Tag archive: bargaining-power
Creative Way to Split the Difference
There are many ways to split the difference when the gap between negotiators is not too large. The most simple splits consist of dividing the difference in some way that cries out, “If not here, where?” A split in half where there are two parties involved, or in quarters when there are four, makes for an uncontested arrangement most times. Splitting the bonus pool by revenue produced can help lead a bonus committee to consensus and closure. I have been in negotiations where flipping a coin determined final distribution and outcome. Simple solutions facilitate agreement.
Splitting the difference even in a simple way does have a danger built in. The next time someone on the other side says, “Let’s split the difference,” watch out. Before you are tempted to say “Yes,” calculate how much of the difference you will give away by signifying agreement. It may be, as Shakespeare once said, “by much too much.”
Sometimes, on the other hand, complexity is called for. As we said earlier, satisfaction is what we negotiate about, not dollars, goods or services. What is interesting about satisfaction is that is has a time dimension. Some prefer their satisfaction early or in advance while others prefer it to occur far in the future. Changing the time shape of satisfaction has the power to bridge bargaining gaps. When indecision or impasse looms, one way to avert it is to customize the shape of satisfaction and dissatisfaction to fit the specific time needs of each side. The calculus of satisfaction differs from person to person and from one time period to another.
Negotiated benefits, rewards and work contributions can be provided all at once immediately, later or at the end of performance depending on a person’s preference, age and lifestyle. Some now, more later and the balance at the end may suit some negotiators more than others. Benefits may also be offered over a period of time, then triggered to increase or decrease by some event, index or performance milestone later.
If these creative approaches fail and a gap remains, it can prove to be useful to establish a joint committee to study the matter and make a recommendation. Committee decisions often serve as the catalyst that bring the disputed sharing formula to rest.
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More Collaborative Both-Win Tradeoff Ideas
The following tradeoff areas that follow offer opportunities for mutual reward when used in collaborative Both-Win® negotiating.
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- Partnering for Both-Win® synergy. Partnering of suppliers with their customers has proved enormously successful. When suppliers integrate their resources, needs, information and relationships with those of the buyers, they created efficiencies that lower costs and benefit both in many ways. Partnering is as applicable inside the organization as it is between buyers and suppliers. Two parties, united together as partners, work collaboratively to create new approaches to doing their jobs. They will succeed because they can then combine their assets, ideas and talents to better fit and meet their mutual and individual needs and problems.
- Systems, procedure or process flow tradeoffs. Every system, process or way of doing something is to some extent obsolete or not serving the original purpose it was designed to do. Savings in unnecessary work or material can always be found if we study the process or procedure carefully and modify it to serve current conditions and needs.
- Worldwide outsourcing tradeoffs. Outsourcing, even on a global scale, is now feasible for a wide variety of needs and services at little risk. When faced with what appears to be an intractable difference in cost or delivery, both sides would be wise to consider outsourcing part of the work they do for others.
- Transport and shipping tradeoffs. Moving and handling costs constitute a surprisingly large part of total cost even in day-to-day workplace interactions. Technology is changing how we interact to get work done. Opportunities for mutual gain reside in looking closely at how things and people in the office move about. On a worldwide stage, transportation and shipping costs are an enormous part of total production cost. Fierce competition between shipping between transportation companies is exacerbated by volatility of oil prices and carrier supply; these costs demand considerations. The high cost of transportation and shipping make this a prime target for creative Both-Win® success.
- Cash management tradeoffs. Most individuals and companies handle their cash flow needs poorly. Cash management tradeoffs balancing revenue and outgo deserve a higher place in the budgeting process than small organizations give it.
- Insurance tradeoffs. Corporations pay in advance for possible untoward events that often have a small or modest probability of happening. The ratio of what we pay for security and how much risk we should be willing to take is amenable to constant analysis.
How to Move a Competitive Negotiation into a Collaborative Mode
Two people get together to iron out differences they wish to reconcile. Before long they inadvertently say or do something that adds distance to the gap separating them. Compromise generally serves to bring them closer to agreement but often fails if the gap is large or one of the two has not been tactful in expressing him- or herself.
Settling differences in an oncoming impasse like this can best be accomplished if the parties change their mode of dealing with one another. Each by now is exhausted; they have said all they can about the remaining difference and moved as much as deemed responsible or wise. Further jousting for concessions seems futile. A change in strategy is called for.
Collaborative Both-Win® negotiating is the way. The magic of this approach is that it transforms their bargaining attitude from competitiveness to cooperation, from self-centeredness to mutual gain. The following segues that follow work well in moving a competitive negotiation to one in which joint effort between parties takes center stage.
The “Let’s find a better way for both of us” approach. This approach is simple and direct. Just to suggest to the other party that a better way for both is available if we look for it together.
The “Ask for something in return” segue. The hidden power of asking for something in return when you make a concession is that it provides negotiating space for further talk and opens previously unexplored avenues for agreement.
The “Ask the other side for help” segue. When in doubt about what to do next or how to bridge the gap or difference, ask the other party to suggest ideas. You’ll be pleasantly surprised at how please they will be to help in most cases. The existing difference may be as unpleasant to them as it is to you. They may know about avenues for potential mutual gain that you are not aware of.
The “Ask higher authority on their side for help.” Experiments confirm that people in authority like to help others when requested to do so in a courteous manner. Often they know more about solving a problem than those at lower levels because they have had experience with such matters already. Their advice may well become a point for further modification and collaboration with the other side because someone at a higher level in the organization had a role in suggesting it.
The “Krunch” segue is appropriate when you make an offer or concession to the other that they reject with the remark, “You’ll have to do better than that.” This objection, which I call the “Krunch,” is hard to handle, both because it is so general and because it always appears so firm.
The best way to respond is to move the discussion from the general to the specific. “What do I have to do better than?” is a “help me” question that sometimes elicits information useful to further collaboration, especially when the relationship between parties is good.
In my next post, I will give more examples of Both-Win® segues to help move the negotiation toward a collaborative mode.
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How Expectations Rise and Fall in a Negotiator’s Head
Almost everybody going into negotiation has some target or goal in mind. It may be based on reality or merely a hope for the best. It may be based on what the other party can live with or be far beyond their capacity to say “Yes.” The validity of the estimated target will, in the end, be determined by the give and take of the process, the balance of power and each side’s perception of it, as well as the bargaining skill of those involved.
Targets in a negotiator’s head are not set in concrete. They rise or fall with the tides of success or failure based upon what is said and done at the bargaining table. Goals are set. Feedback follows. Every demand, concession, threat, delay, fact, explanation, deadline, or remark has an effect on the picture in a negotiator’s head. The target moves up and down with each work and each new development.
How expectations change is important to those who negotiate and is summarized below:
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- Every concession can serve to raise the other side’s expectations. Every “No” has the opposite effect. Small concessions, reluctantly and slowly given, are not likely to raise expectations very high. Large concessions do.
- It takes a number of small failures to move expectations down. Saying “No” just once is not enough. It may take many “No’s” to convince the other that you mean it. That’s why persistence and repeating your viewpoint helps move the other to your position.
- Research shows that those who ask for more in negotiation generally achieve more but they also suffer greater risk of deadlock and possible relationship risk. Good backup for your position and an open discussion of reason reduces those risks.
The Firm “No” Response
There are people who respond to any new idea presented to them or any opening offer in negotiation with a firm “No.” They usually do so with a view to reducing the other person’s expectations or by ending the talks as quickly as possible. Of course, both are legitimate negotiating objectives, even if they are not conducive to fostering better relations between the parties.
This firm “No” approach is sometimes used by buyers in commercial negotiations when they have considerable power and wish to leverage that strength to achieve a goal they have already decided on. The seller is told, “This is my final offer. Take-it-or-leave it.”
If you are going to respond to someone’s idea or position with a firm opening “No,” minimize the hostility they will surely feel. Never use the phrase, “Take-it-or-leave-it.” It is unnecessarily incendiary and invites retribution. When a firm “No” is backed by facts, good precedents or history, it is less onerous. So also when the “No” is defended by existing organization policies, procedures or published constraints. Yet, however politely a firm “No” is rendered, it will be resented.
Time is also a factor in determining how the “No” will be accepted. If the other person is provided adequate time to present and defend their position or idea they will not resent the “No” as much. Whether a firm “No” is expressed early or late in the talks makes a difference. A “No” expressed late in the bargaining process is apt to be received with less bad feeling.
What can you do when the other opens the talks with a firm “No” to your “great” idea or “reasonable” offer? My advice is: test the rejection hard. It may not be as rigid as it appears.
Several options are available. The best, I believe, is to broaden the nature of the deal under discussion. Expand the problem or differences to be resolved to include other matters of interest to both sides such as service, work product or quality considerations not covered by the “No” response.
In addition to broadening the matter or issue, you may test the “No” by using one of these ideas:
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- Saying the words, “But it doesn’t apply in this case,” usually opens the door to further interest on the part of the other side. They will wonder why so you will have to spend time preparing for the “Why” and come up with some reasonably good reasons. The negotiating dialogue that follows will allow you to also discuss other aspects of your basic position.
- Another approach that works surprisingly well is to continue speaking as though you never heard the “No.”
- Find a face-saving way for the person who said “No” to retreat from their position. In a strange way, the person who says “No” in a rigid way has trapped themselves into an awkward, inflexible position. They need a good way out or they won’t retreat.
Quick Deals are Dangerous
Research indicates that quick negotiations, while dangerous for both sides, are worse for one party than the other. Those prepared win better settlements in quick negotiations, as do negotiators who are more skilled and possessing greater bargaining power. Quick deals should be abstained from where a fair and reasonable outcome is sought and creative collaborations is the goal.
Quick negotiations are risky and best avoided in the workplace. If at all possible, hurried talks should be postponed for later when ample time is available. Matters of compensation, budget allocations, performance and schedule commitment are too important for both sides to be settled under the pressure of time. Your career and reputation are at stake if the agreement reached leaves inadequate resources or time to effectively complete the assignment under consideration.
Mistakes happen when people fail to give themselves enough time to process information and make thoughtful decisions. Omissions are common. You think of all the brilliant things you should have said or asked for after the meeting has taken place.
Contingencies that mar plans often occur but are overlooked. Simple calculations go wrong in quick deals. Under the pressure of quick decision-making, listening is difficult and sensible rebuttals are hard to formulate. When time is short, opportunities for collaboration are absent. Discovering creative alternatives together becomes very unlikely. Quick deals lead to outcomes that are at best marginal, and at worst disastrous.
It is far better to set aside enough time for uninterrupted talk by both sides, enough time for all viewpoints to be aired and for creative alternatives to be explored. Little is gained by reaching agreements that fall apart or fail to provide the satisfaction sought.
When time is short, have the courage to face into it. Renegotiate another meeting. There is no rule that says you cannot meet later. A change in time or venue would be far better than a quick deal that results in shortsighted settlement.
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Getting Off to a Good Start
Negotiations that get off to a good start are apt to end better. I’ve attended negotiations where the atmosphere was so loaded with hostility and distrust that fruitful bargaining was not possible. Moments after the parties met, recriminations for past shortcomings dominated the discussion and triggered deepening anger. Further talks to quiet both sides fell on deaf ears.
It’s helpful to open with “non-task” talk. Talk about anything that will establish modest ties together. Speak of the weather, a recent sports event, a current movie, a breaking news story on the internet, or something funny that someone on television said. Also helpful is small talk about mutual friends and acquaintances that open the relationship door between parties in non-threatening ways. Inquiries as to the health and welfare of family members and children are usually welcome if done with discretion. “Non-task” talk is not a waste of time as some think; it is a catalyst that makes difficult bargaining flow more smoothly. Don’t be surprised though if you occasionally have to deal with someone who won’t abide with small talk. They are strictly business. They may not appreciate or reciprocate your attempts to establish rapport.
“Non-task” conversation is an important part of the negotiating process. The paradox is that it is all the more necessary when the parties do not enjoy a strong relationship prior to entering into negotiations. When they already have a good relationship, light talk develops in a natural way and smoothes the path to agreement even when the differences are wide.
Another action we can take is to make it easier to negotiate is to break bread or meet with others on a regular basis long before difficulties occur. Good rapport with associates is something we should deposit in our relationship savings account. When too much time passes between each lunch it becomes hard to re-establish the level of rapport that existed earlier. “Let’s meet for lunch next week” is not nearly as good as, “Let’s have lunch on Mondays every two weeks.” Regularity is important.
It is also good to open talks with verbal assurances about your strong desire to reach a fair and reasonable agreement. Bill Van Allen, a superb high-level executive and negotiator, always opened his negotiations by personally assuring the other side of his regard for their relationship and of how much he valued a fair and reasonable settlement. He told them in no uncertain terms that he was open to anything they had to say and would do all he could to achieve a mutually satisfactory outcome. His message was simple but important: higher management expected the negotiators to maintain their strong relationship and to reach a fair agreement.
Being treated nicely stays with you during the negotiation and long afterward, whatever the outcome. Contrast that with those who negotiate by tactlessly saying what they please, making you uncomfortable or criticizing everything you say. There are people who negotiate that way, especially when they have power. Such discourtesy and intimidation have no place in the workplace where relationships are so crucial to long-term success.
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Good Notes and Frequent Summaries Build Power and Foster Amity
One of the smartest managers I ever worked for did something few others did. He kept better notes at meetings than anyone in the room. Then, before the meeting ended, he summarized from his notes whatever they had discussed and agreed to. He followed up in a short time with an email summary to each attendee inviting their comments. When a dispute later emerged about what had been said or settled, his notes and summary tended to prevail.
Agreements are rarely written and signed by the parties in internal negotiations. Written agreements are, of course, common in external dealings. Yet, the problems in both internal and external bargaining are similar. Misunderstandings are common. People are so busy thinking about what they want to say they don’t listen to what the other is saying. Words, ideas and responses come in a torrent, too fast to comprehend or integrate fully. Where different technological specialties and expertise are involved, what is said to one may be clear to them but as opaque as a foreign language to the other. Good notes and frequent summarization of where the parties stand reduce the risk of serious argument later.
We often forget how important good notes can be to a negotiator. Though informal rather than legal, they are nonetheless a source of legitimacy and power. Every negotiated agreement involves actions to be taken in the future by each side. Problems often arise. Good notes help resolve them.
It pays to keep track in writing of the things you do on an ordinary day to help make an agreement work well. Special positive actions on behalf of the other party should not be taken for granted or discounted in value. Unless you make note of these good deeds they are likely to be forgotten later when the contract or agreement is renegotiated or when a problem arises. Good notes add strength to your position. They are like money in the bank.
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