Negotiation Blog

Film Award for Best Negotiating Practices

By Thomas Wood

The lead up to the Academy Awards always gets me excited about seeing great films. This year Martin Scorsese's "Hugo" and Michel Hazanavicius’s “The Artist” were fabulous, and received 10 and 11 nominations respectively. But will they win at the 2012 Academy Awards? I hope it's not deja vu of the 2011 Academy Awards, when brothers’ Ethan and Joel Coen’s “True Grit” received 10 nominations but didn’t win. Well, True Grit definitely won Best Picture for Negotiating Practices among our team of professional negotiators here at Watershed Associates.
True Grit tested the “grit” of every character’s negotiation moxy in the various negotiations that transpired in this movie, and there were many.
 
The story is tried and true:  Teenage girl seeks revenge on her father’s killer, and pairs up with two strong willed lawmen-for-hire to chase down the killer in Indian territory of the 1880s. There’s an opening scene with Dakin Matthews playing a tough and crotchety old businessman and trader, Colonel Stonehill, and Hailee Steinfeld playing the vengeful teen, Mattie Ross. As Mattie prepares to set out on her adventure, she needs resources, and she comes to the trader to negotiate for them.
 
Before he died, Mattie’s father had purchased and paid for two ponies from the trader. Her father had paid for the ponies, but the ponies had not yet been delivered to him and are still in the custody of the trader. Mattie’s father also had his saddle horse boarded at the trader’s stable. Along came a thief who, upon murdering Mattie’s father, stole her father's saddle horse, and left behind the saddle, the two ponies, and the less valuable horse Mattie's father had lent the theif.
 
When Mattie approaches the trader, her astute preparation becomes apparent. The trader is quick witted from years of experience (and a great script), but has to determine whether Mattie has a strong BATNA (plan B), or is bluffing. Mattie uses just enough friendliness and legitimacy to her advantage, while also showing she is prepared and goal oriented (a picture perfect example of Watershed’s mantra: be firm, fair and professional). The trader is caught off guard by this shrewd teenager, and to his disadvantage underestimates her negotiation skill and determination.
 
There are lots of negoiation missteps, mostly on the part of the experienced trader. There are things the trader could have learned about Mattie’s need for resources if he wasn’t caught off guard and had asked better questions. Simply by using sincere curiosity and probing more effectively, the trader could have landed a much better deal. He focuses only on dollars instead, missing low cost/high value trades he probably could have made with the girl. He also makes other common erros in his haste, such as
  • responding to her offer in a way that makes it difficult to explore Mattie's interests,
  • negotiating against himself without waiting for a counteroffer when faced with Mattie’s various BATNAs/bluffs, and
  • declaring multiple times that this is his final offer.
And yet, the trader held all the cards from the start. At the opening of the negotiation, Mattie has nothing and the trader has everything – the ponies, the payment, the saddle, the less valuable horse, and the expertise. Mattie doesn’t beg or play the victim who needs charity. She uses many Best Negotiating Practices, among them
  • an assertive but defensible opening offer,
  • legitimacy,
  • persuasive analogies,
  • a strong BATNA, and
  • a tapered concession pattern.

Mattie has almost no power in this negotiation, but she leverages something much more potent – her skill as a negotiator – her true grit.

And that’s only one of many negotiating scenes in the Oscar nominated movie from 2010.
 
See True Grit again or for the first time, and test your “grit” as a negotiator by spotting all the missteps and Best Negotiating Practices interlaced in this great film.

 

Negotiating Tip

Never say No or Yes. Use the negotiated yes: "Yes, if…"


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Negotiation Blog

Negotiators Do Judge a Book by Its Cover

By Marianne Eby

To really understand why something so superficial matters, we are going to think out of the negotiation box. Let's think restaurant menu, think Apple products, think Erin Brokovich, and before we finish, think Mao Zedong. Then we'll better be able to think negotiations.

Think restaurant menu
A restaurant with a well-designed menu invites you to try something new rather than rely on a habitual choice. The menu may list drinks first and separate from the courses to guide you to spend more on high profit libations. When the choices for foods are more limited, with clear titles, and information about each option below the dish, and a price, most of us feel comfortable that we are making an informed choice and can decide more quickly. This helps the restaurant with throughput (seating more diners). When the pictures of food or other people/places on the menu are not enticing, or the information is overwhelming or confusing, diners may walk-out or order a cheaper item so as not to risk as much.
 
Think Apple products
Apple’s core philosophy imbedded by its founder Steve Jobs is that great products come at the intersection of arts and technology. These products make us want to hold them, use them, brag about them, and but of course, spend money on them. Back in 2005 Jobs demonstrated the simplicity of an Apple remote versus the typical peanut shaped remote with dozens of keys on it. Year after year he and Apple have proven that while functioning is critical, the look and feel also matter. 
 
It’s as if the well designed menu or techno gadget (or the poorly designed one), negotiates with consumers on behalf of the company. Forget how good the food really is, or how fabulous the functions of the techno gadget, we will pay more for it when it presents itself well.
 
Think Erin Brokovich
I can’t help but think of the famous scene from the Academy Award winning movie Erin Brokovich (2000). Julia Roberts won Best Actress for her portrayal of Erin Brokovich, a sassy paralegal who helps bring down a chemical company in a class action suit. The real Erin Brokovich admits to dressing and talking “potty mouth” and vents
 
“I was taught never to judge a book by its cover.”
 
The instructive negotiating scene that comes to my mind is when the chemical company sends over an inexperienced attorney to get a quick settlement, and he is slouched in the plaintiffs’ attorney’s waiting room. His posture and facial expression send a message: either the chemical company doesn’t consider this litigation a threat, or this is a tactic to make the plaintiffs think the lawsuit will go nowhere and they should settle for nuisance value.
 
The image of the attorney representing the chemical company mattered greatly in terms of the message that plaintiffs received and thus influenced their next move in the litigation. 
  
Think Mao Zedong
On the other end of the spectrum I envision Mao Zedong, the Chinese leader who led the nation’s communist revolution to become Chairman of the People’s Republic of China from 1949-59. This charismatic leader had such an aura of power that he chose to carry a small book in his hand in order to send a message of approachability. You can read more about his rise to power and expert messaging in Private Life of Chairman Mao by his personal physician, Dr. Li Zhisui.
 
Think Negotiation
Our clothed appearance, body language and facial expressions send a message about how we feel about the negotiations and the other parties. Similarly, like the design of a restaurant menu, the layout of our proposal or response can speak volumes about our approach to our customer, supplier or partner.
 
We don’t always think about how we look and sound and pose at the negotiating table, especially after long hours of preparation on substance or difficult bargaining sessions. We’re certainly not in favor of a cadre of same suited minions arriving at the negotiating table with shoulders held back and strong handshakes. The key is not to be one style, but to intend that the message your negotiating counterpart receives is the one you intended to send, because we often do judge a book by its cover.

 

Negotiating Tip

Try not to negotiate if you are in a negative emotional mood. Research shows you will make inappropriate or unnecessary concessions.


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Negotiation Blog

Negotiator's Keys to a Powerful BATNA

By Marianne Eby

Never enter a serious negotiation without knowing your Best Alternative To A Negotiated Agreement, or BATNA: a plan that you are willing to execute if there is no agreement.

The value of your BATNA is not just that you'll know what to do if a negotiation falls through (your Plan B) -- it's that your BATNA gives you power while you are negotiating.

On one hand, a BATNA is just another piece of important information you prepare. It is one element of your "negotiating envelope" that you must define before engaging with the other party -- along with your Goal, your Most Desirable Outcome (MDO), and your Least Acceptable Agreement (LAA). Although negotiation is a fluid process and you will continually revise your parameters in response to the other party's, this negotiation envelope guides your concessions in Bargaining.

The BATNA differs from the other defining decisions because its execution stands outside the negotiating process—by definition, it’s what you do when negotiation is not working. So while other parameters help you steer the negotiations, it is your BATNA that makes you a stronger negotiator -- because you don't need the other party’s permission or involvement to execute it.

Recently the Chicago Teachers' Union (CTU) demonstrated the power of every union's BATNA: the ability to strike. Although recent decades have seen a decline in union bargaining power, teachers unions are increasingly vulnerable, and the union leader in Chicago lacked influence with the Mayor, Chicago's teachers were able to force 300,000 students out of the classroom, shut down the third largest school system in the country, and win some key compromises from the Mayor.

Under US law, a union's potential BATNA is always to strike. Yet, many a union’s strike BATNA doesn't always have the power that the CTU's did, because some organizations will counter with their own BATNA: the use of "scabs," or non-union workers who can take the place of the striking workers. The NFL, for example, prepared for its recent referee strike by preparing substitute officials to run its games.

Of course, the implementation of a BATNA isn't always preferable (Chicago students lost instructional time) and if it's not well-planned, it can backfire as a means to more power in your negotiation. The NFL's use of replacement referees certainly backfired, causing several weeks of outrage, greater esteem for the regular referees, and ultimately some damage to the NFL "brand."

The ideal way to use a BATNA is to let the other side know you have one. Though an executed BATNA can mark the end (at least temporarily) of the negotiating process, that doesn’t mean that a contemplated BATNA shouldn’t be an integral part of that process. Letting your counterparts know—in an advisory rather than threatening way—that you have other options is an important part of your negotiating stance.

Despite the word "Best" in BATNA, you can have more than one—in fact, you should have more than one, because the more you have, the greater your flexibility and power. BATNAs can vary from a move as simple as finding a new supplier of goods or services, to one as radical as dropping a project altogether. The better conceived and more numerous your BATNAs, the less likely you’ll need them. The other side will know you have viable alternatives, which will make them more willing to deal.

Here are the main things to remember as you develop your BATNA:

  1. The more BATNAs you have and the more willing and ready you are to execute one, the less likely you will need a BATNA.
  2. Consider short-term and long-term BATNAs. Sometimes you don’t have a BATNA and must reach agreement. Be sure to continue working on a long-term BATNA for future use.
  3. Find a graceful way to ensure the other side knows you have BATNAs and you are willing to execute them. Reveal this information during the Exchange stage. In the Bargaining stage, you will decide if and when to reveal your BATNAs.
  4. BATNAs can be used as an advisory or a threat. Threats damage relationships; advisories strengthen them.
  5. If you are not willing and able to execute your BATNA, it's not a BATNA -- it's a bluff.
  6. You don't need your negotiating counterpart's agreement to develop or execute your BATNAs; these decisions are yours and your organizations.
  7. Any BATNA should be a solid, viable alternative to an agreement, and one the other party will recognize as such. The NFL learned from experience that a poorly conceived BATNA will backfire, often costing more than the originally requested concessions.

Negotiating Tip

When negotiating over the telephone, be slower than usual to agree to new ideas or requests. You can always call back once you've considered how to say "yes" in exchange for some value.


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Negotiation Blog

Negotiators use the Power of Alliances at Dubai Air Show

By Thomas Wood

The 2013 Dubai Air Show was the most lucrative in the history of the event, with more than $200 billion in transactions in only five days. We can only imagine the intense preparations for negotiations, and the trades and sparring that followed suit. What we can say for sure, however, is that a strategic approach used by a few of the airlines resulted in a win-win deal.

On my recent trip to Kuwait to work with management and their teams at a multi-national client on their negotiations, there was much talk about the 2013 Dubai Air Show, where Boeing alone received roughly $100 billion in orders for its new 777X “mini-jumbo.” This was a truly astounding accomplishment, lauded by its CEO as the “largest product launch in commercial jetliner history.”  This was definitely NOT "business as usual." But it wasn’t just the pure volume of business that made this feat "NOT business as usual."

Qatar Airways and Emirates Airline, long-time fierce competitors, joined forces to buy hundreds of Boeing’s new models – a groundbreaking development that has been heralded as a transformative moment for the industry. As the two largest airlines in the Middle East, the two companies have had a long history of suspicion, competition, and rivalry. Executives realized, however, that although alone they each lacked sufficient negotiating leverage to demand discounts from Boeing, together they could secure better terms.

This joint effort – the first time the two regional giants had worked together in such a manner – shocked many analysts. The Wall Street Journal reported that Mr. Akbar Al Baker, CEO of Qatar Airways, explained his thinking to reporters. “Don’t you think it is good to align with one of the neighboring airlines and order airplanes? It is good for the industry and also to show to the world that we are competitors, but we also work together.” Gulf News reported that Al Baker noted, "When you negotiate with a supplier, you get the benefit of economies of scale,” and those large purchases allowed Boeing to offer discounts without sacrificing its own margins. Negotiating teams on both sides seized the opportunity to think creatively and create value for all parties.

The negotiators also created strong working relationships that are likely to pay dividends in future deals. Gulf News also reported that Al Baker proudly informed reporters that “when we do a similar program in the future, yes I hope that we will be able to do it together.”

But alliances aren't built in a day, so let’s give Boeing some credit as well. As reported by the BBC, Boeing’s negotiators identified that lucrative opportunities existed in the Middle East market and invested the necessary time and effort to understand that market’s unique characteristics. While budget gridlocks are jeopardizing opportunities in Western capitals, for example, Boeing saw that business leaders in the oil-rich nations of Qatar and the United Arab Emirates (UAE) are racing to become a global hub for air travel. To take advantage of this, Boeing’s negotiating team members no doubt did their cultural homework before engaging with their Arab counterparts in Dubai. The UAE government published cultural advice for Western negotiators, stressing the importance of face-to-face meetings when building relationships, and properly conveying respect when greeting your local counterparts. Boeing’s negotiators apparently took this advice to heart and earned the respect, trust, and admiration of their Qatari and Emirati partners.

Strategically building alliances and creative trades resulted in Boeing walking away from the Dubai Air Show with more than $100 billion in orders, more than twice the value of orders it’s European rival, Airbus, received. The impact of that is far reaching. As reported on NPR, Boeing is now in a stronger position to head off competition from its main competitors in the highly contested mini-jumbo market throughout the next decade.

Boeing executives may also benefit in future negotiations with its labor unions. The International Association of Machinists (IAM) in Puget Sound voted down a recent contract proposal because it had too many give backs (frozen pensions, lower wages for new hires, etc). Boeing had been on the defensive in those discussions, partly due to the success of Airbus. Now Boeing may be able to leverage its triumphs in Dubai -- the guarantee of future work --  as a solid BATNA: sending that work away from Puget Sound if a deal with the IAM isn't reached.

I always counsel my clients to think more strategically about their negotiations. Leverage can come from many sources.

Negotiating Tip

Path to enduring agreements: build trusting relationships; share interests; create value as you address interests; distribute that value.


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