Tag archive: bargaining
“Aim higher to do better” Revisited
It always amazes me when something we have been teaching as a simple truth for a long time becomes someone else's revelation. From Business Week, September 10, 2007: "A new study conducted by professors at leading MBA programs suggests that most negotiators don't realize how much they are leaving on the bargaining table." (Because they didn't aim high enough) The professors divided nearly 300 students into buyers and sellers of motorcycle parts. After three separate negotiations of 45 minutes each, the professors compared the outcome with what each party had predetermined to be their limit. "The professors discovered that each side underestimated how much the other party was willing to bend, with the result that each party reckoned it got the better end of the negotiation." "The buyers, for instance, thought they had hit the seller's bottom figure, when in fact they still overpaid by a wide margin." The professors logically concluded that you should lead with an aggressive bid, and then give in slowly. "…the costs more than outweighed by the possible benefit." This is always good advice as long as we remember that aiming higher takes into consideration the current market place, the nature of the relationship and does not mean to aim stupid to do better. Jim SauerweinRead more »
Negotiating During Economic Turbulence
During times of economic turbulence (LIKE NOW!) most negotiations get tougher. Don't reduce your bargaining power by making mistakes. Now is not the time! Here are eight common negotiating missteps people make. Despite their good intentions "not to do that again," mistakes like these happen over and over. Don't fall into these negotiating traps!Read more »
- Do not underestimate your negotiating power. Most people tend to have more power than they think. Make a systematic analysis of your power -- understand your strengths. Your negotiating power rests on a foundation of more than just competition or financial matters. Your commitment, knowledge, risk taking, hard work, and your negotiating skill are also real sources of power. Don't assume the other party knows your weaknesses. On the contrary, assume they do not, and test that assumption. You probably have more power than you think.
- Don't be intimidated by status. We all become so accustomed to showing deference to titles and positions that we carry these attitudes into the negotiation. Remember that some experts are superficial; some people with PHD's quit learning years ago; some people in authority are incompetent; a specialist may be excellent in their field but without skill in other areas; learned people, despite high positions of power and authority, sometimes lack the courage to pursue their convictions, or sometimes don't even have a strong conviction on the issue being negotiated.
- Remember not to be intimidated by statistics, precedents, principles or regulations. Some of today's decisions are being made on the basis of premises or principles long dead or irrelevant. Be skeptical. Many premises or principles may not apply today -- or do not apply for your specific situation. When necessary, challenge them!
- Do not forget that the other party is negotiating with you because they believe there is something they can gain by being there. You may discover that this negotiation, no matter how small, is part of a larger framework in the other party's objectives. This fact alone may provide you greater negotiating power that is apparent from the situation. Be positive in your approach. Assume the other party wants an agreement as much as you do. If it appears they do not -- find out why.
- Don't focus on your own problems or your possible losses if a deadlock occurs. In all likelihood, there are consequences for the other party as severe as your own. Concentrate on their problems and issues. These will reveal opportunities for possible ways to agree.
- Most negotiations require some concession making. Don't set your initial demands too close to your final objective. There is sufficient evidence to conclude that it pays to start high. Don't be shy about asking for everything you might want and more. Many times your demands are too modest, or too easy to achieve. The other party may not know what they want, or may have a set of values quite different from your own. Remember never to give a concession without obtaining on in return. Don't give concessions away free -- or at least without a thought provoking discussion with the other party about what they are getting. A concession granted too easily does not contribute to the other party's satisfaction as much as one that they struggle to obtain.
- It is a mistake to assume you know what the other party wants. It is far more prudent to assume you do not know, and then proceed to discover the realities of the situation by patient testing and discussion. If you proceed to negotiate a deal on the basis of your own untested estimates, you are making a serious mistake.
- Never accept the first offer (even if you like it). Many people do. There are two good reasons not to: First, the other party is probably willing to make some concessions. Second, if you do accept the first offer, there is a distinct chance the other party will feel that their offer was foolish and they should have asked for more. Immediately their satisfaction with the agreement will be reduced, and they may find ways to spoil the agreement later. In either case, the negotiator who takes the first offer too fast makes a mistake.
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.Read more »
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:Read more »
- 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."
Forestalling a Breakdown in Talks
Let us consider some ways to forestall breakdowns before they harden into long-term bickering or wars. The suggestions that follow will help get stalled talks back on track. They allow a negotiator to rebuild negotiating space for talk without the loss of face or bargaining power for either side.Read more »
- Change the time shape of performance. Not everything needs to be done now, next month or next year.
- Get the help of someone both sides can trust and respect to mediate the difference. That’s what the Chinese and Japanese do so effectively.
- Alter the risk factors that make it harder for one side or both to say “Yes.”
- Change the scope of work. There is always some room for give and take in the work to be done or the way it is done. Getting into the details serves to enlarge negotiating space and point the way to economies of effort.
- In most negotiations, as the end approaches, the sum of settled issues generally outstrips those that are not. Nobody at the table relishes the idea of walking out after so much has been accomplished. It pays to recapitulate all matters already settled and those still open. The balance usually favors moving on to closure.
- Determine if the gap that separates you can be bridged gradually: a little now, more later and completely next year.
- The best way, by far, to break an impasse is to collaborate with the other person to search for and discover a better arrangement for both sides. Change the mode of negotiating from the conventional competitive mode to one that is collaborative and Both-Win®; that is, coming from an essentially self-centered mode to one that fosters mutual gain.
Last Minute Hitches
If there is one thing you can count on in negotiation it is that last-minute hitches will arise. The negotiation so close to closure will show signs of unraveling before it is signed. Why are last minute hitches and how you handle them so important to those who negotiate in the workplace? It is because such hitches add enormous stress to the negotiating process as closing approaches. People respond to stress at the bargaining table by making mistakes, missing nuances and omitting important details. Experiments confirm that even experienced negotiators make larger concessions than usual as talks move to conclusion. Negotiators who anticipate last-minute hitches are less likely to be stress by them or fearful that the desired agreement will drift away. They recognize that as final agreement gets closer, works and phrases take on different meanings. They define duties, obligations and performance standards in specific rather than general ways. Suddenly, both parties at the table know that the words they choose define exactly who does what, and when, and how actual performance will be measured. Potential problems become visible as details are discussed and settled. These last-minute hitches and their resolution determine whether the final agreement will work or fall apart. Last-minute hitches, in my view, are natural and beneficial to reaching lasting and prudent agreements. They should be accepted by both sides as a necessary and positive part of the negotiating process; they should not, as is often done, be a reason for accusing the other side for going back on their word.Read more »
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.Read more »
A Walk in the Woods
Some things are best not settled in the light of publicity or under the scrutiny of those at the table. Much of what is said in the negotiating room is said not to reach agreement but to prove to others that their views are being expressed and fought for. Off-the-record talks permit the opposing parties to tell the other what the real impediments to agreement are and why some issues are more important than others. Off-the-record discussions also set the stage for later accommodation at the bargaining table. In her ten-year research study of labor negotiations, Ann Douglas found that private talks between principal negotiators frequently preceded settlement. I had the same experience in customer-supplier negotiations. What we learned from each other during private meetings could not have been said in front of others. Yet it was what we learned “off-the-record” that closed the deal. Off-the-record talks foster movement toward settlement because the negotiators can talk about their personal feelings as well as their organizational constraints on a person-to-person basis. They can privately indicated a willingness to compromise or to exchange one issue for another. These informal moves toward reconciliation might be politically unwise if discussed at the table in front of others. There is a downside to off-the-record talks. Good negotiators know that not everything can or should be said off the record. They also know that some people, especially those with a strong need to be liked, talk too much in the privacy of a comfortable restaurant or under the gentle influence of good wine. Therein lies the danger inherent in a walk and talk in the woods.Read more »