conclude the transaction on the spot. Summarizing This is a technique requiring one negotiator to summarize all the issues being discussed, emphasize the concessions made, and highlight the benefits the other side would gain by agreeing to the proposal. As the discussions near the deadline and consensus is reached on all outstanding issues, one side summarizes the points and asks the other to approve them. The summaries should be short and reflect accurately what has been discussed. This is an approach that can be applied in any cultural environment or business situation. Splitting the Difference A useful closing technique is splitting the difference, in which both parties are close to agreement and the remaining difference is minimal. At that point, it may be preferable to split the difference rather than continuing endless discussion on minor issues that may be secondary to the overall objectives and possibly jeopardize the relationship. Splitting the
Closing Your Business Negotiations
difference supposes that both sides started with realistic offers—otherwise it would give an unfair advantage to the party with an extremely low offer (by the buyer) or a high offer (by the seller). This is a common technique that can expedite closure, but negotiators must ensure that it does not result in an unbalanced agreement. Trial Trial is a technique used to test how close the other side is to agreement. In a trial offer, one party makes a proposal, giving the other an opportunity to express reservations. Objections to the trial offer indicate the areas requiring further discussion. By making a trial offer, the initiating party is not committing itself, while the other party is not obligated to accept. Generally, a trial offer results in a constructive discussion on remaining issues while maintaining a fruitful dialogue between the parties until a consensus is reached. This is a useful technique to test the remaining matters to be clarified. Ultimatum or Else Another technique is to force the other side to make a decision on the last offer. If the other side fails to respond or accept the offer, the initiating party walks away from the negotiation. The “or else,” also known as ultimatum, is generally not recommended for negotiations in which trust and goodwill are required to execute the agreement. Choosing a Method The closing technique should be selected during the prenegotiation phase. Once chosen, it must be carefully prepared to ensure that it is mastered. The technique selected should fit the environment in which the discussions will take place and should match the overall objectives of the negotiations. With experience, negotiators can shift from one closing technique to another or combine one or more as part of their negotiating tactics. Overall, experienced negotiators prefer the approaches of concession, of summarizing, and of splitting the difference, although the techniques of assumption, prompting, linkage, and trial closing are effective in certain types of negotiations and cultures. Common mistakes can be avoided in this process provided that negotiators prepare in advance. A selected list of dos and don’ts, as well as key points to remember when closing negotiations, is given in the accompanying box. When to Close As nearly every negotiation is different, particularly in international business, the time to bring the discussions to a close varies greatly from one situation to another. Timing is also highly influenced by the cultural background of the negotiators, the complexity of the deal, the existing relationships, and the degree of trust between the parties. For example, when two companies have been doing business for years and are discussing repeat orders, they are likely to arrive at a settlement rather rapidly. Discussions concerning the setting up of a joint venture, however, may take months or years to finalize. It is important when making the final offer to ensure that the other person has the authority to decide, otherwise additional time may be required to discuss the offer within
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Closing a Negotiation: Some Dos and Don’ts Do: • • • • • • • • •
Anticipate last-minute demands when planning your negotiating strategy and tactics. Agree to an agenda that reflects your objectives and to realistic deadlines. Listen to the other party’s objections and ask why they are not agreeing. Emphasize the benefits to be gained by the other side by accepting your proposal. Look for a change in the pattern, size, and frequency of the other party’s concessions. Overcome objections by giving clear explanations. Take notes throughout the discussions, including your concessions and the ones made by the other party. Make your “last offer” credible and make it with conviction. Examine the draft agreement and clarify any points that you don’t understand, before signing.
Don’t: • • • • • • • •
View closing as a separate step in the negotiations. Be in a hurry to close. Make large concessions at the last minute. Rush into costly concessions because of deadlines. Push your advantage to the point of forcing the other side to leave the negotiations. Lose sight of your long-term objectives when getting blocked on minor issues. Become too emotional when closing (you need to think as clearly as possible during the close). Discuss the deal with the other side once you have agreed (you run the risk of reopening the negotiations).
Remember: • • •
Flexibility is at the heart of closing a deal. Experienced negotiators plan their closing tactics during their preparations for the negotiations. Successful negotiators follow their preset goals and concentrate their efforts on essential issues. (continued)
Closing Your Business Negotiations
• • • • • • • • • •
Encourage the other party to close, when the time is appropriate, since many negotiators either fear or do not know how and when to close. The best time to close is when both sides have achieved their expected goals. Close only if the deal is good, not only for you but for the other party as well. The notion of closing varies in different parts of the world because of cultural factors requiring closing techniques. Closing is not done in a hurry. Overcoming objections is a part of getting approval of proposals. Successful closers seek consensus. Buyers often say “no” one more time before saying “yes.” Nothing is agreed until everything is agreed. Not all negotiations lead to closing on a deal—sometimes no deal is better than a bad deal.
that organization. In some countries, closing is time-consuming, as negotiators need to consult other members of the organization for approval. These additional discussions may result in delays as well as further demands for last-minute concessions. To counter such demands, the initiating party must state clearly when making the final offer that any further changes requested will call for a review of all the issues on which agreement has been reached. A few clues can help experienced negotiators detect when it is time to close the talks. The most obvious one is when the concessions by one party become less important, less frequent, and are given more reluctantly. Generally, this is a sign that no further compromises are possible. Any concessions beyond that point may lead to a break in the negotiations. In nearly all negotiations, a time comes when both parties have met most of their objectives and are ready to concede on some lesser issues to reach agreement. Up to that point, both sides exchange views to determine their respective needs, validate their assumptions, and estimate the negotiating range and the type of concessions required. Most concessions are made towards the end of the discussions, particularly as the deadline approaches. It is generally accepted that as many as 80 percent of all the concessions are exchanged in the closing phase of the talks. By this stage the parties have become familiar with each other’s interests, tend to take a problem-solving attitude, and usually consider making concessions to reach agreement. Another clue that it is time to close the discussions is when one party considers it has reached its maximum outcome and decides to make a final offer. This final offer must be made with conviction and followed by a request for a firm commitment from the other party. It is sometimes difficult to determine if the party making the final offer is trustworthy or is rather simply employing a closing tactic to arrive at a settlement in its favor. Again, a great deal depends on the relationship and trust between the two sides, as well as the cultural environment in which the negotiation is taking place. In some countries, a final offer is considered final, while in others, it conveys willingness to reach agreement.
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When making a final offer, the party initiating the proposal must be willing to terminate negotiations if the other side refuses to accept. To avoid breaking the negotiation process, however, the party making the final offer can introduce a deadline for the other side to consider the “final” offer. This gives the receiving side more time to reexamine the proposal or to obtain additional facts enabling the continuation of negotiations. In some countries, negotiators begin the discussions with general principles followed by more specific issues. The party shifting to specific issues is usually expressing its interest in bringing the discussions to a close. In other countries, however, negotiators start to compromise on specific issues one by one until all outstanding matters have been agreed to. These different approaches illustrate the influence of the cultural background on business negotiations and the need to be flexible in concluding international transactions. It is widely accepted that negotiators, before agreeing to a final offer, ask for last-minute concessions. Such requests are expected and are part of the negotiating process. To be prepared to respond to last-minute requests, negotiators should keep a few concessions in reserve to maintain the momentum and to encourage the other party to close. These concessions should preferably be valued and appreciated by the requesting party, yet not be too costly to provide. For this reason, negotiators should identify the real needs of the other party and the likely concessions to be made just before closing and build them into the overall package. Before applying any of the closing techniques mentioned above, the negotiators should ask themselves the following questions: • • • •
Does the agreement meet our goals? Will we be able to fulfill the agreement? Do we intend to commit the resources to implement the agreement? Do we consider the other side capable of meeting its commitment to the agreement?
Only when each question is answered with a yes can both parties be ready to bring the discussions to a close. Deadlines The most obvious sign that it is time to close discussions is when the deadline approaches. It is important that the deadline be agreed to in advance by both sides, at the initial stage of the negotiations or when setting the agenda. A deadline arbitrarily set by one party in the course of the talks can lead to undue pressure on the other to close. Deadlines should however be flexible. They can be renegotiated to allow the discussions to proceed until agreement is reached. In particular, when negotiators enter into complex talks in different cultural environments, the possibility of allowing extra time should be built into the planning. Final Points When a deal is about to be concluded negotiators need to ask themselves certain questions to avoid unpleasant experiences in the implementation phase. In most cases agreements that run into problems do not suddenly become difficult to implement. Instead it is
Closing Your Business Negotiations
generally minor issues that are unattended to or left to degenerate over time that lead to major crises. To ensure smooth implementation, negotiators should ask themselves the following questions: • • • • • •
Have all the essential issues been discussed? Is the agreed proposal workable by both parties? Does the agreement clearly specify what is to be done by both sides, including payment terms, delivery schedules, product specifications, and so on? Have the major barriers to implementing the deal been identified and the means to overcome them agreed to? In case of potential disputes during implementation, what mechanisms have been instituted to resolve them? If either of the parties needs to renegotiate the terms, what procedures should be followed?
It would be advisable for the persons engaged in the talks to remain involved in the implementation phase. Each side should monitor the execution of the contract through the agreed procedures, and by periodic visits and ongoing communications. By maintaining regular contact and paying attention to minor details, the parties can help to ensure smooth business relations. Conclusion Many negotiators do not know how to bring their business talks to a successful close. They should be thoroughly prepared including knowing when and how to apply appropriate techniques and to respond to the other party’s use of closing tactics. By mastering closing techniques, negotiators can achieve agreements that both sides can implement smoothly throughout the life of the agreed transaction. In closing a deal, it should be remembered that negotiations based on trust and fair play may lead to repeat business and referrals. As it is expensive and time consuming to find new business partners, it is advisable to retain existing ones by agreeing to terms and conditions with which both sides feel comfortable.
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Reading 1.7
Defusing the Exploding Offer: The Farpoint Gambit Robert J. Robinson
Situations in which offers are made with an expiration date attached are common in negotiation. In a way, all offers are inherently limited by time: One cannot, for example, leave a car dealership, return several years later, and attempt to accept the last offer made by a dealer who may or may not be employed there any longer. Obviously, the validity of an offer is affected by the passage of time. “Exploding offers,” in contrast, are deliberate, calculated strategies. They are typically offered together with an extremely short, artificially imposed time limit. Consider, for instance, the following common manifestations of this phenomenon: •
•
•
Mary is looking for an apartment in a new city, and finally finds one that suits all her needs. When she asks about the rent, the landlord says, “The rent is $900 per month, but I tell you what—give me a check for the security deposit today, and I’ll make it $850. Otherwise it’s $900.” John needs to buy a car. He haggles for several hours with a dealer, getting the price lower and lower. Finally an impasse is reached: John is still not happy with the price, but the dealer is unable to offer a more attractive deal. As John gets up to leave, the dealer says, “Look, it’s the end of the month. If we can do this today, I’ll make my quota, and that’s worth another $500 off the price to me. But if you come back on Monday, we start all over again.” Pat is an MBA student looking for a summer job between the first and second years of the program. The school has a recognized recruitment “season” when various companies come on campus, interview students, and, in many instances, offer summer employment. On the first day of the interviews, Pat interviews with Company X. After about 30 minutes, the Company X spokesperson says, “Well, we’d like to offer you the job,” (and names a very generous salary) “but you must say yes or no right now.”
Each of these examples illustrates what has become known as an exploding offer. However, each case probably evokes a different affective response in the reader, and has different implications for the protagonists in the vignettes. Mary has the choice of saving $50 per month on rent but can still have the apartment if she delays until the following day; John probably will not purchase the car unless he takes advantage of the temporary $500 concession; and Pat has the chance to get an attractive summer job—which disappears if Pat’s next response is anything but acceptance of the offer. In this brief [reading] my goal is to further refine the notion of exploding offers (the problem faced by Mary, John, and Pat) and suggest some ideas on how to deal with them, including a tactic that I call the “Farpoint Gambit.” Source: “Defusing the Exploding Offer: The Farpoint Gambit,” by Robert J. Robinson, from Negotiation Journal 11, no. 3, July 1995, pp. 277–85. Used with permission. 72
Defusing the Exploding Offer: The Farpoint Gambit
Characteristics of Exploding Offers Many negotiation scholars use the notion of an exploding offer in informal discussion, and the concept is directly related to analyses of the role of threats and time in negotiating. Specifically, what makes an offer “exploding”? In my opinion, five characteristics separate exploding offers from offers that have naturally decaying life spans. Power Asymmetry Exploding offers generally only exist in situations where there is a considerable asymmetry of power between the offeror and the person receiving the offer. Thus in the cases of Mary and John, one might consider the offers as tactics being used between consenting adults in relatively equal power positions, which might not arouse any sense of discomfort. In Pat’s case, the situation is more ambiguous. Faced with a large company offering a choice between a job or possible unemployment for the summer, a student burdened with loans might feel great pressure to accept as a result of the exploding offer. An even more extreme example is provided by the academic job market, which is filled with newly minted PhD recipients who are looking for faculty positions. Colleges routinely make exploding offers, which are the equivalent of offering a person dying of thirst a glass of water—if the person accepts right away. This leads to the second condition of concern. A Pressure-Inducing “Test of Faith” The exploding offer often places great pressure on the person receiving the offer. This is not in itself unusual or necessarily reprehensible. However, the situation becomes more complex when the pressure is excessive and is built on power imbalances. Thus in the case of the faculty candidate, I have personally witnessed situations where the person receiving the offer is placed under excessive pressure by the argument that “if you’re one of us you’ll accept now.” This not only applies “normal” negotiation pressure but also raises the threat that accepting later risks making the organization angry with you for “holding out.” This makes the act of attempting to negotiate further somehow vaguely (or explicitly, depending on the degree of coercion being applied) treasonable, and leaves the person receiving the offer with no options but to accept or withdraw completely. In another situation I witnessed, excessive pressure was applied by means of an interesting variation, which consisted of offering the job to the individual and telling them that they were the person that the company wanted above all others—followed by informing the individual that if they were unable to accept the job that day, the offer would be withdrawn, at least until “further candidates have been considered and interviewed for the position.” Restricting Choice Another characteristic of the exploding offer is its use as a tool that
deliberately restricts the choice of the individual. While there is an element of this factor in the case of Mary (the landlord does not want her looking at other apartments) and John (the salesperson does not want him looking at other cars), it is somewhat peripheral in both of these negotiations, which are aimed at closing a deal. In Pat’s case, however, the exploding offer as a means to restrict comparative shopping is the primary tactic, and rests on not letting Pat get any other offers or even see representatives of other companies. In fact,
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it might even emerge that Company X is interviewing particularly early in order to prevent the candidates from seeing anyone else. Lack of Consideration and Respect Exploding offers involve arbitrary deadlines that are unnecessarily rigid. They can create enormous hardship for the individual involved, who may be called from family duties, may be forced to break leases, or may suffer other financial hardships in order to accept the offer. Appeals for flexibility and consideration are routinely ignored by the offeror, displaying an utter lack of regard for the other negotiator.
Exploding offers are sometimes made because a negotiator is ambivalent about the person or proposal in question, or is using this strategy as a means of resolving internal strife within the negotiator’s organization. This is a somewhat cynical viewpoint, and it is not uncommon for one side to make an exceptionally self-advantageous exploding offer. If the offer is accepted, then a fine bargain has been achieved; and if the offer is rejected, the offeror can move on to other options. The problem is that the offer, as made, was not a serious, good faith attempt to reach a settlement. Thus while Pat might be told that he or she is the candidate that Company X wants, the reality is more likely that Company X wants a warm body with Pat’s qualifications, and if Pat won’t accept, then an interchangeable individual will be substituted.
Lack of Good Faith
Why Are Exploding Offers Made? It is not difficult to understand the thinking behind the use of exploding offers, in terms of the perceived advantage this affords the offeror. The ability to impose terms and back them up with a tight time limit may force the other side to capitulate or agree before it might otherwise have done so, increasing the value of the deal for the party making the offer. In many ways, the exploding offer is the ultimate hard-bargaining tactic: Party A makes a final offer and then threateningly says, “And that’s good until noon tomorrow. After that, you can find another partner.” In essence, the tactic defines an end to the negotiation process. An exploding offer is not only an offer in the traditional sense but is also the last offer. Rejection will automatically terminate the negotiation, and in some cases, the relationship as well. In terms of the three cases we are examining, it is easy to understand how exploding offers can serve the interest of the offeror. In Mary’s case, the landlord wants to tie in the new tenant that very day. Perhaps the landlord is going away and wants to get the apartment filled. Or maybe he just thinks that Mary is the kind of tenant he wants in the building, and is trying to sweeten the deal. Perhaps the rent really is $850, and the landlord is disingenuously offering the $50 discount. Whatever the reason, it is worth $50 per month to the landlord to commit Mary that day, rather than undergoing the opportunity cost of continuing to search for other tenants. Similarly in John’s case, the dealer may in fact be trying to meet the quota for the month, or he may be looking for a way to make a sweeter offer without undercutting the “going” price for that model car. In any event, having John leave the dealership is to be
Defusing the Exploding Offer: The Farpoint Gambit
avoided at all costs, and the $500 exploding offer is an incentive for John to stay and make the deal. In Pat’s case, Company X is presumably interviewing several MBA students over the next several days. The company must pay to have the interviewer stay in a hotel until the process is concluded. During that time, the interviewer makes offers and waits for the students to pick among several offers; if rejected, the interviewer might make another offer and so on. How much simpler it is to tie up the first likely looking individual the interviewer meets, and go home. There is also another reason why the exploding offer is used. It can be a sign of offeror weakness that might not be at all apparent to the recipient of the offer, but is almost always present.1 Negotiators who use exploding offers may perceive themselves to be at a disadvantage relative to their competitors in terms of salary, conditions of sale, or the like. Or they may have severe time or budget constraints. Once again, the function of the exploding offer can be either to force a quick acceptance by ending the negotiation (and thus avoiding the necessity of sweetening the deal to an unacceptably high level) or to restrict the ability of the recipient to comparison shop, and therefore discover that the market was willing to pay at a significantly higher level.
Dealing with Exploding Offers: Try Being Reasonable First In the tradition of Getting to Yes (Fisher and Ury, 1981) and Getting Past No (Ury 1991), a number of possibilities exist for the individual faced with an exploding offer. Most of these involve getting away from positional stances in order to explore underlying interests and to look to create value via “principled negotiation” (Lax and Sebenius 1986). It is important to realize that exploding offers can be dealt with using these techniques, especially if there is some degree of goodwill in the interaction. An exploding offer is often made by a party that believes it stands to lose out in the negotiation or is unsure of its power. Building trust and appealing to reason can go a long way toward addressing this underlying concern, resulting in the exploding aspect of the offer being withdrawn. For example, apartment hunter Mary might say, “I understand you’d like a check today. Let me be honest. I really like this place, and I want to take it for $850 per month. But I have to see a few other places. How about I call you in the morning, first thing?” This might suffice. Or in the automobile dealership case, John the customer could say, “I really appreciate the $500 reduction. But I need to think this over. What if I call you 9 a.m. Monday? Can we make the offer good until then?” The dealer can accept, in which case the deal is still alive, or reject the counteroffer, in which case John is faced with the same decision he had before he made the suggestion. If the dealer really wants to make a quota, a sales agreement could be drawn up, dated that day, but requiring John’s agreement on Monday before it goes forward (John should probably not pony up any money until Monday). These are relatively easy situations to resolve. However, the classic exploding offer scenario, replete with elements of hard bargaining, cynicism, and coercion, is the job offer case involving Pat, the student. Here there needs to be a real addressing of interests.
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My advice to students in Pat’s situation is to have them point out to the organization that, since it wants its employees to be happy and productive, it is in the organization’s interest to let the students feel that they have freely chosen this position as the most attractive option. The way to achieve this is to make the most attractive offer, not to constrain choice. Also, if the student is really the one that the organization wants, then the employer should be prepared to wait for that individual, rather than treating him or her like an interchangeable part. The recipients of exploding offers should also be prepared to make sensible counteroffers. They should be able to say when they would be in a position to accept, and to explain why this date makes sense (as opposed to choosing an equally arbitrary future time such as a week or 10 days). I usually tell my students about my most enjoyable employment experience, when I was made an offer and told, in effect, “take your time deciding. You’re the one we want, and we want you to do the thing that’s right for you. We are here to help you make that decision in any way we can.” The contrast between this kind of attitude and an exploding offer, both in terms of an individual’s feelings and the likelihood of a good future relationship for the parties, should be obvious. I have academic friends who are tortured, years after accepting their jobs, with the question of what would have happened if their employers had allowed them the time to take one more interview, or await the decision of another school. My first recommendation is, then, to engage in problem solving with respect to uncovering interests, generating and exploring options, moving to creative solutions, and emphasizing relationship issues. However, this can fail if the other party is unsympathetic or locked into a positional or cynical stance. In such an instance, particularly if one feels that the other side is behaving in an ethically questionable fashion, I recommend the “Farpoint Gambit.”
Fighting Fire with Fire: The Farpoint Gambit While I always recommend first attempting a “principled” or “integrative” solution, I believe that when such tactics prove untenable, more assertive steps need to be taken. Doing this successfully depends on understanding where the power of the exploding offer resides. Exploding offers pivot on a credible, inviolable deadline. If the deadline is violated and the negotiation continues, the credibility of the explosion (the removal of the offer) is destroyed. And if the other side has depended on this threat as a central tactic, their entire position may collapse, putting the recipient of the initial offer in a very advantageous position. The technique I recommend, which I call the “Farpoint Gambit,” is from the catalog of “hoist-them-by-their-own-petard” tools, which sometimes makes it particularly satisfying to employ. The Farpoint Gambit derives from an episode of the science fiction television show Star Trek, The Next Generation, in which the crew of the Enterprise (the spaceship from Earth) is put on trial by a powerful alien “for the crimes of humanity.” (The episode is called “Encounter at Farpoint,” hence the name of the technique.) The alien creates a kangaroo court with himself as judge, and the captain of the Enterprise (Jean-Luc Picard) defends the human race. At a certain point, the alien judge becomes piqued by the captain’s spirited defense, and says to the bailiff, “Bailiff, if the next word out of the defendant’s
Defusing the Exploding Offer: The Farpoint Gambit
mouth is anything but guilty, kill him!” He then turns to Picard and asks, “Defendant, how do you plead?” Picard thinks for a moment as the bailiff menacingly points a weapon at him, them firmly announces, “Guilty.” As the courtroom gasps (and after an inevitable television commercial break), he adds, “Provisionally.” This is essentially the Farpoint Gambit. The alien has presented Picard with the ultimate coercive offer: Say you’re guilty or I’ll kill you. Obviously, Picard doesn’t think he’s guilty, but he doesn’t want to die. The power of the threat depends on getting Picard to admit that he’s guilty—he does, but in such a way (“provisionally”) that the alien judge is compelled to ask, “And what is the provision?” Picard then proceeds to talk his way out of the jam (as always happens with television heroes), and all is well. The point is that the alien is caught in his own trap: He’s still arguing with Picard, who is still not guilty or dead. In the same way, an exploding offer can be defused by embracing it, using the Farpoint Gambit. Consider again Pat’s situation. Essentially, Company X is the alien, saying to Pat, “either the next words out of [your] mouth are ‘I accept,’ or it’s no deal.” Pat can attempt to reason with the company’s representative, and if that does not work either walk away, accept, or use the Farpoint Gambit by saying, “I accept. Provisionally.” The provision could be anything that takes the negotiation beyond that day, and might be things like “provided I can meet with the person I would be working for,” or “provided my coworkers prove satisfactory,” or even “provided I don’t get a better offer from the companies I’m still waiting to hear from.” The key is to make requests that are completely reasonable, but which will eventually result in the deadline being violated, due to the need for further clarification, or the lack of authority of the negotiator making the offer. Once the deadline passes, the credibility of the threat is destroyed, and successive attempts to set arbitrary deadlines can be dealt with in exactly the same way. The recipient of the offer can accept at his or her leisure, or reject the offer based on an unsatisfactory resolution of the provisions of the original acceptance. The Farpoint Gambit also works by leveraging off fractures in the other side or the imperfections in their informational strategies. Thus in Pat’s case, the company’s negotiator may not be authorized to offer moving and relocation expenses, or know what the policy is on day care for children. In such situations it is extremely easy to accept “pending satisfactory resolution of these issues” and then to continue to negotiate those and other issues. The success of the Farpoint Gambit ultimately rests on the notion that the person receiving the exploding offer can eventually withdraw from the situation if no satisfactory resolution is forthcoming, without the offeror being able (or inclined) to sanction them for doing so. While this technique is about helping people get what they want from a coercive negotiating partner, it is not about helping people find a way to wriggle out of commitments given in good faith when they change their minds or get a better offer. Inevitably, some negotiations, even those resuscitated by the Farpoint Gambit, are bound to fail. However, if conditions are attached to the acceptance—and these are not, by a reasonable assessment, met—then there really is not anything the company can do when the student withdraws, or the faculty candidate accepts an offer elsewhere, although possible reputational damage should still not be overlooked. It may be that each side has as
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much at stake as the other, which will help to keep both reasonable—no organization wants to get the reputation for strong-arming prospective employees with techniques of dubious morality. In other cases, there may be actual legal provisions that allow the individual to withdraw within a specified time limit after accepting, such as in the case of signing an agreement to purchase a car. The Farpoint Gambit has a further advantage: It is nonescalative (Pruitt and Rubin 1986) and non-zero-sum in nature. Like the crew of the Enterprise in their endless quest for new frontiers, the Farpoint Gambit may force negotiators toward improved solutions at the “Pareto frontier” (e.g., see Raiffa 1982). It moves the parties in the “right” direction—that is, toward one another rather than apart. In this sense, the Farpoint Gambit is not as dangerous as techniques that require one side to call the other’s bluff, or see who can hold out the longest. In these latter cases, someone frequently wins, and someone loses. The Farpoint Gambit is about both sides being able to take care of underlying interests, and thus able both to “win” and get what they want, with the offeror paying a fair price.
In Conclusion: When to Use—Or Not Use—The Gambit I would strongly caution against using the Farpoint Gambit as a routine technique to gain advantage. Nothing is more frustrating and unacceptable than someone who makes a habit of taking a deal, and who then continues to impose conditions or introduce new issues. Indeed, this is the flip side of the reprehensible lowballing technique employed by shady salespersons. In pondering this, I have come up with some guidelines for situations in which I believe it is legitimate to employ the Farpoint Gambit. Ideally, I would make sure that all three of these conditions were present before I would feel completely comfortable in using this tactic. • • •
The other side is perceived by the recipient of the exploding offer to be behaving unethically, and does not respond to appeals to reason. The recipient is truly interested in making a deal but needs more time to make a decision. There genuinely are issues that need clarification, which would make the difference between accepting or rejecting the deal.
The Farpoint Gambit is a technique that should not be used lightly, in a spirit of deception, or with a lack of good faith. However, in situations where the individual is trapped by the hardball tactics of an offeror who relies on an exploding offer, the Farpoint Gambit offers a means whereby the pressure applied by the other side can be turned against them, much as a judo expert can use a foe’s momentum to provide the energy that leads to the latter’s own undoing. To be sure, this is itself a hardball tactic (Schelling 1960; Deutsch 1973), and many might not feel comfortable using it. I offer the Farpoint Gambit as someone who has seen many friends, loved ones, and students put under enormous pressure, forced to make critical life decisions under unnecessarily difficult circumstances due to the callous use of power by people and institutions not operating in good faith.
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Notes The author would like to acknowledge the useful criticism he received on earlier drafts of this work from Professors Roy J. Lewicki of the Ohio State University; the late Jeffrey Z. Rubin of Tufts University; and Michael Wheeler of The Harvard Business School. Also significantly contributing to this work were members of the Program on Negotiation/Fletcher School of Law and Diplomacy “Tuesday Evening Reading Group.” 1.
Only in the case of a true monopolist, making an offer with many potential buyers, can one argue that the exploding offer is truly an act of self-serving arrogance and convenience on the part of the offeror.
References Deutsch, M. 1973. The resolution of conflict. New Haven: Yale University Press. Fisher, R., and W. L. Ury. 1981. Getting to yes: Negotiating agreement without giving in. Boston: Houghton Mifflin. Lax, D. A., and J. K. Sebenius. 1986. The manager as negotiator. New York: Free Press. Pruitt, D. G., and J. Z. Rubin. 1986. Social conflict: Escalation, stalemate, and settlement. New York: Random House. Raiffa, H. 1982. The art and science of negotiation. Cambridge, MA: Harvard University Press. Schelling, T. 1960. The strategy of conflict. Cambridge, MA: Harvard University Press. Shell, G. R. 1991. When is it legal to lie in negotiations? Sloan Management Review 32, pp. 93–101. Ury, W. 1991. Getting past no: Negotiating your way from confrontation to cooperation. New York: Bantam Books.
Reading 1.8
Implementing a Collaborative Strategy Roy J. Lewicki Alexander Hiam Karen W. Olander
This [reading] shows how to use the collaborative strategy. The word collaboration may sound strange to people who are used to viewing negotiation as competitive. But bargaining does not have to be a win–lose proposition—the pie does not have to be fixed. In many cases, conflict and competitiveness between the parties lead them to believe that there are only limited resources to be divided between the parties. It is often possible to find solutions to problems that will satisfy all parties by changing or growing the pie instead of fighting over it. The pie analogy, however, leads us to the principal challenge of a collaborative strategy: the parties must somehow learn how to work together. Collaboration, which is an open, sharing, creative process, does not come naturally when you are in a conflict situation or do not trust the other party. Collaboration is therefore difficult for many negotiators to master. Some negotiators think they are collaborating when in fact all they have done is wrap their competitive strategy in a friendly package. Thus they put on the “image” of collaboration, only to move in for a competitive “grab” near the end of the negotiation. This is not collaboration—it is competitiveness in a collaborative disguise. True collaboration requires the parties to move beyond their initial concerns and positions and go on a joint quest for new, creative ways to maximize their individual and joint outcomes. Before we examine how the collaboration strategy works, let’s see how a demonstration case can be adapted to this strategy. Here are Felice and Sara taking a cooperative, win–win approach to setting up a partnership to develop their interior decorating business: “The bottom line is, we need $50,000 in cash, right now, if we want to do this right. I know you have the money—why are you hesitating to use it when we obviously need it?” “But Sara,” Felice objected, “what’s the rush? This is a big decision for me. What if things don’t work out? I’d be taking all the financial risks and suffering most of the losses. Whatever happened to getting a bank loan?” “Well, I tried a few banks, but I didn’t have any luck—my credit history isn’t so great.” Sara paused to offer some homemade cookies to Felice. “I’m sorry I’m being so pushy, I know this is something that you need to think through, and I’m not helping. It’s just that I’ve already made some important contacts, and found promising offices for rent; I’m afraid if we don’t get started soon, we’ll never get going.” Felice thought for a minute as she ate the cookie. “I understand your impatience, I’m impatient, too. I’m excited about working together and I don’t want to waste more time. Maybe we’re going about this in the wrong way. Let’s just take a few minutes to go over our situation. We want to start an interior decorating business together. You have a lot of Source: “Implementing a Collaborative Strategy,” from Think Before You Speak: A Complete Guide to Strategic Negotiation, by Roy J. Lewicki, Alexander Hiam, and Karen Wise Olander, 1996, pp. 99–119. New York: John Wiley & Sons, Inc. Used with permission. 80
Implementing a Collaborative Strategy
experience, but no money to invest, and I have no experience but possibly a lot of money to invest. However, I’m reluctant to sink all my savings into something that may not work out, partly because I’d lose everything I have, but mostly because I’m afraid of ruining our friendship if it doesn’t work out. I could probably get a bank loan, but then I’d still be responsible for all the finances, so it seems to me that we should consider bringing in a third party in some capacity.” “Hey—that’s not a bad idea. But we would need someone who’d only help us financially—we still need to have control of the business,” Sara absently picked crumbs off her sweater. “You know, that reminds me—an old friend of my dad is an architect in a very respected firm. I wonder if we could hook up with them somehow, maybe exchange the rent for an office in their building with a percentage of our business. They could refer customers to us, and eventually we could do the same for them. It’s a beautiful old business—you’ll love it. It would be a terrific showplace for our work. Do you think I should call him?” “Well, let’s think for a minute,” said Felice, “What percentage would we offer them? How about 20 percent? That gives them enough to feel it’s worthwhile without taking away our control. Then I could invest $20,000 in the business to get us started and we’ll each keep 40 percent of the ownership.” “That sounds great! Let me try it—I’ll call my dad right now and get the architect’s phone number.” When Sara and Felice proposed the deal to the architect, he was very enthusiastic about their work and the potential for the fit with his business. He offered them office space in his building, and they moved into an office the following week. Within a month, they had landed several jobs that generated a cash flow and helped to establish their reputation as creative, reliable decorators. Over time, the business flourished. They eventually bought the 20 percent back from the architect (with a handsome profit), and their friendship remains strong.
Characteristics of the Collaborative Strategy In the collaborative strategy both the relationship and the outcome are important to both parties. The two parties usually have long-term goals that they are willing to work for together. Both parties are committed to working toward a mutually acceptable agreement that preserves or strengthens the relationship. Because each party values the relationship, they will attempt to find a mutually satisfying solution for both parties. Working together effectively in a collaborative negotiation process can itself enhance the quality of the relationship. This approach is very different from the competitive strategy, where both sides want to win so badly that they pursue their goal at all costs and ignore all the factors that might allow a collaborative process. In addition, in the collaborative model, intangibles are important and accounted for. These include such items as each party’s reputation, pride, principles, and sense of fairness. Because these concerns are important, the negotiations must stay on a rational, reasonable, and fair level. If the parties get angry at each other, the collaborative atmosphere will degenerate into a competitive one. Allow for plenty of venting time if you or the other party begins to get irritated, and be sure to listen to complaints about your behavior with an open mind to avoid conflicts that can derail collaboration. There must be a great deal of trust,
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cooperation, openness, and communication between the parties to engage in effective problem solving. Finally, the parties must be willing to make concessions to accomplish their goals. These concessions should be repaid with creative win–win solutions, but they represent a risk for each party that the other party must be careful not to abuse. In the collaborative strategy, the constituency (if there is one) plays a very different role from that which it plays in competitive negotiations. Generally, the members of the constituency are supportive and will promote the relationship between the two parties. The collaborative strategy relies on deadlines that are mutually determined and observed. They are not used for manipulation, as we found in the competitive strategy. Information flows freely and is not used to control the situation or guarded to maintain power. The objective is to find the best solution for both sides. Similarities between the two parties, not differences, are emphasized. There are four major steps in carrying out a collaborative strategy: (1) identify the problem; (2) understand the problem; (3) generate alternative solutions; and (4) select a solution. We will examine each in detail.
Steps in the Collaborative Strategy Identify the Problem This may sound like a simple step, but in the collaborative model both sides are involved equally in the process, and both need to agree on what the problem is. When you were gathering information you focused on your point of view, but for the collaborative strategy to work, you will need to work closely with the other party to find a common view of the problem.1 When defining the problem, try to use neutral language and to keep it impersonal. For example, you might say “We are not able to get our work out on time” rather than “You are preventing us from doing our work and getting it out on time.” It is important to define the obstacles to your goals without attacking other people. Try to define the problem as a common goal. For example, in the Sara and Felice situation, they might say, “Our goal is to find a way to start our business without Felice having to assume too much financial risk.” Keep the goal definition as simple as possible. Try not to load the situation with peripheral issues that are not really related to the central concern. Stick with the primary issues. Each party needs to be assertive, but cooperative at the same time: You need to be clear about what you want to achieve, yet not at the expense of dominating the other side. Because the relationship is important, you need to see the problem from the other party’s perspective—“to walk a mile in the other person’s shoes” as much as possible. Understanding and empathy go a long way to finding the common issues.2 Watch out for a tendency to define solutions before you have fully defined the problem. In fact, you should avoid discussing solutions until you have thoroughly defined and understood the problem(s). And remember, the more creative the problem definition, the more likely you are to discover a new, beneficial win–win solution. Throw caution to the wind, brainstorm wildly, and hope for a creative insight that will make it fun and easy to solve the problem.
Implementing a Collaborative Strategy
Understand the Problem In this step, you try to get behind the issues to the underlying needs and interests.3 As noted earlier, an interest is a broader perspective that each side has, which is usually “behind” their position. In our example, Felice’s position is that she does not want to provide full financial backing for the new business; her interest is to minimize her financial risk while also helping to get the business started and into a profitable mode. You need to learn not only about the needs and interests of each party, but also about their fears and concerns. Felice’s fear is that she will lose a large amount of her investment (and her savings) if the business goes bad. The reason for getting behind the positions is that they tend to be fixed and rigid; modifying them requires the parties to make concessions either toward or away from the target point. In contrast, interests define what the parties care about more broadly, and there are often multiple “roads to Rome,” or several ways to resolve the conflict between these competing interests. In addition, a focus on interests tends to take some of the personal dimension out of the negotiation and shifts it to the underlying concerns.4 Since there is bound to be a difference in thinking styles, people will approach even similar issues in different ways. Positions offer only one way to think about an issue; interests offer multiple ways to think about it. Thus you can find out “where they are coming from” more effectively by discussing interests than by stating positions. Interests may reflect current or longer-term concerns. And parties are likely to have multiple interests. It is also important to realize that each party may have different interests. By using “why” questions, you can dig deeper into the reasons for each party’s position. An interest is the why of a position. Interests may be substantive,5 as with concerns for prices, rates, and availability of resources. Interests may have to do with the process, as in how we will conduct the actual negotiation. This concern may, in turn, be based on how the process has been completed in the past, or on how we want to change and improve it for the future. Concerns may also center around sustaining and enjoying the relationship. Or a party may have a strong interest in principles. They may be concerned about what is fair or ethical, right or acceptable. For example, Felice and Sara have a number of interests at stake in addition to the substantive interest of their specific solution to funding their new business. Because they are starting a business in which they will work together actively, they are trying to get off on the right foot in the way they solve and deal with joint problems. Thus they want to establish a good problem-solving process, they want to preserve—and even enhance—their relationship with one another, and they probably care a great deal about principles, such as the precedent created by both the outcome and the process of this negotiation or the perceived fairness of their agreement. Felice and Sara have a lot riding on this deliberation, and it is most important that they work it out in a way that creates a good outcome and strengthens their working relationship. Remember that even if you define interests carefully, they can change. Since the negotiation process is an evolving one, you may need to stop from time to time to reconsider interests. If the conversation begins to change in tone or the focus seems to shift, this may be a signal that interests have changed. Since the collaborative strategy is one of openness, the parties with changing interests should be encouraged to share their shifts in needs. The other party may facilitate this by being willing to expand resources,6 extend the time frame,
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or change the details of the negotiation to accommodate the changed interests (we say more about some of these tactics in the next section). As Sara and Felice’s business took off and prospered, their interests changed. As the business was successful, Felice was less worried that her financial investment would be seriously at risk. As the new decorating contracts were assured, she became more confident and trusted Sara more, and the two were eventually able to buy the 20 percent investment back from the architect. Both the changed nature of the business and the trust level between Sara and Felice had a lot to do with changing the interests of these two negotiators. Generate Alternative Solutions Once you have defined the issues to the satisfaction of both parties, you can begin to look for solutions. Notice that this is plural: solutions. You want to find a group of possible solutions, then select from among them the best solution for both parties. There are two major ways to go about finding solutions. One is to redefine the problem so you can find win–win alternatives for what at first may have seemed to be a win– lose problem. The second is to take the problem at hand and generate a long list of options for solving it. To illustrate the different approaches, we will use an example suggested by Dean Pruitt, about a husband and wife who are trying to decide where to spend a two-week vacation.7 He wants to go to the mountains for hiking, fishing, and some rest; she wants to go to the beach for sun, swimming, and night life. They have decided that spending one week in each place will not really be adequate for either person, because too much time is spent in packing, unpacking, and traveling between the two locations.
Redefining the Problem
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Expand the pie: If the problem is based on scarce resources, the object would be to find a way to expand or reallocate the resources so that each party could obtain their desired end. Knowing the underlying interests can help in this endeavor. For example, the parties could take a four-week vacation and spend two weeks in each place. While this would require more time and money, each person would get a two-week vacation in the chosen spot. Logroll: If there are two issues in a negotiation and each party has a different priority for them, then one may be able to be traded off for the other. For example, if Problems A and B are common to both parties, but Party 1 cares most about Problem A and Party 2 cares most about Problem B, then a solution that solves both problems can provide each party with a happy resolution. “You get this and I get that.” If there are multiple issues, it may take some trial and error to find what packages will satisfy each party. In our example, if the husband really wants to stay in an informal rustic mountain cabin, and the wife really wants to stay in a fancy hotel, then another resolution is for them to go to the mountains but stay in a fancy hotel (or an informal beach house at the shore). Offer nonspecific compensation: Another method is for one party to “pay off” the other for giving in on an issue. The “payoff” may not be monetary, and it may not even be related to the negotiation. The party paying off needs to know what it will
Implementing a Collaborative Strategy
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take to keep the other party so happy that they won’t care about the outcome of this negotiation. In a house sale negotiation, for example, the seller might include all window coverings (curtains, drapes, blinds) as part of the deal. The buyer may be so delighted that he decides not to ask for any other price break. In our vacation example, the wife might buy the husband a set of golf clubs, which will make him so happy that he will go anywhere she wants to go (since there are golf courses everywhere). Cut costs: In this method, one party accomplishes specific objectives and the other’s costs are minimized by going along with the agreement. This differs from nonspecific compensation because in this method the other party can minimize costs and “suffering,” whereas in the other method, the costs and suffering do not go away, but the party is somehow compensated for them. This method requires a clear understanding of the other party’s needs and preferences, along with their costs. In our vacation example, the wife says to the husband, “What can I do to make going to the beach as painless as possible for you?” He tells her that he wants to stay in a beach house away from the big hotels, get some rest, and be near a golf course and near several places where he can go fishing. They both go down to their favorite travel agent and find a location that offers all these things. Bridge: In bridging, the parties invent new options that meet each other’s needs. Again, both parties must be very familiar with the other party’s interests and needs. When two business partners (Sara and Felice) bring in a third partner who can offer resources neither of them wanted to contribute, this is an effective example of bridging. In our vacation example, the husband and wife go to a travel agent and find a place that offers hiking, fishing, beaches, swimming, golf, privacy, and night life. They book a two-week vacation for Hawaii and have a wonderful time!
The second approach to inventing solutions is to take the problem as defined and try to generate a list of possible solutions. The key to finding answers in this approach is to generate as many solutions as possible without evaluating them. The solutions should be general rather than party-specific—they should not favor one party over the other. At a later stage, each solution can then be evaluated to determine whether it adequately meets the needs and interests of both parties. What is interesting in this process is that both parties engage in trying to solve the other party’s problem as much as they do their own.8 It is a cooperative endeavor. And, as you have probably heard many times before, two heads are better than one. If you get to this stage, but the issues still seem murky, you may need to go back to the problem definition and rework that step. It should be easy to generate solutions if the problem is clearly stated in a way that does not bias solutions toward one party or the other. Otherwise, if you are comfortable with the definition of the problem, forge ahead. There are a number of ways to generate ideas for solutions. Remember that you are only generating solutions in this step, not evaluating them or deciding whether to use them—yet. That will happen in the next step.
Generating a List of Solutions
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Brainstorming: This common method for generating ideas usually works best in several small groups rather than one large one, depending on the number of
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people involved. Write down as many ideas as possible, without judging them. It is best to write or post the ideas on a flip chart, chalkboard, or similar display device, so that everyone can see them and keep track of what has been done. The key ground rule is that ideas must not be evaluated as they are suggested. Don’t let anyone say, “Oh, that’s a dumb idea!” or “That won’t work!” Keep ideas flowing, keep focused on the problem and how to solve it, without associating people with the problem or the solutions. It often happens that people quickly think of a few possibilities, and then run out of ideas. At this point, it is easy to think you are done because you have a few solutions. Don’t stop here—stick at it for a while longer. Otherwise you may miss some really good ideas, particularly creative ones that no one has considered before. Ask outsiders for ideas, too. Sometimes they bring a fresh approach to the problem. Piggybacking can be used in conjunction with brainstorming.9 This technique is simply to build on someone else’s idea to produce yet another idea. It’s often done by working in a sequence order; one person starts with a brainstormed idea, then the next person has to “piggyback” until possible variations on the idea are exhausted. Nominal groups: In this method, each negotiator works with a small group— perhaps his or her constituency—and makes a list of possible solutions. These are discussed within the group, then considered, one at a time, by the group as a whole. They can be ranked in terms of preferences or likely effectiveness. The drawback of this method is that anyone not present at the session will miss offering input or helping to shape the solution. Surveys: Another useful method is to distribute a questionnaire stating the problem and asking respondents to list possible solutions. In this case, each person works alone on the survey, so people miss out on the synergy of working together. However, the advantage is that a number of people who have good ideas, but are normally reticent about getting into a group’s conversation, can offer their thoughts and ideas without being attacked or critiqued. Another advantage is that this draws in the ideas of people who may not be able to attend the negotiation or formally participate in it.
Prioritize the Options and Reduce the List Once you have a list of possible solutions,
you can reduce it by rating the ideas. In communicating your priorities and preferences to the other party, it’s important to maintain an attitude of “firm flexibility.”10 Be firm about achieving your interests, while remaining flexible about how those interests might be achieved. There are a number of tactics to keep the discussion collaborative while being clear and consistent about your preferences: • • •
Remember that you are only prioritizing the list, not yet deciding on the actual solution. Be assertive in defending and establishing your basic interests, but do not demand a particular solution. Signal to the other party your flexibility and willingness to hear the other party’s interests by practicing your listening skills.
Implementing a Collaborative Strategy
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Indicate your willingness to modify a position or have your interests met in an alternative way. Perhaps you will be able to trade one point for another. This will demonstrate your openness to suggestions and willingness to work together. Show ability and willingness to problem solve. Skill in problem solving is valuable here, especially if you get stuck on a particular point and need to find some way to resolve it to everyone’s satisfaction. If you can settle this issue, it will help when you get to the next step and are actually deciding on the solution. You will have set the stage for collaboration. Keep lines of communication open. If tempers flare, take a break, and talk about it if need be. Also talk with the other party about how you can continue to work on the problem without getting angry or losing control. Make sure both parties feel that they are being heard. Steer discussion away from personalities, and concentrate on the issues: “Separate the people from the problem.”11 Underscore what is most important to you by saying, “This is what I need to accomplish,” or “As long as I can accomplish _____, I’ll be very happy.” Resist the temptation to give in just to get a resolution. Giving in is an accommodating strategy that will not result in the best outcome for both parties. Reevaluate any points on which you disagree. Be sure that both sides agree on the adjusted prioritized list so that you will both feel comfortable as you move to the final step. Eliminate competitive tactics by identifying them and either confronting them or renegotiating the process. If the discussion becomes competitive, point out that this is happening. Then try to resolve the problem before the entire negotiation becomes competitive.
Select a Solution12 Using your prioritized list of potential solutions from the previous step, narrow the range of possibilities by focusing on the positive suggestions that people seemed to favor most. For example, one way to prioritize is to logroll (package each person’s first choice together). If parties have the same first choice, but very different preferences for it, try to invent a way for both sides to “win” on this issue. Try to change any negative ideas into positive ones,13 or else eliminate them from the list. Stating alternatives as positives keeps the negotiation upbeat and on a positive note. Avoid attributing negative ideas to any particular person or side. Evaluate the solutions on the basis of quality and acceptability. Consider the opinions of both parties. Do not require people to justify their preferences. People often do not know why they have a preference; they just do. When you are preparing to select a solution, if you foresee any potential problems with this process, you may want to establish objective criteria for evaluation before you start the selection process.14 In other words, before you move toward picking among prioritized options, work against a set of objective facts, figures, data, and criteria that were developed independently of the options. There are numerous examples. In our example between Felice and Sara, they might go to a small business assistance agency, such as a local bank or small business development group, to find out how other business partnerships
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have dealt with this situation. If a car owner and a garage mechanic are having a dispute about how much it should cost to repair a starter motor, there are books available that indicate the “standard” cost for parts and labor for this repair. Finally, if a group of people is trying to pick a job candidate from among a group who applied for the job, their work will be considerably facilitated if they spend time developing criteria by which to evaluate the applicants before they actually look at résumés and interview people. If you can’t find objective criteria, another technique is to have a third party help you. If necessary, use subgroups. These are helpful if the problem is complex or if the outcome will affect a large group. It may be more efficient to use several small groups than to use one large one. Be sure the subgroups contain representatives from each party. Intangibles are often operating in the decisions. For example, gaining recognition or looking strong to a constituency may be important factors in the selection of solutions. Acknowledge the importance of intangibles by building them into the decisions. For example, if the other party needs to maintain esteem with a constituency, they may be willing to settle on a lesser point that still allows them to appear in a favorable light. In fact, it will help them greatly if you work with them to determine how to make them look strong and capable to the constituency. Fairness is usually one of the most important intangibles. In a win–win negotiation, both parties want to achieve a fair outcome, rather than maximize their outcome—which they might push for in a competitive negotiation. There are a number of ways to decide what is fair, but three common criteria often apply:15
Fairness and Other Intangibles
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An outcome that gives each side equal outcomes. Thus it is not surprising that one of the most common ways to solve negotiation problems—particularly win–lose, competitive ones—is for the parties to agree to “divide it down the middle.”
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An outcome that gives each side more or less based on equity (what it has earned or deserves, based on the time or energy committed). In this case, the side that puts in more should get out more. Equity is usually based on the ratio of outcome to input, so that the person who works harder, suffers more, and so on deserves a proportionally larger share of the results.
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An outcome that gives each side more or less, depending on what it needs. In this case, if one side can create a legitimate claim that it needs or deserves a better outcome, there may be a good case to be made for dividing up the resources so that those with greater needs actually gain more.
We can see how the equity versus equality arguments can easily come into play in the discussions between Felice and Sara. Sara—having no money but great creative skills—could argue that they should split all profits from the business equally. In essence, she is arguing that creative contribution and financial contribution to the business should be weighted equally. In contrast, Felice—having few creative skills but a lot of money to put toward the venture—could argue that they should split profits in proportion to the amount of money contributed during the start-up. If the two of them stuck to these positions strongly, they could have an intractable dispute over how to value financial and creative contributions, which would be a major block in their discussions.
Implementing a Collaborative Strategy
If emotions surface, or if people get angry, take a break. Give people an opportunity to discuss the reasons for their dissatisfaction. Be sure everyone has cooled off before you start again, and try to keep personalities out of the deliberations. If taking a break does not work, seek out a third party to help you.
Emotional Escalation
Other Suggestions for Keeping the Decision-Making Process on Track You can use logrolling to make combination options. You can also take advantage of risk preferences, differences in expectations, and differences in time preferences. For example, one party may prefer an option with low risk, while the other party is willing to accept an option with a much higher risk; you may be able to combine these so that each party gets its preferred outcome. Likewise, some options may satisfy only short-term concerns, but may be more important to one party than longer-term issues. These, too, can be traded off. It is very important not to rush the process of selecting solutions, appealing as it may be to do so. If you get to the bottom line too quickly, you may miss some good potential options, and you may fail to ensure that both sides participate equally.16 Collaborative efforts require the participation of both sides; they may also require time to mull over alternatives and think through all the consequences. Good collaborative negotiation requires time and cannot be rushed. Remember that everything is tentative until the very end. During the solution-generating phase, some people may even object to writing anything down, as this may make them nervous. They may feel they are being railroaded into commitments they have not agreed to. Other than the “working documents” that you may create as you define the problem and invent options, you may want to begin to record decisions only when the group is close to consensus. That way, nothing is set in stone until the very end. This open, fluid approach makes it possible to share creative ideas and suggestions. The minute one party says, “But you said yesterday you’d be willing to . . . ,” the collaboration starts to unravel as participants begin to worry about being held accountable for “positions.” This difficult and critical rule is violated too often as people revert instinctively to a competitive style without realizing the impact on idea generation and sharing. Once the parties have agreed on solutions and prepared a document to outline the agreement, it should be passed around for everyone to read. Some people have suggested that this may even be an excellent way to manage the entire prioritization and decision-making process. Start with a tentative draft of what people agree to, then continue to pass it around, sharpening language, clarifying words, and writing out agreements so that all agree with it and pledge to live by it. You may want to make a plan for implementing the agreement, and to set up a time frame in which the parties can try out the solution.17 This again allows for all to fully participate and to become committed to the plan.
How to Be Successful with Collaborative Negotiation Researchers have identified several keys to successful collaboration.18 They are useful as a checklist for the strategic negotiator in planning and implementing a collaborative strategy.
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Create Common Goals or Objectives There may be three different ways the goals will be played out: All parties will share in the results equally; the parties will share a common end but receive different benefits; or the parties will have different goals, but share in a collective effort to accomplish them. In any of these cases, both parties believe that they can benefit by working together as opposed to working separately, and that the results will be better than they would be if each party worked separately. Maintain Confidence in Your Own Ability to Solve Problems This is more or less a matter of “If you think you can, you can.” As we mentioned earlier, it helps to have a strong knowledge of the problem area, but lack of knowledge can be overcome if the desire is there. Probably the most important element is to develop skills in negotiating collaboratively, since it is a less common form of negotiation. The more you do it, the better you will become at doing it. Value the Other Party’s Opinion Valuing the other party’s point of view is difficult if you have been accustomed in the past to focusing only on your own position and maintaining it. In the collaborative strategy, you value the other party’s position equally with your own.19 You need good listening skills and openness to hear the other party’s point of view. Share the Motivation and Commitment to Working Together In the collaborative strategy, you are not only committed to the idea of working together with the other party, you take actions to do so. You pursue both your own needs and those of the other party. This means each party must be explicit about their needs. In collaborative negotiation, the parties strive to identify their similarities to each other and to downplay their differences. The differences are not ignored, they are simply recognized and accepted for what they are. The parties are aware that they share a common fate, particularly if they expect to work together after this negotiation has been completed. They know they can gain more if they work jointly than if they work separately. To do this, they focus on outputs and results.20 Motivated, committed parties will control their behavior in a number of ways. Individuals will avoid being competitive, combative, evasive, defensive, or stubborn. They will work at being open and trusting, flexible, and willing to share information and not hoard it for their own use. A Cautionary Note Believe it or not, there is such a thing as too much collaboration! The
two parties must not be so committed to each other that they do not look out for their own needs. If they begin to subordinate their needs to the other party, they will be moving toward the accommodating or lose–win strategies and will lose out on the benefits that the collaborative strategy can offer.
Implementing a Collaborative Strategy
Trust Because trust creates more trust—which is necessary to begin and sustain cooperation—it is important to make the opening moves in collaborative negotiation in a way that engenders trust.21 Opening conversations may occur even before the formal negotiations begin, when the parties are just becoming acquainted. If one party finds a reason to mistrust the other party at this time, this may stifle any future efforts at collaboration. If the parties are new to each other, or if they have been combative or competitive in the past, they will have to build trust. Each party will approach the negotiation with expectations based on the research they did on each other or on past history. Generally, we trust others if they appear to be similar to us, if they have a positive attitude toward us, or if they appear cooperative and trusting. We also tend to trust them if they are dependent on us. Likewise, making concessions appears to be a trusting gesture, so we are likely to respond in kind. In contrast, it is easy to engender mistrust. This often begins either with a competitive, hostile action, or with an indication that one does not trust the other. Once mistrust gets started, it is very easy to build and escalate, and very difficult to change over to collaboration. Trust escalation and deescalation have often been compared with the children’s game “Chutes and Ladders.” In this analogy, it is easy to move down the “chute” of mistrust, rapidly sliding to the bottom, but much more difficult to climb back up the “ladder” that will restore and sustain good trust between parties.22 Clear, Accurate Communication Communicating effectively is the bedrock of negotiation, no matter what form the bargaining strategy takes. In the collaborative strategy, precise and accurate communication is of the utmost importance. It is crucial to listen well so that you know what the other party wants and why they want it. This requires more than just superficial listening. It is through communication that one party shares information with the other party.23 This communication must be delivered in the most concrete of terms so there is no confusion or misinterpretation. Feedback and frequent questions can clarify the message if necessary. Some of the communication in negotiation may be formal, based on procedural or other rules such as rules of order. Sometimes communication will be informal, as during breaks and after sessions. Or perhaps the entire undertaking will be informal, depending on the personal characteristics and styles of the participants.
Obstacles to Achieving Good Collaboration Collaborative negotiation is a lot of work. But the rewards can be great. Sometimes, however, no matter how much you want to succeed, obstacles may prevent you from moving ahead with a collaborative strategy. One (or both) of the parties • •
May not be able to do the required work. May have a win–lose attitude.
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• • • • •
May not be able to see the potential for collaboration. May be motivated to achieve only their own goals. May not be capable of establishing or maintaining productive working relationships. May be inhibited by biases. May have a constituency that is pressing for competitive behavior or quick outcomes.
Further, the situation may contain elements that require a mix of strategies. Then you need to separate the issues into the component parts and deal with each separately. Sometimes you may feel that you do not have the time or energy to push forward with a collaborative strategy, especially if you encounter one or more of the preceding situations. What If There Is a Breakdown? If there is a conflict, try to move the discussion to a neutral point, and summarize where you are.24 If there is a total breakdown in communication, and you just cannot get the negotiation back on track, you may need to resort to conflict resolution strategies or to thirdparty intervention. And also note that you and the other party can, at any point, reach a mutual agreement to abandon your collaboration and adopt another negotiating style. For instance, you might try collaborating, decide you don’t like working together, and decide that you will “agree to disagree” and revert to a conventional competitive strategy—or toward a more expedient and simple outcome through compromising. Remember, however, that you will give up the relationship benefits, so do not advocate the competitive strategy unless you decide your initial estimation of relationship importance was too high. Also, since you will have shared much information through your collaboration attempt, it can now be used against you in a competitive negotiation. Therefore, the slide from collaboration to competition is not generally a happy or profitable one because some of the actions you undertook under the assumption that you could trust the other and work with them may now be used against you as weapons.
A Case Study: Negotiating Strategic Alliances A business example of the use of negotiation is in the area of strategic alliances, which are gaining in importance worldwide, particularly in Europe. Global competition has intensified the scramble for access to markets, products, and technologies. Strategic alliances are one strategy that companies are using to survive or to keep up with the new developments in industry. Negotiating a strategic alliance presents a challenge. “A bad negotiation tactic may do lasting damage; good negotiation tactics must be repeated a number of times before the partner accepts this as a pattern.”25 In a strategic alliance, the relationship concerns will be very important. In 1985 Corning and Ciba-Geigy formed Ciba Corning Diagnostics, an alliance based in the United States, designed to enhance Corning’s medical diagnostics business. Ciba-Geigy is a global pharmaceutical and chemical company based in Switzerland.
Implementing a Collaborative Strategy
Corning, based in New York, is a world leader in glass and ceramics technology. The alliance would combine the strengths of the two partners to develop innovative medical diagnostic tests. There was synergy in what each partner could offer to the alliance. Negotiation went smoothly, as Ciba was willing to have Corning manage more extensively in the beginning. Corning’s managers were willing to concede on points of strong interest to Ciba, and thus they were able to agree on a time line for their work. Each partner appointed its director of research and development to the board of the new alliance, which signaled to the other party a willingness to share technology, while garnering internal support for the alliance as well. Each side had representatives to build consensus, improve communication, and obtain support for the parent organization, Ciba and Corning actively looked into ways for each partner to gain by opening up possibilities for broadening the product line, marketing, technology, and growth. They were able to negotiate any issues that arose because, as mutual trust grew, they were willing to discuss such problems clearly and openly. A strategic alliance will not succeed if the two potential partners have conflicting underlying motives. If they are both leaders in their field, it may be difficult for them to collaborate. Likewise, if they have strongly differing views of which activities should take priority or what the time lines should be, the success of such an alliance would be questionable. To create a successful alliance, each organization must be willing to support the efforts to create an alliance agreement. This means that political support must be generated within the organizations of the potential partners. Building support may take time. For example, the Japanese take a long time to complete this process (at least from the American point of view). Conversely, the Japanese see American firms as too pushy.
Negotiating with Your Boss Since everyone has had some sort of experience dealing with a boss at one time or another, we will take a moment here to look at ways to negotiate collaboratively with a manager.26 Although performance review, salary, and benefits are usually the major areas for discussion and possible conflict with one’s manager, there are others that arise more often. For example, what if you are asked by your boss to do a project that you realize you cannot possibly complete without working overtime? If you do not mind staying late, go ahead. But if you find yourself doing this frequently and resenting it, maybe you need to consider negotiating about it the next time. Negotiating with the boss is often viewed as a competitive, win–lose, or fixed-pie situation. It can also be viewed as a lose–win situation, in which it is better to accommodate and let the boss win all the time, rather than try to argue for a preferred outcome and have the boss be angry at your “assertiveness.” But if you think about it, both parties might be able to gain something from collaborative negotiation. Think about the steps in the collaborative strategy we covered earlier in [this reading]. Look at your own needs, as well as those of your boss. Remember that the key to collaborative bargaining is to find a way to solve the other person’s problem. So in our hypothetical situation, your boss may have been asked by her boss to drop everything and get this project out, at any cost. (Your boss may have some bargaining of
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her own to do.) At any rate, your boss has to have this project done, and there is no way for you to complete it during normal hours, given the other work you have to do and the deadlines for those projects. Your boss could ask someone else to do it, but perhaps she knows you can do the job better and more quickly. First, clarify the situation. Find out the circumstances from your boss. Be sure you understand the details of the project. Gather information you may need about what you are working on at the present time. When it is time to discuss the project again, you will be prepared. Be sure your boss knows and understands the situation from your side. List what you are currently working on, and make sure she is willing for you to put those things aside to work on this rush project. Or does she prefer to have you give it only part of your attention? We knew one person who, when her boss piled new work on her desk, made a list of all the projects she was currently managing. Then she handed the list to her boss, and asked him to number the list in the order that he wanted things done. It made him decide what his priorities were. You can make a number of suggestions for how to complete the project given the circumstances. (This means you will have brainstormed for ideas before you meet with her.) One option might be for the boss (perhaps with your help) to find more resources. Two people could perhaps help with the project, thus halving the time it will take to complete. Another option would be for your boss to get an extension of the time allotted for the project. To do this, she would have to negotiate with her boss. A third option might be to change the “specs” of the project (e.g., make it less detailed or more streamlined), which would allow you to complete it in less time. You also could suggest, “If I stay late several nights to do this project, I would like to take compensating time off,” or “If I do this project, then I need help to complete my other projects on time, or else an extension.” These are compromising strategies. This example illustrates that even an apparently simple negotiation can be more complex than we realize. In this case, it involves not just you and your boss, but her boss as well (and who knows who else?). In any situation, it helps to break down a problem into its component parts and try to get at the underlying needs.
Summary In this [reading], we have outlined the collaborative strategy. When using this strategy, your objective is to both maximize your outcome on the substantive issues and sustain or enhance the quality of the relationship between you and the other side. To do so, you need to meet your outcome needs as well as the needs of the other party in a manner that strengthens the trust, mutuality, and productive problem-solving in the relationship. Good collaboration is a wonderful thing to be able to create and sustain. But it is not an all-purpose panacea, and making it work well often requires a large commitment of time and energy. There are times when the parties might be just as well off to compromise, accommodate, or even avoid negotiations.
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Endnotes 1. A. C. Filley, Interpersonal Conflict Resolution (Glenview, IL: Scott Foresman, 1975); G. F. Shea, Creative Negotiating (Boston: CBI Publishing, 1983). 2. A. Williams, “Managing Employee Conflict,” Hotels, July 1992, p. 23. 3. R. Fisher and W. Ury, Getting to Yes (Boston: Houghton Mifflin, 1981); R. Fisher, W. Ury, and B. Patton, Getting to Yes: Negotiating Agreement without Giving In, 2nd ed. (New York: Penguin Books, 1991). 4. M. Freedman, “Dealing Effectively with Difficult People,” Nursing 93 (September 1993), pp. 97–102. 5. D. Lax and J. Sebenius, The Manager as Negotiator: Bargaining for Cooperation and Competitive Gain (New York: Free Press, 1986). 6. T. Gosselin, “Negotiating with Your Boss,” Training and Development, May 1993, pp. 37–41. 7. D. G. Pruitt, “Achieving Integrative Agreements,” in M. Bazerman and R. Lewicki (Eds.), Negotiating in Organizations (Beverly Hills, CA: Sage, 1983); R. J. Lewicki, J. Litterer, J. Minton, and D. A. Saunders, Negotiation, 2nd ed. (Burr Ridge, IL: Richard D. Irwin, 1994). 8. M. B. Grover, “Letting Both Sides Win,” Forbes, September 30, 1991, p. 178. 9. G. F. Shea, “Learn How to Treasure Differences,” HR Magazine, December 1992, pp. 34–37. 10. D. G. Pruitt, “Strategic Choice in Negotiation,” American Behavioral Scientist 27 (1983), pp. 167–94; Fisher, Ury, and Patton, Getting to Yes: Negotiating Agreement without Giving In. 11. Fisher and Ury, Getting to Yes. 12. Filley, Interpersonal Conflict Resolution; D. G. Pruitt and P. J. D. Carnevale, Negotiation in Social Conflict (Pacific Grove, CA: Brooks-Cole, 1993); Shea, Creative Negotiating; R. Walton and R. McKersie, A Behavioral Theory of Labor Negotiations (New York: McGraw-Hill, 1965). 13. Shea, “Learn How to Treasure Differences.” 14. Fisher and Ury, Getting to Yes. 15. B. H. Sheppard, R. J. Lewicki, and J. Minton, Organizational Justice (New York: Free Press, 1992). 16. R. H. Mouritsen, “Client Involvement through Negotiation: A Key to Success,” The American Salesman, August 1993, pp. 24–27. 17. A. Williams, “Managing Employee Conflict,” Hotels, July 1992, p. 23. 18. Pruitt, “Strategic Choice in Negotiation”; D. G. Pruitt, Negotiation Behavior (New York: Academic Press, 1981); Filley, Interpersonal Conflict Resolution. 19. Getting to Yes: Negotiating Agreement without Giving In. 20. Freedman, “Dealing Effectively with Difficult People.” 21. C. M. Crumbaugh and G. W. Evans, “Presentation Format, Other Persons’ Strategies and Cooperative Behavior in the Prisoner’s Dilemma,” Psychological Reports 20 (1967), pp. 895–902; R. L. Michelini, “Effects of Prior Interaction, Contact, Strategy, and Expectation
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of Meeting on Gain Behavior and Sentiment,” Journal of Conflict Resolution 15 (1971), pp. 97–103; S. Oksamp, “Effects of Programmed Initial Strategies in a Prisoner’s Dilemma Game,” Psychometrics 19 (1970), pp. 195–96; V. Sermat and R. P. Gregovich, “The Effect of Experimental Manipulation on Cooperative Behavior in a Checkers Game,” Psychometric Science 4 (1966), pp. 435–36. 22. R. J. Lewicki and B. B. Bunker, “Trust in Relationships: A Model of Trust Development and Decline,” in J. Z. Rubin and B. B. Bunker (Eds.), Conflict, Cooperation and Justice (San Francisco: Jossey-Bass, 1995). 23. M. Neale and M. H. Bazerman, Cognition and Rationality in Negotiation (New York: Free Press, 1991). 24. R. H. Mouritsen, “Client Involvement through Negotiation: A Key to Success.” 25. Stephen Gates, “Alliance Management Guidelines,” Strategic Alliances: Guidelines for Successful Management (New York: Conference Board, Report Number 1028, 1993). 26. T. Gosselin, “Negotiating with Your Boss”; M. B. Grover “ Letting Both Sides Win.”
Reading 1.9
Solve Joint Problems to Create and Claim Value David A. Lax James K. Sebenius
To solve your individual value-claiming “problem,” your tactics must help you to learn accurately about the true zone of possible agreement (ZOPA) and to shape the other side’s perceptions of the ZOPA in a manner favorable to you. Yet most negotiations are not purely about value claiming. We now move to the table in search of tactics that both create and claim value, ideally on a long-term basis. At the end of the day, you want to create all possible value jointly, claim a full share of it, and prevent yourself from being exploited by a value-claimer. This can be a challenge, especially when the other side is playing a hardball, claiming game. Perhaps this stance is purely tactical or perhaps your counterparts simply don’t see the potential for joint gains. Either way, this [reading] offers a number of suggestions to push the negotiation in a productive direction. Here’s the essence of the joint problem that our tactics must solve. Creating value requires cooperation to elicit information—about interests, views, capabilities, and so on—and use that information to generate mutually beneficial options. This takes communication, trust, openness, and creativity. Yet those very qualities can open you up to exploitation by a determined value claimer. If you put all your cards on the table, while others play theirs close to the vest, you’re likely to get nailed. And yet if everyone hides his or her cards, revealing little, and searching for openings to exploit, it becomes nearly impossible to come up with joint gains. You and your counterparts are likely to have a battle royal over a small pie. Put otherwise, information in negotiation is a two-edged sword: essential to solve the joint problem and to create value, but also a source of vulnerability to a value-claimer on the other side. You can’t easily separate the creating and claiming processes. It turns out that the way you create value affects how it gets divided. And the battle over dividing the pie often affects how much, if at all, it gets expanded. Managing this creating-claiming tension productively is the essence of successful negotiation. Problem-solving tactics, undertaken with a full understanding of the value-claiming aspect of negotiation, offer the best route to great outcomes. Constructive negotiation processes, in which value is created as well as claimed, nevertheless tend to emphasize the joint nature of the problem to be solved. They stress: • • • •
Reconciling the parties’ real interests, rather than battling over their positions The future and mutual possibilities, rather than the past and who was right, wrong, and to blame for what happened before Factual discussions, rather [than] broad generalizations Joint problem solving, rather than adversarial posturing
Source: “Solve Joint Problems to Create and Claim Value,” from 3D Negotiation: Powerful Tools to Change the Game in Your Most Important Deals, by David A. Lax and James K. Sebenius, 2006, pp. 205–26. Boston, MA: Harvard Business School Publishing. Used with permission. 97
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We can’t hope to compress all of what’s known about creating and claiming value at the table into a single [reading]. But we will combine our own experience and the prescriptions of others to suggest some tactical guidelines that will make you more effective in a wide range of situations where there is the opportunity both to create and claim value. Our tactical advice falls into four basic areas, which serve as the main sections of this [reading]: 1. 2. 3. 4.
Ask, listen, and learn. Divulge information strategically. Foster an appealing and productive negotiation process. Adopt a persuasive style.
Each class of tactics needs to be approached with a keen sense of productively managing both the creating and claiming aspects.
Ask, Listen, and Learn At the table, you learn by listening and observing. You rarely learn much when you are talking! Sales experts say that most salespeople talk 80 percent of the time and listen 20 percent of the time—but that the most effective salespeople listen 80 percent of the time and talk 20 percent of the time. One of the toughest things about negotiation is that it is hard to listen while you are talking. Even when the other side is talking, you tend to focus on what you are going to say next. So, actually listening to the other party, and processing what they’re saying, requires extra effort. A few tactical suggestions follow. Try Active Listening Active listening, in which you play back to the other party what you just heard her say, helps you slow down and focus your attention on what she is saying. For example: “Let me just make sure that I understood you. You are concerned that if your bonus formula is tied to the projects you work on, and if the company decides to allocate more work to others, your compensation would go down even if allocating the work to others makes the company more profitable. If I understood you correctly, you’d like to have your bonus guaranteed at the level you received last year. Could you say a bit more about that?” Even repeating back what you’ve heard without paraphrasing, followed by a pause, often prompts your counterpart to expand upon the point, and share more of his or her motivations in ways that may be helpful. It also may allow your counterpart to clarify her statement in a way that gracefully backs down from some aspects of the position or assertion. And, critically, when you keep testing your understanding, they know that you are listening. Avoid Questions That Ask for a Yes or No Answer Questions that elicit flat yes or no answers can be damaging. For example: “Do you mean you won’t do a deal if it doesn’t provide full indemnification for you and your team?” The answerer either has to undercut himself (unlikely) by saying “no,” or by saying “yes”
Solve Joint Problems to Create and Claim Value
invest personal and perhaps organizational credibility in not backing down from the statement (in which case you’re worse off having asked this yes-or-no question). Ask Open-Ended Questions In many cases, the most effective questions are open-ended. For example: •
“Why?” “Why not?”—as in, “You’ve said that your contracts people don’t want to reimburse us for expenses that you have historically reimbursed us for. Can you say a little more about why this has become an issue at this point?” Or, “You say you can’t agree to any price increases for two years. Could you tell us more about your situation and what’s behind your thinking?”
•
“What if we did it this way?”—as in, “What if we were to give you a bigger piece of our business? How would that affect your cost and sales situation? How much could you reduce the per unit price?” “How would that work from your perspective?”—as in, “How would it work from your standpoint if we were to raise fees on the following services, in the following circumstances?” “What kinds of problems would that create for you?”—as in, “If we were to reach agreement to provide the capital to fund the cash-calls that the partnership agreement requires you to make in return for a significant share of the returns you would get, what kind of pluses and minuses would that involve for you?”
•
•
And after you ask, really listen. When you start making proposals, listen to their objections. These objections may spotlight interests that they had not disclosed previously, and which, as a result, are not reflected in your proposals. Objections can enable you to shape new packages that better meet your interests, as well as theirs. Bring a Designated Listener When you bring a team to negotiate, it is helpful to include on the team a designated listener—someone whose role is not to talk, but carefully listen and take notes.
Divulge Information Strategically Of course, you will be expected to do more than listen at the table; you will be expected to talk about your own needs and expectations. Here are some battle-tested ideas for revealing information in ways that also elicit information from the other side. Begin with the End A successful executive we know in the outsourcing industry begins his major negotiations by sitting down with his customer to write the positive press release that the two sides hope will result from the conclusion of a successful negotiation. By hashing out the joint ideal up front, he learns about key interests of his counterpart and also shares important interests. Both focus away from the barriers and on the opportunity, the “pot of gold” that could result from effective cooperation. At the same time, both sides may be gaining some
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psychological commitment to making a deal. When the negotiation hits a tough patch, the executive pulls out the release to reorient the effort. Use the Norm of Reciprocity to Build Trust and Share/Gain Information The concept of the “norm of reciprocity” leads us to want to reciprocate when someone does something that’s helpful to us. It is a powerful psychological force, which you can tap into to gain information. Share some low-cost information, and encourage the other side to share some information, as well. If your opposite numbers fail to reciprocate—or if, based on your prior research, they appear to be trying to mislead you—consider having an explicit discussion about what you have been trying to do: that is, to give and get enough information to enable you to jointly design a mutually beneficial deal. Sharing that information makes each of you vulnerable but is safer if both of you do it. If they do reciprocate, provide additional information, and request more. In many negotiations, you can tap the power of the reciprocity norm to build trust over time. You may perform a personal favor, take your counterpart out for drinks or coffee, provide some helpful information outside of the negotiation, or in some other way do something positive. All of these moves are designed to build trust. The trust, in turn, will enable you and your counterpart to share information that will enable you both to create value. Present Multiple Equivalent Offers To learn more about your counterpart’s interests and trade-offs, you can present her with a choice of two packages of equal value to you, and—without asking her to accept or reject either—ask her which package is better for her. If you have designed your packages carefully, you will learn something about her side’s trade-offs, and move in a value-creating direction while revealing little about your preferences. Similarly, if you are a buyer of a multifeatured product or service, you can ask the seller to price the product or service both with and without a certain feature. In this way, you can learn about the seller’s trade-offs without revealing yours. Sequence Issues Carefully and Negotiate Packages We now turn to how sequencing the issues properly helps to create and claim value. Of course, to sequence issues properly, you need to understand your full set of interests associated with that issue and its relationship to other issues. For example, if you are negotiating the form of a transaction—merger, acquisition, or equity joint venture— there are powerful implications for the rest of the negotiation on how you settle that initial issue. The most common advice about issue order is to settle the “easy issues first.” On the positive side, this approach can help build trust, rapport, a sense that progress is possible, and momentum as you tackle harder issues. Getting easy issues out of the way can simplify the remaining negotiation. Yet if you do settle the easy issues first, the only ones left at the end may require tough, value-claiming battles. This issue-by-issue approach may inadvertently transform
Solve Joint Problems to Create and Claim Value
a potentially cooperative deal into a highly competitive one, with real deadlock risks near the close. This often happens when everything but price is settled and the parties are far apart on this particular issue. Working out an overall, value-creating package for the endgame—in which nothing is settled until everything is settled, and there is mutual gain realized relative to no-deal options—can shift the dynamics in a much more positive direction. When U.S. President Jimmy Carter was in the final stages of peace treaty negotiations between Egyptian President Sadat and Israeli Prime Minister Begin at Camp David, he confronted just such a situation: “The only serious problem was [Sadat’s] desire to delete the entire paragraph on Jerusalem. I knew that the Israelis wanted the same thing, but I confess that I did not tell Sadat. I reserved that concession just in case I needed some bargaining points later on. Earlier in the process, Carter had packaged a classic easy issue—on which both Egyptians and Israelis wanted the identical outcome (to defer the status of Jerusalem)—with other, more contentious items. By doing this, Carter turned the ultimate package (minus Jerusalem) into more of a plus for each side, rather than setting up a much riskier, win–lose finale.” The negotiating dynamics involving easy issues can become complex. For example, faced with two main issues—one not too important to them and the other vital to them— some negotiators will fight hard on the vital one, then be flexible for the easier one, hoping to make up for any hard feelings. Other negotiators make a point of “giving in” first on the less key issue, hoping to generate some pressure for reciprocity from the other side on the remaining question. However, what is an easy issue for you to concede may in fact be the other side’s most critical issue to get, or at least quite important to them. You may or may not realize this at the time you “give” on that issue. If you’ve already said yes to such an issue or issues, you may have little leverage left for your hardest topics when you later tackle them. This possibility amplifies the general wisdom of developing packages rather than settling issue-by-issue. A further implication of this issue-sequencing logic affects agenda management. When negotiating large contracts, it is common to have one party’s attorney make a list of unresolved issues and have the group work down the list one issue at a time, attempting to get closure on each before moving on to the next. While this method of agenda setting can help the parties to organize the remaining questions, it is almost guaranteed to leave unrealized value on the table for all parties. If the parties have opposing interests on each issue, they will typically reach mid-range settlements on each of the issues. Yet doing so fails to heed a basic principle of value creation. Specifically, for each side to do better, the party that places greatest weight on each issue should receive more favorable treatment on that issue in return for “compensation,” such as giving the other(s) favorable treatment on the issues most important to them (providing the issues are of roughly similar importance). Thus, the agreement reached by finalizing one issue at a time is likely to be substantially worse for all parties than that reached by a process that is geared to look for differences in interest and thereby to facilitate trades. Although issue-by-issue agenda management is often the default procedure in many complex negotiations, we’d advise a focus on negotiating packages where possible.
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Foster an Appealing and Productive Negotiation Process Process Matters People tend to feel better about an agreement—and value it more highly—if it was reached by a process that they feel was fair. Conversely, they tend to reject offers, even economically attractive offers, if the process feels coercive. We have found very useful negotiation process advice in Getting Past No, written by our friend and colleague Bill Ury. While it is framed as advice for dealing with difficult people, the book’s advice works equally well in less adversarial settings. At its core is the notion that you should try to transform your negotiation process from one that is “face-toface against each other” to “side by side against the problem.” Don’t think of the other side as “them” or as your adversaries; seek to align both your efforts against the problem of jointly craft agreements that meet each side’s interests on a lasting basis, rather than glare at each other each other across the table. The physical setup of the negotiations can play a role here. When both sides troop into a meeting room and position themselves on opposite sides of the conference table, this physical setup can almost function like a stage set, unconsciously cuing each side to fall into a well-worn script and adversarial roles. (“Ladies and gentlemen, this afternoon’s production will be ‘Face-to-Face Against Each Other.’”) We have seen negotiators break this unconscious mold by inviting both sides to set up on the same side of the table, together opposite a white board on which the “problem” was summarized. (“Instead, this afternoon’s production will be ‘Side by Side Against the Problem.’”) Would it surprise you that encounters of the second tend to be more productive? In line with Ury’s advice, we suggest that you relentlessly reframe your negotiation process in the following four directions. Move from Positional to Interest-Based Conversations Even when the discussion may seem to be narrowly focused, the interests that motivate the other side are often much richer than their bargaining positions. Many tough negotiators are quick to stake out firm positions: “You have to cut your price by 5 percent per year if you want to keep our business.” Our first advice is not to encourage this by, for example, starting or responding with “Here’s my position. What’s yours?” Although your counterpart may not be eager to engage in a collaborative process, consciously reframing away from bargaining positions to broader interests can help engage the other side in a more productive discussion. “I take it that you are trying to decrease your overall costs of manufacturing by 5 percent. What is the overall plan for doing this? What if we could figure out how to cut your manufacturing costs by 5 percent of what you pay us?” Often the kinds of questions we outlined above will help move past positions to interests. The hard positional bargainer will likely require a lot of effort before engaging in a value-oriented discussion. But consciously focusing the discussion on how you can help the other side make more money—without cutting your prices!—can help engage a positional bargainer.
Solve Joint Problems to Create and Claim Value
Move from Blaming and Past Actions to Problem Solving and the Future When there have been problems in a relationship, they can infect the negotiations and turn the at-the-table interactions into a blame game. “You guys just can’t perform. You set deadlines and don’t meet them. You’ve introduced new features that don’t work they way you said they would.” And so on. There’s usually little advantage in arguing about who is to blame for what hasn’t worked in the past, especially where the complaints have some validity. Your goal should be to learn from the past and push the focus to the future, by asking, “Let me get this straight. Which new features were you planning to use? How were you planning to use them? We need to make sure that the development group really understands what you are trying to accomplish.” Instead of arguing about who’s right and who’s wrong, aggressively reframe to focus on to a joint quest to make the product do what they want. “I don’t think the features you are using were meant to do what you intend, but I’m pretty confident that with a few modifications, we can enable the system to deliver what you want.” When there is a strong emotional content to your counterpart’s presentation, you may need to acknowledge that emotion in a productive way, and then move toward problem solving—a subject that we’ll return to below. Move from High-Level Assertions to Fact-Based Statements Negotiations can founder when they focus on high-level generalizations and assertions. This is especially true when the discussion degenerates into a “did not”/ “did so” interchange. For example, in a negotiation to renew a large outsourcing contract, a customer was convinced—and repeatedly asserted—that an outsourcer was overcharging them by significant amounts relative to their competitors in a highly competitive industry. The outsourcer protested strongly. The negative generalization cast a shadow over all of the substantive negotiations on the renewal of the contract: “How can we trust them on this issue if they’ve been screwing us for the last few years?” We played a mediating role in this negotiation. To move from generalizations and assertions to facts, the parties agreed to our suggestion that we look on a confidential basis at how much the customer would have paid, given its usage, if it had been subject to the contracts of each of the comparable competitors also served by the outsourcer. Our analysis showed the customer actually enjoyed better contracts than all but one company. The outsourcer readily agreed to retroactively adjust the customer’s contract so that it received the benefits of the one superior contract. The customer felt less aggrieved and greatly appreciated the outsourcer’s gesture. By moving from assertions and counterassertions at high levels of generality to a more specific fact-based discussion, the two parties got their renewal negotiations back on track; in fact, they signed a several-hundred-million-dollar contract several months later. Move from Price Haggling to Joint Problem Solving Among the pitfalls of standard tactical negotiation is a relentless tug toward the kind of pure price negotiation. To maintain a productive climate, you may need to relentlessly reframe the negotiations away from that pure price focus, in favor of a fuller package of
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interests. For example: “I understand that you want to reduce costs of operation, and that the prices we charge you are important. We will respond to you on pricing. As we’ve discussed, price is only one part of what gives you a competitive advantage relative to your competitors, and we believe that we should focus not on price alone but on how we can help you maintain and strengthen your overall competitive position.” If you’ve done a good job of understanding the other side’s interests and situation—both from a business standpoint and from the personal standpoint of the individuals with whom you are negotiating—you can probably steer the conversation toward proposals that solve broader problems for your counterpart, rather than just reducing prices. What if you can’t? Then it’s time to look for a way to appeal to the other side’s stated interests, while still meeting your own. One of our clients—an engineering-oriented company, whose products include all the bells and whistles that its engineers could pack in—was losing ground to several Chinese firms that had begun offering a stripped-down version of the product for a fraction of our client’s price. In negotiations with its customers, our client tried to explain that, as the customer grew, it would need to buy many more of the Chinese products. Because of the extra features, the customer would have to buy far fewer of our client’s products to get the same functionality. This would mean lower total overall costs. The procurement vice president, who was clearly rewarded on minimizing total current outlay and not on lowering total lifetime outlay, continually demanded that our client match that low Chinese price and didn’t want to budge from that position. In response, we advised our client to deactivate all the advanced features in their product, and sell it as a “strippeddown model” at a very low margin that would be cost-competitive with the Chinese models. When the customer grew and needed to expand its network, it would then have to purchase those advanced features—and would have to negotiate to get access to them at more attractive margins. But, at that point, purchasing these additional features even at high margins would be better than its no-deal option of purchasing another slew of the Chinese products. In other words, our client turned the procurement VP’s price-focused tactics against him by meeting his customer’s interests of minimizing current cash outlays—while securing a higher-margin growth path for the long term. Our client followed this strategy with a number of customers, simultaneously increasing margins while becoming the market share leader in its product category.
Adopt a Persuasive Style To work with your counterpart to create value—and at the same time to claim sufficient value for yourself—you should adopt a persuasive style. A persuasive negotiator: • • • • • •
Understands the other side’s story Is open to persuasion Is both empathetic and assertive Uses reciprocity to build trust Matches appeals to the other side’s circumstances Recognizes how people process information
Let’s look briefly at each of these points.
Solve Joint Problems to Create and Claim Value
Understand Their Story Different people interpret the same information or event differently. What set of facts, assumptions, and world view causes the other side to interpret things the way that they do? What are you missing? Be Open to Persuasion If you are not (or do not appear to be) open to persuasion, your counterparts very likely will sense that and adopt a similar stance. Being open to persuasion is persuasive. Be Both Empathetic and Assertive Robert Mnookin has identified two key dimensions of negotiation behavior: empathy and assertiveness. You are empathetic when you try to understand the interests and desires and motivations of the other side. You are assertive when you make your interests and demands clearly known to the other side. Many people feel that they must choose between being assertive and being empathetic—being “hard” or being “soft.” But that’s a false choice. Showing empathy about your counterpart’s interests, perceptions, and constraints may make him or her more open to providing you with useful information. The more empathetically you understand your counterpart, the more effectively you can design value-creating deals and the better positioned you are to claim a full share of that value. Frame Proposals in Terms of What They Care About You are always more persuasive when you frame your proposals in terms of the values, beliefs, goals, and incentives of the recipient—and you deliver them in language used by the recipient. An associate of Rupert Murdoch remarked that, as a buyer, Murdoch “understands the seller—and, whatever the guy’s trying to do, he crafts his offer that way.” For example, Paul Levy, CEO of Beth Israel Deaconess Medical Center in Boston, wanted his institution to be named the Official Hospital of Boston’s immensely popular baseball team, the Red Sox. Before Levy had even heard about the opportunity, several other distinguished local hospitals had already made proposals to the Red Sox for this designation. Levy listened carefully to the new Red Sox management as it expressed a strong interest in being a good steward of a great franchise and actively participating in the life of the community. Accepting the baseline proposal for financial contributions by hospitals, Levy’s team developed a detailed plan and presentation. Not only did this plan involve a financial relationship, but it also explained Beth Israel’s own mission of community service and Levy’s own role as a steward for an institution with a distinguished history. Against this backdrop, the presentation outlined several concrete steps through which Beth Israel and the Red Sox could jointly perform meaningful, visible service to their communities. Levy’s suggestions included (1) a September 11th blood drive at Fenway Park (the team’s stadium); (2) an Organ Donor Awareness Night at the stadium introduced by two players whose friend’s wife survived as a result of a liver transplant; and (3) funding and managing a Red Sox Scholars Program, which annually established college scholarships for 25 academically talented but financially challenged middle-school students who would
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be mentored by Beth Israel doctors, and who would shadow key people in the club offices and at the hospital on “career days.” The Red Sox were persuaded by this approach, adopting these and other initiatives within 18 months. Seek Agreements That Feel Fair to Both Sides At the end of the day, as noted earlier, most of us want to believe that the agreement we reached was both fair and reached by a fair process. So your preparations for negotiations should include: (1) developing compelling, fact-based arguments supporting your position; (2) identifying fairness rationales likely to be advanced by your counterpart; and (3) formulating counterarguments disputing the fairness of the counterpart’s rationales. If the people on your side find it difficult to put themselves in your counterpart’s shoes, consider bringing in someone who is not directly involved in the negotiation to try to think like the other side. Being seen as genuinely caring about fairness as well as making proposals that seem fair can both enhance your persuasiveness. Persuade with Stories, as well as Analysis Many businesspeople try to hammer away at those they’re trying to persuade with compelling facts, logic, and analysis. But this may not be the most effective way to get people to act. In fact, psychologists have monitored subjects’ brain activity during various kinds of persuasive appeals and have noted that many people’s brains tend to “go dark” (i.e., show little brain activity) when presented with fact/logic-based appeals. In contrast, when people hear vivid stories or analogies, their brains light up, or become more active, and they tend to have much higher retention of the implications of what they’ve heard. Inoculate against Potentially Disadvantageous Arguments If you can anticipate the counterarguments to your proposal that are likely to occur to your counterparts, you should acknowledge and deal with these counterarguments as part of your own approach. If you fail to raise the obvious counterarguments, they may reverberate inside the heads of the other side and weaken the persuasiveness of your overall appeal. From a psychological standpoint, it doesn’t matter much whether you address the counterarguments at the end or intersperse them throughout in your appeal. However, there are tactical considerations. For example, if you are presenting your argument in a context where you are likely to be interrupted and unable to complete the full argument, start with a clear presentation of your own complete argument before dealing with the counterarguments. Build Both Substantive and Relationship Credibility Building credibility along two dimensions—your knowledge and your relationships—can enhance your persuasiveness. You will be more persuasive on subjects in which you are perceived to have expertise. Thus, either be or bring a subject-matter expert. On the relationship level, establishing and continually strengthening your relationships with the other side will also go a long way toward making you more persuasive. If you don’t have a
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strong relationship with your counterparts, look to bring in people who already have one. For example, a new key account manager might want to enlist the aid of her predecessor, if that predecessor had a good relationship with the executive on the other side. Where possible, plan ahead. Build relationships with the people on the other side before the negotiations get started. Match Your Appeal to Where the Other Side Is Our colleagues Doug Stone, Bruce Patton, and Sheila Heen argue that conversations take place on multiple levels: the rational, the emotional, and the “identity” level. The rational conversation is all about facts: What happened, and what should happen? Who said what, and who did what? Many negotiators try to operate only on the rational level and are uncomfortable about acknowledging feelings in the context of a professional negotiation. But the fact is, many meaningful negotiations raise feelings, and some raise strong feelings. Rather than denying that fact, acknowledge it, and tailor your approach to take account of emotional issues. And pay attention as well to identity issues—the most fundamental issues of self-image and who we are: good/bad, competent/incompetent, and so on. Respond to the Emotion When Your Counterpart Displays Emotion A counterpart who is angry, tense, or hurt is unlikely to react constructively to or even be able to hear a rational appeal. While you normally want to move to the rational level in the negotiation, you often have a choice about whether to respond to the substance or respond to the emotion. It is usually better to respond first to the emotion and its underlying basis: “It sounds like you are pretty unhappy. I imagine I would be unhappy too if I understood the situation as you did.” But being empathetic does not mean that you have to accept responsibility for the other person’s feelings or allow these feelings to serve as a basis for action. Remember: be both empathetic and assertive. Once your counterpart’s feelings are better understood and acknowledged, he or she may be able to engage more effectively in substantive discussion. Let’s raise one important caveat here. There are negotiators who use anger and intimidation as bargaining tactics. We know a successful investment banker who, at critical moments on conference calls, sometimes reaches into his pocket for his “angry man pills.” It often works; the recipients try to buy their way back into his good graces with concessions. In such cases, the attacker may pull back as soon as he is convinced that these tactics won’t work. In some cases, blustering back may be exactly what is needed; in others, ignoring the outburst can be most effective. A great deal depends on the specific person. Learning about their history and style is vital to avoid a “blind” response. Sometimes, however, you need to step back and negotiate explicitly about the process of negotiation: “We have to tell you that we are offended by what felt to us like accusations and insults. We don’t think discourse of this kind is going to help us resolve the problems we jointly need to resolve. We are not interested in continuing this kind of discussion. Would you prefer to take a break for half an hour so that we can refocus, or would you prefer to reschedule at a later date?”
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Deal with Your Feelings, Too You have feelings, too, and these are likely to be engaged by a difficult negotiation. You will be more effective if your feelings don’t seep out in the form of barbed comments, sarcastic questions, or the inability to listen. You need to find an effective way to express your feelings without asking the other side to take responsibility for your feelings. One way to do this is to make “I” statements rather than “you” statements. Rather than saying, “You are untrustworthy,” try, “When you make me a verbal offer and then follow up with a letter of intent that doesn’t seem to match it, it becomes hard for me to trust you.” It’s also important to disentangle the impact of your counterparts’ actions from their intent. The fact that their actions had a negative impact on you does not mean that the impact was intended. After you have delved into their intent, it can make sense to explain how you experienced the impact of these actions. Make Your Appeal Work Through Their Cultural Filters Culture matters in negotiation. You and your counterparts may have very different cultural perspectives on the purpose of the negotiation, on communication, and on appropriate and constructive behavior. Is a long silence awkward, a sign of respectful consideration, or a tactic to get the other side to blurt out something of use? When your negotiation crosses national borders—or straddles other kinds of divides—a conscious focus on culture can be helpful to effectively create and claim value. Bookstores are full of books focusing on cross-cultural negotiation, mostly with an emphasis on surface behavior and etiquette—to get to “yes,” should you “kiss, bow, or shake hands”? Some of this advice is useful. But if you are not sure about how to avoid unintentionally offensive acts or gestures, we suggest any number of handbooks that go deeper than surface behavior or, better, getting local advice. The point is to avoid falling prey to national cultural stereotypes, most of which contain at least a grain of truth, but many of which can be dramatically off base. For example, in its approach to decision making, Sony is less like a traditional, consensus-driven Japanese firm and more like a Western company. Similarly, when negotiating with U.S. counterparts, it matters a great deal whether you are on Wall Street or in Kansas. And culture is not merely geographically based. For example, we sometimes find greater similarities among engineering-oriented firms from different countries than we do among, say, between marketing- and engineering-oriented companies from the same country. Culture (whether national, corporate, or professional) is embodied in expectations of more than surface behavior. Indeed, while surface behavior is the tip of the iceberg, deeper culturally based issues are like the invisible mass under the surface, far more likely to cause a deadly crash. Table 1 highlights a number of such negotiation-related expectations that are strongly influenced by culture. Think of it as a kind of checklist as you move into less familiar territory. If you aren’t confident in a given category, seek advice. If you are negotiating in a culture in which agreements follow from relationships, as is often the case, for example, in South America, you’re generally well advised to begin by developing relationships, rather than jumping into the details of the deal. If the other side expects agreement to follow from the development of general principles—as might be the
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TABLE 1 | Cultural Expectations in Negotiation Deeper Expectations Negotiation objective
Is the ultimate goal of negotiation more a signed contract or a relationship between the two sides?
Fundamental view of negotiation process
Is negotiation a process through which both sides can gain, or through which one side gains and the other loses?
Social unit
Is it an individualistic or group-oriented culture?
Power/decision making
Does the other side make decisions in an authoritarian fashion, with one key person? Is it a small group process? Is there a formal or informal hierarchy involved? Is consensus required?
Implementation
How likely and expected is literal implementation of the agreement? Or is the deal merely a starting point for further negotiation?
Surface and Process Expectations Team organization and representation
What level, type, and number of team members are expected?
Etiquette
Introductions, business cards, gifts, and socializing before substance of negotiation; expected deference, etc.
Formality level
How formally does a negotiator talk to others, use titles, dress, speak, and interact with other people?
Communication
Do negotiators place emphasis on direct and simple methods of communication, or do they rely on indirect and complex methods? Is persuasion, for example, fact-based and technical in nature, driven by deductive logic, argued from precedent, or a function of the status of the would-be persuader?
Emotional expression
Do negotiators show or hide their feelings; that is, do they exhibit a high or low degree of emotionalism?
Risk and uncertainty tolerance
Do participants have a high or low propensity to take risks and handle uncertainty while negotiating? In deals?
Sensitivity to time
How important is it to minimize the time spent negotiating? Do negotiators exhibit a high or low degree of impatience and urgency? Many or few interruptions? Long or short time horizon?
Building an agreement
Does an agreement begin from general principles and proceed to specific items, or does it begin with agreement on specifics and build “up” to an overall deal?
Form of agreement
Do negotiators prefer detailed contracts or agreement on general principles?
case in France, for example—don’t come into the first meeting with a detailed term sheet. Instead, be prepared to introduce general principles and work out the conception of the deal first. We have found that negotiators tend to overattribute problems in negotiations to cultural differences. A U.K. CEO, for example, persisted in attributing his French counterpart’s actions to French “arrogance,” although upon further investigation, we found that the French negotiators were following an entirely rational, and almost obvious, strategy. That said, getting the right cultural filters in place—national or otherwise—is an important input to our method. How the other side sees its interests (both in substance and in the
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process of negotiation) and understands the game you are jointly playing—and what its expectations are of that game—should be key inputs into your tactical choices.
Can You Write Their Victory Speech? Can you write the thirty-second, three-minute, and ten-minute versions of the your counterparts’ “victory speech”—the speech they would give to their peers, bosses, and spouses about why the agreement they made with you is smart, fair, reasonable, and better than the alternatives? The point is not altruism; if you can’t convincingly write such a speech, your proposal may not be persuasive and you probably need to learn more about the other party’s situation, interests, and no-deal alternatives. Beyond serving as a rough diagnostic, the victory-speech exercise may also help you in framing proposals to the other side that “let them have your way” (for their reasons, not yours). Finally, keep in mind that the potential to create value does not mean that claiming tactics go away or are somehow irrelevant. Many of the tactics we describe in this [reading] are designed to help you create value, claim a full share of that value, and defend yourself against exploitation. We’ll end [this reading] by returning to research we discussed on the importance of focusing on the opportunity and not the downside, even to the extent of committing a brief paragraph to paper on your positive aspirations for the deal. Negotiators who emphasize the outcomes and behaviors they want to promote, as opposed to those they want to avoid, tend to do better in the kinds of situations we’ve been discussing. Focusing on the opportunity—the possibilities of creating value and claiming a full share, on a long-term basis—is likely to cause you to reach and sustain attractive agreements in your negotiations. •
Effective tactics must productively manage the tension between the cooperative moves necessary to create value jointly and the competitive moves to claim it individually. This means eliciting enough information to generate good options while managing your vulnerability.
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Ask, listen, and learn: • Listen actively. • Ask open-ended questions rather than yes/no questions: “What if? Why? Why not? How would that work for you?” • Bring a designated listener. Divulge information strategically: • Begin with the end: At the beginning, jointly envision the pot of gold at the end of the rainbow, perhaps by writing a press release in advance on the hoped-for outcome that meets everyone’s core interests. • Use the norm of reciprocity to build trust and share/gain information: start by offering low-risk information and ratchet up. • Present multiple equivalent offers. • Sequence issues carefully and negotiate in packages.
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Foster an appealing, productive negotiation process by establishing a positive atmosphere: • Psychologically place the parties side by side against the problem rather than face-to-face against each other. • Focus on advancing interests rather than arguing positions. • Focus on the future instead of the past and on problem solving instead of blaming. • Focus on disaggregated fact-based communications rather than high-level assertions. Adopt a persuasive style. • Be open to persuasion. • Be both empathetic and assertive. • Tell stories as well as using facts and logic. • Inoculate against potentially disadvantageous arguments. • Match your appeal to where your counterparts are and how they process information. • Make your appeal work through their cultural filters. For the deal that “lets them have your way,” write your counterparts’ victory speech, showing their key audiences why accepting your proposal was a wise decision.
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Reading 1.10
The Walk in the Woods: A Step-by-Step Method for Facilitating Interest-Based Negotiation and Conflict Resolution Leonard J. Marcus Barry C. Dorn Eric J. McNulty
Guiding Novices through Interest-Based Negotiation Negotiation professionals often lead groups whose members are unschooled in negotiation techniques through a conflict resolution or problem-solving exercise. In such situations, the focus is the dispute itself, and these professionals have neither the time nor the resources to conduct extensive training in the methods of constructive negotiation. In this [reading], we introduce a structured analytic process that we call the “walk in the woods.” This model is based on concepts articulated by Roger Fisher and William Ury (1981) for the practice of what they called “principled negotiation,” but which is now more commonly referred to as interest-based negotiation. While not designed to replace formal negotiation training, our process has proven particularly useful for quickly helping novice stakeholders develop some basic tools for multidimensional problem solving and interest-based negotiation. It is intentionally simple but firmly rooted in both classic and contemporary negotiation scholarship. The “walk in the woods” refers to the classic 1982 meeting of two Cold War nuclear arms reduction negotiators: Paul Nitze, leading the U.S. delegation, and Yuli Kvitsinsky, who led the delegation from the Soviet Union. Their interactions were dramatized by playwright Lee Blessing in his play A Walk in the Woods (1988). Facing a desperate impasse in their talks, the two men together left the retreat center outside Geneva, Switzerland, where they were meeting to, literally, take a walk in the woods. On their scenic stroll, Nitze and Kvitsinsky discussed shared and divergent concerns, interests, and objectives. Each achieved a genuine understanding of what the other’s country faced in the escalating arms race, of what they might accomplish if they were to reframe their positions, and of how they might realize significant mutual force reduction, eventually reaching a compromise that could have involved significant arms reductions for both countries. (This was a particularly noteworthy objective given Nitze’s reputation as a hard-liner on relations with the Soviets.) Although their agreement was subsequently rejected by both Moscow and Washington, their meeting has come to be seen as an important example of the advantages of informal interpersonal bargaining and interest-based negotiation (Kremenyuk 2002). Source: “The Walk in the Woods: A Step-by-Step Method for Facilitating Interest-Based Negotiation and Conflict Resolution,” by Leonard J. Marcus, Barry C. Dorn, and Eric J. McCulty, from Negotiation Journal 28, no. 3, July 2012, pp. 337–49. Boston, MA: Harvard Business School Publishing. Used with permission. 112