Don't anchor yourself: When preparing for a negotiation, remember to develop your 'ask' or opening offer first - before your goal and least acceptable agreement or walk-away.
Negotiation Blog - Leveraging Power
Law & Order Viewers Learn Bargaining
By Marianne Eby
For the last 20 years, the popular television American crime drama Law and Order has taught hundreds of millions of viewers in 19 countries about US criminal law. What those viewers may not realize, however, is that they have also become quite familiar with the nuances of negotiation strategies that apply to commercial and internal negotiations as well. Watch this show and you'll improve your own bargaining skills, maybe even earn your get out of jail free card.
Since trials are expensive and unpredictable, both sides in any legal dispute—including criminal cases—try to reach a settlement before resorting to court. A plea bargain, as its name indicates, is an agreement on the plea the defendant will enter; in exchange for the simplicity and efficiency of a guilty plea, the prosecutor will make some kind of concession in the punishment.
We may forget that plea bargaining is just bargaining. What’s different about it, and what makes it so drama-worthy, is that the consequences are life binding. Instead of the parties negotiating over money, scope and terms (the traditional objects of commercial bargaining), they are often trading the parameters for criminal punishment — jail time, psychiatric treatment, or another kind of restriction. Money can play a role as well, in terms of fines, relinquished assets or victim compensation, but nothing gets more heated than when the primary concern is our freedom. With such heightened stakes, the plea bargaining on Law & Order surreptitiously involves and instructs viewers in a number of issues that arise in all bargaining.
First, the likely negotiation strategy for plea bargaining in a criminal case would seem to be competitive rather than collaborative -- defendants certainly value the outcome more than their relationship with the prosecutor. And, at first glance, it may appear that the opposing sides in a plea bargain are of unequal strength, which should lead to a one-sided negotiation.
But regular viewers of Law & Order come to understand that the complex variety of cases and their handling by attorneys who work with each other regularly can complicate the bargaining process and lead to a variety of negotiation strategies -- from competition to compromise -- depending on the case. Though the prosecution has all the resources of the police and other government agencies on its side, the defense has some advantages. For instance, it need not prove the client’s innocence, only raise reasonable doubt about the state’s claims of guilt. Defendants are also often able to gain concessions on jail time and other penalties by assisting the state in other prosecutions.
Plea bargaining on Law & Order also gives us a clear view of the difference between a negotiator’s position and interest. The defendant's position is his or her plea -- guilty or not guilty. But it is in his or her interest to consider a different plea, based on the likelihood of conviction, if it will reduce his or her sentence. The defendant's interest can include things like less jail time, confinement at a particular facility, lower bond, dropped charges, etc. Also lawyers can have different interests than those of their clients -- defense attorneys are paid more if they go to trial, and always need to maintain a good relationship with the prosecutor because their next deal may depend on it.
The prosecution’s stated position is that it must punish the defendant for his/her crime. Its interest, however, is in curbing crime generally, sometimes by using information from lesser criminals to successfully prosecute more serious offenders, information they are willing to trade for a reduced sentence. On “Law & Order,” consideration of this sort of trade is often presented as a moral dilemma, pitting the greater good against justice in a particular case.
Law & Order also gives viewers a sense of the nuances, timing, and performance of a skilled negotiation. The attorneys on the show (and the viewers) enter a plea-bargaining process knowing the facts of the crime, the evidence, and the law. But we know after several episodes how equally important is the understanding of the other side's histories and tendencies for well-timed offers and proposals, and skillful responses.
If no bargain can be struck, both parties have the same Best Alternative to a Negotiated Agreement (BATNA)-- a trial, with high costs and risks for both sides. But regular viewers of the show know they need only wait for the next episode to see another negotiation unfold.
Like the Energizer Bunny, Washington’s debt ceiling negotiations keep on giving
By Thomas Wood
We tried to restrain ourselves from commenting in our negotiation workshops these last two months on the drama going on near our Washington, DC offices as the US President and Congress negotiated the US debt ceiling, with the President’s signature healthcare legislation – Obamacare – as the bargaining chip. Careful to stay neutral, but always alert to the strategy angles, we now have a few things to say, and they are all seeped in the fundamentals of negotiating. This Energizer Bunny just keeps on giving!
Negotiations to reopen the shuttered federal government and raise the nation’s debt ceiling were notable for one side’s insistence that it wasn’t negotiating at all. But despite the claims of President Obama and other Democratic leaders that they wouldn’t bargain over what they described as the basic functions of government, in the end they worked out a deal with their Republican adversaries. Most of us just don’t mean it when we say we won’t negotiate.
What other negotiating lessons can we learn from Washington’s latest fiscal crisis? At least five fundamentals.
1. The first is that preparation takes time. Although the partial shutdown of the federal government caught many Americans by surprise, defunding the government as a strategy for derailing health care reform was a plan in the making by an important faction of the Republican Party. President Obama, for his part, apparently decided in 2011—in the midst of another debt-ceiling confrontation—that he would never again negotiate over whether Washington should have enough borrowing authority to pay its bills. As it generally does, this early planning affected the outcome of the negotiations.
2. Another prominent feature is the power of deadlines. Deadlines often figure in negotiation—sometimes proposed to spur action in a cooperative way, sometimes wielded as a weapon by one side to intimidate the other.
Government funding was due to expire October 1 and the Treasury’s borrowing limit (the “debt ceiling”) would be reached on October 17. There was a difference between the two, however: the first was acknowledged by both parties to be justified and absolute, since it was the statutory end of the government’s fiscal year. The second was a less concrete estimate by the Treasury. Some Republicans probed this second deadline, suspecting it was arbitrary and changeable. Though the GOP was criticized for questioning the precision of the debt ceiling deadline because the consequences of default were so severe—regardless of exactly when it was triggered—in less drastic situations such probing of deadlines is entirely appropriate.
3. Third, our approaches can evolve as the negotiations evolve. Like most political confrontations, the strategy when this negotiation began was competitive. Each side felt it had right on its side and demanded the other yield. The Republicans, however, almost immediately shifted to what they presented as a compromise strategy, inviting the President and other Democrats to talk out their differences. But Democrats felt secure enough in their position—and viewed the GOP proposals as so unreasonable—that they didn’t feel pressured to go along. This is not usually a practical strategy for ongoing relationships such as the President and Congress must maintain, but such is the degree of political polarization in Washington today. Eventually, to break the weeks-long deadlock, Democrats joined in the compromise strategy, which seeks to give something to each side.
4. Fourth, positions are merely one way to satisfy interests. That’s why positions move in negotiations. The general wisdom is that the Republicans got much less than the President out of this compromise settlement, but some commentators think that viewpoint is confusing positions with interests. In fact, Republican positions changed over the course of the negotiation: beginning with a demand to defund or delay the implementation of the Affordable Care Act (Obamacare), then moving to other tax and spending issues, and eventually to policies disconnected from the budget.
But Republican interests remained the same throughout: a smaller, less intrusive federal government funded by lower taxes. Viewed that way, even though health care reform was only slightly modified, a central GOP interest was served by maintaining existing spending restraints in the temporary budget adopted as part of the deal.
5. And last, without a strong Plan B or BATNA, there is little likelihood of a big win. One reason President Obama could at least in the beginning maintain that he was not negotiating, and in the end get more of what he wanted, is that the other side began the process without apparently developing a strategic Negotiation Envelope. This is a planning tool that maps out wants (Most Desired Outcome), reasonable expectations (Goals), fallbacks (Least Acceptable Agreements) and “Plan B” (Best Alternative To a Negotiated Agreement—BATNA). The most aggressive GOP leaders of the confrontation seemed to have identified a lot of Most Desired Outcomes, but not one Least Acceptable Agreement. And there was no viable BATNA, since the public would not put up indefinitely with a closed government or with the economic chaos caused by a national default.
Perhaps that’s the principle negotiating lesson of the federal fiscal crisis of 2013: set a reasonable goal and chart a path to get there. Whatever the merits of the Republicans’ politics and policies, their negotiating strategy may need a recalculation.
Leverage Used Outside the Bargaining Table
By Marianne Eby
Another company founded in a garage, Amazon.com is the world's largest online retailer, responsible for sales of one third of the books sold in the United States alone. Being that big and powerful doesn't make Amazon.com's negotiations any easier. Looking at the state of negotiations with one of its suppliers, Hachette Book Group, a billion dollar publishing house, we can observe the use of leverage away from the bargaining table to influence negotiations.
Despite Amazon's stock tumbles this year, or because of them, the giant online retailer is flexing its negotiation muscle. There are a variety of book titles that consumers are having trouble getting their hands on while being notified of delayed ship dates and being offered alternative titles from other publishers that can ship quicker. Those titles on the slow boat are owned by Hatchette Book Group, one of the top 5 publishers in the world, and a behemoth in its own right.
For example, if you want Mariano Rivera's memoir, "The Closer" which was published last week, and you go to your Amazon account, you may have to wait 2 to 5 weeks to get the book written by the guy with a 90 mph fastball. Of course you can go to a local bookstore for instant gratification, or order from another online retailer and get it in about 24 hours. But Amazon knows that we want to get it from Amazon, because that's where we get most of our stuff. As reported in the New York Times, Amazon has been down this road before and it gets the deals done.
Hachette Book Group out of France is no small player, as the world's third largest trade and educational publisher. And Hachette isn't taking this sitting down, but is getting the press out, letting everyone know that it's top requested titles are being held up by Amazon, not by Hachette. Does that make you want to go elsewhere to get your favorite Hachette titles? On the surface Hachette is taking the high road, and publically emphasizing the relationship of good will that it has built with Amazon.com, while letting the press have a field day with this turn of events.
Amazon.com probably wants the same trades any online retailer wants from its suppliers -- bigger discounts and longer payment terms, and other favorable treatment as a preferred customer. It can only do so much at the bargaining table. The real leverage is in its business strategy and risk tolerance -- how much of our allegiance is Amazon willing to wager?
There's no silver bullet to negotiating with a customer you can't afford to lose, and Hachette probably can't afford to lose Amazon.com.
Shifting Power in Negotiations: Taylor Swift vs. Spotify
By Leslie Mulligan
Taylor Swift made a big splash this week when she removed her album, 1989, from Spotify, one of the world’s largest digital music companies – calling Spotify a “grand experiment” that was under-valuing the beloved music created by her and many other artists. Her attempt to gain leverage in negotiations is a strategic move, but will it work?
Taylor Swift took a stand by pulling her music catalogue away from Spotify, a growing digital music service that provides a two-tiered model to “lure listeners away from piracy.” Her stand calls attention to a growing power imbalance: amazingly, Spotify only launched in 2008, but now has over 50M users worldwide. Spotify’s growth, mirroring the rest of the digital music industry, has been astronomical, but many musicians feel they are now being unfairly compensated in the new “streaming” era.
So far, Swift’s “negotiation” with Spotify has played out more in the public domain than in the well-heeled hallways of NYC, Spotify’s US HQ. Swift is adeptly following many of the principles that expert negotiators advocate when confronted with an imbalance of power – what to do when power has shifted out of your favor:
Have a strong BATNA and be ready to execute it –Taylor Swift is in the enviable position of having pretty deep pockets herself, and she will still make serious money on 1989 and the rest of her music as she has myriad other outlets for the sale of her music, but firing the first salvo like this certainly got the attention of the digital streaming music industry. Rolling Stone magazine quotes Swift’s record label President, Scott Borchetta, as describing this move as a “big fist in the air”.
Paint a picture of what will happen if a “deal” falls through – When Swift followed her first move by then yanking her entire musical catalogue, the vision of the future without Taylor Swift was crystal clear, and not a pretty picture for Spotify. Can Spotify hold off other artists who may feel the same way?
Create coalitions: Taylor Swift is the darling of Pop music, and the biggest name to call out Spotify, but she is only one in a growing group of well-known but disgruntled artists: Jason Aldean of the Country music fame has also pulled his most recent album, Old Boots, New Dirt. But it is not just the Pop/Country worlds that are vocal: the Black Keys and Radiohead of the Rock world have also expressed concern, if not fear, of the changing landscape. David Byrne, lead singer of the Talking Heads of rock infamy, criticized streaming services just last year. Even informal alliances, if not formal coalitions, can impact the balance of power in your favor.
Attack the source of their power – Spotify’s success has come from the rapid growth in its user base. But if the fans are unhappy with the musical selection, or even just concerned that their favorite artists are unhappy, who knows what may come next – a fan revolt? Well, Spotify is already trying to shift the balance of power back, with their recent blog posted Nov 11th, making sure that the fans know that we are the center of the Spotify universe, but not to the detriment of their artists.
Reveal some of your interests -Using the media mouthpiece, Borchetta hinted at what Swift really wants – more control. Borchetta criticized Spotify for its lack of flexibility: "They take [the music], and they say, 'We're going to put it everywhere we want to put it, and we really don't care about what you want to do. Give us everything that you have and we're going to do what we want with it.' And that doesn’t work for us. . . . They just need to be a better partner.” It’s not unusual for a negotiator to demonstrate their plan B with a left punch while reaching out their right hand for a future deal.
Most of us do not have the resources or fame of Taylor Swift, but we can address power shifts in our own negotiations by following these tried and true principles. These strategies should level the playing field if not improve your position outright. But taking these steps may not mean success – the pundits at Harvard assert that Taylor Swift’s moves are an anomaly and she may be the proverbial lone wolf. Only time will tell how the power shakes out, but hopefully fans around the world will still enjoy the music.
4 Ways to Use Negotiating Power Wisely
By Thomas Wood
Fortune 500 companies exert power in the marketplace, and by extension in negotiations. It's easy to exert power in negotiations, but not as easy to use it wisely. Seeing the new Fortune 500 list just released, and how many of our clients are in it, made me think of the many discussions with those clients, and their customers and suppliers, about the perils of being powerful.
This week Fortune released it's 61st Fortune 500 list. Fortune 500 companies are ranked for FY revenue reported, together totaling $12.5 trillion. They reported a combined profit of $945 billion, and employ almost 27 million people around the world. To say they have power at the negotiating table is an understatement.
Watershed Associates has served many of the Fortune 500 with negotiation training, including three of the top 5. We advise many negotiators in these Fortune 500 companies about their real world challenges. The negotiators on the front lines know that power from size can be real or perceived, but it can also shift easily. Revenue and profitability giants don't always hold all the power; many factors influence who holds the power in a negotiation:
- Which of you is a customer or supplier the other can't afford to lose.
- Which company has the available cash flow to weather a downturn.
- Your position in the industry matters - You can be a Fortune 500 company, but if your market position is lowest among your industry competitors, you might not have power in your negotiations.
- Your company’s agility – how fast can it change direction to adapt or respond to external market forces?
- Expertise – which company forecasts weather, economics, access to natural resources, or consumer mood better?
- How quickly you need a deal in relation to how quickly (or not) your counterpart needs a deal.
- And of course, the relative strength of your Best Alternative to a Negotiating Agreement (BATNA), or plan B, as compared to your counterpart's BATNA. BATNA is all about Who stands to lose the most if there is no deal. Sometimes, it's the party with perceived power.
But when you do have the power in a negotiations, you still have challenges:
Others are trying to shift the power balance; bet on it!
Power holders are often less diligent and thus more oblivious to the growing power of the powerless; they don’t assess the situation accurately and don’t change to suit it. This arrogance can leave you oblivious to a growing source of power.
Your behavior reveals much to the other side and can drive defensive behavior.
For example, when a customer or supplier feels they get unfair deals from a powerful company, they might shift power by building coalitions, give better deals to the competitors at your back door, and strengthen relationships with your next generation decision makers. Or if they feel the deal struck was one-sided, there is always potential for you to be blindsided or receive less during execution of the contract, and the party who feels they got less at the bargaining table will be the one looking for ways to recapture that value during the contract period. Remember, the powerless go on the offensive if they perceive unfairness.
The powerful are not always liked.
Let's face it, we can love a company on its way up -- think Amazon or Google or Microsoft -- but once those companies became giants, we started rooting for the new players. There is greater focus on showcasing failings of the powerful, so they are actually more vulnerable to downfall than the smaller companies.
With power in hand, what can you do to keep that power from working against you? Try these 4 strategies to use your inherent negotiating power wisely:
1. Be Likeable.
Being likeable is highly underrated in life and in negotiations. There is lots of advice on how to be likeable. And being likeable doesn't mean you give away value at the negotiating table. It does mean that you:
- Invest time into building relationships; Get to know your counterpart's company and the individual negotiator(s). Use rapport, find affiliations (common interests), and keep commitments.
- Demonstrate that you are working as much on this deal as your less powerful counterpart.
- Reveal your humanity; Share stories about volunteer work, injuries, mistakes you learned from, etc. Smile and laugh when appropriate as they share their stories. Enjoy them!
- Like them! Even if they aren't very likeable, think about what you do like or admire -- their sense of humor, their recall of detail, their interesting analogies, etc. But be sincere and don't overdo it. Let the other side earn your respect and professional friendship over time.
Remember, companies don't negotiate. People negotiate. And people extend the most consideration to people they respect and trust.
2. Ask for Collaboration
Articulate your company’s interest in mutually beneficial negotiations with smaller players. Literally, ASK them to engage in a collaborative discussion with you. Persuade your less powerful counterpart why you want this deal (because they may be assuming you don't really care, and thus they have nothing to lose by playing hardball). They will be surprised to hear you ask them to be collaborative, when that is exactly what they thought was not attainable.
3. Demonstrate You Are a Collaborator
The less powerful counterpart comes to the table expecting to have to grab whatever value they can and hide any weaknesses. If they find you are collaborative from the start, they become less guarded. When they are less guarded, you will be able to identify their interests and find alignment with yours in a way that builds value rather than simply dividing it.
To show you are collaborative:
- Show empathy -- care about what matters to your counterpart.
- Use objective criteria and standards of fairness to explain offers -- don't just assert positions. Explain your position with data, industry standards, expert analysis, etc.
- Early on, the offer of a small "free gift" may be in order.
- Plan at least one concession they need or want and let them earn it along the way.
- Allow yourself to be nibbled (gently), giving a little more at the close of negotiations.
4. Never Threaten Your BATNA.
If you have the power, your less powerful counterpart knows you have BATNAs, or alternatives to this deal. No need to talk about your BATNAs. When the powerful talk about their leverage and alternatives, it is perceived as a threat. People react to threats with every possible counter offense.
Being a collaborative power holder pays dividends now and later.
You want the other side to expose their true interests, propose ideas and creative solutions, so that more value can be created and a sustainable agreement results. You want to be known as a fair negotiator who creates value at the bargaining table. Flaunt your power, and you will not achieve this. And one day, the power will shift!
Donald Trump's "Art of the Deal" - What's his final grade?
By Leslie Mulligan
Donald Trump is certainly dominating headlines these days as he campaigns for President – he is all over TV news, social media and can’t help but pop up in our daily conversations with friends and family, regardless of your political leanings. But he has never been shy, as a long-time fixture on the NY real estate scene; he promotes himself as a skilled “deal-maker.” As a negotiating expert and trainer myself, I was compelled to read his first book, Trump: The Art of the Deal, to explore what negotiation concepts he relies on, and maybe to see what he misses. Regardless of his own “pomp and circumstance”, based on the ideas in his book, what grade would Trump get in Negotiation Fundamentals – Pass or Fail?
Let’s walk through the book a bit before we grade Mr. Trump. Overall, the book is a good read, shedding light on this provocative political candidate with deep dives into many of his real estate deals. He does frame a few negotiating fundamentals, but the narrative really serves as a showcase for Trump’s inimitable style. He liberally uses old-school negotiating tactics, which may work one time, for one deal, but do not necessarily play well in long-term business relationships. Does Donald Trump “play well with others?" His book highlights mostly his successes, as you would expect. But in this blog, I will dissect his view of Negotiating a bit, with lessons learned for all of us. In any case, the stage has now shifted, as he plunges into the political arena. In fact, Trump himself proclaimed in his presidential announcement last June: “We need a leader that wrote The Art of the Deal.”
Although originally published in 1987, I read Trump's book this year for the first time. In fact, with Trump’s recent political ascendancy, many people have been prompted to buy the book; The Art of the Deal’s sales have jumped, to the point where the book is hovering around the Top 100 books on Amazon – quite a coup for an almost 30–year old book (that sold millions when originally released). It is also the #3 Best Seller in Amazon’s Business Professionals Biographies.
Politics aside, here is my critique of Trump's first book and his thoughts on deal–making. How would Donald Trump do in a class on Best Negotiating Practices?
The original New York Times book review had an intriguing closing comment, perhaps prophetic for current Trump loyalists: “Mr. Trump makes one believe for a moment in the American dream again.’’ After an introductory chapter that chronicles a week-in-the-life of Mr. Trump, Chapter 2 tackles the substance (and style) of his deal-making prowess – The Elements of the Deal – opening with an autobiographical perspective:
"My style of deal–making is quite simple and straightforward," he writes. "I aim very high, and then I just keep pushing and pushing to get what I'm after. Sometimes I settle for less than I sought, but in most cases I still end up with what I want."
He then illustrates 11 key elements of “the deal”, which are articulately summarized in a recent Business Insider article. When I ponder a highly successful negotiation that yields win–win results, 6 of Trump’s eleven Key Elements resonate quite loudly with me (we will revisit the remaining five later in Part II of this blog).
1– THINK BIG
The first and perhaps most important Key Element is Trump’s call to action: Think Big! He urges “If you’re going to be thinking anyway, you might as well think big”. This is Negotiating 101 – and so is definitely worth exploring further. Any negotiation eventually produces some give and take; you rarely close at your very first offer. In fact, be forewarned – if you do close at your very first offer, you may have used persuasion, not negotiation, and later, the other side may have “remorse” about the deal.
But in a normal give and take, to maximize your results you start by opening big, as you will inevitably come down off of that first offer through the course of bargaining. What Trump misses is that if you start so aggressively that your opening is indefensible, you lose credibility and trust. So think big, but be sure that you can make a substantive, realistic case for your first offer – you want to be taken seriously on every offer that follows.
Trump tries to separate himself from lesser negotiators:
“Most people think small, because most people are afraid of success, afraid of making decisions, afraid of winning.”
I disagree. The negotiators I work with may be less skilled, fear conflict or lack confidence, but they do want success. So I challenge you to quell your anxiety, and most importantly, do not negotiate against yourself before you ever sit across the table from a negotiating partner – go ahead, stretch and think big.
2– PROTECT THE DOWNSIDE, AND THE UPSIDE WILL TAKE CARE OF ITSELF
Donald Trump is a realist, well, maybe more of a pragmatist, too. His 2nd Key Element is "Protect the Downside and the Upside Will Take Care of Itself." To me, this means that although he thinks big, he definitely considers his “bottom line”, so that he knows when to stop in any negotiation – self-protection, if you will. In negotiating parlance, we define a Negotiating Envelope (also known as the Zone of Possible Agreement) – two end points that establish your Most Desired Outcome (MDO) by thinking big, but also your Least Acceptable Alternative (LAA) that protects your downside, by contemplating the lowest you are willing to go. Savvy negotiators push themselves, stretching when they set their objectives initially, and then confidently open at the negotiation table, but only after privately setting a walk-away point. This focus on your plan will frame your success.
3– KNOW YOUR MARKET
I wholeheartedly support Mr. Trump for emphasizing Planning – preparation is critical in any negotiation – actually, the more prepared you are before you sit down at the table, the more confident you will be. And we know that Donald Trump does not lack for confidence. This idea is echoed in another of Trump’s Key Elements – "Know Your Market." He may mean this primarily in the real-estate/business sense, but any good negotiator knows that the more prepared you are, the more you increase your chances of success. Think through not only your Negotiating Envelope, but also the other side’s, consider what the other side is most likely to offer – and really want. The best negotiators spend much more time planning and preparing than they ever do in the actual negotiation. Never sit down with the other side until you have thoroughly vetted (or at least thought about) not only your own negotiating strategy, but your negotiating partner’s, too. Our refrain is, “A failure to plan is a plan for failure.”
4– MAXIMIZE YOUR OPTIONS
During the planning phase of negotiations, do not get fixated on only one approach – having back up options gives you leverage. Trump knows this, as he commands us to "Maximize Your Options:"
“I never get too attached to one deal or one approach.... I always come up with at least a half dozen approaches to making it (a deal) work, because anything can happen, even to the best–laid plans.”
Plan B and Plan C, alternatives to any deal you are negotiating, are what we call BATNAs in negotiating parlance. BATNA – the Best Alternative to a Negotiated Agreement – means you have leverage, and power, at the table. A BATNA is a well–conceived plan that you are willing and able to execute if no agreement can be reached. You want the other side to worry that you may walk away from the table and execute your own plan B – and you know Trump plays that card. Now Trump may bluff at times – sometimes it feels like he is bluffing when we watch him campaigning – but it is clear that he knows the value of BATNAs.
5– USE YOUR LEVERAGE
BATNAs clearly provide leverage, but they are not the only way to gain leverage at the negotiating table. What is leverage? Trump defines it well:
“Leverage is having something the other guy wants. Or better yet, needs. Or best of all, simply can’t do without”.
These are what we call Interests – you want to delve into the other side’s underlying interests, why they want what they want.
In his book, Trump describes a time when he was interested in buying a corporate jet – he really wanted a 727 but it cost $30 million at that time, so he had his brokers looking for a G-4, going for only $18 million. Serendipitously, Trump discovered that Diamond Shamrock, a Texas oil and gas company, was in serious financial difficulty, even while its executives had been enjoying the perks of a decked–out 727. Not surprisingly, new management now wanted to ditch the jet, as well as shake up the executive team.
Trump made a call, starting with some pleasantries, and expressed interest in Diamond Shamrock's jet. It was clear to him that the new CEO wanted to deal. Trump then low-balled an offer at $4 million, admitting to himself even that this was absurd. But knowing the other company was in desperate financial shape gave him leverage. Indeed, Diamond Shamrock countered at only $10M, as unloading its corporate jet was a primary Interest. Both sides agreed at $8M, a tremendous price for a refurbished jet with all sorts of fancy amenities – just Trump’s style.
In this case, Trump leveraged his knowledge of Diamond Shamrock’s financial troubles, and its need to both lose a costly asset and send a message to Wall Street around a new management team at the helm. In negotiation, we often think about what we need – but to really hit a home run, you need to spend more time thinking about what the other side needs, and why they need it. If you know what they need, and you can deliver it without a huge cost to you, then you have leverage – the upper hand!
The final Key Element in Trump’s book that I really value is "Have Fun!" His view is almost child-like: “The real excitement is playing the game,” and he maintains that he has a very good time making deals, especially all of the deals described in his book. This may sound like boasting, but still, I applaud this advice to have fun. People who have fun while engaging in otherwise stressful activities – think parenting, mountain climbing, negotiating – excel more than others.
Collaborating to reach a solution can be energizing, socially gratifying, and filled with surprises. If you approach the agreement with the spirit of cooperation and collaboration (rather than conflict), not only will you enjoy it more, but you will get a better result – for both sides! Many people shy away from negotiating because they view it as conflict; someone has to lose, right? Well, not necessarily; both sides can win. Interest–based, collaborative negotiations yield better results. Trump may lose sight of this from time to time, but that doesn't mean his advice to have fun won't help you become a better negotiator.
What didn’t I agree with in The Art of the Deal?
I believe that we can all become better negotiators – by learning, by practicing, by experience. Trump, on the other hand, believes only some lucky few have an inherent capability to dazzle at deal–making. He asserts, “More than anything else, I think deal–making is an ability you’re born with. It’s in the genes.” I respectfully beg to differ; we can all improve, by enhancing our current negotiation skill set, adding some better strategies, and reinforcing our confidence.
Donald Trump plays hardball a bit more than necessary, probably because he comes from an old–school perspective. Uber–competitive tactics do not foster long-term collaborative partnerships in business – but it is his style, that is obvious. There were also strategies and behaviors that Trump missed in his 11 Key Elements – skills that can be invaluable to a negotiator.
Finally, I give Trump a PASS in Negotiating Fundamentals, but I would say he is a low B student.
Come back for Part II, when I lay out essential concepts that Trump may miss (or misuse), which will transform you from a good negotiator to a great negotiator, regardless of your DNA. Become an A+ negotiator!