Your Negotiation Today

You've probably noticed that the last two years have been difficult for many individuals and many organizations. As the recession winds down, new opportunities will emerge, both for you personally and for your organization. Your negotiating skills are more important than ever.


In 2010 make things happen versus permitting things to happen to you!


Negotiating is a fundamental skill all business professionals must refine to survive. Regardless of your position within your organization, you will be negotiating today, tomorrow and throughout 2010. First and foremost, make sure you protect your own interests and the interests of your organization. Strive to create more innovative, Both-Win outcomes in your negotiations. The value you can create with your own unique knowledge, resources, perceptions and approaches to your negotiations is something to be treasured. You can make a real impact in your organization.

Every day you negotiate something.

It does not matter if you are an engineer, a salesperson, a supply management or procurement professional, a manufacturing specialist, construction manger, contract manager, marketing manager, project manager, or any of a multitude of other executive and top level positions (yes even CEOs). Every day (every hour) you negotiate something (schedules, resources, designs, prices, costs, specifications, work hours, legal terms and conditions, land values, etc.).

I want to personally thank all of you that have attended the Karrass Effective Negotiating Seminar and wish you much success in 2010. You have the skills to insure your organization's success.

If there are business associates you work with, or negotiate with, that have not yet experienced the Karrass training, please let them know about Karrass. The more everyone knows about negotiation, the better the probability for success.We know after 40 years of training business professionals, with proper skills (which can be learned), all negotiators can produce better outcomes--sometimes exceptional outcomes.


Chester L. Karrass

Is it non-negotiable?

We often say that everything is negotiable, but sometimes negotiators come to the table with a list of non-negotiable demands. How do you deal with issues that are not up for negotiation?

Non-negotiable demands tend to be extreme, and defy compromise. Sometimes, they are centered on ethical, religious, professional or economic values that are deeply held. By making non-negotiable demands, some negotiators demonstrate their convictions.

In business negotiations, non-negotiable items tend to be issues such as cost structures, trade secrets and management decisions.

Some negotiators use non-negotiable demands for the express purpose of creating a deadlock. Indeed, they do not want to reach an agreement, and they use unrealistic demands to create an environment where compromise cannot be reached.

However, non-negotiable demands are a part of the bargaining process. They lower the other party’s expectation and make him or her more willing to compromise on other issues to avoid having a confrontation of deep-seated values.

There are several countermeasures you can use when faced with non-negotiable demands:

1) Conduct off-record talks
2) Dial down hostility
3) Ask for an explanation of why these demands are non-negotiable
4) Discuss the issues that ARE negotiable
5) Avoid panic and anger

Have you gone into a negotiation with non-negotiable demands? Did you end up compromising?

Staying on higher ground.

What happens if a business negotiation degenerates into a squabble? There is no agreement and no resolution and everybody goes home unhappy. Perhaps the best way to avoid this scenario is to take control from the beginning of the negotiation.

How do you establish a “higher ground?” You come to the bargaining table with back-up. According to Dr. Chester L. Karrass, there are five types of backup that can help you stay on higher ground:

1) Guiding Principles: Agreeing on principles makes it easier to agree on details, so establish the principles at the beginning of the negotiations. For example, a guiding principle is that the seller is entitled to a fair profit.

2) Guiding History (Precedents): It makes sense to know what has happened historically between the two parties: what prices were paid, quantities negotiated, any problems or issues. You can’t argue with history!

3) Guiding Logic: Using logic and reasoning makes any negotiation more civilized and thoughtful. Logic is persuasive.

4) Guiding Standards: Standards are really guidelines. What are the standard terms and conditions, the standard prices? By sticking with standards, your viewpoint may prevail.

5) Guiding Rules, Regulations and Laws: Before you go to the negotiation, be sure to research what company policies or government regulations support your position. Rules and regulations can help increase your legitimacy

Basically, it is up to you to gather together the information (backup) that you need to set the tone for the negotiation. By using this backup and communicating it clearly to the other side, you are lining up resources to favor your position. It is hard to argue with principles, history, logic, standards and rules!

What type of backup do you use most often?

Playing good cop/bad cop

If you want to see a good cop/bad cop scenario played out, look no further than your TV, especially on the long-running crime drama, Law & Order. In the earlier episodes, Lenny and his partner (who changed about every two seasons) would find a suspect and take him in for questioning. One of the cops would play it tough, scaring the suspect or making him angry, and the other cop would play it easy, being more friendly and coaxing the information out of the suspect in a “this helps all of us” way.

Why is this scenario so effective? Simply because the bad cop makes you want to collaborate with the good cop. The good cop will seem reasonable and pleasant. And we all want to work with the more friendly types.

The good cop/bad cop scenario can be used in negotiations exactly the same way the police use it. One person on the team can be the designated bad cop. He or she will play it tough, be aggressive and have the biggest demands. When the time is right, the good cop takes over. The good cop will take the tone to a more cooperative level, and decrease the demands. The other side will be much happier to deal with the good cop, thinking his or her demands are much easier to deal with.

What if you are on the receiving end of a good cop/bad cop scenario? Can you recognize it and deal with it appropriately?

Chester Karrass recommends the following counter moves:

1) Let the bad cop talk until the other side gets fed up
2) Walk away
3) Use your own bad cop
4) Call a caucus
5) Learn to recognize that both the good cop and the bad cop are on the same side and want the same things.

Have you played good cop/bad cop successfully? Were you able to up your demands because of it?

Is it urgent?

When we scan business news stories about negotiations, many times we see negotiations described as “last minute.” For instance, here is a story about the last minute negotiations on Michigan’s state budget, where lawmakers scrambled to create a budget after their midnight deadline: http://www.detnews.com/article/20091001/POLITICS02/910010435/-1/rss

There is little doubt that when one or both parties at the negotiating table feel a sense of urgency, there will be a serious push to resolve the issues at hand. Sometimes, the only thing that leads to a resolution is the feeling that it is urgent to do so.

Urgency also plays a role in diplomatic negotiations. This past week we’ve seen a flurry of diplomatic activity regarding Iran’s alleged nuclear program. As a revelation was made that Iran had a second nuclear enrichment facility, American and European negotiators went in to high-gear, convening a high level meeting with Iranian representatives in Geneva.

When negotiations get down to the wire, resolution becomes urgent. Often, there is a deadline that must be met. The truth is deadlines force action because urgency is a great motivator.

As Chester L. Karrass points out in Give and Take:

“Deadlines pressure people into making an either-or choice. If the choose to accept the deadline, they get the deal over with. If they don’t, the consequences are unpredictable.”

For some people, to reach a deadline and have no resolution is failure. Most people, especially negotiators, want to avoid failure. This desire to avoid failure also leads to a sense of urgency.

Urgency will certainly lead to increased negotiation activity, and usually, to resolution. The easiest way to create a sense of urgency is to impose deadlines that must be met.

How do you deal with urgency in negotiations? Do you use urgency to your advantage?

Argument or Negotiation?

When is a conversation an argument and when is it a negotiation? Although both arguments and negotiations try to resolve conflicts, there are differences.

Merriam-Webster defines an argument as “a): reason given in proof or rebuttal and b): discourse intended to persuade.”

Generally, in an argument, one side is trying to persuade the other that there is one correct way to view a situation. That side will work hard to persuade the other side of the validity of the argument. This is why many times arguments escalate.

As this article about persuasion from Suite 101 http://businessmanagement.suite101.com/article.cfm/resolving_conflict#ixzz0SblNpnf7
points out:

“When persuasion doesn’t work most people try again. They present their argument in a different fashion, hoping that their message will get through to the other side. But the other side has heard, considered, and firmly rejected the argument. Each repetition will only crank up the volume on an already unmistakable message: they disagree and repeated arguments will only aggravate them.”

Arguments tend to polarize and harden positions, sometimes resulting in grievances for both sides. Arguments can get personal and heated. Arguments tend to be zero-sum: only one side can be right. Negotiations, on the other hand, should be win-win.

Negotiations work to bridge positions, find the points of agreement so that a settlement can be reached. Negotiations find common ground, or areas where compromise can be made to achieve goals.

Negotiations involve some sort of bargaining whereas arguments require a complete turnaround in point of view.

In the end, if your goal is to achieve a solution to a problem, you don’t argue, you negotiate.

Predictable Behavior

Wouldn’t it be nice if you could predict exactly what the other side was going to do during your next business negotiation? Well, you probably can, and no, you don’t need a crystal ball. All you need is an understanding of what the other side has done before to gain insight into the predictability of people.

Most people are predictable. Perhaps you don’t act the same in every situation but you most likely follow a set pattern. You also tend to react predictably. For instance, some people will always use humor to defuse a stressful situation.

In his book The Negotiating Game, Dr.Chester L. Karrass tell us the following about predicting behavior:

“The best way to predict behavior is to look at a person’s history. A careful study of the other person’s habits, temperament, opinions and values will reveal useful patterns. The personality traits of a person tend to guide his or her behavior in accordance with the individual’s major intentions.”

Knowing the other person will obviously help you predict his or her behavior. If you have negotiated with him or her before, you have a pretty good idea of how he or she will react. But what if you are negotiating with someone you don’t know and you haven’t had a chance to do more research on? The most important rule about predicting behavior is to know that people will always act to protect their self-interest and their self-image.

Every negotiator would do well to become a student of human behavior. Being able to predict reactions and behavior will certainly give you an edge at negotiation time. You may even be able to adjust your behavior to elicit the type of reaction you are looking for.

Have you been able to predict the other side’s behavior? Has that helped you when you are negotiating?

Smokescreens - Negotiation

Where there’s smoke....

Have you ever been in the middle of a business negotiation and suddenly the conversation shifts? Before you know you it you are discussing the latest vacation spot in the Caribbean and you are nowhere near resolving the pressing issue of delivery of your order. What happened? The other party just threw up a smokescreen.

Smokescreens are the other person's method for delaying a decision, changing the subject or clouding an issue. Perhaps it’s a ploy to get more time or to save face.

Last week we talked about icebergs and how they can derail a negotiation if you aren’t aware of what they are. Don’t get derailed by smoke either. Learn to recognize the smokescreen. To help you out, here is a list of typical smokescreens, taken from Dr. Chester L. Karrass’ book Give and Take.

Detailed explorations of unimportant processes or procedures.
Family talk (or talk about other personal/home/vacation topics).
Sudden bathroom breaks.
Sudden hunger.
Changing specifications.
Surprise alternatives.
Out loud reading of complicated or long or irrelevant regulations.
Permitting telephone interruptions.
Encouraging irrelevant cross talk.
Providing answers to questions not on the table.

Do you recognize these? Have you been smoked before? How have you cleared the air?

Non-Negotiable Positions

If you are involved in negotiations you will, sooner or later, encounter a “non-negotiable” position. This is an inevitable part of negotiating. You might have to lay out your non-negotiable position to someone, or you could receive a non-negotiable position from someone else.

When someone encounters a non-negotiable stand, the common reaction is to get angry and lash back.

Are non-negotiable positions negotiable? Do they serve a purpose at the bargaining table? The answer to both questions is yes.

Non-negotiable positions are appropriate under some circumstances. They serve to lower the expectations of the other party. They can also help make the other party more willing to compromise rather than risk a serious confrontation. However, you should not make something non-negotiable unless you have considered the cost of deadlock; the degree of mutual dependence between the parties; potential backlash; face-saving needs; and your ability to support and defend your position.

Sometimes non-negotiable positions are so extreme that compromise appears virtually impossible. At stake may be deep-rooted values or policies that are of an ethical, religious, professional, or economic nature. The introduction of such a position may create hostility. A non-negotiable position is dangerous for the party making it. It can so inflame the other party that deadlock becomes inevitable on all the other issues being negotiated.

Is there room for taking a non-negotiable position in your negotiations? Of course there is. It happens every day.

“We cannot reveal our costs.”
“We will not show you your competitor’s proposal.”
“We will not give you our design secrets.”
“We cannot reduce the price because government regulations prohibit us from doing so.”
“We will not permit your people to interfere with our management decisions.”

These positions may or may not be non-negotiable, but they sure sound like it to the inexperienced negotiator. You need to test positions like these.

The following countermeasures will help you keep emotions under control even when deeply held values are threatened:

1. Move to “off-the-record” discussions to diffuse the hostility and gain a better understanding of the other party’s position.
2. Explain why the demands are non-negotiable. Sometimes the best concession you can give is simply a good explanation.
3. Be prepared to discuss the issues that are negotiable. Agreement here may soften the non-negotiable positions.
4. Don’t panic—remember all of the negotiating tools you have at your disposal from the Karrass seminar.
5. Don’t be afraid to use your negotiating strength—with discretion.

Approach something that appears to be non-negotiable with a cool head, complete information, and a through understanding of the organizational and personal issues surrounding the position. When challenging a non-negotiable position, provide sufficient time for acceptance of your arguments. This will help soften the non-negotiable position. Karrass research indicates that most non-negotiable positions turn out to be somewhat negotiable.

Use A Bogey

In a crunch? Use a bogey

We recently discussed the “Krunch” tactic, where we negotiate by asking the seller to “do better” on price. The Bogey tactic is in some ways, a variation of the “Krunch.” It goes like this: You are negotiating to buy bathroom tiles, and the seller offers a truckload at $5,000. You say you have only $4,200, which is what your budget allowed and can write a check in that amount right now. The key is that, you, the buyer must make the offer (and the constraints) believable. You are appealing to the seller’s desire to work with you, to help you meet your budget.

What the bogey tactic does is start the search for a better deal. The bogey gives sellers a chance of showing what they know about their products, and what is included beyond the price offered. It may result in a better price or perhaps just a better understanding of what you are getting.

Dr. Chester Karrass says that the bogey should always be considered when purchasing complex products or services. The seller is motivated to help the buyer to resolve the problem, so the negotiation becomes cooperative instead of competitive.

Karrass advises salespeople to be prepared for a buyer’s bogey:

1) Have alternate packages available before entering the negotiation.
2) Make sure you know who makes the final decision and who is actually paying the bills.
3) Stand firm.

Bogeys can be used by both sides of a negotiation.

Salespeople use what is called a seller’s bogey, where they say: “I’d love to close this sale, but we need to resolve a few issues first,” and then proceed to add some terms and conditions such as full payment upfront, minimum order amount, delivery time, etc. In the end, a seller’s bogey, may help increase the size of an order, close a sale, eliminate competition or mine information about what the buyer really wants.

Have you successfully used a bogey tactic?

Familiar with the Krunch Negotiating tactic?

You’ve got to do better than that!

It is perhaps one of the oldest tactics in the negotiating world. Most everybody uses it at one time or another, from our everyday interaction at a store to the most high-level negotiation. At Karrass we call it the “krunch” tactic, and we think it works well, although we advise buyers not to overuse this technique.

How the “krunch” tactic works is simple: you put the burden on the other party to change the price in order to get your business. We state: you’ve got to do better than that (with the subtext “if you want to do business with me”).

There are several reasons this tactic works on sellers, and most of them are psychological. The salesperson probably thinks one or more of the following:

The buyer must have a lower price
The buyer wants to do business with me
The buyer must know something I don’t
The buyer is giving me another chance

There is also a systemic reason the “krunch” works well in negotiations: companies generally build in some wiggle room on their pricing. In fact, when buyers overuse the tactic, sellers will start building a ten percent addition to the price, which they can later remove in order to get the business.

Salespeople do not have to fall for the “krunch” negotiation tactic. They should first ask what the problem is: are other sellers offering the same product and the same service at a better price? Salespeople (and buyers) should recognize that there is more to price than just dollars. A price involves service, quality, delivery, reliability and other “soft” factors.

As Dr. Chester Karrass points out in his book Give and Take: “Handled right, it is possible to make an opportunity out of a krunch. A salesperson should not go into a negotiation without asking himself or herself, ‘What will I do if the buyer says ‘You’ve got to better than that?’’.”

Have you used the “krunch” tactic successfully? Have you refused the “krunch” tactic successfully? Let us know your experiences.

Will negotiations repair the U.S.--Russia relationship?

President Barack Obama has traveled to Russia to hold a summit with Russian President Dmitry Medvedev. The two had met in April in London, and had decided to continue negotiations on a replacement for START 1, a nuclear arms treaty drawn in 1991 and which expires on December 5 of this year. They will also discuss the war in Afghanistan, Iran, and terrorism.

The Associated Press is reporting that: “More broadly, the U.S. wants to use the summit to overhaul the U.S.-Russian relationship.” (Read full AP article here: http://www.google.com/hostednews/ap/article/ALeqM5hNIxj5X1YKnv5oMTXWK_qnkplCMAD998KG9G0 )

The United States and Russia are negotiating new arms reductions. A point of contention, however, is Russian opposition to the planned U.S. missile defense shield in Eastern Europe. The AP reports that the Russians have already allowed one concession: “...they will agree to allow the United States to use their territory and air space to move munitions and arms to U.S. and NATO forces fighting Taliban Islamic extremists in Afghanistan.”

CNN is reporting that Russian and U.S. nuclear negotiators will issue a joint statement on the framework for a new arms control agreement that would replace the START I agreement. (http://www.cnn.com/2009/POLITICS/07/06/obama.russia/index.html). The statement is not legally binding, but instructs that negotiations continue to create a formal agreement.

Beside the disagreement over the missile defense shield, the U.S. has another issue to contend with: the power issue. Although Medvedev is the president of Russia, Vladimir Putin is the prime minister and appears to wield significant power. Obama will also meet with Putin.

It remains to be seen if these negotiations help reset the U.S. relationship with Russia, something the Obama administration is seeking to accomplish.

Do You Need a Mediation?

Webster’s defines mediation as “intervention between conflicting parties to promote reconciliation, settlement or compromise.”

The U.S. Equal Employment Opportunity Commission (EEOC) defines mediation as "a fair and efficient process to help you resolve your ...disputes and reach an agreement. A neutral mediator assists you in reaching a voluntary, negotiated agreement." The emphasis, which the EEOC includes in their definition, is on fairness and efficiency. If you are interested in labor meditations, please read more about the EEOC and negotiation here.


By understanding those definitions, it seems that every business and diplomatic negotiation could use mediation. After all, what is negotiation if not the act of reaching an agreement?

However, not every negotiation requires a mediator. Many times, the parties are able to reach an agreement on their own. On the other hand, certain situations such as deadlock or when communications have been compromised by heightened emotion, benefit greatly from mediation and even require mediation to be able to conclude negotiations.

A mediator helps to diffuse conflict and to reach accord. He or she acts as a communications go-between.

Dr. Chester Karrass tell us that mediators bring the following to a negotiation:

• They suggest realistic expectations
• They listen to both sides without bias
• They help stimulate alternative thinking or different approaches to a resolution
• The may suggest a compromise that neither party considered
• They may give both parties an “out” or a way to save face

Choosing a mediator is probably just as hard as the situation that brought you to mediation. A good mediator must be impartial and must command respect. A good mediator also has the social skills to manage conflict, knowledge of business practices, and experience. Be wary of any mediators with conflicts of interest or who are overly biased.

Patience -- A Negotiation Virture

Earlier this week, we discussed keeping your cool. Getting emotional can derail a negotiation, and so can being impatient. In fact, Dr. Chester Karrass advocates using patience as a negotiation tactic.

Dr. Karrass believes patience is one of the MOST powerful negotiation tactics. Patience, in conjunction with persistence and determination, can help you win at a negotiation table.

During a negotiation, patience means being willing and able to bear the situation, and not being rushed into a decision because the other party is looking for a resolution. Patience is a long-term tactic because the expectation is that you will gain more by waiting than by seeking a quick end to the negotiation.

The reason patience is so powerful is that it gives you the gift of time.

What can additional time do for you?

• Help you to really understand the issues
• Allow you to explore the other side’s expectations
• Discover the risks
• Test your opponent’s determination
• Find new alternatives

Time also allows more information to be shared, and with this knowledge, you are in a better position to negotiate an outcome that may be more beneficial to both sides.

Patience is also a powerful tactic because it functions as a testament to your resolve. When the other party thinks you are resolute, you may obtain more concessions.

Perhaps Saint Augustine put it best when he said “patience is the companion of wisdom.”

Have you had a negotiation succeed because of your willingness to be patient? Please share your stories with us in the comments.

Negotiations in the Spotlight: NFL vs. NFLPA

Soon, the National Football League (NFL) will be entering negotiations with the NFL Players Association (NFLPA). This will be a high-stakes negotiation, as football is the most popular and most profitable sport in the United States, making about $8 billion each year.

This will be the first negotiation between new NFLPA Executive Director DeMaurice Smith and NFL Commissioner Roger Goodell. Read an interview with Smith in the Seattle Times here:

http://blog.seattletimes.nwsource.com/seahawks/2009/06/08/the_business_en.html

Several items are on the table:

• Collective bargaining agreement expires in 2009 and negotiations on extending the agreement began on June 1.

• Players are seeking a larger portion of the league’s revenue streams.

• Players’ salary cap is due to be removed in 2010.

• NFLPA wants access to NFL financial accounting. Read full story on ESPN.com:

http://sports.espn.go.com/nfl/news/story?id=4181186

• Expanding the playing season (more games translates to more revenue).

The sour economy is playing a big role in this negotiation. Sponsorships have slowed and ticket sales are down. Players want to make more but team owners are claiming they are getting less revenue.

In a June 9 Forbes Magazine article, Tom Van Riper reports that these negotiations could escalate to a strike or lockout because each side is looking to establish its power. Read full article here:

http://www.forbes.com/2009/06/09/nfl-players-union-business-sports-football.html

In the article, Riper writes: “Goodell's biggest weapon for averting a strike: Convincing the players that it is the worst possible time for a stoppage given the recession. The last thing anyone wants is to antagonize an already stressed-out fan base by haggling over too many details.”

It seems that the recession could work in the NFL’s favor. It will be interesting to watch these negotiations unfold, and see how they affect other sports negotiations.

North Korea Negotiations

What if diplomatic negotiations don’t work?

Over the weekend, North Korea engaged in a nuclear test that brought both concern and swift condemnation from the international community. President Obama vowed to “stand up to this behavior,” which many believe proves that North Korea is on the brink of becoming a nuclear power.

Has the United States reached a point with the North Korean government in which diplomatic negotiations are no longer feasible? Bloomberg News reports that: “In the wake of the new tests, some argue that the U.S. and its allies must go beyond diplomacy to influence the North Koreans.” Some are calling for stronger international pressure. Others are arguing in favor of pressuring governments and businesses that are engaged with North Korea. Read the full article here:

http://www.bloomberg.com/apps/news?pid=20601087&sid=ad2G26D3X61s&refer=home

Although we can’t speculate on what will happen with this delicate political and diplomatic situation, we wonder whether you can or should negotiate with a party who does not seem to want to negotiate with you. Clearly, if a party refuses to come to the table, a negotiation is stalled before it even began.

However, is it perhaps not that the North Koreans don’t want to negotiate, but rather that there is such a wide cultural rift that both North Korean and United States negotiators are simply not understanding each other? Or maybe the North Koreans subscribe to the idea of winning through intimidation?

Dr. Chester Karrass is not convinced that intimidation is an effective negotiation tactic, but that does not stop an opponent from engaging in these types of threatening behaviors. Dr. Karrass, in his book In Business As In Life---You Don’t Get What You Deserve, You Get What You Negotiate, identifies eight types of intimidation tactics:

1) Legal intimidation
2) Intimidation by experts
3) Intimidation by raising the stakes
4) Threats
5) Status intimidators
6) Intimidation by taking hostages
7) Physical and environmental intimidators
8) Emotional, nuisance and embarrassment intimidators

It could be construed that by conducting this nuclear test, North Korea is attempting to raise the stakes and perhaps threaten the international community. Dr. Karrass believes that there are ways to deal with intimidation tactics, namely by offsetting each tactic with actions of your own.

In this case, the stakes are so high that the United States must find a way to engage with North Korea. What would be your advice to U.S. negotiators?

Roxana Saberi - Concession or Justice?

You have probably heard of the American journalist Roxana Saberi, who was imprisoned in January by Iran on charges of spying. Saberi protested her innocence, and even embarked on a hunger strike. She was released this week.

Saberi became a touch-point in diplomatic negotiations between the United States and Iran. The New York Times reports that: “The Iranian government, some analysts said, sought to use the arrest of a journalist to gain leverage in talks with the United States over its nuclear program and other matters.” Read the full article here: http://www.nytimes.com/2009/05/12/world/middleeast/12iran.html

There are several theories about why Saberi was released.

On Foreign Policy’s blog Shadow Government (http://shadow.foreignpolicy.com/posts/2009/05/12/how_to_understand_the_case_of_roxana_saberi), the author Michael Singh theorizes that Saberi’s release was a negotiation tactic by the Iranians, in order to appear as if they have made a concession.

This is interesting because it goes to the role of perception in negotiations, especially in diplomatic negotiations. If we think the other party is making a fair concession, are we also likely to make a concession? In this case, what concession is Iran looking for from the United States? Is this merely a power play?

Diplomatic negotiations with an authoritarian regime like Iran’s tend to be largely based on assumptions. Dr. Chester Karrass says in his book Give and Take: The Complete Guide to Negotiating Strategies and Tactics:

“The reality of negotiation is that we must and should make assumptions about our opponents. We must assess as best we can what they can or will do, what risks they are willing to take, and what decision criteria are most important...The important thing to remember is that your assumptions are just that. They are no better than poorly educated guesses, at best.”

In this case, the United States faces hurdles in verifying assumptions, because we depend on the Iranians to give us information and access. We may never know what the Iranians intended with Saberi’s arrest or release.

Is Saberi being used as a pawn in US-Iran negotiations? Please share your thoughts in the comments.

A Game of Chicken?

Turning a negotiation into a game of chicken?

Robert Gibbs, the White House press secretary, said today about the Chrysler negotiations that Chrysler’s creditors were playing a game of chicken with the government for a better deal.

As you have no doubt heard, Chrysler’s negotiations with its main bank creditors (JPMorgan Chase, Citigroup, Morgan Stanley and Goldman Sachs) and the US government broke down at the last minute, and no deal was struck before the April 30th deadline.

Chrysler is now expected to seek Chapter 11 bankruptcy protection. However, Fiat will still form an alliance with the US automaker, giving Fiat a majority stake.

Was the government-imposed deadline to blame? Did the creditors believe that the government was so anxious for a deal to be struck that they engaged in a game of chicken, seeing who would be the first to concede?

You are playing a game of chicken when you are given a chance to take the "final" offer or risk the consequences. In Dr. Karrass’ view, negotiations should not become a game of chicken because you should be able to keep talking.

In this case, the problem was there really was no more time to keep talking. With a firm deadline in place, Chrysler was against the wall. The creditors knew that Chrysler was in a bad position and yet they made a final offer that was not acceptable either to the government or to Chrysler. Given the situation, there was no time to continue talking to find a better deal.

Update: Chrysler Reaches Agreement

Last Friday, we talked about whether a deadline would help Chrysler reach an agreement. Today, we have an answer.

It seems that on Sunday, Chrysler was able to resolve some issues with labor, reaching a concession agreement with the UAW. Here’s the story:

http://news.yahoo.com/s/ap/us_chrysler_labor.


Negotiations are still ongoing with Fiat and Chrysler’s debtors, but things are looking up for the automaker, which may be able to avoid bankruptcy after all.

As a Deadline to a negotiation approaches concessions and the magnitude of concessions often increase. If the Deadline is real -- as this one appears to be -- participants will often start making riskier decisions.

At a Deadline one negotiating option is to simply halt the talks and walk away. It appears that this option probably is not available to Chrysler or its unions.

Chrysler's Deadline Next Week?

Will a deadline help Chrysler negotiations?

Chrysler is the midst of a tough negotiation that pits the carmaker against its creditors, the Italian automaker Fiat, the United Auto Workers (UAW) and also has the U.S. Government playing a role. The government has imposed a deadline of April 30for a deal to be reached. This means that the carmaker has only a few days to reach an accord and avoid a Chapter 11 bankruptcy. At stake is $6 billion from the government, which would be in addition to the $4 billion in loans it already extended to Chrysler.

Deadlines always increase the pressure to close a deal. In some cases, negotiators don’t know if a deadline is real and whether the other party is just trying to force a deal. Dr. Karrass advises you to be skeptical of deadlines in negotiations. However, he cautions, there is also a risk in not believing in a deadline, especially if it turns out that the deadline is real. In this case, the government has imposed a very real deadline on Chrysler.

The Agence France Presse reported yesterday that the Chrysler negotiations have gone into high gear because of the impending deadline. http://www.google.com/hostednews/afp/article/ALeqM5h0aZkvaukxQboyJU6uRLR9WxMvfA

A deal that would avoid bankruptcy for Chrysler is a very complex restructuring of the company’s debt, involving four major US banks. Fiat would agree to invest cash, but the Italian company seems reluctant to do this.

Today’s New York Times is reporting http://www.nytimes.com/2009/04/24/business/24chrysler.html?_r=1&hp that the US Treasury will direct Chrysler to prepare a Chapter 11 filing. It would seem that the government does not think Chrysler can reach a deal before April 30th.

Will the deadline force all parties to reach a deal? Will Chrysler have to go into Chapter 11, and if so, will there still be a deal with Fiat?

Extracting the truth in negotiation

The audio is not great on this. Turn up the volume.





Until next time...think about it.

No wonder the peanuts are $42....

I received an email:

Have you been following the Dodgers' negotiation with Manny Ramirez and his agent, the infamous Scott Boras? The Dodgers presented an offer of a 2 year contract, first year for $25M, second for $20M with a player option to opt out of the contract after the first year. Some of the money is deferred, so there is a "funny money" component here.

The deal was rejected by Boras and Ramirez, who then presented a counteroffer. Dodgers owner Frank McCourt would not respond to this counter, and then rescinded his own offer, saying "Now we start from scratch."

If I'm following correctly I sense at least three techniques from the Effective Negotiating seminar. Evidently McCourt's position was a "take it or leave it" (although I don't know if he expressed this in the negotiations, or just decided it after the fact). He then withdrew from the negotiating process entirely (forced deadlock), and for good measure added a kind of "Escalation" when he threatened to start over from scratch.

I've thought about doing this sort of grand gesture negotiating in some of my own deals, but usually decided I was just being emotional and not very business-like. However, in McCourt's favor, Boras and Ramirez have come back with two slightly more attractive counter-positions in the interim. My question is this: are there rules or guidelines for when it's smart and productive to withdraw an offer and step away from the negotiation?

Thank you,

Baffled and Intrigued

B and I,

Thanks for your query.
Clearly, you took the Karrass negotiating seminar seriously.

First let's catch everybody up with the players in this little drama. If you don't keep up with sports or sports negotiations, and you would like an entertaining and enlightening look at Mr. Boras, here it is.

In terms of negotiating, Mr. Boras seems to suffer from his own history. There are teams that historically won't even deal with him.

This relates to observations I've made recently about being too tough in negotiations. After a while, your reputation may not only intimidate your counterparts - they may just not show up. You may be the 800 pound gorilla in the room, but, given the choice, who wants to be in a room with an 800 pound gorilla?

To your question: I like to think that there are No hard-and-fast rules in Negotiation. Karrass would say, "No cookie-cutter approach."
Given that, when would one withdraw temporarily from a negotiation?
There may be several reasons, but among the biggest are:

1.

When you learn new information and need time to regroup. In this case, maybe something more was revealed to Mr. McCourt by the Boras side that made them feel the landscape had changed significantly. This could be an advantageous or disadvantageous change.

2.

To demonstrate the firmness of your limits.
This may be done for Mr. Boras' benefit or it may be done as a demonstration to the rest of Dodger's ownership, that McCourt is serious. Understanding the very public nature of the negotiations, Mr. McCourt may be sending a message to other players, current and future, regarding the limits within which the Dodger's will deal.

3. And, of course, there's always the good possibility of EGO being involved.

Remember, there is a substantial difference in a salaried worker doing a production deal for a company that needs to stay alive, and this deal wherein undoubtedly Mr. McCourt cares for the Dodgers and Mr. Boras has some level of allegiance to Mr. Ramirez, but each may see his own needs in great relief relative to the over-all picture....

More on agency in negotiation as we move forward.

Until next time...think about it.

Negotiating Deadlines

Deadlines force action. It’s no accident that tax returns are filed on April 15, that Christmas presents are bought on December 24th, or that political lobbyists get bills passed just before adjournment. We accept many deadlines that are part of our daily lives—work starts at 9AM and stops at 5PM, airplanes leave at their scheduled time, bills are due on the 10th of the month.

We respond to many deadlines almost without awareness. Deadlines pressure you into making an either-or choice. You can choose to accept the deadline, or ignore it and live with the consequences.

Be skeptical of deadlines. Sometimes they are real and sometimes they can be negotiated.

Many deadlines are not as real as you might think they are. Hotels will let you stay beyond 1PM without charge. Bids due on the tenth may be accepted on the eleventh. The offer that was to expire on June 1 is usually available on June 2. Newspaper reporters miss their deadlines, but I’ve yet to run into a blank column in a newspaper.

Of course, when you are negotiating, there is a risk in not believing a deadline. The more you know about the other party and their organization the better you will be able to determine if a deadline is real.

Remember—time is power. Most of us go into a negotiation with a self-imposed weakness. We are always aware of the time pressure on ourselves. That knowledge makes us less effective than we could be. What we should concentrate on are the deadlines that constrain the other party. If you have deadlines, there are probably deadlines on the other person. These three questions will help guide you out of the deadline trap:

* What self-imposed or organization-imposed deadlines am I under that make it harder for me to negotiate?
* Are the deadlines imposed on me by myself, or my organization, real? Can I negotiate an extension with my own people?
* What deadlines are putting pressure on the other party and their organization?

Be wary and skeptical when a deadline is impacting your ability to negotiate the best agreement. Time limits have a way of hypnotizing us. We tend to accept them even when we shouldn’t. That’s why you should put a deadline on any offer you put on the table. It may help motivate the other side to make the decision you want.

Scrambled Eggs - How To Defend Against Disorder

It is wiser to simplify matters than to confuse them. "Scrambled Eggs" does the opposite. It deliberately mixes things up for tactical reasons. Scrambling can be used to forestall a deadlock, make the other person work harder, force through a last-minute demand, or retreat from a prior concession. Sometimes it is used to determine how well the other party keeps his or her wits under pressure.

Negotiations should be conducted in a orderly fashion. The Scrambler knows that disorder can also work.

The Scrambler takes advantage of the mistakes people make when they are confused. Suddenly apples can't be compared to apples, and cost comparisons become impossible to make.

It akes self-confidence to stop a scrambler. These steps help:

1. Have the courage to say, "I don't understand."
2. Keep saying "I don't understand" until you do.
3. Insist that matters be discussed one at a time.
4. Recognize that you do not have to talk about things as the Scrambler want you to. Start in your own way and get the Scrambler going down your line of reasoning.
5. Remember scrambling can backfire. The Scrambler can become as confused as you are.
6. Watch for the mistakes you are sure to make when confused.

Your key defense is to never negotiate an issue until you understand it. Practice and courage help unscramble the Scrambler.

Make them an offer they must refuse.

The Karrass Effective Negotiating Seminar teaches you how to use a 'Bogey' as a discovery tactic to gain more information. The more you know about what is on the other party's 'sheet,' the better the opportunity for you to find ways to create a Both-Win agreement.

Consider making them an offer they must refuse.

This is an interesting negotiating technique. There are times when you should make an offer the other side just has to refuse. Why should anyone give the other party such an offer?

Here's what this negotiating technique can accomplish.

Proposals like this help set the stage for making offers later that look good by comparison (i.e. it helps establish aspiration levels). Making an offer like this gives you time to explore various alternatives that could be acceptable. Using this technique can stall the negotiation; force talks to break down; or help postpone a decision until a time that is more favorable to you. All of these events provide you more time that can be used to craft a better agreement for both you and the other side.

One of the best reasons for making an offer the other side can't accept is to help you zero in on what is acceptable. The magic of such an offer is that it opens up a flow of conversation. When people believe that no agreement is likely, they talk more candidly with one another. It is then that real motivation and goals are revealed. After gaining this additional information, there is no reason you cannot then follow-up with a more knowledgeable offer that is acceptable.

There is some risk associated with this negotiating technique. But, you may find this technique can open up an avenue to a value enhanced agreement.

Caution is necessary -- particularly if you are on the 'sales side' of the negotiation. Make sure you leave yourself a way to re-enter negotiations. You want to use this negotiating technique to stop the negotiation, to allow you to gain more information, but you do not want to eliminate your proposal from consideration.

Negotiating Around An Impasse

You did everything right, yet you find yourself at an impasse with the other party. What do you do?

Too many negotiations break down for the wrong reasons. Impasses are not always caused by world shattering issues or great matters of economics. Many breakdowns are the result of simple things like personality differences, fear of loss-of-face, troubles within the organizations, a poor working relationship with the other party, or one party's sheer inability to make a decision.

Any consideration of how to break an impasse must take into account the human factor. It may not be what you do, but how you do it that becomes the critical factor.

Here are several moves useful in averting or breaking an impasse:

1. If the impasse involves money -- offer to change the shape of the money. A larger deposit, a shorter pay period, or a different payment stream works wonders -- even when the total amount of money involved is the same.

2. Change a team member or the team leader.

3. Eliminate some of the uncertainty. This can be cone by postponing some difficult parts of the agreement for renegotiation at a later time when you both have more information.

4. Change the scope of risk sharing. A willingness to share unknown losses or gains may restore a lagging discussion.

5. Change the time scale of performance. Maybe it's OK to complete 60% over four months rather than three months. It might be easier to start slower and still complete the job within the desired timeframe.

6. Assure satisfaction by recommending grievance procedures or guarantees.

7. Move from a competitive posture to a cooperative problem-solving mode. Get engineers involved with engineers, operations people with operations people, and bosses with bosses.

8. Change the type of contract: fixed price, indexed or scaled price, time and materials.

9. Change the base for calculating percentages: a small percentage of a larger base or a larger percentage of a smaller, but more predictable base, may bet things back on track.

10. Create a list of options or alternatives that need to be discussed. Or change the order of discussion.

11. Suggest changes in the specifications or terms.

Impasse breakers work because they re-engage the other party in discussions with his or her organization and team members. These icebreakers help create a climate where new alternatives can be developed and refined. Surprisingly, sometimes the introduction of new alternatives has the effect of making old propositions look better than ever.

Try to pre-plan a face-saving way to reopen discussion should an impasse occur. If you set the stage before the impasse sets in, you can better handle the problem.

Take It Or Leave It!

"Take it or leave it" is a negotiation. And, there are many bargaining situations in which it is appropriate. This tactic has a legitimate place in your negotiating tool kit.

Much of today's business is conducted on a "take-it-or-leave-it" basis, whether we like to call it that or not. When you go into a retail store you see items clearly marked with a price. Some prices, like your electrical or water bill, are fixed by regulations. Many industrial goods and services are sold at the same price to all customers.

"Take it or leave it" is not as ominous as it sounds. It often represents good pricing policy for the seller, and a better way for the buyer to buy.

"Take it or leave it" makes sense under the following conditions:

* When you don't want to encourage future negotiating.

* When the other party is under a lot of pressure to say "yes" to what you propose.

* When a drop in price to one customer will force a drop to all customers.

* When others have already accepted your proposition.

* When you can't afford to risk a loss because you are selling at the lowest possible price.

* When you want to signal the other party that you have gone as far as you are going to go.

If you are going to use "take-it-or-leave-it" in your negotiation, there are ways to minimize hostility. Never use the expression itself because the words alone are enough to anger the other person.

"Take-it-or-leave-it" positions that are backed by legitimacy are less offensive. When a firm position is backed by regulations, published policies, clearly observed price tickets, or customary trade practices, it tends to be accepted more easily. The same is true when your firm position is accompanied by a good explanation and positive proof statements.

People are more willing to accept a "take-it-or-leave-it" later in a negotiation than earlier. Timing is important in reducing hostility.

"Take-it-or-leave-it" is a legitimate tactic in negotiation. A surprising number of people welcome it because it saves them the trouble of bargaining.

If you are going to use it, there are three things you must do. First, give the other party all the time needed to discuss the matter; and second, be sure to tell your boss, or your team, that you are going to use it. The person who forgets this is could be in real deep trouble. Finally, if you use 'take-it-or-leave-it' as a negotiating tactic, remember it could result in a 'dead lock'. You need to plan for this. If you really want, or need, to come to an agreement with the other party, determine which negotiating techniques you will use to re-open negotiations should a 'dead-lock' occur.

Scrambled Eggs and Negotiating

Disorder -- (i.e. Scrambled Eggs) -- is a negotiating tactic.

When negotiating good, lasting agreements, it is generally wiser to simplify matters than to confuse them. However, "Scrambled eggs" does the opposite. It deliberately mixes things up for tactical reasons. Scrambling can be used to forestall a deadlock, make the other person work harder, force through a last-minute demand, or retreat from a prior concession. Sometimes it is used to determine how well the other person keeps his or her wits under pressure.

Negotiations should be conducted in an orderly fashion. The Scrambler knows that disorder can also work.

The Scrambler takes advantage of the mistakes people make when they are confused. Suddenly apples can't be compared to apples, and cost comparisons become impossible to make.It takes self-confidence to stop a Scrambler. These steps help:

1. Have the courage to say, "I don't understand."

2. Keep saying "I don't understand" until you do.

3. Insist that matters be discussed one at a time.

4. Recognize that you do not have to talk about things as the Scrambler wants you to. Start in your own way and get the Scrambler going down your line of reasoning.

5. Remember scrambling can backfire. The Scrambler can become as confused as you are.

6. Watch for the mistakes you are sure to make.

Your key defense is to never negotiate an issue until you understand it. Practice and courage help unscramble the Scrambler.

Negotiating 101: What If? Would You Consider?

"What-If" and "Would-You-Consider" are excellent discovery devices that can help you build better agreements.

Both types of questions provide an avenue for getting more information than you would ordinarily be given.

A buyer who knows more about a seller's cost and price structure is bound to make better decisions. A seller who knows more about a buyer's specific needs and constraints will be in a better position to configure a product offering.

Following are some examples of how you might use this negotiation technique.

Buyers: you need to make sensible business decisions based on the best information you can get. "What if" is a good way to get pricing data as well as other information. The "what ifs" listed below usually open up new alternatives and generate valuable answers. Their logic is self-evident.

• What if we double the order (or halve it)?
• What if we give you a one-year or two-year contract?
• What if we drop the warranty (or increase it)?
• What if we supply the material?
• What if we own the tooling?
• What if we buy apples and pears instead of just apples?
• What if we let you do the job during the slow season?
• What if we supply technical assistance?
• What if we change the specification in this way?
• What if we give you progress payments?

Any of these "what ifs" provide insights into the seller's business practices and motivations that would not otherwise be available. "What-if" questions may create organizational pressures for the salesperson. With every "what if," the salesperson may have to go back to their engineering, production, and pricing people. They may find it hard to say no to a buyer's innocuous sounding request. Many a salesperson has lowered the price rather than go through the tedious routine of re-pricing.

Salespeople: the next time a buyer asks a "what-if" question, make sure you don't shoot from the hip. A well-considered answer can pay big dividends. An alert salesperson can turn "what if" into an opportunity instead of a problem. Use "would-you-consider" or "what-if" questions to probe and find out what the buyer really intends to buy. Buyers may not have as many options as they say they do.

Here are ways you can respond to a buyer's "what if" questions:

• Would you consider taking grade-B products, a larger delivery, spare parts?
• Would you consider last year's model?
• "What if" we change the configuration this way?
• Visit with other people in their organization (production, engineering, etc.). You may get a better picture of the buyer's constraints and the potential options you can present.
• Never price a "what if" on the spot.
• If a concession is offered, make it contingent on getting something in return. "Would you consider" this if we reduce the price?

Both "what-if" and "would-you-consider" questions open up new avenues of thought for both parties. Use of this discovery and information gathering technique can lead to a better deal for both parties.

Perceptual Power

I recently celebrated another birthday and one of the comic cards I received illustrates a great negotiation lesson. Picture a small goldfish swimming in the fish tank. Strapped to the goldfish is a shark's fin, which protrudes out of the tank several inches.

Now, how much power does this little goldfish have? If the other occupants of the tank accept that fin as real, has the goldfish grown real power or perceptual power?

How much value is there in perceptual power? It is easy to dismiss perceptual power as bluff or fake, but you might be interested in some other's thoughts:

· Re Jesse Helms: "…he plugs into no important levers, controls no important network, has relatively scant rewards to offer and penalties to impose on his own." "…such power as he has is strictly a function of their own willingness to let him push them around." Meg Greenfield, Newsweek, August 1, 1997

· The idea of power lies in the mind of those involved in the bargaining. J. Winkler

· (Power) It is relative to the assumed power of the other party. J. Winkler

· Their power exists if you accept their power. Karrass

· In an Article titled, "Cheney: Not What He Used to be" in THE WEEK magazine, November 11, 2005, re Cheney losing power in W.DC, "…in a city where power is the appearance of power."

Too many people quit in the planning stage of a negotiation because, "I don't have anything to work with." They move quickly into damage control and away from finding the best agreement for both parties. The RESULT BECOME self-fulfilling. We can't afford to respond soley to our evaluation of our real power and our estimate of the other party's power.

From now on, think about how to grow the perception of our power and test our estimates of the other party's power.

Jim Sauerwein

The Circle of Discovery

Most students of the negotiation process agree that the best negotiators will perform a thorough process of discovery prior to sitting down with the other party.

The process of discovery itself requires resolving some internal concerns, such as:

1. How much do I really need to know? (In the next article we'll discuss some of the characteristics of the other party it would be helpful to know.)

2. What is going to be the best approach to discovering each of these points of information?

3. When does it become too much to ask?

4. When should discovery start?

5. Who, in our organization should be assigned each of the points to discover?

6. How will we verify the information we do discover?

7. Who in the other party's organization will we use as a source?

8. How can we deal with our people's philosophy toward discovery?

Now, hold a mirror up to the above list and prepare your organization for the other party's discovery process:

1. What is safe and / or appropriate to share with the other party? Some of these issues must be made available to create the best agreement possible for both parties.

2. What is the best way to disclose?

3. Who is the most appropriate person to disclose vital information?

4. How do we train our vulnerable people to not disclose information we do not want disclosed?

I will never advocate lying, but it is imperative your folks have permission to not answer a question! Here are some ideas on how not to answer a question and still maintain our integrity:

· "Wow, great question, but that answer can only come from Penny in Engineering."

· "Why is that important to you?"

· "I am not authorized to answer that question."

· "You know, we used to provide that type of information to trusted folks, like yourselves, but then we realized that our friends changed jobs, and their replacement never seemed to have the same level of confidentiality as the first person. Pretty soon our propriety information became street knowledge. Now, after being burned a few too many times, no one in our organization is authorized to disclose this type of information."

Some relevant quotes for you:

Remember, a loose woodpecker inside of the ship may be a greater danger than all the storms on the outside.

"I have never been hurt by what I didn't disclose, but I have oft regretted what I did say."

"It is better to remain silence and be thought of as a fool, than to open your mouth and remove all doubt."

"Silence creates confidence in your position."

"Wise folks speak when they have something to say and fools talk when they have to say something."

Entrenchment---The Avenue to Face-Loss!

Everyone knows what Entrenchment is. It is the process of arguing the same logic so many times that you can't change your own mind.

It is similar to a couple beginning a driving trip with the wife asking her husband, "Do you want me to get out the map?" Of course, we men are descendents of the great explorers, so the answer has to be, "I don't need a map, I know exactly how to get there; indeed, I think I know a good short-cut." Several hours into our 30 minute trip, we have said "I know where I'm going and we are not going to stop for directions." 17 times. By now there is no face-saving approach to ask for directions.

When entrenchment happens in the negotiation process we shift from a discovery-oriented both-win negotiation to a contest. Matters of principle will now overcome the ideal of the best agreement.

There is no fancy remedy for entrenchment except awareness. If you catch yourself repeating the same argument over and over, stop it! Hard to do? Maybe, but we all have to be in charge of ourselves in our negotiations.

What if our other party is becoming entrenched? Confront it early and gracefully: "It seems to me we are revisiting the same arguments without making any progress: may I suggest.........."

Another approach would be to find something in the other person's arguments that could be acceptable to you and make a concession on that point only, in exchange for a concession on one of their points.

Give to get; keep it moving!

Jim Sauerwein

What Level of Authority Should You Have?

Most negotiators ignore the fact that having limits on their authority can make their jobs easier – it's a source of negotiating power.

A negotiator with limits becomes harder to deal with. They can say "no" gracefully – someone else is saying it. That someone else can be a procedure, a policy, a budget, an engineering standard, or maybe a regulation that can't be changed.

Often one person's limits can become the other person's problem. If you and I are negotiating and I have limits to my authority, it is up to you to figure out a way around them. You are forced into a choice: either accept the deal at my limits or make a lot of work for yourself, and maybe get no deal at all.

If you challenge my lack of authority by taking the problem to a higher authority, other apprehensions set in. Now you must take on my boss, or their boss, or the legal department, or the engineering staff – all of whom represent new relationships and a greater degree of preparation on your part. Also, if you do go to higher levels, there is always a chance the party you are negotiating with will get angry.

There is greater strength in not having authority than in having it. A person going into a negotiation needs to ask, "What limits do I want imposed on my authority?" Well chosen limits can make a big difference in the outcome of your negotiation.

Negotiating Understandings and Agreements

An Understanding is an expression of mutual viewpoint and attitude on an issue. An Agreement is a conclusive commitment to mutually acceptable terms. And a Procedure is a way of doing something.

You're probably wondering what this has to do with negotiating. What difference does it make? After all, isn't a deal a deal?

When you're negotiating it's not enough to simply reach agreement. Even when two parties have the best intentions, Agreements break down for a variety of reasons. Breakdowns occur because those responsible for implementing the Agreement often do not understand the common viewpoints, attitudes, and backgrounds that brought about the Agreement. Sometimes the breakdown occurs because neither party knows how to make the Agreement work or how to prove what is, or is not working.

A good Agreement should not only spell out the work and money involved, but should also discuss the understanding behind the Agreement and a Procedure for measuring cost in the event that additions or deletions of work occur. A poor Agreement simply leaves the parties bickering about whether verbal understandings are being met and whether costs are being accumulated fairly.

The next time you are in a negotiation, better say to yourself, "It is not enough just to reach agreement on terms. Are there any understandings and procedures that ought to be documented in detail right now, while they are fresh in our minds?"

Concessions -- Much Like Investing in the Stock Market

A negotiator should approach their concessions like an investor approaches the stock market.

Prudent stock market investors look to increase the value of their money. They look at growth potential, expected dividends, and risks associated with an investment. They attempt to compute the present value of the investment given the expected growth rate and dividend payouts. This present value is balanced against the associated risks, compared to other potential investments, and a decision is made to buy or not. Is the investment fairly priced, over-valued, or under-valued?

A good negotiator does the same thing, but on a very subjective level. Negotiators need to focus on the present value of satisfaction, determine the present value of future satisfactions (and dissatisfactions), and compare that to making no deal at all or holding out for a better deal.

This brings up a fundamental but subtle point about any negotiation. The flow of positive and negative satisfiers in any deal is in the head of each participant. Some participants are optimistic about the future. Others are pessimistic. Some are "I-want-my-kicks-right-now" people, while others are prepared to wait a long time.

Much of your strength as a negotiator comes from your ability to provide satisfaction in one form or another. You can help raise the present value of the deal by getting the other party to place a higher value on future satisfaction. You can do the same thing by showing them that future dissatisfactions are unlikely. If they want kicks now, show them how much more important kicks will be later.

Concessions can play a big role in creating the flow of satisfaction. But this flow between people is not as simple as it looks. Before you start making concessions to increase satisfaction, think about how you want to do it. Take into account who will benefit, in what way, when, and from what source.

A concession can provide satisfaction to the receiver now or later. Maybe the receiver wants to take it all at once or a little at a time. A concession can direct its benefits to the organization, specific parts of the organization, third parties, to the other negotiator on a personal level, or to all of them at once.

Every negotiator has the same role to perform: to raise the present value of future satisfaction for the other person and thereby help the other party reach a decision.

Yelling and Screaming

Some people get their way by deliberately yelling and screaming. It's a negotiating tactic. These screamers know from experience that other people find this tactic uncomfortable. Most people find it difficult to cope with a screamer. This is especially true if others are around to witness the scene. Most cringe at the thought of having to deal with an obnoxious character - so they simply give in.

A loudmouth is accustomed to winning these negotiations and uses this tactic time and again to get their own way, or to gain a better position than other, more reasonable people. Their plan is to intimidate the other party into submission.

People who yell and scream do so because they have learned, like children, that it is easier to scream than to take the time to persuade by rational means. In fact, the weaker their position, the more they resort to loudmouth tactics.

As parents, we have a responsibility not to let our children get their own way by yelling and screaming. When children rant and rave, we have to call their bluff by calmly demonstrating that their approach will not work. This takes a good deal of parental courage, patience, and self-confidence.

How do we handle an adult negotiator who uses such tactics?

This question is important because many of us, sooner or later, will have to deal with someone who yells and screams. Don't let this negotiating tactic trap you into responding with like actions. If you both end up yelling at each other a satisfactory outcome is a remote possibility.

The key defense is not to be intimidated. If you remain rational, refuse to take abuse, deal in terms of fact - not emotion, and act with quiet dignity and firmness, the loudmouth will soon stop. If not, then it is wise to bring them to someone at a higher level who can handle the screamer with calm authority.

The experienced loudmouth has won a lot of easy victories since childhood. Don't let them win another one at your expense.

Price and Perceived Value

I imagine everyone has heard, "You get what you pay for." In the world of negotiating, we worry about real versus perceptual value. We wonder, "Do people feel better if they pay more?"

The person responsible for pricing at a large California winery once told me, "In the absence of their ability to evaluate quality, people will pay a higher price to insure quality!" Almost everyone has compared two similar items and has chosen the more expensive one so as not to make a mistake. Valid or not? We'll never know!

In the world of the consumer, we have an amazing example of this perception: the hamburger. Years ago, McDonald's decided to capture a larger market share by reducing the price of their hamburger from $0.99 to $0.49 in a special promotion. What happened? They didn't sell any hamburgers. People became suspicious of the product. McDonald's had reduced nothing but the perception of the value of the product.

There is a new hamburger war going on now that is exactly the opposite of McDonald's approach.

2002: DB Bistro Moderne in New York introduced a $29 hamburger. They sold about 200 per day.

2003: Old Homestead Steakhouse in New York introduced a kobe beef hamburger for $41.

Later in 2003: DB Bistro introduced as $50 version with truffles.

2007: A hotel in Jakarta, Indonesia added a $110 Kobe beef hamburger to its menu.

Ok, this is a little silly, but, each of these restaurants sells a bunch of hamburgers each day. Why? There is more to the buying motive than satisfying the needs of form, fit and function. People buy for a lot of reasons we will never be able to measure.

This provides a large "BEWARE!" when we negotiate on the buying side of the desk. There is a war between evaluating Total Cost and Psychological Gratification!

Jim Sauerwein

Is There a Place For a Sense of Humor in Negotiating?

In his first book, What They Don't Teach You at The Harvard Business School, the late Mark McCormick makes this observation: "Other than common sense, the most important asset in business management is a sense of humor. Laughter is the greatest diffuser of business tension and you want to be capable of using it."

Ben Franklin's rules for bargaining include: "Keep your sense of humor."

There is indeed a place for a sense of humor in the negotiating process. I imagine most of us would rather negotiate and do business with someone who keeps the process somewhat relaxed and even enjoyable. Noel Coward gives us some good advice for balance: "Wit is like caviar. It should be served in small portions and not spread about like marmalade."

You may remember that Henry Kissinger's early days in government service were not very productive. It was not until he hired a couple of humor consultants to teach him a sense of humor did Mr. Kissinger become effective. In the book, Travels with Henry, the author reports that some of the arms limitation talks in the Kremlin included laughter and downright silliness. Of course, these were not silly people, it is just that they needed some device for keeping the pressure maneagable and laughter was that device.

Remember, laugh and the whole world laughs with you.....

Jim Sauerwein

NBC and NFL Football Negotiation

Most of us just watched the 2007 Super Bowl. Here's the background on interesting negotiation NBC had with the NFL. NBC negotiated the broadcast rights to NFL football.

It all started with NBC wanting to get their ratings up and deciding that NFL Football was the way to go. This is a great example of a Both-Win corporate negotiation. Sports Illustrated magazine covered it in an article last year.

In any competitive negotiation you must first protect your interests (what's the best deal for me). And at the same time look for opportunities to create an outcome that is good for both parties. The people at Harvard talk about Win-Win ----- Karrass calls this type of negotiation a Both-Win.

After being shut out of NFL broadcasts for nine years, NBC negotiated a six-year deal with the NFL for about $600 million a year. NBC lags in the ratings game and hopes this NFL deal will help them gain ground on ABC and CBS.

What did NBC get with the deal?

• Four hours of potential top 10 prime-time programming every week.

• Two Super Bowls (2009 and 2012) - talk about advertising $$$$.

• The annual Thursday-night opening game.

• Two wild-card games each season.

• A platform to promote NBC's prime-time lineup of shows.

• And the right to choose the late-season games it will broadcast, so fans can see the most competitive games at the end of the season (a right the NFL would not provide before)

Now, keep in mind that NBC is owned by GE.

Here's what else was negotiated into the deal.

• GE Finance will play an increased role in the NFL loan pool financing program that helps NFL owners finance new stadium construction.

• GE's new Security Services Unit will promote and provide stadium security to NFL owners.

• Fans and players will have the advantage of on-site medical technology provided and promoted by GE Medical Products.

• And, it costs a lot to illuminate these football stadiums. GE is the leader in energy efficient lighting technology and manufactures a lot of light bulbs.

The investment firm of Goldman Sachs estimated that the value of these GE add-ons could be worth as much as $500 million in profits to GE.

This was a great example of expanding a negotiation to come up with a creative deal involving much more than just broadcast rights.

Note from the Author . . .

We are very pleased with the readership of this site, but we would like to ask a favor.

If you don't have a comment on a particular article, how about a question regarding negotiation?

Perhaps you would share with the readership a difficult negotiating problem you have or are encountering.

We would like to hear from you. Is there a topic you would like us to discuss?

Jim Sauerwein

Persistence Is Good Until . . . . .

Since childhood we have been encouraged to be persistent. I remember being taught, "Winners never quit; quitters never win!", "If at first you don't succeed, try, try, try again."

Certainly persistence is a virtue in the negotiation process, but there is a limit to what that characteristic can achieve before it becomes a negative.

If you and I open the negotiation with differing views, then slowly find ways to decrease the gap, we will be encouraged to continue the process. Consider what would occur if one of us reaches a point where it is important to take a stand on a particular issue and convince the other party that we have reached our limit. The other party keeps pushing to create movement, perhaps making another concession. We reiterate our position again and perhaps again. If both parties are not careful, we will become entrenched.

Consider rewriting our parent's mantra to, "If at first you don't succeed, try, try and back off!" Backing off does not mean quitting, it means redirecting our energy. In the face of an impending entrenchment, I personally like to immediately summarize, "What we have achieved so far....", then mention the seemingly inflexible issue and inquire why it has become such a sticking point. After asking, be sure to be quiet and let the other party respond.

The goal is to learn the other person's logic. If you have better or updated logic which can replace the other person's mindset, it may be possible to give them a face-saving way to accept, then sell your ideas in their organization without causing them to look wrong.

Perhaps a manufacturing customer based a standard cost or budget figure on raw material prices, or natural gas prices or transportation costs of two years ago. By learning their logic, you can replace it with current logic. Remember, no one is wrong; the logic has changed.

Jim Sauerwein

Teaching Your Customers How To Negotiate With You.

Every selling organization that has been in business for a while has taught their customers how and when to do new business with them.

We focus hard on learning the customer's organization, how it works, who are the influencers, who has the buying authority, what are their hot buttons, how are they evaluated, etc. It is important to be aware that while we are busy learning to "sell the way the customer buys," they are learning how to work their suppliers for their advantage.

Most sales managers have told their customer service reps that if the customer is really angry, "give them whatever it takes to make them happy". What have we just taught our customers? We have taught them to get really angry!

Every sales manager complains that the salespeople give away too much profit as the end of a quota period approaches. This happens for two reasons. One is the need to book all the business we can to raise the backlog prior to the quarterly or year-end report. The second is to help the members of the sales force make their quota. So, what have we taught our customers? We have taught them to hold off on large orders, when they can, until close to the end of our fiscal year or the end of a quota period. Customers learn to hold large negotiations until the time we need their business the most.

Individual sales people have taught customers to nibble hard on little value issues just before awarding the big order. As long as the customer continues to get things or service items for free, what have we taught them? We have taught them to keep the negotiation open for longer than necessary because "freebees" keep flowing in their direction.

What should we be teaching our customers?

• Our product is always fairly priced
• We perform more than we promise
• Your cost of doing business is reduced by doing business with us
• It is easy to business with us
• When the customer wants something extra, or a change, there will be a well documented and justifiable charge
• Our goal is to profitably help our customers succeed
• We will never cut the price of a high quality product to match the price of a poor competitor
• We will lose orders based on price, but not on value
  
• At some price we want the competitor to take the order. As a matter of business judgment, we want the competitor to fill their capacity with low margin business.

Jim Sauerwein

Favorite Negotiating Books

Every week or so, I am asked what my favorite negotiation books are. Of course Karrass' classic, The Negotiating Game will always be my favorite. Here is a list of some of my other favorites:

• Bargaining for Advantage by Richard Shell, Viking

• Smart Bargaining by Graham and Sano, Harper House. This one is out of print, but Amazon always seems to have a few used ones.

• What They Don't Teach You at the Harvard Business School by Mark McCormack

• Bargaining for Results by John Winkler, Pan

• Friendly Persuasion by Bob Woolf, Putnam (Good for sports fans)

• Getting Past NO by W. Ury, Bantam

• The New Negotiating Edge by Gavin Kennedy, Nicholas Brealey (pub)

• Getting to YES by Fisher, Ury and Patton, Penguin

• Beyond Negotiating by Carlisle and Parker, Wiley

• On Negotiating Mark McCormack, Dove

• Think Before You Speak Lewicki, Hiam, Olander, Wiley

• Getting Ready to Negotiate by Fisher and Ertel, Penguin

Of course, Harvard Business School always publishes good compilations. Some that I have read recently are: Negotiation, On Mergers and Acquisitions, and On Negotiation & Conflict Resolution.

Jim Sauerwein

Negotiating Space

Today you'll negotiate with someone – unless you live on a deserted island – even then you'd probably have a few negotiations with yourself.

Think about all your meetings and interactions with co-workers, your boss, your spouse, your children or a best friend. There are negotiations you'll have with buyers, sellers, waiters, and taxi drivers.

OK, so you're participating in all these negotiations—every day. How much 'Negotiating Space' have you been leaving yourself? Negotiating Space (leaving yourself room to negotiate) is something that really impacts your ability to achieve satisfying agreements – for everyone in the negotiation.

Research proves that people who give themselves room to negotiate do better than those who don't (e.g. Chester Karrass the negotiating researcher).

If you are looking to buy something you will do better if you make a low initial offer. If you want to sell someone a product, service, idea, concept, or change-of-policy, start out high.

The case for starting high and making slow, reluctantly given concessions, is a strong one. This approach gives you a chance to test the strength of the other person's position and their willingness to stand firm. This process helps you gather valuable information about the other person's position and feelings. This is information that becomes really useful when you start looking for Both-Win opportunities.

Wherever you decide to start your negotiation (i.e. take a position), have a good, logical reason for starting where you do. This helps avoid an appearance of flippancy.

The Harvard Business School has questioned the value of 'positioned based bargaining.' Several articles have been published on what has become known as 'interest based bargaining' or 'principled negotiations.' Interest based bargaining theory states that one should never take a 'position' in a negotiation. One should only negotiate from common interests. This concept, originating in the academic world, has its roots in legal, political, and diplomatic negotiations. To a more limited extent "interest based bargaining" has been tried in labor negotiations.

It is really hard to establish 'Negotiating Space' if you don't take a position.

Contrasting with the 'interest based bargaining' approach is what Dr. Chester Karrass developed as 'Both-Win' negotiating. The Karrass style of negotiating evolved out of real-world business negotiations. The Both-Win approach stresses the importance of establishing an initial position. Your initial position helps you create 'Negotiating Space.' Then the negotiating process utilizes this 'Negotiating Space' to uncover optimal, Both-Win outcomes. The Karrass 'Negotiating Space' approach is much more practical and realistic in today's business world than the Harvard 'interest based bargaining' approach.

Think about it. How many of your negotiations allow you to not take a position? What about the pressures you have from your own organization, your boss, or the marketplace. That's simply reality. The Karrass approach recognizes this reality and provides an initial competitive negotiation phase to help establish a process that builds a relationship with the other party. This relationship then allows you to work towards discovering Both-Win opportunities.

First, you go through a competitive phase where positions are disclosed and defended. This helps you understand the position of the other party, what power issues exist, expectations, and pressures at play. This understanding helps you build a more trusting relationship with the other party that can foster greater sharing of information. Ultimately this is what permits "Both-Win" opportunities to emerge.

An 'interest based' negotiation starts by each party providing the other party complete information about their 'situation,' and the expectation that each party is obligated to share information. This immediately puts the negotiators at risk. If one party does not reciprocate, the other party has instantly given up most of their negotiating power. Interest based bargaining fails to address this issue of power and the impact power plays in the outcomes of negotiations.

Fisher and Uri, two Harvard authors, argue that establishment of trust is not essential to 'interest based bargaining.' It's hard to imagine interest-based negotiations working in the absence of trust. True Both-Win opportunities can only revel themselves when a trusting relationship has been established. Relationships don't just happen automatically—it takes work and it takes time to build a trusting relationship.

Some sources suggest interest based bargaining might be appropriate if:

* Each party to the negotiation has complete authority to strike a deal without further review by anyone else. (This is not usually the case in most business negotiations. Most of us are not Bill Gates or Donald Trump.)

* Each party has the ability to clearly and effectively communicate. In many cases a facilitator is necessary to provide guidance and assistance that helps lead to a successful 'interest-based agreement.' (With the billions of negotiations taking place each day that's a lot of facilitators to hire. Most people are less than ideal communicators. Is this is a practical approach to negotiating?)

* Each party must be willing and motivated to assume the behavior changes and risks associated with interest based bargaining. There can be no hostility and no hidden agendas. (Does this sound like what really happens in most day-to-day business negotiations?)

* Each party must have reasonable expectations. They should not expect interest based bargaining to result in agreements superior to those obtained through position based bargaining. (So if there is higher risk using the 'interest based' approach, and no expectation of greater rewards, why do it?)

The desired result of 'interest based bargaining' and Karrass Both-Win negotiating are very similar. However, the Karrass Both-Win negotiating process is superior in helping achieve the desired results on a consistent basis. It's a proven negotiating process that is both practical and powerful—and can be used by anyone. Everyday.

Tried using the BOGEY Lately?

Today I was working with a marketing consultant on a new project. It came down to negotiating the amount we were going to spend on software, design, fulfillment, etc. In the negotiation I used a 'BOGEY' and it worked wonderfully. More negotiators should try using a Bogey. You'll find it opens up some very productive conversations with your suppliers.

I think the term 'BOGEY' was originated by Dr. Chester Karrass, the guy you see in all the airline magazines advertising his effective negotiating seminar.

The Bogey is an effective, ethical, and simple negotiating tool. I don't understand why more negotiators don't use it. It can benefit both parties in a negotiation and open the path to some really creative outcomes. A Bogey should always be considered when you are purchasing a relative complex product or service.

Here's how it works.

Let's say you want to expand your corporate web site to include several industry specific Blogs, direct downloading of product brochures and specifications, and the collection of demographic information so you can 'customize' marketing communication with existing and potential clients. All of this needs to interface into the company's CRM system and create a customer specific history.

You go out and get a few bids from companies who are qualified to handle the project. And after review of the responses, you select the contractor you'd think you'd like to work with and have them in for further discussions.

Let's say their bid was $88,000 to do the work. It's one of the higher bids you received, but you like the work they do and have confidence in their ability to complete the project on time.

So you throw out a Bogey.

You say, "I love your proposal, but all corporate budgeted for this project is $60,000."

A salesperson will generally respond to a Bogey by either changing their proposal, reducing the price, or showing you what alternatives are available. Whatever their response, you will learn things you never knew before you used the Bogey.

In almost all cases you learn more about the product and services being proposed and alternatives that impact the price. This new information puts you in a better position to make a more informed decision.

Why does this work so well? When I tell a salesperson I love your product but only have so much to spend, most salespeople tend to respond in a positive, friendly fashion. How can they be hostile toward someone who likes them and their proposal? The salesperson gets involved with me and my budget problem. All that remains between them and a closed sale is a little problem solving.

The negotiation moves away from a competitive affair to one of cooperation. The salesperson, knowing that budgets do exist, tends to feel sorry for me. The salesperson's frustration is directed against the 'system' that senselessly and arbitrarily created this roadblock. Usually the salesperson starts taking a new look at my real needs, and before long it is discovered that some items in the original price can be trimmed away, others can be changed, and still others can be adjusted to help me meet my budget. Each party helps the other reach its overall goals.

What often results from this buyer-seller interchange is a functionally usable product at a lower price. Or, maybe a much superior product at a somewhat higher price.

Part of the reason the Bogey is so effective is that it involves the salesperson's ego. People like to help others in need. The Bogey gives the salesperson a chance to show their knowledge of their product, the buyer's business and dedication to the buyer's well-being.

The Bogey may not necessarily lead to a lower price for the buyer, but the buyer will be better off having learned a lot more about the product than was known before the Bogey was put into play.

Try a Bogey the next time you're in a negotiation. I think you will find it to be very useful. I did!

kmoney