Business Negotiation October 15, 2013

Negotiating with Full Authority-Why and When it’s Not So Wise

Full authority is a booby trap we set for ourselves, especially in our personal dealings. From a strategic standpoint, you are better off with limited or no authority rather than full authority. There are good reasons for this.

The trouble with full authority is that it boxes you in. When buying a car, it’s the salesperson who retains the flexibility of asking the boss’s permission to give or not give this or that concession or extra. It is she who finds it easier to change her mind while you, having full authority, feel constrained to live with what you’ve said. She has a built-in face-saving way out. You don’t.

It is the car salesperson who has time to think, while you feel pressured to say yes or no. She can more easily ask for advice from others, while you, being fully in charge, have nowhere to go. The fact that you have full authority skews the process of give and take in her favor.

Those with full authority should recognize that they are at a disadvantage and compensate for it. They should build time to rest, to think, to check facts and to touch base with others in the planning process. They must feel free to ask dumb questions and to say “I don’t know” as often and as casually as other people do.

Above all, the key to negotiating with full authority is to avoid pressuring yourself into a quick decision, even though you have authority to do so. In my experiments, one-on-one negotiators with full authority took less time to plan and settled sooner than those who had others at their side.

An acquaintance of mine, Sid, is president of a large company and has full authority to commit to business deals. Here are his suggestions as to how to escape from full authority:

• Sid is unafraid to tell the other party that, although he has authority to make an agreement, he wants to check with his vice-president or lawyer before doing so.
• When financial issues are involved, Sid buffers his full authority by stating that he feels obligated to clear the matter with the controller or bank loan committee.
• Sid often limits his authority by hiding behind company policy and procedures as a reason for delaying a decision or holding out for further concessions.
• Sid also disciplines himself to confer with other executives in his company who will be responsible for executing the agreement. This is important because they understand the ramifications of the agreement better than he does from an operational level.

The reality is that Sid recognizes the dangers inherent in full authority and compensates for it. His ego is strong enough to surround himself with credible limits. These are usually accepted by the other side as reasonable. Imposing these limits on himself helps Sid make intelligent decisions under pressure.