Bargaining For Advantage Summary

SUMMARY Negotiation is a four-step process, which involves preparation, information exchange, opening and making concessions and closing and gaining commitment. Learn exactly how to behave at each step by first understanding the six foundations inherent to negotiation: your bargaining style, your goals and expectations, authoritative norms and standards, relationships, the other party's interests and leverage. Find out why the most competitive people do not make the most successful negotiators and why you should set expectations instead of targets. Learn how to set the standards in your favor and how to navigate relationships in the negotiation. And, understand why the most powerful tool you have is knowing what the other side wants and using that to turn the tables of leverage in your favor. THE SIX FOUNDATIONS MAKING THE MOST OF YOUR PERSONAL NEGOTIATION STYLE Negotiations are polarizing; people tend to love them or hate them. A common misconception is that only competitive, cut-throat sharks can be successful negotiators. But you do not need to build up a thick skin in preparation for a negotiation. Social science experiments have shown that the most effective negotiators are people who like to collaborate and are good listeners who spend lots of time in preparation and research. One of the keys to effective negotiation is not how smart or clever you are, but how much you know about what the other side needs and wants. Depending on the situation, you may even consider taking an alternate route other than negotiation to resolve a conflict. Here is a chart that shows when you may need to progress to a negotiation situation rather than just using influence or persuasion to get what you want or need. If the situation does progress to negotiation, part of being prepared is knowing your own personal bargaining style. A short description of each may be enough to tell you which best describes you. Avoidant – Refusing to participate in a negotiation, whether out of anxiety, the knowledge that one does not perform well and so choosing an agent or preference for the status quo. – Readiness to equally split costs or benefits. Compromising Accommodating Competitive Collaborative – Willingness to bow to the other’s demands or preferences. – Drive to obtain more of a scarce for one’s own side. – Seeking mutually beneficial solutions. Here is a short list of tendencies that often follow each of the bargaining styles. Become a more effective negotiator by doing some introspection into how you tend to behave in negotiations. Simple self-awareness will enhance your success. In addition, reading the situation and bringing in an outside agent when needed is critical. For example, if you are competitive and the situation is one where relationships are paramount and collaboration is necessary, consider sending someone else in your place. Or at the least, be aware of your competitive tendencies and keep your aggression in check. In addition, the actions that really matter when it comes to negotiation success have nothing to do with personality. Social science studies that cover negotiation have found that these four characteristics correlate highly with the top negotiators: “a willingness to prepare,” “high expectations,” “the patience to listen” and “a commitment to personal integrity.” Fostering these habits will prove more fruitful than trying to change innate tendencies. 1. Turning Negotiation Goals into Expectations It is not enough to set a negotiation target, you must set a goal and make that goal an expectation. What is the difference? The main difference is in one's "attitude." A target may be arbitrary and is simply something one hopes to reach. On the other hand, a goal should come with the "expectation" that it will be achieved. Rather than just a lackluster number, an expectation is emotion-laden, something in which you have conviction and belief. There are compelling psychological reasons to set goals and expectations. Studies indicate that once a goal is set, subjects believe that anything beyond the goal has been forfeited and is left on the table. Also, it's been shown that humans exhibit "striving mechanisms" and focus their actions and behaviors on something once it's been stated. For this reason, it's essential to focus on your goals and expectations, not your bottom line. You don’t want to be trapped in inching toward your lowest number when you could be striving for your highest number. How should you determine where your goal should be? Shell argues that your goal should, in most cases, be the most aggressive bid for which there is a reasonable argument. You should be able to justify your expectations to the other side “with a straight face.” On the contrary, it doesn’t have to be the number for which there is the “best argument,” just a reasonable argument. 2. The Role of Norms and Standards in Negotiation In any social setting, there are sets of recognized standards and norms. For example, in most sports, our norms and standards tell us that the best athletes are strong, fast and agile. In college admissions, the best applicants have high standardized test scores and top marks on their high school transcripts. But reasonable people may disagree about whether those are the right benchmarks by which to judge. Here is where you can learn how to gain the upper hand in a negotiation. Before engaging with the other side, research the norms and standards you expect them to use in the negotiation. If you are selling your house, understand whether the buyer's agent is calculating an offer price based on square footage or the number of beds and baths. If you are entering a licensing agreement, see if you can find out whether your partner hopes to be paid a fixed annual sum or expects a royalty agreement. Use what you know about their norms and standards to frame your own offer or response. By using language and benchmarks they understand and prefer, you tacitly make a harmless concession to the other side. In turn, they will feel compelled to make a concession your way at no cost to you. 3. How to Navigate Relationships in a Negotiation Relationships are at the heart of any negotiation. A special relationship can dramatically alter the recommendation about how to proceed in the negotiation process. One example comes from the 1930s, in the world of think tanks and the scientific community. The Institute for Advanced Study in Princeton was searching for leading scientists to participate in what it hoped would be ground-breaking research and experimentation. The director sought out Albert Einstein and asked him what it would take for him to join. A humble Einstein replied, "Three thousand dollars per year would suffice," unless the director thought it would be appropriate for him to "live on less." A typical negotiation would end there or perhaps even edge downwards. The director, however, greatly valued the relationship he was beginning with Einstein and his potential future role at the institute. The director offered Einstein three times as much as he had asked, an annual salary of $10,000. “[The director’s] problem was how to make a potential ‘crown jewel’ professor feel honored and appreciated so he would adopt the institute as his professional home. The amount of Einstein’s salary was distinctly secondary.” The director, whatever his personal predilection, used an accommodating style of negotiation because he valued the relationship more than the cost of any item in Einstein’s employment package. Poor relational skills or awareness can unintentionally kill deals. Two executives were discussing a potential joint venture. Barry was the owner of a U.S. chemical company, competitive and sharp. Karl was the head of a Swiss company that wanted to license Barry's technology. Karl was more trusting, laid-back and friendly. The evidence from their email exchanges showed their personalities at work and revealed that the exchange was not going well. Barry thought Karl was hiding something with his vague responses, and Karl felt continually attacked. All it took was an expert to advise Barry on his approach to the relationship at stake in the negotiation. Once both men met in person and worked on their relationship, the deal's details fell into place. Karl proposed a tentative offer that surprised Barry with its generosity, and the rest is history. Often, taking a step back and analyzing how the relationship is playing into the negotiation itself can ease the way forward. 4. What the Other Side Wants Knowing what the other side wants is a magic bullet that opens the door for an agreement to be reached. So why is it so hard to figure out? There are a couple of reasons that have arisen from research on negotiation. First, most people suffer from confirmation bias. We assume that others have the same outlook as we do or we think we have someone figured out. It becomes hard to see beyond our own assumptions, and we close off other ways of interpreting words and behavior. The result is that it becomes impossible to accurately read subtle signals received from the other side. Psychologists also point out a "fixed pie bias." Under these assumptions, we get drawn into believing every win for them is a loss for us and, therefore, fighting for every morsel. Thinking this way can blind both parties from seeing mutually beneficial options. Perhaps there is both something you're willing to give up that the other wouldn't mind conceding. Accommodating personalities might also struggle with understanding what the other side wants due to being overly accommodating. When someone is falling over themselves to please you, they might fail to truly listen to your preferences. Or, they might jump to offering something generous that doesn’t suit your needs. It is now clear why the best negotiators are curious collaborators who spend more time listening than talking. It is through this tactic that they gain coveted information about what the other side needs. Kelly Sarber worked in sales for a waste management firm in Arizona. Looking to expand beyond the state, she was pursuing a contract in Oceanside, California. When the bids came in from the other companies competing for the business, hers was five dollars per ton higher, but she won the bid anyway. How did she do it? Sarber learned that Oceanside was struggling with an erosion problem and was dramatically losing the sand on its coveted beaches. In addition to needing trash hauled away, Oceanside needed a solution to its sand-loss problem. As part of her bid, she promised that her trucks would drive in a truckload of Arizona sand each time they came to pick up Oceanside’s trash. Knowing what they needed enabled her to win the negotiation on favorable terms for both parties. 5. Why Leverage Matters Who has greater leverage in a negotiation depends on the situation. Generally, you can identify the side with the most leverage by noting which side is most comfortable with the status quo. They have the least to lose if the deal falls through. Leverage does not naturally flow to the side with the most conventional power or control. Criminals who take people hostage often hold a large amount of leverage over governments and law enforcement. They have already risked everything and have nothing to lose from a failed agreement. On the other hand, governments have not only their citizens' lives at stake but also their reputation of appearing malleable to criminal demands. In this way, a small number of individuals who previously wielded zero influence in society can bend heads of state to their will. There are three types of leverage. Consider whether any of them might be more appropriate to your situation before strategizing to gain more. Positive leverage stems from a circumstance in which the other side naturally has more needs than you do. This can be real or perceived, but regardless, if you sense the other side is a little desperate, you have positive leverage on your side. You have what they want and the ability to offer that or withhold it in exchange for a demand of your own. Negative leverage comes about when a threat is applied. You may hold more leverage than the other party, but if they make a credible threat that altogether changes the circumstances of your deal, the leverage has shifted. Negative leverage is most commonly applied in business situations. Normative leverage is at play when you have the rules and standards on your side. For example, if you injured someone in a car accident, but they were the ones who ran the red light, you clearly have greater leverage in a dispute about the collision. Knowledge about the three kinds of leverage can equip you to prepare for a negotiation by strategizing how to garner as much leverage as possible. NEGOTIATION AS A FOUR-STEP PROCESS Decades of research have consistently outlined negotiation as a four-step process. The four stages can be identified in situations as varied as “rural African land disputes” and “American business mergers.” A short overview of each section will leave you feeling more prepared to tackle negotiations. 1. PREPARATION To prepare for a negotiation, first assess the type of negotiation you will encounter and shift your approach accordingly. As discussed previously, research things like what they are really looking for and the standards and norms they will adopt. Here is a simple framework for beginning your preparation. Plot where the negotiation lies on the dimensions of the importance of the relationship and the level of conflict over the issues at hand. Then, use the recommended strategies in each quadrant to plan your approach. For example, a business merger where both leaders will remain in place would fall in quadrant B, where both conflict and the importance of the relationship are expected to be high. 2. INFORMATION EXCHANGE Next comes information exchange. Here, the most important thing to remember is to listen first, talk second. This approach will both improve your likeability and rapport with the other party and enable you to learn valuable information about the other side. You can then use this information in the exchange of offers. What information should you share at this stage? Since formal offers have not been put forth, it is appropriate at this point to give “signals” regarding the strength of your leverage and your goals or expectations. If your leverage is not strong, you can increase it somewhat by playing up the “uncertainty of the stronger party’s future if it passes up your offer.” Or, you can acknowledge your situation and appeal to their emotions, “personalizing” your offer as much as possible with things like a handwritten letter or an in-person meeting. 3. EXCHANGING OFFERS Exchanging offers usually consists of an initial proposal and then a bit of haggling back and forth until you reach a price in a mutually agreeable zone. The question of who should offer first is decided in some cases, like in buying a home with a list price, but undefined in others. When given the opportunity, strongly consider being the first to offer. Though contrary to some negotiation advice, Shell sees many benefits in this approach. These include being the first to nail down a range for price. Research shows that humans tend to focus on the first indicator of value that is given. If the opposing party were to name a price far below your target, it would be an uphill battle to get them in the range you desire. On the contrary, the burden of proof lies on them to negate the range you suggest if you are the first to offer. 4. CLOSING AND COMMITMENTS If the other party is dragging their feet to close or commit, consider using the psychological principle of scarcity. Scarcity plays on the human need to obtain more of what we think is dwindling or may soon be out of grasp. This explains tactics like flags on online products indicating low inventory, exploding job offers and dramatic walkouts signaling a "take it or leave it now” opportunity. You can use these tactics to activate the principle of scarcity and get a deal to close.