Contrary to popular belief, 9 out of 10 times you will benefit greatly by making the first offer.
Negotiation Blog - Exchange
Importance of good moods during bargaining phase of negotiations
By Thomas Wood
I recently led a webinar where I shared a number of tips to gain a psychological edge in negotiations. One thing I really enjoy about webinars is the interaction. You can ask the group a question and everyone can write in their answers at the same time. You can hear from everyone quickly.
For example, I was speaking about the importance of putting your counterpart in a good mood before you start to negotiate. This is an overlooked, yet essential part of the initial exchange at the bargaining table. People in a bad mood say "no;" they don’t say "yes." People in a bad mood are inflexible, and would rather get their teeth pulled at the dentist than make concessions. Yet, while someone would never walk into a negotiation without knowing what their MDO (most desirable outcome) is, they would start to negotiate with a counterpart who is in a bad mood, even though it is almost as important to get your counterpart in a good mood as it is to know your MDO.
In my experience, many people walk into a negotiation and they are so nervous themselves, that they don’t even notice the mood of their counterpart. Sometimes both parties are nervous and neither person is doing anything to help calm down and relax their counterpart, as they can’t even relax themselves.
What was refreshing and interesting in this webinar was to hear how people get their counterparts in a good mood. They used food, talking about their families, telling jokes and laughing about something light. When you hear these responses, it sounds so easy. You will get better trades when your negotiating counterpart is in a good mood. So why don’t we do this more often?
Unilateral disclosure in negotiations — foolish or enlightened?
By Thomas Wood
When you disclose valuable information to your negotiation counterpart, you want equally valuable information in return. Right? Not always. Sometimes what you seek in return is a new level of trust – that will lead to getting more information and ultimately, trades that create value. Sometimes "one-way" is "two-ways".
- Have you ever begun talking to a negotiation counterpart where sufficient trust hasn’t yet developed?
- Are you facing negotiations where the trust previously established has been damaged?
- Are you asking to re-negotiate an agreement as a result of changed market conditions that were not originally anticipated?
- Is trust the goal? The US had a preliminary interest to bring other nations “to the table”, and the risk of that engagement taking years was too great, so trust needed to be repaired/developed quickly.
- Low risk? The disclosure was low risk because experts had long provided reliable estimates that were very close to accurate. In fact, the experts’ guesses were only off by 18, so revealing the actual number did not put the US at a disadvantage.
- High value? The value of the information to other nations was great, as it allowed them to justify to their stakeholders that working with the US in global nonproliferation would be met with the transparency they sought.
- Information Exchange stage? Much preparation had been done, but no new offers were on the table, so Bargaining had not commenced when the US disclosed. The US was in the Information Exchange stage of negotiations, and chose to make the unilateral disclosure at the May 3, 2010 opening of a five-year review of the Nuclear Nonproliferation Treaty.
Tom Brady's BATNA Prevails in Deflategate
By Leslie Mulligan
Famed quarterback Tom Brady will take the field this Thursday in the NFL's season opener when the New England Patriots play the Pittsburgh Steelers. Brady will no doubt demonstrate his prowess in the game, but unlike other seasons, he'll step on the field with one victory already in hand. It turns out that in the pre-season battle of the BATNAs, Brady had the winning strategy.
In July Commissioner Goodell denied Brady's appeal of the NFL"s (US National Football League's) May 2015 4-game suspension for alleged cheating -- involvement in or covering up deflated game balls -- and upheld his own decision. Brady and the NFL Players Association (NFLPA) went to court to fight this battle, as intense competitors will do. Ultimately, Judge Richard Berman ruled in Brady’s and the NFLPA’s favor, vacating the 4-game suspension that the NFL had levied.
When I wrote about the situation in July, I was keeping an eye on the stakeholders, the parties' interests, and the available BATNAs. Now we know that victory in the battle of the BATNAs led us to the finish.
BATNAs are your Best Alternatives to a Negotiated Agreement, or plan B. The other side doesn't have to agree with your BATNA, because it's the plan you will execute if negotiations don't produce a desirable result.
Knowing the strength of your BATNA relative to your counterpart, and being willing to execute it, is essential as you enter any negotiation, as the NFL regrettably realized this past week. We can all learn from the NFL's missteps.
Every successful negotiator knows that you are more powerful at the negotiation table if you have a strong BATNA, preferably more than one. But remember - your BATNA is your back-up plan, your Plan B. In fact, your Plan A should be to reach a mutually beneficial agreement through dialogue, without having to execute BATNAs. This is paramount, especially if you will need to work together in the future.
Clearly the NFL and the NFLPA have an ongoing relationship and must work together going forward. Executing BATNAs can be risky because you don't know the fall out, unlike the greater certainty that comes with a negotiated agreement. Executing BATNAs can also damage relationships, as we have seen play out in this situation. To that end, Judge Berman urged both sides to negotiate a solution rather than do battle in court.
But each side evidently thought that its BATNA was the stronger BATNA.
As you enter a negotiation, one critical step is to assess the relative strengths of each side’s BATNA. This assessment is done in the Exchange stage of negotiations, while you are measuring your opponent’s position, understanding their interests, and assessing their trustworthiness and credibility. Depending on the strength of your BATNA and your assessment of the other side, opening offers are made. In Deflategate, both sides had strong opening positions: Brady refused to accept any ruling that included missing a football game because of cheating, and the NFL seemed to require Brady to bear some level of responsibility by accepting the NFL’s Deflategate investigation led by Ted Wells.
These seemed like aggressive opening offers at the time, but both sides must have felt that they had strong BATNAs. If you are confident in your Plan B, you can afford to be very assertive with your opening position. As no negotiated settlement was reached, each side apparently believed that they had the superior BATNA. Clearly, Brady and the NFLPA made the right assessment.
Although the NFL under-estimated the strength of Brady’s BATNA, the NFL did do one thing well. The NFL immediately sought to improve its BATNA by filing a pre-emptive lawsuit against Brady in a New York federal court, rather than the players-friendly venue of Minnesota, where recent trials had been held that went the player’s way.
A good negotiator constantly works to improve short and long-term BATNA’s, before and during negotiations, and certainly when agreement can't be reached. Roger Goodell and the NFL clearly had that on their minds, as they filed the NY lawsuit to reaffirm the NFL's ruling on the same day the ruling was issued – July 28th.
For more on ways to leverage your BATNAs, check out an earlier Watershed blog, the Negotiator’s Keys to a Powerful BATNA.
We have likely not seen the last of the NFL vs Brady case, as the NFL recently stated that it will appeal Judge Berman's decision. But this move should not stop Tom Brady from joining the New England Patriots on the field as the NFL opens its season. Let’s hope that both sides reassess their negotiation strategies to find a way to address their interests and appease their stakeholders. While the battle of the BATNAs has a victor, nothing's certain about who will win the season opener. Let the games begin!
Should you present your negotiation offer differently to a man than to a woman?
By Marianne Eby
Taking gender into consideration as one factor that may affect a person’s receptiveness to an offer is helpful, as long as you remember that broad categories don’t always work and many other factors affect a negotiator’s style besides gender. But yes, it may help to present your offer differently to a man than to a woman.
This question came up at one of our negotiation workshops recently, during a discussion about how different communication styles affect negotiations. A participant brought up a rule of thumb she’d read about gender considerations when asking for something:
If you’re asking something from a woman, start with small talk or a narrative that prepares her for your request. But if you’re asking a man, do the opposite – open with your request, and elaborate with context and detail afterwards.
Was this a good rule of thumb, and if so would it be useful in negotiation?
Let’s consider this rule in a simple negotiation. If you want to ask your neighbor to remove a tree that leans into your yard, and your neighbor is a woman, you would begin by talking about her garden, your garden, and what is thriving in your yards, before asking about the tree. If your neighbor is a man, on the other hand, such a rule of thumb suggests you start right off with the “ask” about the tree, and fill in the details next.
The participant was spot on. In fact, the last few years of research on the differences between male and female brains can help us. In the 2008 book Leadership and the Sexes: Using Gender to Create Success in Business, Barbara Annis and Michael Gurian describe the differences in male and female brains (there are over 100, and how understanding them can make or break effective communication in corporate culture).
The research tells us that as it turns out, many clichés about gender -- i.e., women are more emotional, men are less talkative -- are proven by PET and SPECT scans of our brains! Images of brain activity show that:
- In men, language tends to occur mostly in the left brain (the logical, linear-reasoning side), whereas in women, language occurs in both the left and right brain (the perceptive, intuitive, “artistic” side).
- In women’s brains, there are more active sensorial and emotional centers, and they too have stronger links to language. Men don’t process as much emotion, and they don’t tend to link feelings and senses to words as much.
- Men’s brains enter a rest state, or “zone out,” several times a day, and particularly when overwhelmed by words. Women’s brains usually do not shut off in this way except during sleep.
- Men’s brains circulate more testosterone, the competition/aggression chemical, whereas women’s circulate oxytocin – the bonding chemical.
These differences have contributed to the different expectations women and men bring to communication, and to the clichés or cultural norms that have developed.
It’s easy to dismiss the chit-chat part of the approach to a woman as a waste of time. But it’s actually quite efficient, because women tend to get lots of clues during the chit chat. It’s not that the chit chat itself is so stimulating to them; what is stimulating is the wealth of information they gather from the chit chat about trust, comfort/discomfort, readiness to close, ect.
Men, on the other hand, tend to get fewer or no clues during such chit chat, so it makes sense that men find it stressful or wasteful: they find themselves processing what seems to be otherwise useless information.
Let’s say we approach Bob and say: "Hi Bob, how’s it going? I’ve got a question about this tree of yours that is causing me some concern.” For Bob, it is important to have a kind of frame or subject heading for the conversation before he can engage productively. Without that, the extra effort to establish “relational harmony” may be more verbiage and more detail than he wants to absorb at that moment. The chit chat would be inefficient and ineffective.
Let’s say we approach Sally and say: "Hi Sally, how’s it going? You really did get a nice deep blue in that hydrangea. How did you do it?....Your tulips were magnificent this year as well. Any tips for me?.....Now tell me about this tree….” For Sally, the entry dialogue is important: it establishes that they are friendly neighbors, with an interest in a win-win solution, which is her “frame” for a problem-solving negotiation about the tree.
Do these findings about the male and female brains change the way we negotiate in business? No and Yes.
No -- Establishing rapport and trust are critical parts of any negotiation, whether your counterpart is the same gender or not. And that rapport typically depends on a conversation which helps uncover shared interests.
And Yes – Style matters, and a master negotiator adopts strategies that will be most effective with the style of his/her counterpart. Establishing rapport is critical, but it doesn’t have to be the opener.
The real value of our workshop participant’s rule of thumb is that it gives us one simple tip to take with us on the road: plan your approach; sequence and timing matter.
All that jazz: it's negotiation too
By Marianne Eby
What do the best negotiators and jazz musicians have in common? That question is inspired by a recent article on CNN Opinion: “What the best jazz musicians and business brains have in common.” The argument made, not surprisingly, is that business leaders are more successful when they are open to possibilities rather than stuck on certainties, and when they are empowered to improvise. Good negotiators know how critical this insight is to what they do.
We teach and write about the importance of creativity as a game-changer in negotiations, and the need for improvisation as a skill at the bargaining table. But here are three deeper parallels between great jazz and great negotiation:
• Exchange: In jazz, particularly in rehearsal, the musicians exchange musical ideas, take cues from each other, and find new paths through a melody or score. The more experienced they are, and the better they know their instruments and their partners, the more possibilities there are in the music. In collaborative negotiation, similarly, preparation is essential, but then bargaining is a genuine exchange, where the unexpected can happen, and new ideas develop. Open-minded listening, asking questions, and paying attention to the other party's real interests can lead to creative concessions and counter-offers that bring new value to the bargaining table. In negotiation, as in jazz, "Improvisation grows out of a receptivity to what the situation offers."
• Learning and finding new value: In jazz improvisation musicians learn more about the music -- about the melody, their instruments, their partners. Similarly, in a good collaborative negotiation both parties learn more about their own and each other's businesses. A creatively handled conflict between a buyer's terms and a seller's bottom line can bring in new elements of value: a seller might offer a new packaging or delivery method, innovative payment terms, a valuable training program. Buyers might offer sources of new business, coveted tickets to a game. A good negotiator, like a jazz musician, finishes an exchange with an expanded understanding of their own and the other party's value.
• The relationship: Another facet of the parallel between jazz musicians and great negotiators is that both understand the core value of the relationship. Jazz musicians treat music as something that is only fully achieved with and in relation to another musician -- they know that "creativity is a collaborative achievement," as Barrett puts it. Similarly, good negotiators know that one of the most valuable products of a collaborative negotiation is often the collaborative relationship itself.
In jazz musicians as in great negotiators, creativity and improvisation are not just skills or tactics, but they represent a whole mindset, or philosophy of negotiating: a collaborative negotiation itself finds or creates new value, just as an interactive, collaborative jazz performance creates new music. So let's jazz up our negotiating!
Prevent An Ambush: Five Tips
By Marianne Eby
In a recent seminar, a client described a negotiation crisis he'd had: at a meeting he believed was going to be an information exchange with his wholesaler, he was ambushed: without warning, the other side brought a team of eight from his company, made a lowball offer, and then announced that they no longer needed our client's business. What to do?
Our client was less stunned than he might have been -- the same person had pulled the same stunt two years before. Why was our client still doing business with him? A surprise attack is for competitive, not collaborative negotiations, since it tends to sacrifice the relationship to the outcome. And indeed, our client had avoided contact with the bully after the last deal, believing he would be gone by the time the contract needed renegotiation. Ending the relationship was difficult, because the bully's company had become our client's sole source of distribution.
When you have to negotiate with a bully, here are five tips for preventing and defending against a surprise attack:
- Keep Working on Relationships. Like nasty neighbors, hostage-takers, dictators, oligopolies, and sole-source suppliers, a wholesaler who is has a large portion of your market is difficult because you can't avoid them -- you have to find a way to have a relationship with them. Prior to bargaining, work harder than you otherwise might to find affiliations, make gestures of friendliness, and get to know other people on the team and in the company. Even if you find the "bully" difficult to deal with, you will get to know him or her better, which will help you anticipate tactics and resist the angry reaction that a surprise attack can trigger.
- Build a Strong BATNA. Your BATNA is very important in this kind of negotiation, because it is more difficult with a sole distributor. Finding alternatives to a deal with your main distributor requires a lot of probing, conversation, and relationship-development with other potential wholesalers and retailers. You may be able to negotiate with second-tier wholesalers, or plan an "end-run" around the bully and offer a deal directly to retailers. Do this legwork before an information exchange.
- Develop a joint agenda. Get the other party to agree ahead of time on what will be discussed in a meeting. If an ultimatum or something comes up that you didn’t discuss when you negotiated the agenda, remind the other side that their new item is not on the agenda both parties agreed to and will have to wait for the next session.
- Focus on Interests. One way to help distract from the hostility or negativity created by a tactic like a surprise attack is to focus on your own interests, and on the legitimate interests of the other side. What is the real reason for the hardball tactic? What do you really need out of the deal? Consider your BATNAs and the possible BATNAs for the other side.
- Manage emotions. If you find yourself faced with a surprise attack despite your attempts to prevent it, it will be critical to keep your cool. Anger blurs thinking. Our client wisely did not respond to his counterpart's ambush and mostly kept his cool -- then went to gather intelligence about the other side. He found that the bully had treated a number of other companies to a similar tactic, but had not met with most of them. Thus our client discovered he had more bargaining power than he realized.
Our client's plan after our discussion was to circle back to other retailers and wholesalers and explore his options and strengthen his BATNA before returning to the bully. Stay tuned for an update!
By Marianne Eby
Lying is not an easy subject to discuss.
How many lies did you tell today? None? How many times were you lied to today? Not sure? According to the latest research – people lie on average 3 times every 10 minutes, and most of us can't recognize a lie over 50% of the time. So what’s a negotiator to do when your counterpart is not going to announce that they are lying?
Everybody lies. You don’t believe this do you? Think about these everyday examples:
- Compliments that seem expected but are not sincere: "Nice hair cut” might get your boss to be easier on you in this afternoon’s staff meeting.
- You respond that you too are from Oklahoma City when in fact you are from Norman, Oklahoma where you lived from birth through high school. Maybe you tell this lie because it’s easier than describing where is Norman, or maybe you don’t want to be perceived as naive, or maybe you want to build an alliance and your business counterpart went to school in Oklahoma City so there is some advantage to you to be vague in declaring where you are from.
- Apologies that are necessary but resented by the speaker: "Sorry we are late” is appropriate to say, even though your colleague has been late on numerous occasions and you feel justified to be late this time.
- Providing agreement to appease someone : "Yes, that hotel was fine,” even though this customer put you up at a low end hotel where you heard the trucks on the highway all night, but you can’t afford to lose this customer so you aren’t going to complain.
Lying plays out regularly in negotiations just as it does in everyday conversation.
Imagine a building owner who says that for this deal to work, the buyer interested in the building needs to close the deal in 2 months. The prospective buyer in fact wants to close within 2 months, but rather than exposing this interest, the buyer exacts some concession from the owner in exchange for agreeing to close quickly. Is this lying? Or just good negotiating?
We are not in any way suggesting that anyone should tell factual lies in a negotiation - ever - or in any way commit fraud, which his illegal. (Fraud is a misrepresentation of material fact upon which someone justifiably relies to their detriment and suffers resulting damages, and the offense varies by jurisdictions worldwide.) If you are asked a question in a negotiation and you don't want to say the truth, you are obliged to find a way to not answer the question so that the other party knows the question remains unanswered.
But lying happens in negotiations without any factual lies being exchanged. Lying occurs regularly in a back-and-forth conversation where each party recognizes they would have to ask for candor on each and every topic to expect to get it. That's not practical in an intense negotiation, so negotiators understand that the other side is there to seek advantage, leaving little room for any justifiable reliance on your negotiation counterpart’s "negotiation lies."
Why not just negotiate in a straightforward and honest exchange?
Here are just a few examples of why it doesn't happen:
- If a seller reveals her bottom line, the other side would be foolish to offer any more than that.
- If a buyer discloses his must have issues up front, those concessions will be leveraged heavily to close the deal.
- Admit that you have total authority to finalize a deal and you will be pushed to decide and concede all issues on the spot.
- Open with terms of a deal you want, then that will become the starting point from which negotiations begin, assuring you get less than you wanted.
What strategies can you use to close a mutually beneficial deal given that Negotiators Lie?
There are many:
You are negotiating a lease for additional office space. The real estate agent tells you that if you don’t increase your offer by $10K by the end of the day, you’ll lose the space to another company. Is she bluffing or is the deadline real? Ask her lots of questions about the deadline and the competing offer: What time today? Why today and not tomorrow? Who told her this? Why does she believe it’s true? Could it be her source was bluffing? What exactly did they say? When did they tell her? If she was being straightforward, her answers will likely come easily. But if she was bluffing, she will have to go into cognitive overload to keep her story believable. While she is answering, assess how hard she is thinking in order to produce the answers, because even good lyers have to work hard mentally to keep their story coherent.
Propose ideas and options
What do you do when your negotiating counterpart says, “Take it or Leave it.” Do they mean it? Maybe. Is it a lie? Often. Should you test it? No, you should ignore pronouncements of “take it or leave it.” It’s up to you to float options – What if? How about? I wonder how we’d each feel if we can’t reach an agreement? Might another way work? Does your counterpart engage in discussion of these hypothetical options? If so, they didn't mean "take it or leave it" literally.
Use economically equivalent offers
Negotiators often add extra issues to the pot so that they can give in on the ones they don’t really care about and thereby seem cooperative, motivating you to concede on the issues that matters to them. If your counterpart insists that price, delivery time and contract length are all critical and can't be prioritized, offer 3 economically equivalent deals where one of these is addressed in each offer. The offer your counterpart chooses to discuss most will provide clues as to what issues really matter. Now Probe more to find out why that issues is so important.
Offer contingent concessions
Your counterpart insists something is true that you can’t verify: “We plan to build 3 plants next year so our capacity will be doubled by the time you need more product.” Agree to move volume from other suppliers as long as the plants go live by a date you are comfortable with. And put that contingency in writing.
Use Best Negotiating Practices(R)
Rather than spend your energy trying to determine if you are being lied to and navigating around lies, use Best Negotiating Practices that ensure mutually beneficial and sustainable agreements:
- Build relationships with your counterparts: Meet face-to-face when possible and get to know them as humans, not just negotiators
- Prepare: research, verify claims, plan questions
- Exchange: Probe with sincere and intense curiosity, test assumptions, build trust
- Bargain: Bargain with integrity by modeling truthfulness; explain resistance, trade value, admit mistakes and offer any needed apologies
- Listen, be observant and manage our emotions: Be in the moment of the conversation rather than thinking of your next explanation or offer. Emotional states make you more vulnerable -- angry at being taken advantage of, excited about the deal you about to get, depressed about previous losses -- all of these mental states make you more receptive to deceit. Notice clues to lying, but don't accuse - instead use the strategies identified above.
If you think you can spot a liar, then you won’t need these strategies (but at least check your reliance on tell tale myths for spotting liars at the door). And beware: According to the latest research and expert Leanne ten Brinke, you’d be overestimating your chances of successfully knowing a lie when you hear it. A good liar’s lie-revealing facial expression only lasts 1/15th of a second and takes an expert to recognize; body language can give clues but results in many false positives. And accusing a person of lying who didn’t in fact lie, will likely cause the honest person to become defensive – a clue we often misread as protecting a lie. False accusations usually destroy trust, which leads to more lying.
Keep it simple
Avoid lying in your negotiations as much as possible, even though it's a natural part of the game. Expect your negotiating counterpart to lie quite a bit. Don't get mad (it'll backfire); Use Best Negotiating Practices and defensive strategies to find the truth so you can make good decisions and reach a mutually beneficial and sustainable agreement.