Negotiation Space

First, let’s define “shill.” Shill is both a verb and a noun. As a noun, shill has two definitions according to Merriam-Webster:

1)       One who acts as a decoy

2)       One who makes a sales pitch or acts as a promoter

By extension, the verb shill means to promote or to act as a spokesperson.

What do shills have to do with business negotiations? In negotiations, shills are decoys being used to manipulate pricing and interest.  According to Dr. Chester L. Karrass, shills are used by both buyers and sellers to:

• Establish a market price
• Stimulate interest in the product
• Create competition

Many times, shills are used to test reactions to price. They are also used to reduce expectations.

Some shills are unethical—like the ones that are planted by a seller to establish an artificially high price. However, some are ethical. Following are some examples:

• Sending requests for proposals to many sellers even when only a few are qualified and making sure all competitors know about the others.
• Negotiating with two companies at the same time, in different rooms
• Showing a prospective buyer that other buyers are touring the facility
• Telling the buyer that price are likely to rise soon as shortages develop

As with many negotiation tactics, the best countermeasure is to be skeptical and think that things are not always what they appear to be.

Have you used a shill? Have you been fooled by a shill?

Communicating effectively is crucial for an effective business negotiation. Your goal is to make yourself and your position understood, and this relies on your communication ability. In a negotiation, there is no room for communication breakdowns and misunderstandings.

How do you make your communication more effective?  First, assess your current communications skills. To do this, you could start with ten questions that Keith Rosen provides on the On AllBusiness.com post entitled: Ten Questions to Improve Your Communications Skills. Some of thee questions are:

• Did I respect the other person’s point of view? Did I have a reaction to what they said that prevented me from listening to their full message?
• Did the other person feel heard and understood? Did I acknowledge them?
• If I was asking someone to take a specific action, did I make my request clear?
• Am I speaking in a way that the other person can understand? Am I communicating in a way that will make the other person want to listen?
• Am I checking to see if the conversation was successful?

Once you have self-assessed, you can see what areas need improvement. Communication ability is something that can always be worked on and refined.

If you are aiming to be very concise and clear, you may want to read A Fighter Pilot’s Guide to Effective Communication on the Harvard Business Review blog, where Lt. Col. Rob “Waldo”  Waldman provides tips gained from his fighting days. Waldman writes:

In the heat of battle, where effective communication is critical, fighter pilots:

1. Brief the mission in order to establish objectives, delegate responsibilities, analyze threats, and review contingency plans.
2. Establish a communication (”comm”) game plan which confirms when and where to change frequencies.
3. Ensure positive two-way communication is established during critical elements of a mission.
4. Brief a back-up plan in case communication fails (known as “radio-out” procedures).
5. Debrief every mission to review lessons learned and reinforce training.

How do you work to improve your communication? Please share any resources in the comments.

Merriam-Webster defines perfectionism as: “A tendency to set rigid high standards of personal performance.”

According to Mosby’s Medical Dictionary, perfectionism is “a subjective state in which a person pursues an extremely high standard of performance and, in many cases, demands the same standards of others. Failure to attain the goals may lead to feelings of defeat and other adverse psychological consequences.”

Both definitions point to some problems with perfectionism: rigidity, extremely high standards, and when goals are not achieved, feelings of failure.

Perfectionism in business negotiations could be manifested as setting unattainable goals, looking for the perfect deal or agreement, demanding complete adherence to certain standards. Perfectionism cannot accept alternative solutions because only one solution is perfect. In other words, perfection in business negotiations may be unachievable, and even detrimental. Perfectionism may also be the enemy to win-win negotiation.

Can you recover from perfectionism and change your ways? The first thing you have to do is admit that your perfectionism may be a problem.

On Bnet.com, Penelope Trunk wrote “Perfectionism is a Disease. Here’s How to Beat It.” One of her suggestions is “allow yourself to be wrong in front of others.”

On the Harvard Business Review blog, author Peter Bregman says that if you want to be happier at work, you should avoid perfectionism, and he tells you how in the article “How to Escape Perfectionism.”

Bregman observes:

“Perfectionists have a hard time starting things and an even harder time finishing them. At the beginning, it’s they who aren’t ready. At the end, it’s their product that’s not. …

But the world doesn’t reward perfection. It rewards productivity. And productivity can only be achieved through imperfection. Make a decision. Follow through. Learn from the outcome. Repeat over and over and over again. It’s the scientific method of trial and error.”

Are you a perfectionist? Have you found it helps or hinders your ability to negotiate effectively?

Have you ever wondered why some people create complex solutions for simple problems? It is because people mistakenly think when something is more complex, it seems more intelligent. But we all know that simple generally works better: is easier to implement and can be easily understood.

In business negotiations, look for simple solutions—those that can be easily understood. Dr. Chester L. Karrass tells us that there is power in simplicity. There may even be savings in simplicity. Karrass recommends using round numbers. For example, if a seller is asking $252,100 for a house, why not offer a round number such as $250,000? That is an easy $2,100 savings. Harvard researcher Thomas Schelling has researched the power of round numbers and found that they more easily command attention.

Sometimes during a negotiation, the other party intentionally creates confusion by being complex. It is definitely harder to reach a fair deal when you are confused about the terms and other details. Simplify matters to avoid confusion, and to make sure everyone clearly understands what is being discussed. Ask the other party to clarify, to make it simpler.

Extend the quest for simplicity to your choice of words and language. Has anything ever seemed more convoluted and difficult to follow than a contract written in legalese? People will be nodding their heads and agreeing to things they don’t understand. Use plain language to ensure everyone understands what is being said!

Take it from Leonardo Davinci who said: “Simplicity is the ultimate sophistication.”

You are in the midst of a difficult business negotiation, and besides grappling with lots of details, the other party is acting aggressively.

What is your best response?

Is it to respond aggressively? Let things fly?

According to Dr. Chester L. Karrass, the best thing to do is to act unpredictably. Your strategy when dealing with a party that is overly aggressive is to mix cooperation with aggression. By mixing up your response to an aggressive party, you are communicating your desire to reach a mutually agreeable accommodation. You may respond in kind, but you may also be cooperative. The other party may also be thrown off balance because he/she will not know how you will respond.

Aggressiveness is an attitude, and as Dr. Karrass says, attitudes are hard to change because they are both emotional and rational. A negotiation cannot take place if the parties involved are not willing to change their attitudes sufficiently to be able to problem-solve. Dr. Karrass writes in his book The Negotiating Game: “It is therefore necessary to engage in attitudinal bargaining in order to assure that negotiations are conducted in a climate that results in final stable agreements.”

It is important you don’t confuse assertiveness with aggressiveness. To be assertive is to speak up, to make sure your viewpoint is heard. To be aggressive is to be belligerent. It is about trying to get your way by wearing down the other party.

How do you deal with aggressive behavior? What strategies and tactics have you used?

Power in negotiations
When we talk about power in a negotiation, what do we mean? Dr. Chester L. Karrass defines power in a negotiation as the ability of a negotiator to influence the behavior of the other party. He also lists eight principles about power:

1. Power is relative.
2. Power can be real or apparent.
3. Power can be exerted without action if the other party believes that an action can take place.
4. Power is always limited.
5. Power exists to the extent that it is accepted.
6. Power does not separate the ends from the means.
7. Power entails cost and risk.
8. Power relationships change over time.

Dr. Karrass states that these eight power principles are applicable to most if not all negotiating situations, from the diplomatic to the simple sales transaction.

But apart from the principles of power, you may want to determine the sources of power. Power can be drawn from various situations.

• Legitimacy: We give power to those who have genuine authority through ownership, tradition, and laws.
• Knowledge: The control of information gives power. The more you know about your product, your market and the other party, the better your power situation.
• Commitment: The degree of loyalty and commitment to an organization or a situation determines how much power you have. For instance, if you are non-committal about your job, you may not get promoted.
• Negotiation skill: Your negotiating skills can be developed and honed. The better your negotiation skill set, the higher your power.

What we can take away from all this is that power can be increased or decreased—it is not stable, plus, it depends largely on perception.

Perhaps Alice Walker put it best: “The most common way people give up their power is by thinking they don’t have any.”

Can you counter a counter-offer or a final offer? Most of the time, the answer is yes, you can always counter. In a few cases, the last offer or counter-offer is really the final one. The other party is not going to change course, but in most cases, especially if there really is the will to reach a mutually agreeable deal, the final offer can be countered.

Dr. Chester L. Karrass says that you should not accept the final offer at face value, and suggests you test it.

To test the firmness of the “final” offer you can:

• Determine whether the other party is hedging
• Don’t overreact
• Provide a face-saving way out from the “final” offer
• Consider walking out
• Introduce new alternatives and solutions

Counteroffers are common in real estate and in job searches. In an article from Essortment about home selling counteroffers, the author provides this advice:
• Don’t respond immediately
• Think flexible
• Know your bottom line
Read the article here: http://www.essortment.com/home/homesellingstr_supa.htm

A final offer is often a game of chicken, to see who will be the first one to blink. It takes a good deal of confidence to counter a final offer, but it may be worth it in order to get a deal that is more suitable. However, sometimes a final offer really is final. You will either have to test it or accept it.

How do you counter a final offer?

Unfortunately, in the world of business negotiations, not everyone plays nice. Some parties will bring out dirty tricks to help them “win” or perhaps hopelessly deadlock the negotiation to avoid reaching agreement.

You don’t have to fall prey to dirty tricks—the first step is to learn to recognize unethical or dirty negotiating maneuvers. If the other party uses one of these tactics or maneuvers, you are dealing with dirty tricks:

Bribery maneuver: The unethical use of payoffs or collusion for the other party to get its way.

Missing person: An authority trick where the person who has the ability to grant final approval is deliberately absent

Blackmail: Basically, a threat, this is an amount maneuver where the other party says pay this or else!

Scrambled eggs maneuver: Deliberately creating confusion by throwing lots of issues and numbers.

Low balling: Providing a really low figure—an offer too good to be true—just to get into a negotiation.

Personal attacks: Deliberately attacking someone to destabilize the negotiation.

Stretchout maneuver: Where one party will deliberately extend the negotiations over a long period, in order to reveal uncertainties prior to agreement.

There are dozens of other dirty tricks, ranging from deliberately providing the wrong information to engaging in bait and switch. To protect yourself, the best thing is to be prepared for the other party to engage in unethical maneuvering so you can recognize something is amiss before you get too far.

What kinds of dirty tricks do you see most often?

Here’s a scenario: You have been in a business negotiation for several days. There are ten items on the agenda and you have been reaching agreement on each of them, albeit slowly. You come to the tenth item and you can’t reach an agreement. What do you do?

• Do you agree to disagree on the tenth item but declare you have a deal?
• Do you call the whole negotiation off?
• Do you agree to negotiate on the tenth item at a later date?

This is a common occurrence since there will be items that are harder to agree on than others. But should you allow hard issues, or issues where you are deadlocked, derail the entire negotiation? Perhaps the best answer is that it depends on what it is and how big an issue it really is.

If you can’t agree on an item now that will keep most certainly keep coming up in the future, then you should continue to negotiate until you reach agreement. This is especially important if you are in the process of negotiating a joint venture. As is reported in “The Rules of Alliance,” a BusinessWeek article about an upcoming alliance between Intel and GE, joint ventures have to respond to compatible, mutually-agreed objectives. The article says:

“But there is a powerful temptation for two companies that are strongly attracted to each other to rush things along, like teenagers with hormones raging. ‘You get impatient. You want to get moving. You’re excited,’ says Louis Burns, vice-president and general manager of Intel’s Digital Health Group [...] Often during negotiations, Burns notes, if two sides agree on nine points and are stuck on the 10th, they’ll let the 10th one slide and agree to revisit it down the line, if need be. But for joint ventures, he warns, ‘the problem is that the 10th point will come and bite you in the backside later.’”

Read the article here: http://www.businessweek.com/managing/content/aug2010/ca20100826_270920.htm

If you are discussing something that does not have the ability to impact the entire scope of the agreement, or that is deemed to be minor, then you should agree to disagree on the one issue, and revisit it later.

What are your thoughts? Please share your experiences in the comments.

Is there a point where you stop negotiating? The emphatic answer is yes. There is always a point in a negotiation where you stop negotiating.

In the best case scenario, you stop negotiating when you get to your Both-Win deal, and everyone is satisfied. However, there are times when you are not getting to any resolution, and you have to know when to stop.

When either party has made a final (read unchangeable) decision: Say you have decided to terminate an employee. He/she needs to go because you need a different skill set from what this employee offers (or what he/she can learn). There is no more room for discussion. The employee may try to negotiate with you: he/she will learn new skills, he/she will try harder, etc. You have made a final decision and you are not looking to have your mind changed.

When you have reached deadlock: Sometimes parties reach an impasse and cannot reach an agreement. Sometimes one party uses deadlock as a tactic to test the resolve of the other party. Although sometimes deadlocks make it easier to reach compromise afterward, sometimes they just mean the negotiation is not going anywhere.

When there is a reluctance to reach an agreement. Sometimes parties enter a negotiation without really wanting to negotiate. It may be a requirement that they attempt to negotiate a deal, but there is no will to do so. If either party is reluctant to negotiate, stop negotiating because the negotiation is going nowhere!

When there is unethical behavior going on: Bad faith and lack of integrity will not create a solid, workable agreement. If there is unethical behavior from either party, you will need to clear it up or you won’t be able to continue your negotiation.

When either party is found to have no authority: If the party you are negotiating with does not have the authority to enforce a decision, chances are the agreement will not stand.

When do you stop negotiating? Please share your views in the comments.