Tag archive: united-states
How Haste Makes Waste in Closing
Henry Kissinger, our former Secretary of State, was widely recognized as a careful negotiator. But even he made some serious mistakes. One of his worst occurred when he wanted to close an agreement with the North Vietnamese four weeks before the 1972 presidential election. Kissinger wanted the deal, wanted it badly, and wanted it then and there. Marvin and Bernard Kalb in their book, Kissinger, described the closing this way: “In a grand rush toward the finale, there was simply not enough time to scrutinize the fine print and the numerous appendices of the draft agreement. The Americans were careless and permitted ambiguities to slip into the draft. If Kissinger had been negotiating with the Russians or the Chinese, he no doubt would have been meticulous about every syllable; but with the North Vietnamese, after more than three years of painful negotiations, he seemed more concerned about nailing down the deal than about making sure that every detail was correct-an attitude that played right into the North Vietnamese hands.” The United States paid dearly for Kissinger’s rush to closure. The North Vietnamese took advantage of every ambiguity to the great distress of our allies in the South. Several years later we were ignominiously driven from Vietnam without a shred of honor. If Kissinger can make a mistake like that, so can you or I. Whether you want the deal badly or not, take the time to cross the “t’s” and dot the “i’s.” Don’t just hope for the best as Kissinger did.Read more »
Use a Mediator
In Japan, mediators play a large role in buy-sell negotiations. Mediators, usually old friends of both, introduce buyer and seller. When the seller is ready to make a proposal, the mediator assures that the seller’s price, terms, specification and scope of work for the product or service to be rendered are in line with the buyer’s needs. There are few surprises for either party when these mediators do their job well. During the performance phase, it is the mediator who helps settle disputes. If prices must be changed because the seller is losing money, or if the buyer has reason to need a lower price, it is the mediator who harmonizes the divergent viewpoints. Disputes between buyer and seller about property rights, sharing of production improvements, quality of standards or layoffs of employees are resolved with the mediator’s help rather than by law. Such disagreements rarely go to court in Japan, which has far fewer lawyers than the United States. Mediators are catalysts who maintain the state of harmony between Japanese suppliers and their customers. They facilitate agreement in several ways:Read more »
- They can sell new ideas to each side more easily that if the same ideas were proposed by either party alone.
- They can cause both buyer and seller to ask themselves: “What decision do I want the other side to make and what must I do to help them make that decision?”
- They can suggest realistic expectations.
- They can invite both parties to talk once more after they walk out.
- They can listen privately as each side expresses controversial ideas without angering the other.
- They can stimulate mutually beneficial win-win creative thinking.
- They can listen in private to on side expressing distaste or distrust of the other without angering the other side.
- They can suggest compromise positions that either party alone would be afraid to propose for fear of weakening its bargaining position or power.
Intimidation by Financial Hostages and Other Hostage Types
Hostages are collateral in negotiation. They can be traded for something else. The United States learned in Iran and Lebanon that televised pictures of Americans held hostage by a foreign power, no matter how small or weak, have an enormous impact on our subsequent actions. The hostage in business is rarely a person but something else of value. It may be money, goods, property, secrets or a company’s reputation. In effect, the hostage holder says, “If you don’t give me what I want, you won’t get back what I’m holding.” Hostages in the world of business come in various shapes and styles. I once saw a movie in which a house was held hostage by a tenant who wouldn’t leave and wouldn’t pay the rent no matter what the landlord did. When the owner threatened legal action, the tenant threatened to tear up the place. In a similar but legal way, tax authorities tie up a citizen’s bank account and then negotiate the merits of a tax delinquency case. All of us have heard of car mechanics who refused to release an automobile until the bill in dispute was paid by certified check. When the other side holds something we need, they limit our ability to deal freely. We are inhibited from taking actions we might normally pursue. The hostage taker gains the initiative. As Presidents Carter and Reagan learned in dealing with Iran, it’s never easy to bargain with hostage takers. But there are countermeasures we may employ which help us resist those who kidnap our assets and hold them for ransom. We can raise the stakes by taking hostages in reprisal. We can forfeit the hostaged asset. Or we can place it in greater jeopardy by taking aggressive action that deprives the hostage taker of things they need. We may go to court to settle the dispute, or resort to mediation or arbitration. Or we may do nothing and hope that holding the assets hostage may, in time, cost the holder more than they are worth. Of course, the best way to deal with hostage problems is to anticipate them in advance. Introducing severe penalties into the initial contract will make it less profitable for the other side to hold your assets or property. None of these defenses is easy or inexpensive. That’s why hostages, or even the threat of hostage taking, is so intimidating.Read more »
The nineteenth century writer Balzac once described a negotiation between a French nobleman and a peasant. The peasant got the best of the deal for a strange reason. The high-born nobleman felt it was demeaning to bargain with a peasant who smelled so badly. The peasant, sensing the reluctance of the nobleman, asked for a high price and stood fast. With his head held high, the nobleman acted as if all this haggling about price was of little matter to him. With as much grace as he could muster, he gave in to the peasant’s full asking price. Social class can affect the outcome of negotiations. Even in the United States, people tend to be intimidated by those who are wellborn. In Europe this tendency is worse. Those in higher social classes are accustomed to deference, and it serves them well in business negotiations. Especially if, unlike the nobleman in Balzac’s story, they go into talks well prepared and determined to bargain. Americans are more responsive to social status than to class. While we do not have an aristocracy as they do in Europe, we do have a status system replete with its own symbols of power and prestige. Men and women who have achieved power and prominence carry this strength to the bargaining table, as do those who are very rich or very successful. I am reminded of Tevye, the poor milkman in “Fiddler on the Roof,” when he sings to his horse, “If I were a rich man, people would come to me asking questions that would cross a rabbi’s eyes. It wouldn’t matter if I got it right or wrong, because if you are rich, people think you know.” Once I gave a series of negotiating seminars to bankers. I was surprised to learn that, though most of those attending were younger than thirty-five, many were vice presidents. “Why do many young vice presidents?” I asked the owner of the bank. “Good for business,” he said. “Young loan officers are always dealing with older executives in the firms we lend money to. We have found that these older executives treat our loan officers more respectfully when they carry the authority of vice president.” In negotiation, a higher level executive- a CEO, President or Vice President-exerts more influence that those lower on the pyramid. Like status, educational level and wealth, a negotiator’s place on the organizational chart plays a hidden role at the table. If you are apprehensive about negotiating with people more powerful, higher on the organizational chart, more educated or wealthier than you, there is a good way to cope. Recognize that you will be intimidated and compensate for it by being as well prepared as you can be. The saving grace is that these “higher types” are less likely than you to be knowledgeable about the nitty-gritty of the issues in contention.Read more »
The Negotiator’s Bill of Rights-The 4th and 5th Amendments
The Fourth Amendment in the Negotiator’s Bill of Rights is: You have a right to be a broken record. Sooner or later people run out of new things to say in negotiation. At that point some are embarrassed to say again what they said before. My advice is, don’t be afraid to repeat yourself. Many experiments confirm that an audience will retain more of what the speaker says if it is repeated. The more the speaker repeats, the better it is remembered. When you do not know what to say next, say what you said before. Say it again and again and again. I was once in a negotiation with an Iranian manufacturer who sold industrial lighting fixtures. What I remember most about his was that he was the most persistent broken record I ever met. Even when I repeatedly said “no” to the many things he asked for, that didn’t stop him. He would return again and again and again to the same issue after talking about something else for a while. He made the same arguments over and over again as though I had never heard them before. He was the perfect “broken record.” After the negotiation was over, we became friends. I asked him why he repeated himself so much. He laughed and said it was common in Iran and also worked well for him in the United States. I have since found it easier to be a broken record. When I don’t know what to say next, I shamelessly say what I said before, said before, said before. The Fifth Amendment: You Have the Right Not to Answer Questions and You have a Right Not to Know the Answer People who feel that they should know the answer to every question asked of them place themselves in a difficult position. They deprive themselves of the right to say “I don’t know” or “I will try to find out.” The Negotiator who thinks he must know almost everything about the subject at hand usually talks too much and, in doing so, is likely to damage her position rather than help it. If you are lucky enough to run into someone who is so insecure that he feels he must answer every question you ask, be patient. He will soon tell you more than he should. You have a right not to know the answer to a question. You also have the right not to tell what you know if you do know the answer. You have a right to give half an answer or none at all. You have a right to say, “I’ll look into it,” rather than shoot from the hip with a quick statement. A negotiation is not a test. The right answer may be a partial answer, a delayed answer or no answer at all.Read more »
Authority to Negotiate-Some Contrasts Between Cultures
While there are large variations within each culture, my studies indicate that each society has a “stream of tendency” in the matter of authority styles. North American negotiators tend to have broad authority to close agreements. In contrast, French negotiators have considerably less. The French management system places greater emphasis on central decision-making and authority rather than individual freedom to act. They are more bureaucratic in structure. Greater constraints are placed on their negotiating teams. This often leads the French to escalate authority to higher executive levels before a final agreement is signed. British and German negotiators resemble the North American authority style more closely than the French. While limited authority tactics are employed in all cultures, the tendency in the United States, Great Britain and Germany is for negotiators to enjoy broader authority to reach agreement than French men and women in business. In contrast to North American negotiators, Chinese negotiators have virtually no authority to make final decisions. They begin the talks by saying that they have full authority, but it soon becomes apparent that this is not so. Authority in China, especially when you are dealing with the government or large enterprises, is buried in the bureaucracy and hard to identify. Non-Mainland Chinese business people also bargain with far less authority than North Americans. Chinese decision-makers are rarely at the table, in contrast to Western negotiators, who usually have the power to make decisions on the spot. Compared to North American negotiators, the Japanese have very little authority to negotiate. The Japanese place great emphasis on consensus building and commitment to targets rather than individual freedom to act. If Japanese salespeople are under pressure to lower a price or change the terms of a sale, they are expected to form a new consensus and receive higher approval. The decision-maker is rarely, if ever, at the table and is usually hard to find. The cultural differences we have discussed are not absolute. They represent, at best, a “stream of tendency” with respect to authority. Differences within each culture are perhaps as great as they are in ours.Read more »
Financial Authority Limits That Move Others Toward Agreement
Everyone and every organization, no matter how rich, including the United States government, suffers financial limits. It is this fact which makes such limits credible. When a buyer says, “I can’t pay more than $10 each because that’s all there is in the budget,” or a rich man says, “I can’t lend you the funds at this time because my money is tied up,” we tend to understand because all of us have suffered budget and cash flow problems at one time or another. Howard Hughes was a billionaire when few others were. Like many wealthy people, Mr. Hughes’ personal dealings were far different from his business ones. Hughes imposed few financial limits on himself when it came to his personal life. When Hughes wanted to buy a yacht he usually paid the asking price without bargaining. He cared about having the yacht available for a weekend date but didn’t seem to care a bit about the thousands he might easily shave off the price. Where business was concerned, however, Hughes ran his multi-billion dollar empire with a dollar limit so low that even a small businessman would have found it cumbersome. Every purchase over $10,000 had to be approved. Can you imagine how often Hughes buyers used this authority limit to play a part in bargaining with vendors? Many transactions were set below the $10,000 limit just to avoid the delay and uncertainty of waiting for approval. The approval limit played another role as well. Not only did it affect how a buyer would deal with vendors but how they would explain their purchasing decision to management. Although the $10,000 limit was absurdly low for a business of this size, the principle of setting a financial limit was important to Hughes. He believed that a company should structure its financial limits to conform to its purchasing and management control strategy. These limits were designed to provide its negotiators with tools to make it easier for them to say “no” or to delay a decision when delay was desirable. Below are financial limits that I, as a negotiator on the selling, buying and management sides of business, have been glad I had when dealing with others:Read more »
- Budget limits.
- Standard cost limits.
- Capital versus expense limits.
- Small purchase limits.
- Petty cash limits.
- Credit amount limits.
- Credit time limits.
- Advance payments limits.
- Progress payment limits.
- Quantity discount limits.
Some Time and Work Differences Around the World: How it Affects Negotiations
There are twenty-four time zones in the world, four of which fall in the continental United States. Anyone who has lived in Los Angeles and played phone tag with businesses in New York knows how difficult it is to deal with just four time zones. Most of us office types work from nine to five. By the time we in California get to work at nine, our counterparts in New York are going to lunch. When they go home at five, it’s only two in Los Angeles. Our communication window is only two hours. Less if they take breaks during the day. We live in a global economy. Americans do business with people in China, Pakistan, Greece and Great Britain. Germans do business with Russians across six time zones. Italian cloth is sold in Singapore and Beverly Hills. Can you imagine all of the telephone tag that’s going on as people negotiate with each other over 24 time zones? It’s even worse than that. Lunch starts in Spain at three, in Germany at one and in Norway at eleven. The Norwegians start work at eight, the Swiss at seven, the British and Turks at nine thirty, the French at seven or eight. The Germans go home at four, the British at five thirty and the Italians at two-but they work on Saturday. When we add cultural work day differences to the different time zones, we have the makings of a communications nightmare. New technology will help, but not enough. What can be done? We can incorporate email, Internet and videophone systems into our work stations. We train our people to waste less time. We can go on the metric system and promote international work standards. We can try to develop an international commercial code to settle disputes. None of these improvements will be easy. For a long time we will have to continue to do business as we are already doing it. The likelihood of mistakes, omissions, misunderstandings and misinterpretations in international bargaining will surely increase until we get a better handle on time and work differences. Time is money. Few people are more aware of this than Americans. They rush from here to there making the most of the time they have. But there is a problem. In negotiation the expression “time is money” means something else. It means that the more time you give to a negotiation, the better both parties are likely to do, and the better you will do. When Americans go into a bargaining situation, they want quick results. Other cultures take lots more time. They seem to know better than we do what “time is money” really means as it relates to the negotiating process. They know it means taking the time to get the story and making a both-win deal.Read more »