Path to enduring agreements: build trusting relationships; share interests; create value as you address interests; distribute that value.
Negotiation Blog - Trades
Negotiating Demands for Unjustified Compensation
By Thomas Wood
As many issues typically arise during execution of an agreement as arise during contract negotiations. Some require contract modifications, while others require a change in performance expectations. I worked with a manufacturing client recently on its dispute with a valued customer. The challenge was how to resolve the compliance issues without damaging the relationship.
My manufacturing client (Sandra) couldn’t get an important customer (Joe) to pay his bill. Joe insisted that a special order of a low volume, high cost part was delivered a week late. This caused Joe to miss his delivery deadline with his big customer. Joe is being slapped with a penalty fee from his customer and wants a 50% discount.
After probing Sandra, I learn that a delivery deadline was not in the contract. There was a verbal commitment to get the part there as soon as possible, but no promised date. Sandra wants to keep Joe happy, but since she didn’t violate the contract, she won’t discount the price.
Before asking an irate customer to be reasonable, Sandra should invite him to problem-solve a win-win solution. A particularly effective way is to listen, draw him out, respond and summarize. For example:
- Joe: "You were late, which made us late and now we are slapped with a penalty; it is your fault and I am not going to pay your bill."
- Sandra: "You are getting flack from your customer and the reason is you were delayed because our product was delivered to you later than expected."
It is challenging to actively listen when you feel attacked, so practice before you make the call.
Be careful not to make counter-accusations. It is counter-productive. "It is not my fault; you ordered the product last minute and we delivered as soon as we could, which is what we told you when you placed the order."
Suggest that you do some research together on what went wrong, what the current obligations and understandings are, and whether they need to be revised. For example, Sandra might say: "I would be happy to consider compensation once we agree on the facts. Would you be willing to take out the contract, see what we agreed to and then decide what needs to be done? Let’s also review the order and communication process that occurred for this part and see if they need to be changed."
Once you have agreed on the facts and process improvements, choose an offer.
CHOICE ONE: Create good will with a concession other than a price discount. Sandra might say, "Given the facts we have uncovered, I’m not inclined to discount this particular order. But I am sorry and want to help. For example, I could eliminate the late payment penalty."
CHOICE TWO: Offer a trade in exchange for a concession. Sandra could say, "You are an important customer to me and I’d like to help you out, so what I could do is give you a 4% discount on this order, if you pay it within 3 days."
CHOICE THREE: Use legitimacy (facts, such as previous agreements, industry standards, competing offers, cost plus). Sandra could propose, "Let’s both see how we have handled this in the past. I will look into how we have dealt with similar situations with other important customers and you look at what you have agreed to with your customers in this sort of a situation. What do you offer your clients if you were not contractually late on delivery, but yet were later then they expected?"
KEY to negotiating a resolution
The key is to turn the conversation into a problem-solving negotiated agreement.
- Make trades you are comfortable with, but get concessions in return.
- Let the facts be the bad guy. It will keep your negotiation from turning into an argument.
- Jointly determine deadlines, but probe arbitrary deadlines you are given
- Come to an agreement on how to keep this from happening in the future.
- Remain calm and sympathetic.
If you do this, your relationship with your customer will be stronger than ever. Remember…. Be firm but fair!
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.
3 Common Mistakes in Negotiations with Neighbors
By Thomas Wood
Are you “on the fence” about your neighbors? I train seasoned business professionals to negotiate in a wide range of industries and professions, and it never fails that I get asked to help with someone’s latest negotiation problem -- not with a key customer or difficult supplier -- but with a neighbor. Everyone has a story to tell! Learn from the mistakes even I succumbed to in neighbor negotiations.
You don’t get to choose your neighbors, and you don’t have to like your neighbors. But unless you are a billionaire like Mark Zuckerberg and can purchase your neighbors' properties in order to protect your own privacy and view, you will have to deal with your neighbors. Here's my tale of hard lessons learned.
My wife and I bought a house next door to a sophisticated widow of considerable wealth - we called her "Lady H." Lady H had previously owned our adjoining lot, with her house being grand and ours being, well, quaint - a more modest guest-house. Lady H lived alone in her old age and wealth, and barely recognized the existence of my family despite our attempts to win her over with fresh picked blue berries and smiles across the lawn.
Years earlier when Lady H owned both parcels, she had a fence placed near our joint property lines but located squarely on my parcel – a chain link fence that was now in disrepair and unsightly. My wife and I were ready to upgrade our property, and assumed that Lady H would appreciate the investment, as it would add to the value of her property as well. We decided to tackle the thing most unbefitting to our properties – the rusted chain link fence on our parcel.
As an expert negotiator who coaches others, I knew exactly what to do – prepare my options and strategies before negotiating a deal with Lady H. We did our research and formed our strategy, and then dropped by to see Lady H. I told her we were taking the old chain link fence down, and handed her a brochure that showed fences with the same open air view as her chain link fence, but added sophistication befitting her estate. While my wife and I were ok with all the options, I didn’t share that with her, as I wanted to see what Lady H wanted first. I had planned to then reluctantly accept her fence preference in exchange for several other things we wanted, like for her to have a dead tree on her property taken down that posed a threat to our safety.
I was ready to discuss options and begin some give and take, but she cut the conversation short. Pointing to the most expensive option, a decorative iron fence, Lady H nicely said, “I like this one. Do what you need to do,” and thanked me for coming by. I was surprised, but pleased at least with the efficiency of our “negotiation."
When our new and very expensive iron fence was installed, I was thrilled. We could see each other’s lovely gardens but without having to look through the eye sore of that rusted chain link fence. My satisfaction was short lived.
A week later, Lady H installed a taller, builder-grade, wood privacy fence on her property, abutting and completely overshadowing the new iron fence. What had I done wrong? Everything, pretty much!
First, know your neighbor's true interests.
I didn't bother to learn Lady H's interests - why she wants what she wants. It turned out that Lady H regretted having sold the adjoining property because she now had a young noisy family that liked to spend time laughing and playing outside - ours. Lady H had grown older since the days when she had installed that chain link fence, and her interests had changed; she now wanted quiet and privacy.
Second, understand who you are dealing with.
Lady H could have simply proposed a privacy fence, and not had to spend her own money to get the privacy she wanted. Why didn’t she? Easy to see why in retrospect:
- Lady H didn’t share her interest with us because we had no relationship (see the 2nd article in this series coming soon), and I didn’t bother to ask her what mattered to her. My assumptions about what mattered to Lady H proved entirely wrong.
- I underestimated Lady H’s ego need to control her surroundings. I opened with our decision to take the chain link fence down, when I could have just as easily met her outside and, while not invading her side of the fence, showed her that time had taken its toll on that fence and simply asked if she'd like to see it in better shape again. I could have begun a conversation rather than take control. My ego bruising led Lady H to take revenge rather than discuss a solution.
- And last, Lady H’s plan B (BATNA) was very strong (and I didn't bother to think she had one since the fence was on our property); she had resources to out maneuver us. From her side Lady H would now see the nice side of her privacy fence. And she didn't really care that from our side we saw our investment erode, with the ugly side of her privacy fence pressed against our new iron fence.
Third, to negotiate a solution requires collaboration.
I did not trade value to reach a mutually beneficial solution, which is how you capture value in collaborative negotiations. When the other party says “Yes” right away, you can be sure that either you did a great job of convincing them, or like in my situation, you are being outmaneuvered. Maybe you unwittingly offered them more than they ever thought they could get, so they jump at your offer, or maybe like Lady H, they have a strong plan B that they are ready and willing to implement. A quick and easy win in negotiations usually turns out not to be a win at all.
With neighbors and in business, knowing the other party's ego needs, interests and BATNAs, engaging in a collaborative conversation to solve your interests and theirs by trading for value – determines whether you actually get what you want. Robert Frost's famous line - Good Fences Make Good Neighbors -- perhaps should have been Good Negotiators Make Good Neighbors.
Masters of the "Mulligan" on the Golf Course and in Negotiations
By Leslie Mulligan
One of the preeminent “grand slam” golf tournaments celebrated globally, The Masters in the U.S.(Augusta, Georgia), began today, Thursday, April 9th. As a negotiation expert with a long career in sales and business development, I know how helpful golf can be to your professional career. Forbes distilled the 19 tips to “Closing a Deal on the Golf Course” and all of them ring true for me. But what many negotiators miss is that mastering the game is not enough; you must also master the "Mulligan", on and off the course.
A "mulligan" is a do over stroke in golf. My last name is also "Mulligan." As you may imagine, many people ask me if I play golf. I do play golf, enjoying the mental and physical challenge as well as the time spent with colleagues, on business and with friends. And I also leverage the "mulligan."
If you are not aware of the golfing term “mulligan”, it is a free stroke that you can claim, but only if your partner agrees. For example, if your ball happens to make its way into the sandtrap (never happens to you?), well, you get a do-over – a mulligan. It's sort of an unwritten rule of golf that found its way into the game when prominent golfer David Bernard Mulligan took a correction shot on the course with friends, and he and his partner later won by 1 point. Getting a mulligan can make a difference.
But offering a free stroke or mulligan, may be even more impactful – on and off the course.
Let's back up and take a look at Forbes tip # 6 -- also a cornerstone for master negotiators – “don’t be too competitive. The emphasis in a business golf setting should be on building rapport and trust with your playing partners.” In collaborative negotiations, a win-win philosophy where value is expanded for all by addressing parties' interests, establishing a trusting relationship is imperative if you want your “playing partners” to reveal their essential interests. If they view you as trustworthy, they may let you know what their priorities are – and you can do the same – allowing the business deal to grow in value for both parties.
Even the PGA (Professional Golf Association) highlights the fact that golfing can help you in your business networking, enabling you to learn about your playing partners, on their Get Golf Ready website: Networking is like socializing on the golf course (or anywhere)– “but with the purpose or intent of gaining information and insight about someone or something.”
Offering mulligans to your playing partner may significantly improve your business relationship (and their golf round). In social science, we know that doing a favor for someone triggers a debt of social obligation, where the recipient of the favor feels like they may “owe” the giver something. Even if it is a small favor, it can still work to your advantage. So why not ensure your playing partner can take a do-over now and again in their 18 holes. They will appreciate your offer, and it may pay off for you in a subsequent business deal.
Now, none of the professional golfers at The Masters will take mulligans, but for amateurs like us, it can be a powerful lever at the negotiation table! A few other tips in the Forbes article caught my eye as potentially very helpful - not just on the course, but at the negotiation table as well:
- Be on your best behavior – golf is a very revealing sport, and if you play with potential business partners, rest assured that they will take their impressions of you on the course into the negotiating arena. If you are trustworthy, likeable and hopefully competent on the golf course, that will serve you well once you are sitting at the bargaining table with them.
- Respect the etiquette of the game – on the golf course, your partners will take notice that you respect the game, and them as well, if you follow the rules and play with decorum. Don’t take your own mulligans, unless offered by your playing partner. In the negotiation process, you also want to earn respect. Don't make outrageous offers or claims, avoid tactical maneuvers (i.e., arbitrary deadlines, bluffing, good cop bad cop) designed to trip or trick the other side. Respecting the process and earnestness of the discussion will accelerate your ability to gain trust, allowing you to more easily learn the interests of your business associates.
- Control your anger – emotions running high can undermine any negotiation, so best if you control yours while at the negotiation table, just like on the golf course. You want your partner across the table, and on the links, to see you as someone who is rational, capable, and working with the spirit of win-win.
In my experience, I know that do-overs in business do not happen often, even with the last name of Mulligan. So seize the moment if someone proposes one at the negotiation table, but more importantly, watch for opportunities to offer a mulligan to your negotiation partners. Favors offered early in a developing business relationship can definitely pay off down the road. And the golf course is an ideal way to tap that opportunity!
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.
What do the NFL Super Bowl, Cheerios, and Puppies Have in Common with Negotiating?
By Marianne Eby
I admit to not knowing much about football despite my son's love of the game. To me it looks more like a bunch of athletes who get paid a lot of money to ram into each other until one team trounces the other. Let's face it - I’m a negotiator who believes in win-win more than win-lose. So it’s no surprise that I was paying more attention to the NFL Super Bowl XLVIII advertisements on Sunday than to the game. And what did this super negotiator see? The deal of the century!
And I’m not talking about one of the many deals in the $10B enterprise that is the National Football League (NFL). I'm talking about the now famous Cheerios commercial. Sunday’s NFL Super Bowl XLVIII Cheerios commercial taught in 30 seconds (and paid $4M for the privilege of doing so) what every good negotiator knows - trades come in all breeds.
Here’s how Forbes describes that commercial, a father at the breakfast table with his little girl, Gracie, using the addition of one Cheerios at a time to demonstrate that there is going to be a new family member (and thus one more Cheerio added to the pile):
“The Epiphany: After the baby brother announcement, the subtle pregnant pause. Gracie’s actor qualities rise to impressive levels to tug at your heart at this point. The frown-pause moment is followed by the epiphany, “and a dog”. Translated: ‘If he’s sweet talking me like this, he must want my approval. That must mean I have some bargaining power – (and what do I have to lose, the little guy his coming anyway). I can use this event to broker and barter a deal. If I have to put up with a babbling infant that cuts into my time and resources, I can now use my unprecedented leverage get what I want in return.’ ”
Opportunities to trade come in all sizes and shapes and sometimes out of the blue, so seize them when you can and everybody wins! The little girl seizes the moment and in her own way (by adding a Cheerios to the family pile of course) makes it clear that family tranquility has a price – a puppy she can call her own. Caught off guard, the dad declares “Deal.”
And Cheerios gave a final negotiation lesson before its 30 seconds of air time was up – the camera turns to the pregnant mom, whose priceless facial expression makes it clear that dad forgot to check with his stakeholders before closing the deal.
The NFL is full of high stakes deal-making in the mega-millions, but this deal has lessons for players, owners and viewers alike. Think about what the other side will ask for before you start negotiating, seize opportunities to get what you want, and always know your stakeholders’ interests before you close the deal.
Women Negotiate Every Day — But For Whom?
By Marianne Eby
Women negotiate everyday – for others – for their team, for their company, for their clients, for their kids. But women have a much tougher time negotiating for themselves. Sheryl Sandberg, COO of Facebook and former top executive at Google, does all women a big favor when she acknowledges that even she was about to not negotiate Mark Zuckerberg’s first offer because it was a “generous offer.”
In the March 10, 2013 episode of “60 Minutes,” Sheryl Sandberg talks about her new book “Lean In: Women, Work and the Will to Lead”, her message for women to "lean in" rather than hold back, and her own missteps -- especially this big one -- when she almost didn’t negotiate on her own behalf. (See link here -- go to 5:56, or read the full script of the interview.)
Sandberg’s husband, David Goldberg, CEO of SurveyMonkey and a successful entrepreneur and technology executive in his own right, describes himself as “apoplectic” when Sandberg suggested to him that she would just accept Zuckerberg’s first offer because it was a “generous offer and I really want this job.” And then her brother-in-law jumped in and said “There is no man taking this job who would take the first offer.”
Sheryl Sandberg stepped back. She was spending more time assessing the extent of billionaire Mark Zuckerberg’s generosity than her own worth! Lucky for her, and for all women, Sandberg “leaned in” and negotiated her value.
Why is it so important that you not accept the other party’s first offer, no matter how good it is? Even when it is well beyond what you thought you would get? The answer comes from psychology 101 and its influence on the fundamentals of negotiating.
First, if you accept the other party’s first offer, they won’t feel like they got a good deal. Why? Because they will reflect on it and conclude that clearly they offered you too much or you wouldn’t have accepted it so readily! Think about it -- you ask for $10K for your used car that might fetch anywhere between $9K and $11K, and the interested buyer says YES! You, the seller, are happy, right? NO! The seller reflects on it and realizes that she could have gotten more for that car. But if the buyer discusses other price comparisons and offers $9,300, the seller will feel good to have gotten $9,700. And you want the other party to feel good about the deal, because then they aren’t trying to renege or get back what they lost in other ways.
Second, if the first offer is fair, or wonderful, or even better than you thought it would be, you still shouldn’t accept it. Maybe your assessment of worth was incorrect. Maybe your research wasn’t thorough, and you could get a lot more in the exchange. In our simple car example, maybe your car, like Sheryl Sandberg, isn’t a dime-a-dozen, and is worth more!
Third, the ending so quickly of negotiations curtailed any opportunity to find more value. Each of you may have been willing to address needs and concerns of the other in ways that would have ensured a smooth execution of the agreement. For example, with more discussion about that car you want to buy, you as the buyer might learn that the seller is willing to throw in the bike rack and take payment in 2 installments. The seller might find out that the buyer has 2 tickets to a great concert tonight that she can’t attend but that the seller would like to. With this discussion, you can both find trades that are hidden value. But when you accept a first offer, there is no more need for discussion, thus eliminating the opportunity to find value.
Fourth, first offers typically anchor us. First offers play a mind game with us by artificially setting the bar from which concessions can begin, thus weighing us down, like an anchor, to accept somebody else’s assessment of value. Never accept a first offer until you have gotten your own first offer on the table. Only make concessions from your first offer, not theirs, and only in exchange for value. (Read more on Who Opens First?)
Fifth, the other party expected to negotiate, and is disappointed. How would Mark Zuckerberg have felt if Sandberg had accepted his first offer? If the other party is a good negotiator, they will feel that an opportunity has been missed to create value. And if they are hiring you to negotiate for the company, but you have just demonstrated that you don’t negotiate for yourself (like Sheryl Sandberg almost did), you have lost respect and maybe more. In fact, if discussions end too quickly because you accepted the first offer, the other party may wonder if they failed to uncover a problem. Did you have something to hide?
At Watershed, we teach business women and men everyday how to negotiate in a way that is more likely to create value, lead to a successful negotiation, and a sustainable agreement. We speak to groups of seasoned professional women about using those same best practices on their own behalf. Women are strong negotiators for others. Listen to Sheryl Sandberg when she says women need to “lean in” and negotiate for themselves as well.
Politicians' Negotiations -- What Can We Learn?
By Thomas Wood
Whatever the nature of our negotiations (commercial, legal, regulatory, internal, etc) we can learn from the ups and downs of some of the most prominent public negotiations. With the Euro in serious trouble and economies worldwide shaken, government negotiations over economic strategies are around the clock and very public. The US negotiations over federal budgets, taxes and spending are a prime example.
With several US significant tax and spending provisions set to kick in (or lapse) in December and January, official Washington will be furiously bargaining at year’s end. And the stakes couldn’t be higher: the fate of the US national economy, the credit rating of the U.S. government, and the confidence of the American people in their elected representatives’ ability to tackle big problems.
In last summer’s negotiations, President Obama and the Congress' House Speaker John Boehner came close to striking a “grand bargain” on long-term debt reduction. It combined restrictions on the growth of entitlement programs (which are trades dear to the Democrat party) with increased taxes on the wealthy (which is anathema to the Republican party). But at the last minute the deal fell apart. Examining elements of this failed negotiation through the prism of Best Negotiating Practices may well provide insight into what could happen at the end of this year, as well as provide guidance for our daily bargaining.
The 2011 budget talks were prompted by a deadline—namely, the need to raise the US government’s debt ceiling so it could borrow more money to pay its bills. Congressional Republicans used this deadline to try to force concessions: they refused to increase the government’s borrowing authority without obtaining agreement by the Administration to substantial budget cuts. While absolute deadlines can be helpful in focusing energy and avoiding unnecessary delay, skilled negotiators can also use arbitrary deadlines as tactic to gain advantage.
The Republicans took a position opposed to any tax increases. The President’s position was that he would not accept the level of cuts in entitlement programs sought by the Republicans without an increase in taxes on the wealthy. For both sides, the interest was to achieve debt reduction while maintaining the support of each party’s political base. Negotiators sought a solution—as good negotiators should—that served the two parties’ interests, even if it seemed to violate their positions (raising taxes by closing loopholes rather than raising rates, for example).
When the deal collapsed, Democrats charged that Boehner had lacked sufficient authority to bargain, and had been overruled by his Republican colleagues in the House. Negotiators should always have sufficient authority to strike a deal, but not absolute authority: carrying limited authority allows them to postpone or deflect unwelcome proposals. In the end, both sides decided that no deal was better than what they viewed as a bad one. They could both revert to the same, ready-made Best Alternative to a Negotiated Agreement (BATNA): elections, in which each side might achieve at the polling place what it couldn’t at the bargaining table.
While political negotiators in each country and all governments have special advantages and restrictions, everyone involved in negotiation can benefit from studying their successes and failures. It will be interesting to see if the US federal budget negotiators busy later this year are among those who have learned anything.
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?
Negotiating Covid Relief – Politics in Play
By Leslie Mulligan
Businesses had to sharpen their negotiation skills as markets and supply chains endured enormous pressure in 2020. Now it’s the U.S. president’s turn to demonstrate his negotiation expertise in passing the $1.9 Trillion Covid-19 Relief Bill. Is he willing to collaborate with Congress, or will he take on a competitive approach? And how will the Republicans respond?
President Biden has made it his mission to tackle the devastating pandemic – it is the very first priority listed on the White House website. Specifically, he has vowed to get the massive $1.9 trillion coronavirus relief package passed in U.S. Congress and ensure Covid vaccines are distributed as rapidly as possible. Time is of the essence as the economy remains weak; many still face desperate times. Yet President Biden has also pledged a bipartisan approach to governance and wants to unite the country – so how do you negotiate effectively with Congress in this still polarized landscape to deliver on these promises; or do you?
Will a collaborative (win-win, interest-based) or even compromise approach produce bipartisan approval, or will the Administration have to take a competitive approach (win-lose) to get results.
Emerging from the last presidential election, the USA is seriously divided, no doubt about it. Yet President Biden is on a quest for unity, including in his Congressional relationships. As a long-serving alumnus of the Senate, he underscored the need for bipartisanship: “I think I can work with Republican leadership in the House and Senate. I think we can get some things done.” But will Republicans reciprocate – will they work with the president and their Democratic colleagues? We don’t know what is happening behind the scenes, but the president has only publicly met with 10 Republican senators in early February to discuss the Covid relief bill. And Republicans have felt rebuffed by their
Congressional colleagues: “…they were frustrated that their views weren’t being considered as Democrats pushed the legislation forward without GOP support”. This may foreshadow a competitive stance.
And yet, President Biden has the support of the American public writ large – even Republicans: “Half of all Republicans believe that President Joe Biden's $1.9 trillion COVID-19 relief package should be passed because of the proposed round of $1,400 stimulus checks, according to a new poll.” 73% of all Americans support this bill, according to a Navigator Research poll last week. Bipartisanship can be achieved in the public domain – that has certainly been realized in the run-up to the passage of this bill. But will any congressional Republicans come on-board? Jen Psaki, the White House Press Secretary, put this question succinctly when asked about Republican support: “Obviously, Republicans in Congress will have to make their own choice about whether they support the final package. But the vast majority of the public supports it, including the vast majority of most members’ constituents. So it’s really a question for them.”
But will Democrats entice them to support a negotiated bill, with a willingness to compromise by giving in on some of what’s been proposed, if not collaborate by finding new solutions that satisfy both parties? Or simply use a heavy-handed competitive approach to get what they want. The overriding negotiation strategy used here may set the tone for the next 4 years.
Time is almost always a factor in negotiations. There is an adage in negotiating – “deadlines force concessions”. And President Biden feels the pressure of a looming deadline. On March 14th, over five million people will lose their weekly $300 federal unemployment benefit. The PPP program runs out for small businesses on March 30th, and the airline industry may take a big hit as $15B in federal funds that subsidize payrolls also expires. But will Congress feel the same pressure of this deadline? Assuredly the Democrats largely will. But Republicans may resist the pressure, advocating that previous stimulus bills have set the stage for recovery - the trajectory is positive. Could Republicans use time as leverage to get more of what they want? All politicians have a political calculus even while making policy decisions – how will these deadlines impact their negotiations across the aisle and with President Biden?
Policy vs Politics
Great negotiators know that their positions are driven not just by what they can conceivably achieve, but by a greater business or overriding imperative. The same is true in negotiations over legislation. Politics are the quintessential overriding imperative that drives what each legislator is willing to do.
“Negotiation in Congress is never solely about policy; politics and policy are always intertwined”, per the Task Force Report published in December 2013 by the American Political Science Association (APSA), Negotiating Agreement in Politics, which sheds light on the challenges of American political negotiations. There are valuable lessons in that report, with pragmatic advice for all parties at the Congressional negotiation table. One truism comes from former Rep. Barney Frank (D-MA): “Nobody pushes for unpopular policies.” And it appears that the Covid relief bill is popular! But elected officials manage their politics to keep their constituents (and donors) happy - they must justify their policy votes. Those up for reelection in 2022 will weigh their policy decisions now against a potentially different political landscape one year hence. In fact, news reports indicate that Republicans believe they are better served to deny President Biden a “bipartisan win” – and so are working to keep their own party cohesive, and plan their own PR push to paint this Bill as “bloated”, disparate and not well-aimed.
When defining any negotiating strategy, it is paramount to assess who your stakeholders and what their Interests are, and how they impact your plan. When it comes to legislation, there is no shortage of competing stakeholder Interests to address.
President Biden is banking on the American public as the most important stakeholder in this landscape. Most of them enthusiastically support this bill, and the timing is such that now is the opportunity to strike. Big business also supports quick passage of this Bill. Just this week, 150 of the country’s most powerful executives penned a letter to President Biden urging action: “Congress should act swiftly and on a bipartisan basis to authorize a stimulus and relief package along the lines of the Biden-Harris administration’s proposed American Rescue Plan."
Republicans may take the longer view, and assume that their stakeholders, their constituents, will accept resistance to this bill. After all, it may get passed even without Republican support. Then the subsequent policies will help everyone, without Republicans having to go “on record” as supporting a democratic presidential priority. “In short, explicitly partisan political considerations condition the opportunities for deal-making on policy issues,” suggests the learned authors of the ASPA report mentioned earlier.
No seasoned negotiator enters negotiations without a back-up plan, known as a Best Alternative to a Negotiated Agreement or BATNA. That means both sides of the political aisle have BATNAs in play that they are willing and able to execute.
Can the Covid relief bill pass without Republican support? Does President Biden have an alternative to a truly bipartisan bill, a BATNA in the lexicon of negotiating? Absolutely – after all, the Budget Reconciliation tool is available to him, now that Congress passed the Senate’s budget earlier in February. As long as the Democratic party stays cohesive, this enables passage of the Covid relief bill with only Democratic support. If Democrats prove each item in their reconciliation bill has a direct budgetary impact, this tool can be used to prevent Republicans in the Senate from filibustering and blocking the floor vote. So inasmuch as President Biden would like Republican support, it is not necessary for passage of this bill. His BATNA is strong, and he is willing to execute it, to ensure the needs of the American public are being met. Republicans too have their BATNA – they can decline to support this Bill, counting on their supporters to look positively on that decision down the road. This is a risk, but will they be willing to take it?
Negotiators come to the table prepared to trade. And President Biden has indicated some willingness to trade on the minimum wage – its inclusion in the Bill at all, a phased-in timeline to protect small businesses, and maybe even the new wage rate.
There are two factors that complicate this element of the bill. First, Senator Joe Manchin (D-WVA) has said he does NOT advocate for the full $15/hour – although he would support a reduced rate of $11/hour. Second, couple that with the fact that the Senate parliamentarian has ruled that as written, the minimum wage hike does not meet the threshold of having a “direct budgetary impact” – thus eliminating it as is from inclusion in the Budget Reconciliation Bill. This bargaining chip may come off the table entirely when the Bill reaches the Senate, or it may become a viable bargaining chip. The president has said he is open to negotiating the minimum wage. But cohesion among the Democratic senators will still be crucial on other elements of the bill, and keeping Senator Manchin in the fold may be a challenge that President Biden faces beyond just this particular legislation.
This bill will get passed, but probably with Democrats taking on a competitive approach ultimately and driving passage without any compromise. President Biden is willing to execute his BATNA and believes that his primary Stakeholder – the American public – needs the relief that it will provide, and will reward his Administration for it. Bipartisanship will have to wait, as the president feels the pressure of the March deadline. The Republican political calculus indicates that they too can take a competitive approach and won’t be penalized by their supporters. But this first interaction between the president and Congress may not bode well for collaboration between the two parties in the future. Time will tell, so stay tuned.