CONSIDER THE FOLLOWING EXAMPLE. A big company, “Mammoth,” wants to expand into a new territory. A small competitor company, “Tiny,” already controls the area. Mammoth wants to buy out Tiny so it will have clear sailing in the new market. The leaders of the two companies meet to discuss a buyout. They have both done their homework and have data to support their claims about what they think the value of the deal should be. Mammoth points out that it could put Tiny out of business entirely, so the buyout price should be low; accordingly, it makes a low-ball offer. Tiny counters with the claim that it has other suitors who have offered a lot more than Mammoth. Maybe that’s true and maybe it’s not. Tiny throws out a startlingly high number. They are stuck, so they decide to take a break.
During an informal moment, everything takes a new turn. The negotiator for Mammoth discovers that Tiny has been thinking about shifting its product line in a way that Mammoth never thought of and could not possibly replicate on its own in the near term. Suddenly, it occurs to Mammoth that a partnership rather than a buy-out would make more sense. Mammoth could build on Tiny’s understanding of and reputation in the new area. Tiny will happily take a fair price for not competing with Mammoth. This will provide the money it needs to underwrite the retooling required to shift to its new product line. (Tiny has been having trouble finding capital.) By combining their efforts, they can sell both Mammoth’s traditional product and Tiny’s new product into the market more effectively than either can manage on its own. They can share marketing and distribution costs. While there are a lot of details to work out, a partnership rather than a buyout now seems more advantageous.
Were you able to recognize the moment they moved into the trading zone? It happened when they both saw the chance to create value: when they discovered that (1) the two sides’ interests were interlocking, not opposed; (2) they would both be better off if they avoided an all-out battle over price that would undermine their relationship and make it harder to work together; and (3) there were deal options neither of them imagined before the negotiations began. In short, it was when they discovered reasons to be optimistic about finding mutually advantageous trades, since both had the authority to improvise in the trading zone. Once they explore those trades, the outlines of the deal space will become apparent.
What If the Parties Haven’t Done Their Homework or Aren’t Authorized to Make a Reasonable Deal?
IT’S HARD TO CREATE VALUE or to know if you are in the trading zone if one or both sides won’t play the What-If Game. Sometimes this occurs because the parties haven’t done their homework. They are prepared only to present their initial demands. They haven’t thought carefully about their interests or their organization’s interests. Other times, negotiators are given a highly restricted mandate by their back table and are not authorized to explore possible trades or improvise in any way.
The best example of this problem I know concerns delegates who represent nations in global treaty negotiations. Each national representative spends months working with different political actors inside their country to clarify what they are going to say at a scheduled global negotiating session. Before they go, they have to decide what they will stress and what they are willing to sacrifice during multicountry negotiations. When they are finally sitting across the table from all the other negotiators in a big assembly hall, they read the script they were authorized to present before they left home. It doesn’t matter if their formal statement ignores what every previous speaker has had to say. All they can do is read their prepared remarks. Indeed, that’s exactly what happens. Each negotiator plays primarily to his or her home crowd. Any deviation from the prepared script would probably result in their being called home and reprimanded.
At night, at the bar, when negotiators chat informally and everyone can speak off the record, that’s when possible trades get discussed, and when there’s a chance of finding the trading zone. At the end of several weeks of formal negotiating, the chair of the session usually distributes a revised version of the proposed treaty. This may be quite different from the draft each country spent so much time reviewing before their representative left for the meeting. Typically, the new version of the treaty is the result of trades that emerged at the last minute. No one, except the chair, is likely to take credit publically for the new package because most of the negotiators did not have authority to propose anything other than what was agreed to internally before they left. Unfortunately, the early draft of the proposed treaty was all they had to consider when they prepared their opening remarks and hammered out their country’s negotiating stand. When the revised treaty suddenly emerges, each negotiator must call home. (In each country, “home” is represented by a different political leader, agency, or cast of characters.) During that last-minute call, each country must make a choice. “Do we support the revised treaty that the chair has distributed at the last minute? Yes, or no?” Further discussions, or still other trades, are not possible because everyone has a return flight scheduled in a few hours.
Think of the poor negotiators who didn’t do their homework ahead of time, or were given no room to maneuver by their back table. They had no impact on the final outcome because they were not empowered to participate in informal trading sessions. All they could do was repeat their opening demands. Ideally, a negotiator needs to know what his or her country’s most important interests are (and which of many ways of meeting those interests might be acceptable). On top of that, negotiators need a clear mandate indicating what they should say at the outset, what new options they can invent, and what package or trades they can support. Until the final moment, negotiators need to be able to explore what-ifs of all kinds. When the chair produces the final version of the treaty, each negotiator only gets to say yes or no. At that point, they must assure their back table that their most important interests will be met.
Avoid Compromise
I WANT TO BE ABSOLUTELY CLEAR that when I talk about trades, I am not talking about making concessions or compromising. Only through the exploration of possible trades can we discover whether there is a deal space and what its boundaries might be. We can do this effectively only if we employ a rapid sequence of what-if questions rather than opening with exaggerated demands followed by an exchange of concessions.
No negotiating party should ever accept an agreement that is worse for them than no agreement. When I hear the word “compromise,” that’s what I think of—terribly sub-optimal deals. In my view, one or both sides taking less than their walk-away, just for the sake of reaching agreement, is always a bad idea. For me, “compromise” involves accepting a package that is worse than your BATNA. I realize there are situations where it is difficult to predict what will happen if there is no agreement, so rather than walk away, parties accept something rather than nothing. Being unclear at the outset about when to walk away can lead to such sub-optimal deals. I also know that parties are often unsure what to do when their personal interests are at odds with the mandate they have received from their back table. For instance, a longtime country negotiator, ready to retire, wants some kind of agreement, even a poor agreement, to show for all his years of effort. Should he accept a weak deal (from his back table’s perspective) if it meets his personal interests?
Some negotiators are not sure they know what their walk-away is at the beginning of a negotiation. Either they haven’t done their homework, or their organization hasn’t given them the information they need. During the back-and-forth, as the negotiation unfolds, they may realize that their walk-away options aren’t as good as they imagined. This might cause them to accept a deal that others, who did not participate in the give-and-take, would see as a weak compromise. Nevertheless, I would stand by my claim that parties should not accept a deal that is worse for them than their walk-away as best they understand it. Sometimes it may be necessary to take a break during an ongoing negotiation, just to reassess one’s walk-away, or even to take parallel steps to generate some other walk-away options.
In some circumstances, p
arties may not be sure whether they should walk away or not. “If we don’t reach agreement now, I’m not confident I know what will happen next. Maybe I’m better off accepting the agreement that’s on the table, rather than no agreement at all.” Or they might say yes to something that turns out to be much less desirable than they imagined it would be. Nevertheless, in my view, no negotiator should knowingly agree to something that hurts their side more than no agreement would. Certainly they should not accept a weak agreement in an effort to encourage or curry favor with a negotiating partner. And they should never settle for a compromise just to justify the time and effort they invested (this is known as “too much invested to quit”). Agreements should reflect a hardheaded assessment of what the outcome represents for your side. Moreover, good working relationships (and particularly trust) are not achieved by caving in to pressure or agreeing to a lopsided deal. Rather, they are the by-product of all sides acting in a principled way. As Roger Fisher, William Ury, and Bruce Patton so elegantly explain in Getting to Yes: Negotiating Agreement without Giving In, negotiators should not give away their interests in the hope of buying a good relationship. All that does is teach the other side to expect more of the same self-defeating behavior in the future.
Some negotiators are in a big rush to get things done. Remember my story about buying the cottage at Golden Pond? As soon as the outlines of a plausible agreement emerged, I pushed too quickly to close the deal. While I didn’t want to disappoint my wife, I probably could have paid less. Until negotiators have worked as hard as they can to create as much value as possible—even if one side is carrying most of the burden of doing this—it is not a good idea to accept a sub-optimal agreement (i.e., one that leaves both sides barely above their walk-aways) before exhausting all value-creating or trading possibilities.
Finding Your Sweet Spot
ONCE CLAIMING BEGINS, cooperation gives way to competition. There’s no way to avoid it. The good news is that once you are in a deal space—in the trading zone—both sides are guaranteed a better outcome than if they walked away. The bad news is you have to figure out how to divide the value you have created.
An all-out battle is likely to lead to hard feelings. Purely competitive behavior can undermine even long-standing relationships. On the other hand, there is no way to avoid the tension that arises when claiming begins. Many negotiation analysts urge parties to talk directly about how to distribute value. I agree, but this is not enough. It implies that a compelling justification for a proposed split will carry the day. Yet one side will argue that an even split makes the most sense, marshaling relevant precedents to back up that assertion. The other will counter with the claim that they brought the most (e.g., capital, ideas, or connections) to the table, so they should get a disproportionate share. Both will work hard to emphasize nonemotional, or factual, arguments that any independent observer would accept as true. Nevertheless, this will not solve the problem. There is no correct solution to the claiming problem.
To justify your claims, you must be able to write the other side’s victory speech. They have to be able to hold their head up when they explain to their back table why they got the share of the value they did. In short, you have to be able to help the other side deal with their back table’s expectations.
Look again at the trading zone diagram.
This time, note the location of the two sweet spots (in gray)—yours and theirs. One is better for you and one is better for them. Why shouldn’t you seek to end up in your sweet spot rather than theirs? In my view, this is a psychological question more than an analytical one. Can you convince yourself it is OK to end up in your sweet spot? What will it take to give you sufficient confidence to engage in such claiming behavior? As long as you know you have done everything you can to help your negotiating counterpart get more than their minimum walk-away (by working hard to create as much value as possible), and you can write a plausible victory speech for their back table, you should feel comfortable aiming for your sweet spot. My colleague, Bob Mnookin, talks about this in terms of empathy versus assertiveness. If you are too empathetic and not assertive enough, you won’t reach your sweet spot. If you are too assertive and not sufficiently empathetic, you’ll probably get no deal at all.
You must give your counterpart a way to show their back table they have been successful. It is your responsibility to spell this out. Even though a mutual-gains or a win-win approach to negotiation requires empathy and self-interested cooperation (to create value), winning at win-win negotiation also requires a commitment to assertiveness or claiming. The point of win-win negotiation is not to make friends, it is to get a good deal, maintain or improve relationships, and enhance your reputation. The six moves described in this book will help you do all these things even in the most difficult negotiating situations.
ACKNOWLEDGMENTS
SOME OF THE MATERIAL in this book first appeared in Negotiation, a monthly newsletter published by the Program on Negotiation at Harvard Law School. Many thanks to Katie Shonk, editor of Negotiation, for all the improvements she made in those early articles. Thanks also to Carri Hulet at CBI (Consensus Building Institute), who did an amazing job organizing and editing the initial version of this volume. My agent, Jim Levine, of the Levine-Greenberg Company, ensured publication of this book—thanks, Jim. John Mahaney, of PublicAffairs, provided crucial editorial advice and tireless assistance. I greatly appreciate the help of everyone at PublicAffairs/Perseus.
Many thanks to the Program on Negotiation at Harvard Law School for permission to excerpt and reprint in modified form:
“When an Angry Public Wants to Be Heard: Approaching Crisis Communications as a Negotiation Rather Than as Damage Control May Save the Day,” November 2003
“First, Find the Facts: When Negotiators Are Squaring Off over a Contentious Issue, Joint Fact-Finding Can Get Talks Off to the Right Start,” December 2003
“Winning and Blocking Coalitions: Bring Both to a Crowded Table: In a Multiparty Negotiation, You Need a Good Offense to Forward Your Interests and a Good Defense to Thwart Others’ Aggressive Moves. Coalitions Can Provide Both,” January 2004
“When You Shouldn’t Go It Alone: Recognizing When You’re in Over Your Head and Need an Agent Can Help You Come Out on Top in a Negotiation,” March 2004
“Divided, You’ll Fall: Managing Conflict within the Ranks: Flatter, Matrixed Organizations Require an Integrated Approach to Managing Conflict,” June 2004
“Negotiation Training: Are You Getting Your Money’s Worth? Companies Can Send Employees to the Best Courses Yet Still Not See Positive Results. Here’s Why This Happens—and How to Fix It,” August 2004
“What Gets Lost in Translation: Even When Negotiators on Both Sides of the Table Speak a Common Language, Different Cultural Expectations Can Prevent Messages from Getting Through. But with the Right Strategies, You Can Surmount Cross-Cultural Barriers in Negotiation,” September 2004
“Stubborn or Irrational? How to Cope with a Difficult Negotiating Partner,” Dec 2004
“Don’t Like Surprises? Hedge Your Bets with Contingent Agreements: No One Can Predict the Future. But You Can Protect Your Accord by Using Contingent Agreements That Anticipate Potential Changes,” January 2005
“Handle with Care: Negotiating Strategic Alliances: How to Adjust Your Approach When Bargaining with a Partner Who’s Key to Your Strategy,” April 2005
“Breaking Robert’s Rules: Consensus-Building Techniques for Group Decision Making: Deciding by Majority Rule Puts a Premium on ‘Winning’ Rather Than on Producing the Best Possible Outcome for Everyone. An Alternative Approach Can Achieve a Decision That Is Closer to Unanimous,” May 2005
“Full Engagement: Learning the Most from Negotiation Simulations: How to Acquire Real Negotiating Skill—without Risking Real Consequences,” August 2005
“Negotiating with Regulators: Securing Licenses and Permits Can Be Daunting. Here’s How to Improve Your Odds of Success,” November 2005
“Nego
tiating with a 900-pound Gorilla: Faced with Taking the Other Side’s Offer or Being Squeezed out of the Market? Here’s How to Expand Your Options,” February 2006
“What’s Special About Technology Negotiations: High-Tech Negotiations Present Particular Challenges. Here Are Three Steps to Take to Surmount Them,” May 2006
“Negotiating for Continuous Improvement: How to Help Your Managers—and Your Company—Learn from Each Negotiating Experience,” June 2006
“Bring Talks Back on Track with Facilitation. When Tempers Flare and Anarchy Threatens, an Outside Expert Can Increase the Productivity of Group Negotiations,” September 2006
“Think Fast! Expect the Unexpected at the Bargaining Table. Practice the Element of Surprise and Turn Moments of Panic into Opportunities for Value Creation,” November 2006
“Find More Value at the Bargaining Table. Many Professionals Are Too Quick to Give Up the Search for Better Outcomes for All Sides. Improve Your Deal’s Quality by Mastering These Four Value-Creating Moves,” February 2007
“Finding a Good Negotiation Coach. Not All Successful Negotiators Are Cut Out to Be Coaches. Here’s How to Select the Right Person to Help You Improve Your Bargaining Skills,” August 2007
“How to Negotiate When Values are at Stake. Negotiators Are Accustomed to Focusing on Interests. But to Resolve an Entrenched Dispute Over Differences in Values and Beliefs, You’ll Need a New Set of Tools,” October 2010
NOTES
The following materials were either cited directly or offer additional ideas about the topics covered in each chapter.
INTRODUCTION: FINDING THE TRADING ZONE AT GOLDEN POND
The shift from win-lose to win-win in the public mind was marked by the publication of Roger Fisher, William Ury, and Bruce Patton, Getting to YES: Negotiating Agreement without Giving In (Penguin, 1991).
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