Ben Franklin’s “meal deal” neatly kept the peace, provided a fair, face-saving way out of the dispute for everyone, and created a fund for James and Ben to divide. It was an inspired piece of negotiating.
Preparation Step 2: Matching Situation, Strategy, and Style
As these cases illustrate, different situations call for different strategies and reward different negotiation skills. Chances are, you will be better negotiating in some situations than others. Figure 7.3 will help you see which strategies are best suited for handling each situation.
FIGURE 7.3
The Situational Matrix: A Strategy Guide
If you are personally comfortable using these strategies, you will be able to handle the situations indicated on the chart. If the strategies indicated are awkward or unpleasant for you, it may be wise to find someone to help you as part of your preparation.
Overall, cooperative people are well equipped to negotiate in Relationship and Tacit Coordination situations emphasizing relationships without significant conflicts of interest. Competitive people are good at Transaction negotiations that focus on the stakes and deemphasize relationships. Balanced Concerns situations call for a mixture of both cooperative and competitive traits, leavened with a collaborative dash of imagination. Franklin’s suggestion that he and James split the cook’s money was a classic imaginative response to a Balanced Concerns situation. It was, at one and the same time, assertive, fair, sensible, and thoughtful.
What personality traits are helpful in executing the problem-solving strategy that works so well in Balanced Concerns situations? First, it helps to be insistent without being too aggressive. Franklin did not compromise his vegetarian principles in his meal deal. He maintained them. Cooperative people sometimes fall short in this regard by discounting their own goals and deferring too quickly to others’ needs. Competitive people, meanwhile, sometimes bargain too hard over positions without attention to people’s underlying interests and feelings.
Second, good problem solving takes imagination and patience. This means that simple compromises can be the enemy of good problem solving. If you split the difference before you have explored all the options, you miss opportunities to meet both sides’ needs more fully.
In fact, if you study Figure 7.3 closely you will notice that although compromise is a useful strategy in every situation, it is usually the second or third best choice. Compromise is therefore better used as a tool to help you when time is short or as a supplement to another strategy than as a one-size-fits-all way to handle all bargaining situations.
Preparation Step 3: Examining the Situation from the Other Party’s Point of View
I have labeled the factors in Figures 7.2 and 7.3 as perceived conflict over stakes and perceived importance of relationship. That is because negotiation situations are products of people’s perceptions, not objective realities. And people often perceive situations differently. In your preparation, you need to consider not only your own view of the situation but also the other side’s.
For example, one party may think the relationship is more important than anything else while the other may think the stakes matter most. Each side may behave differently as a result of their different perceptions.
An important function of the information exchange stage of negotiation (see Chapter 8) is to explore what the other party thinks about the situation. If necessary, you will need to persuade the other side to see the situation as you do.
If you are trying to return an appliance to a department store and the clerk is playing hardball, treating the event as a pure transaction, your first move might be to point out that you have a long-standing relationship with the store (see Chapter 4) that the clerk is placing in jeopardy. If you persuade the clerk (or the clerk’s supervisor) that the relationship matters, he or she may soften his or her stance. If there is no past relationship to point to, the vision of a potential future relationship can sometimes be just as effective.
If, as in my department store example, the other party is represented by a bargaining agent, this introduces another layer of perception with which to cope. There may be a genuine split between the agent’s perception of the situation and his or her client’s. In labor-management negotiations, for example, professional union negotiators often have more of a Balanced Concerns view of the situation than do their rank-and-file members. The professional labor negotiators deal repeatedly with their management counterparts and have a stake in maintaining serviceable, working relationships across the table.
Individual union members, by contrast, have little personal contact with management bosses and do not sit at the bargaining table. From the more distant perspective of a factory floor, workers may take a cynical view of the relationship between the union and the company and see wage negotiations as a Quadrant III Transaction. To bridge this perception gap, union negotiators sometimes need to engage in hardball bargaining theatrics to satisfy their members that they have pushed the company to its limit. Wise company negotiators understand the need for these displays and do not take them personally.
Preparation Step 4: Deciding How to Communicate
The fourth step in your preparation is deciding how best to communicate with the other party. There are two important dimensions to this question. First, should you communicate directly with the other side or get an agent involved? If you are a highly cooperative negotiator and find yourself facing off against a bargaining bully, you might do well to hire a hard-nosed agent or lawyer to do your talking for you. Second, if you are going to negotiate yourself, should you communicate face-to-face, by telephone, or by using an electronic medium such as e-mail? If you want to eliminate sales pressure as a factor in buying a new car, decide what car you want and then do your negotiating over the Internet. Because most complex deals these days will inevitably involve some combination of all communication methods, the wise negotiator has a strategy on how best to communicate at each stage of the process.
I faced both of these questions not too long ago when my wife and I sold our townhouse in Philadelphia to move to a nearby suburb. We had lived on our family-friendly block near the University of Pennsylvania for more than fifteen years and felt warmly toward our neighbors, many of whom were colleagues where we both work. In selling our home, we wanted, if at all possible, to replace ourselves with a family that would fit in well on our tight-knit street. We also wanted to get a good price and, if possible, save the customary 6 percent real estate agent’s fee. So we studied the recent sales and home listings in our part of the city, paid a real estate agent a small fee for a professional appraisal, and asked our neighbors if they knew anyone who might be interested in buying our home.
Within days, we had the name of a neighbor’s college friend—a young professor who was moving into the area with his wife and child to join the university faculty. A week later they visited from New England, inspected (with the help of savvy in-laws) the plumbing, roof, and heating systems, and decided to make a bid. For our part, we immediately felt that this family would match well with the neighborhood. That posed an interesting problem: with our multiple and mutual relationships in the background (and with the other couple somewhat wary that they were up against a negotiation “expert”), what was the best way to negotiate?
We had had a successful person-to-person encounter, so I suggested that we use e-mail. E-mail negotiations can, as I will discuss below, be perilous. But it has some virtues that I thought would reassure the other side in this situation: It would permit them to take as much time as they wanted to consider each proposal, create a clear record of the offers and counteroffers, and eliminate the chance that our side would get away with some clever bargaining move in the context of a face-to-face meeting or telephone conversation.
So that is what we did, and the process worked well. As the seller, we forwarded an offer with our first e-mail message and attached a list of what we thought were comparable listings and recent sales. They came back to us with a counteroffer that was
equally well-researched and justified. We then closed in on a bargaining range over the course of a couple of weeks. In the end, I made a phone call to close the last $5,000 gap with a proposal to split the difference between us—and they accepted. The only bumps in the road for this transaction came a few weeks later, when the couple hired a lawyer to help them with the purchase and sale documents. This irritable woman, who was being paid by the hour, tried her best to inject trouble where peace and harmony ruled. Occasional telephone calls directly to our buyers kept things on track, however. The sale went through and we now happily return to our old street for the annual block party with all our relationships intact.
COMMUNICATION ISSUE # 1 : SHOULD YOU USE AN AGENT?
As you can see from my house-sale example, I am not a fan of using agents unless they contribute more value than they cost. Nevertheless, as I noted above, imbalances in bargaining styles or expertise sometimes make hiring an agent a wise move. In addition, the world is full of real estate agents, financial advisers, lawyers, and brokers of all kinds who act as intermediaries for other parties. So you will often need to deal with them whether you like it or not.
The best reason for using an agent is economic: they can sometimes get you a better deal than you could get yourself. Had my wife and I faced a shortage of buyers in selling our home, an agent might easily have paid his or her way by providing marketing and advertising muscle, showing the house for us when we were at work, and protecting us from annoying contact with rude, unpleasant, and aggressive buyers. The same goes for using a good lawyer to help you negotiate deals. Not only may a lawyer bring negotiation experience and useful relationships to the table, but he or she can often steer the parties past hidden (and genuinely catastrophic) legal and business risks. In fact, the best business lawyers in centers such as New York or California’s Silicon Valley are also some of the most sophisticated business strategists in the world. They don’t just negotiate choice-of-law clauses, they structure deals for maximum value under complex global conditions. Finally, some agents act as “gatekeepers” to entire industries. For example, top publishers will not look at your book proposal unless it comes from a reputable literary agent. And agents play similar, central roles in the entertainment and sports industries. In all of these cases, using agents makes a lot of sense.
But before adding an agent to your team, you should carefully add up the costs that agents bring to the table. These include:• The fee the agent charges. Negotiate this if possible.
• The agent’s own agenda. Make sure you know how your agent is compensated and whom he or she is working for. In real estate deals, the listing agent is paid on commission and works for the seller. This has two important implications. First, agents paid on commission usually do better closing a high number of transactions rather than maximizing each and every one. Indeed, research shows that when agents sell their own homes, they leave them on the market longer than when they are selling yours. In addition, be careful how much you reveal to your agent about your true bottom line. Agents working on commission may be tempted to negotiate to your bottom-line level more quickly than you would to get the deal closed. The opposite is often true of an agent paid by the hour. Like the lawyer who represented the buyers in our Philadelphia home sale, an agent punching a time clock may drag out the engagement to increase the fee.
• Bad feelings. Sometimes agents get into pointless fights, spoiling the relationship between the principals. Lawyers can be “deal breakers” instead of “deal makers” by battling over clauses neither party cares about, creating bad feelings, tensions, and mistrust. If your agent misbehaves in this way, show him or her the door and get the process back on track yourself.
• Miscommunication. Whenever you add layers to a communication process, you increase the risk of honest misunderstanding. And when both sides are using agents, the distortion risk escalates. If you want to get an important message to another party and must work through his or her agent, either ask for a direct meeting with the agent present or put your message in writing.
• Self-serving bias. Real estate agents are confident they can sell your house, and lawyers are sure they will win your case. Research shows that agents often suffer from overconfidence in their own abilities, leaving you with the problems when they are proven wrong. Do your own research and get second opinions whenever possible.
• Time. An old saying goes: “If God had had an agent, He would still be creating the earth.” Using agents creates delays that can prove costly, especially if time is of the essence.
COMMUNICATION ISSUE #2: PERSON-TO-PERSON, TELEPHONE, OR E-MAIL?
The traditional negotiation involves a face-to-face encounter, but our networked world often demands that we use many other means to communicate. In general, face-to-face meetings give everyone the maximum “bandwidth” for communication, allowing people to read between the lines of what is said, ask follow-up questions, get feedback, and develop genuine relationships that can ease the negotiation over many hurdles. We convey more than one-half of the meaning of our messages non-verbally, so you lose a lot of communication channels when you limit yourself to written messages or voice only. The next widest channel for communication is video conferencing, a method that is increasing as geopolitical risks such as terrorism rise and communication technology improves. Next in line is the telephone, which at least permits you to both use and interpret vocal tone and pacing. Last on the list are electronic communications methods such as e-mail and instant messaging.
This list is reversed in terms of convenience—meetings are often the hardest to arrange while an e-mail message is a “click” away. So we are inevitably tempted to use the narrowest communication pipeline (e-mail) the most.
I have already detailed some of the benefits of using e-mail in discussing why I decided it was the best way to negotiate our home sale. These include:• Convenience when parties are at a distance
• Time to consider one’s next move
• A clear record of the proposals
• Ease in conveying large amounts of data to back up proposals
• Leveling of the playing field between negotiators with different levels of seniority and experience
• The power to quickly mobilize large coalitions of like-minded people using group e-mail lists
One additional benefit relates to personality. People strongly inclined to avoid negotiations will prefer using a method such as e-mail because it reduces the risk of a face-to-face disagreement or confrontation.
Because electronic communication is so temptingly convenient, it is especially important to be aware of its pitfalls. Researchers have confirmed these problems repeatedly in experiments. These include: • Increased risk of impasse. Lacking voice tone, facial expression, and conversational pauses, electronic messaging comes across as more aggressive and “in your face” than spoken words. This can trigger reactions in the receiver, who then fires off an angry response. The problem escalates from there. Several detailed studies of e-mail negotiations have confirmed this problem. One pitted MBA students at Stanford and Northwestern University against each other. Half the students were given only their counterpart’s name and e-mail address before starting the negotiation. The other half were given a photograph of their opponent and explicitly instructed to exchange social information on hobbies, families, job plans, and hometowns prior to beginning the negotiation. Ninety-four percent of the “schmoozing” groups had no trouble reaching a deal, while only 70 percent of the “strictly business” groups managed to complete the negotiation.
• Careless clicking. The informality and privacy of sitting in front of a computer screen tends to put us off our guard, and we forget that our message can easily be copied and sent to unintended audiences. A former student of mine once made the mistake of negotiating his salary using e-mail. His message arguing for a raise came across as arrogant, and he appeared to be taking too much credit for projects others had contributed to. The e-mail circulated widely throug
hout the leadership group in his company, and he ended up being fired.
• Delay. Research on electronic communications shows that the same problem can take much longer to solve using e-mail than using face-to-face or voice communication. The narrower the pipeline of communication, the longer it takes to get information through it. Delay and associated misunderstandings are special problems when it comes to using e-mail to resolve disputes, as opposed to constructing deals.
• Polarized decisions in groups. When groups negotiate electronically, they tend to reach decisions that are more extreme in one direction or another than when they meet face-to-face. The lack of social awareness and non-verbal channels for communication seems to reduce our tendencies to compromise.
If you find you must negotiate electronically, even when you prefer using another means, three simple steps will keep you out of trouble. First, think before you click. Never send a message when you are in the grip of a strong negative emotion—and assume that once you send the message it will be read by many people other than the person you are sending it to.
Second, go out of your way in all your messages to engage in a little small talk and make sure to explain your reasoning when you make requests or demands. This may feel phony, but it works to soften the in-your-face feeling your message will otherwise convey. Even starting a message with a cheerful “Hi, John” instead of just “John” can soften the impression you make.
Third, in prolonged negotiations, make periodic telephone calls and, if possible, have a few meetings with your counterparts. These contacts can help convey relationship messages that e-mail excludes. Companies have found that cross-functional project teams working on complicated problems can take longer to complete tasks if they rely exclusively on electronic communication. The solution is to mix electronic communications with conference calls and an occasional meeting.
Bargaining for Advantage Page 17