Negotiation -- trust, but verify.

President Ronald Reagan was in diplomatic and political negotiations with the Soviet Union when he said: “trust, but verity.” At the time, Reagan was signing the Intermediate Range Nuclear Forces Treaty (INF) and he wanted to make sure that the USSR would hold up their end of the deal. Reagan was being careful to keep the balance of power, which had been crucial to avoiding nuclear war during the Cold War era.

You don’t have to be involved in high-stakes diplomatic negotiations to follow this motto because going into any business negotiation without a healthy dose of skepticism could cost you. We are not saying you should be a complete cynic and distrust everything the other party says, but we do advise you to evaluate, to question, to see what is behind the numbers.

In any business negotiation, Dr. Chester Karrass says you can assume the following:

• Numbers/figures are biased to favor the other party
• Numbers/figures can be challenged

To really understand what is being discussed, a good negotiator will always evaluate what the other party is bringing to the table. Otherwise, the failure to evaluate and verify may result in a deal that is more favorable to the other party.

Dr. Chester Karrass recommends following these four principles:

1. Never take anything for granted
2. Check everything
3. Put everything into its proper context
4. Draw a bright line between facts and the interpretation of facts

Fact-check, do the math, ask to see the numbers again. A skeptical negotiator will most likely get a better deal.

Can you quantify negotiation results?

Generally, when you are conducting a business negotiation you are trying to fulfill certain goals: price, quantities, delivery dates, etc. If you have negotiation goals that are measurable, then it seems fairly simple to quantify your results. For instance, you can assess how you did on price, something like achieved a 10% reduction.

Can you assess worth? Worth encompasses a wide range of outlooks on value. One thing is for certain: value or worth is not equal to price. Value is quantified differently by each person or organization depending on how they view the transaction. Worth is established by many factors including perceived value, standards of cost, uniqueness (like a very specialized knowledge) and others.

Dr. Chester L. Karrass writes:
“Worth analysis can shed more light on ... (the other party’s) needs than volumes of cost data. Accountants ....have avoided worth because it is difficult to analyze... (this is) unfortunate because the key to setting sensible targets lies more in what a thing is worth than what is costs.”

Anthony Tjan, CEO of Cue Ball, a venture capital firm, writes the following in his Harvard Business Review blog post “How to Size up a Negotiation” (http://blogs.hbr.org/tjan/2010/02/how-to-size-up-a-negotiation.html ):

“...the most important number to remember is the total number you are trying to achieve. In the course of a negotiation many people end up negotiating on a point-by-point basis and without remembering the real value of any given point in the context of the broader ultimate goal. Making efforts to quantify the spread in a deal makes the negotiation much easier and can even eliminate points of negotiation.”

Tjan also gives a step-by-step indication on how to quantify a negotiation:

1. Understand the big picture price / value you are trying to achieve
2. Determine which of the negotiation points are quantifiable
3. Bound the low and high values of each point
4. Create scenarios for both "edge cases" which might be of concern and for "likely scenarios"
5. Re-prioritize negotiation points
6. Aggregate quantifiable points to see how they compare to the big picture you are trying to achieve

Take a big picture approach to quantifying a negotiation. When you assess a negotiation’s results, you should look at many factors including worth and quantifiable goals.

Negotiating Deadline -- Friend or Foe?

Deadlines force action. It is no accident that many US taxpayers file their annual tax return on April 15th each year (the deadline imposed by the US government). Many Christmas presents are purchased on December 24th. Many political lobbyists get their bills passed just before adjournment.

Deadlines are part of life.
We readily accept many deadlines that are part of our daily lives. Work starts at 9AM and stops at 5PM. The doors on the airplane close at the scheduled time (sometimes). Bills are due on the 10th of the month.

We respond to many of these daily deadlines almost without awareness. Deadlines pressure us 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
Professional negotiators are skeptical of deadlines. Some deadlines are real. Some are not. Sometimes deadlines can be negotiated. Sometimes they can not. Good negotiators find out.

Many deadlines are not as real as you might think they are. Hotels will let you stay beyond their 12:00 checkout time without a charge. That proposal you are submitting is due on the tenth of the month, but may be accepted on the eleventh. The offer that was set to expire on the first of June is usually available on the second of June. All probably can be negotiated.

There are Risks!
Of course, in any negotiation 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 or not. If it is important to you, you need to test the firmness of the deadline.

Remember that time is power.
The more time you have available to you in your negotiation the more negotiating power you have -- and the better the opportunity to use that time to arrive at a more favorable agreement. More favorable for both sides.

Most of us go into a negotiation with a self-imposed weakness. We are always aware of the time pressures on ourselves. This 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 side too.

Three questions that will help you.
These three questions will help guide you out of the 'Deadline Trap'.

1. What self-imposed or organization-imposed deadlines am I under that make it harder for me to negotiate?

2. Are the deadlines imposed on me by myself, or my organization, real? Can I negotiate an extension with my own people.

3. What deadlines are putting pressure on the other party and their organization? Can I use their deadlines to my advantage?

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 should not. That is why you should put a deadline on any offer you put on the table during a negotiation. It may help motivate the other side to make the decision you want.

Civility may save your negotiation

There’s little doubt that lately American society has been experiencing a slide in civility. In 2009, we saw many high profile, public demonstrations of rude behavior from politicians, athletes and musicians. As it turns out, the lack of civility may be influencing the course of business negotiations.

According to a Kansas City Star blog post entitled “Civility is desperately needed in work and in daily life,” business deals are falling through because of a lack of civility from one or both parties. Author Diane Stafford writes:

“From major real estate deals to individual job losses, we’re hearing more tales of business gone awry because of people who were too difficult to get along with.

And, unfortunately, many of those who are most adamant, most entrenched in the rightness of their views, are also the most factually wrong.

They can’t and won’t see it, though. And when there’s no civil sharing of opinions, there’s no compromise or conciliation. Labels and name calling replace discussion.”

Read the blog post here: http://www.kansascity.com/196/story/1712610.html

At Negotiation Space we have discussed bullying and other forms of unacceptable behavior in a negotiation. It is clear that when you are engaging in a business negotiation, treating the other party with disrespect will not help you reach a win-win agreement.

Some professions have mandates or even laws to enforce civility. For instance, in Pennsylvania there is a section of the legal code entitled “Code of Civility,” which enjoins lawyers and judges to

“conduct themselves in a manner that preserves the dignity and honor of the judiciary and the legal profession. These principles are intended to encourage lawyers, judges and court personnel to practice civility and decorum and to confirm the legal profession’s status as an honorable and respected profession where courtesy and civility are observed as a matter of course.” (From: http://www.pacode.com/secure/data/204/chapter99/subchapDtoc.html )

Business may not have a code of civility, but you can help encourage civility in your next negotiation. Some actions you can enforce to maintain civility include:

• Ban name calling or insults from your negotiation
• Listen to the other party without interrupting
• Treat everyone with respect
• Recognize opposing viewpoints without denigrating them
• Discuss issues rather than argue

Do you have any suggestions on how to maintain civility in business negotiations?

Are you sure?

How sure are you when you walk into a business negotiation? Hopefully you are both confident of your negotiating skills and certain of your position.

First, you must be certain of your position, because how can you negotiate on issues you are not sure about? Can you negotiate on price if you don’t know the margins you are seeking to attain or the budget you are trying to stick to?

Second, you must be self-confident and be able to communicate your confidence. The other party will react to your degree of confidence. Not only is important to be certain, it is important to make sure the other party understands whether or not you’re certain.

Remember that confidence is communicated verbally and non-verbally.

If you say: “Absolutely, that is the best we can do” the other party will hear your certainty and proceed accordingly. However, if you say “It appears that there is no room to negotiate further on price” the other party is hearing that you are not 100% certain, and therefore may continue to discuss the issue.

Many of us have verbal tics like starting sentences with phrases like “I think” or “Honestly” or “Like.” Some of these verbal tics can communicate ambivalence. Pay attention to how you are saying what you are saying.

Nonverbal communication plays a large role in how others interpret our intentions, so how you act also communicates your degree of certainty. If you act nervously, the other party won’t trust your certainty or command of the situation. However, if you maintain good eye contact and appear calm, the other party will trust that you mean what you are saying.

Have you ever “lost” a business negotiation because of a confidence issue? Please share any stories about the importance of confidence.

Indirect Information

Last week, we discussed closed-door business negotiations, which can sometimes also be secret negotiations. In these business negotiations, both parties want to keep the content of their discussions quiet. However, sometimes information between the two parties is also kept quiet, or off the record.

In any business negotiation, parties communicate directly at the table, yet there may also be indirect communication going on. Indirect communication supplements what is being said at the table. Indirect information can help provide better perspective and build a stronger negotiation position.

Indirect information is exchanged for many reasons:

• To keep up appearances
• To share conflicting motives
• To build kinship between the parties
• To make information flow easier
• To avoid loss of face
• To allow organizational and personal goals to be changed quietly

You may be wondering how indirect information is exchanged. Sometimes information is exchanged outside the room where the negotiation is held, and sometimes, information is exchanged in a more surreptitious manner. Here are some indirect communication channels:

• Secret discussions
• Rumor leaks
• “Lost” memos or key documents
• Third-party intermediaries
• The media

How have you dealt with indirect information? Have you found it useful or not useful in your negotiations?