Bargaining for Advantage

by G Richard Shell

  Instant messaging is an interesting variant of e-mail that is becoming common in corporate communications and real-time trading, especially when several parties are involved. As executive ranks fill with people accustomed to chatting with multiple parties using IM, this form of electronic communication will doubtless become favored in more formal business negotiations.

  Unlike e-mail, IM permits parties to carry on several real-time conversations at once, including private “side” communications that others are blocked from seeing. In addition, like e-mail, IM has the capability of creating a precise record of all communications. Even conference calls do not have this combination of features. At the same time, IM suffers from the same in-your-face message presentation problems as e-mail and, in some ways, requires even more caution. Your words can become historical records instantly—there is no “pause” before you click during which you can edit out a hasty phrase or emotional outburst.

  Finally, research on IM versus e-mail negotiations suggests that competitive negotiators prepared with intricate arguments to justify their positions have an advantage when using IM. Their opponents, finding themselves at a loss for words in the rapid-fire IM environment, tend to concede points. E-mail, by contrast, gives the slower party a chance to think of and articulate more skillful responses between messages.

  In short, IM negotiations call for extra care, preparation, and prudence.

  Putting It All Together: Your Bargaining Plan

  Now that you understand the basics of situational analysis and can anticipate the various strategies that others may use, you need to combine this knowledge with information on the Six Foundations to create a specific bargaining plan. I have given you a simple form (see Appendix B) to organize the information you have gathered. You should refer to this plan and update it as the negotiation process unfolds.

  The insight you gain from preparation is a key to Information-Based Bargaining. But good planning is only a start. One of the best uses of preparation is to make a list of specific questions you intend to ask early in the negotiation. Your plan, after all, is based on a number of assumptions about what the other side wants and is thinking. As the next chapter will show, the opening stage of negotiation gives you a chance to test those assumptions against information provided directly by the other party itself.

  Summary

  This chapter has introduced you to the basics of good preparation. First, using the Situational Matrix, you should determine the basic situation you face. What strategies are best suited to deal with the situation?

  Next, you need to combine your situational analysis with the knowledge you have about your own stylistic preferences to determine how well suited you are to negotiate the problem. If you are basically non-confrontational, you will have a hard time doing well in a Transaction unless you are negotiating against someone just like yourself. If you are aggressively competitive, you will lack some of the tact needed to handle a Relationship situation that calls for delicate diplomacy.

  Third, try to imagine how the other party views the situation. Do they see the relationship as important? Do the stakes matter as much to them as they do to you? The situational analysis prepares you to anticipate the range of strategies the other side can be expected to use.

  Fourth, decide how best to communicate with the other side. Does it make sense to use an agent? If you negotiate directly, should you meet face to face or rely on telephone or e-mail?

  Finally, combine the information you have gathered on the situation with your insights into the Six Foundations to develop a specific bargaining plan. Use this plan to formulate a list of questions to ask the other side early in the discussion phase to test your assumptions.

  If all this sounds like too much work for the time you have available, remember that even a few minutes spent reviewing the Six Foundations and the Situational Matrix before you start will yield significant benefits. In fact, research indicates that the single most important step in becoming an effective negotiator is acquiring a habit of preparation. John Wooden, the legendary UCLA basketball coach, once summed up the truth about preparation with a phrase that has stuck with me: Failing to prepare is preparing to fail.

  It is now time to move into the interactive stages of negotiation. Bring your bargaining plan along with you as we move to Step 2: Exchanging Information.

  8

  Step 2: Exchanging Information

  It is better to sound a person with whom one deals . . . than to fall upon the point at first.

  —SIR FRANCIS BACON (1597)

  Who is without knowledge? He who asks no questions.

  —FULFULDE FOLK SAYING

  Think back to the negotiating examples that opened the book in Chapter 1. Do you recall the phrase “talking to the mountain”? The Arusha people of Tanzania use that expression to describe the opening phase of negotiations in which the parties exchange their initial demands and counterdemands. No one takes these opening demands seriously. Rather, they are the means by which Arusha negotiators fix the agenda, test expectations, and establish the legitimacy of their positions. The parties conveniently forget their excessive initial demands through “tolerant amnesia” when they get down to the serious business of bargaining.

  And remember the opening stage of the negotiation between Peter Jovanovich and General Cinema’s Dick Smith over the future of Harcourt Brace Jovanovich? The opening encounter was a carefully orchestrated minuet, but Jovanovich departed from his script to give Smith an expensive engraved watch and tell Smith he thought General Cinema was HBJ’s best hope for survival. HBJ was on the brink of bankruptcy and ruin. Peter Jovanovich’s gift and candid admission were important steps in establishing rapport and letting Smith know that Jovanovich would be realistic in light of Smith’s superior leverage. This move helped create an atmosphere of mutual cooperation that propelled the parties into a working relationship and, ultimately, a successful deal.

  Neither “talking to the mountain” nor preliminary moves such as gift giving are bargaining, at least in the ordinary sense of that word. There is no give-and-take and no explicit testing of concrete, realistic proposals. Rather, these initial steps are part of the ritual of negotiation that always precedes and sometimes loops back upon bargaining: information exchange. A good information exchange process accomplishes several important purposes, each of which I will discuss in this chapter. They are: the development of rapport between the individual negotiators, the surfacing of underlying interests, issues, and perceptions that concern the parties and the initial testing of expectations based on the parties’ relative leverage.

  It is during the information exchange stage—not during the later phase of explicit bargaining—that we have our first opportunity to explore the Six Foundations in action. We display our style traits—personality, gender, and culture (Chapter 1), express our goals (Chapter 2), probe to discover the other side’s interests (Chapter 5), and test our assumptions about such things as applicable standards (Chapter 3), relationships (Chapter 4), and leverage (Chapter 6).

  As we share information, we test our counterpart’s commitment to the norm of reciprocity discussed in Chapter 4. If this norm can be established in the exchange of information, both parties gain the confidence that will help them get through the hard work of bargaining and commitment. If it does not take hold, the parties will have a very difficult time making a successful deal.

  Many of the messages we exchange in negotiation take only seconds to convey. Remember the example of the two cars at the intersection in Chapter 7? A momentary exchange of glances is all it takes to assess the intentions and personality of the other driver and make a decision on how to proceed into the intersection. The same is true of more formal negotiations. Enormous amounts of information can be conveyed by a satisfied look, a frown, or a nervous pause in response to a pointed question.

  Cultural differences are also particularly important variables in the information exchange stage of negotiations. As I noted earlier, research
on cultural styles reveals that Americans in particular and Westerners in general are relatively “task-oriented” in negotiation. This means that we Americans like to get down to business, cutting the information exchange stage short with remarks such as “So, are you prepared to make an offer?”

  By contrast, in many “relationship-oriented” cultures in Asia, Africa, and Latin America, the information exchange stage assumes much more importance. Not only do the parties expect to find out what the negotiation is about, but they also seek to establish a personal or professional relationship that goes deeper than the single transaction at issue. If this relationship fails to materialize during the preliminary discussion stage, negotiations are likely to be very difficult, and the parties may never get to meaningful bargaining.

  Let’s look more carefully at some examples illustrating each of the three main functions of the information exchange stage of negotiation: (1) establishing rapport, (2) determining interests, issues, and perceptions, and (3) signaling expectations and leverage. As we do, remember that this preliminary phase of negotiation is often the most overlooked part of the process. Awareness of it therefore yields significant competitive advantages.

  Purpose 1: Establishing Rapport

  The first thing to take care of in the information exchange stage is the mood or atmosphere at the table—the rapport between the negotiators. Information exchange depends on effective interpersonal communication, and rapport facilitates this.

  Some people may think rapport is a trivial point, a mere social nicety, but professional negotiators know better. They may, like J. P. Morgan in his negotiation with John D. Rockefeller, Jr., described in Chapter 7, bypass rapport and growl, “What’s your price?” But when they do so, it is for a purpose. Either they are deliberately seeking to intimidate the other party or they are responding to an attempt at intimidation against themselves. Meanwhile, in Quadrant II Relationship situations, rapport building is the most important aspect of the negotiation process.

  Professional negotiators are full of stories about the carefully planned rapport-building moves they have made to initiate important negotiations. These stories are interesting in their own right, but they also reflect the extraordinary importance that experts place on establishing the right tone early in a negotiation.

  When Armand Hammer, the aggressive CEO of Occidental Petroleum, made his first bid to buy the valuable Libyan oil concession from Libya in the mid-1960s, he distinguished his bid by presenting it in an Arab rather than a Western manner. He went to the trouble and expense of having the bid written out on sheepskin parchment, rolled up, and tied with ribbons bearing the Libyan national colors, green and black. He was showing the Libyans that he had studied and had respect for Arab culture. He also won the contract.

  A time-honored method of establishing rapport in negotiation is to find some common interest, passion, or background experience—unrelated to the negotiation—that you share with the other negotiator. When the legendary founder of Warner Communications (later to become Time Warner), Steve Ross, was just starting out, he was in the funeral home business. One of the first steps that led him out of that line of work and into big business involved helping a small car rental company negotiate a deal with Caesar Kimmel, the owner of some sixty parking lots in and around New York City. Ross wanted Kimmel to let the car company use Kimmel’s parking lots to rent cars and give rental customers free parking. In return, Ross was prepared to give Kimmel a percentage of the car rental business.

  Before going into the negotiation, Ross researched Kimmel thoroughly and found out, among other things, that Kimmel was an avid horse racing fan who owned and raced his own horses. Ross knew something about the track because his in-laws owned and raced horses, too.

  When he entered Kimmel’s office to start the negotiation, he made what was to become a classic Steve Ross bargaining move. Right away, he scanned the room and spotted a framed picture of one of Kimmel’s horses in the winner’s circle of a big race. He went over and studied it for a moment. Then he said enthusiastically, “Morty Rosenthal [Ross’s relative] owned the number-two horse in that race!” Kimmel beamed. The two men hit it off—and went on to launch a very successful venture that eventually became Ross’s first public company.

  The Similarity Principle

  Social psychologists have confirmed Steve Ross’s (and many other expert negotiators’) instincts about the right way to start a negotiation. Psychologist Robert Cialdini calls this the “liking rule.” As he puts it, “We most prefer to say yes to the requests of someone we know and like.”

  Underneath the liking rule is something even more basic: We trust others a little more when we see them as familiar or similar to us. Studies ranging over the past thirty-five years have consistently shown that people like other people more when they display appearances, attitudes, beliefs, and moods that are similar to their own, provided that these similarities reflect well on them. As Armand Hammer’s bid on parchment shows, these similarities do not have to go deep to smooth the way to better communication. Indeed, as I discussed in Chapter 4, common affiliation or membership in a given group such as a club, religion, college alumni body, or even nationality (when in a foreign country), is sometimes enough to induce a momentary feeling of relatedness and similarity. And that momentary opening may be all that is needed to establish rapport.

  Nor does it matter much that both sides know the other is presenting similarity information solely for the purpose of establishing rapport. The e-mail experiments reported in Chapter 7 suggest that even forced prenegotiation “schmoozing” reduces the risk of impasse. I am a specialist in negotiation, and I still succumb to the influence of similarity information when someone tactfully opens a discussion with me by telling me about some shared experience, affiliation, or common acquaintance. The similarity principle is a compelling force in human psychology, much like gravity in physics.

  Rapport Pitfalls: Over- or Underdoing It

  To repeat: Establishing rapport will not and should not gain one side a significant bargaining advantage over the other. If you sense that your counterpart is trying to extract concessions from you on the basis of his or her initial success in establishing rapport, alarm bells should go off. You are being conned, not negotiated with. Armand Hammer did not pay less for his oil concession because he put his bid on sheepskin parchment, and Steve Ross did not get free parking from Kimmel because he expressed interest in Kimmel’s race horses.

  Rather, both men used their knowledge about rapport to open a distinctively personal channel for communication so they could get their “deal message” across. The goal was to get the other party to think of them as unique people, not just faces coming to ask for something. As both stories illustrate, one good way to get other people to think of you as a unique individual is to show them that you think of them that way.

  We walk a fine line in the rapport stage of information exchange. Most of us know when we negotiate that other people want things from us. We therefore guard against and discount techniques such as flattery and social niceties designed to gain influence. Overt, manipulative, and ingratiating behavior does not usually work and can be very costly in terms of credibility.

  At the other extreme are blunders at the beginning of a negotiation that needlessly upset or offend the other party. These are especially common in cross-cultural situations, although any thoughtless act can interfere with bargaining. One of my favorite examples of a clumsy opening move involves Intel Corporation, the maker of computer chips. This story is also a reminder that everyone in a large organization is on its bargaining team, not just the people who happen to be at the bargaining table.

  In the early 1980s, Intel was about to begin some very sensitive negotiations with a company in Japan. The Intel bargaining team had done its homework and was in Tokyo prepared to go through all the social rituals needed to establish a business relationship with a Japanese partner.

  Back at its U.S. headquarters, Intel’s general counse
l, Roger Borovoy, picked up the phone to answer a call from a newspaper reporter and was asked, in a conversational way, whether negotiating with Japanese firms was easy or hard. “Negotiating with the Japanese is like negotiating with the Devil,” Borovoy said. The quote soon appeared in the reporter’s story.

  Shortly after the story was published, Intel’s negotiations got under way in Japan. Borovoy’s quote quickly found its way to Intel’s Japanese counterparts and cast a distinct chill over the proceedings. Intel’s would-be Japanese partners were not amused.

  Andy Grove, chairman of Intel, was so chagrined by this event that he invented a new in-house Intel award to honor it. The award is called “The Muzzle.” It consists of a leather dog muzzle mounted on a wooden plaque. Borovoy was its first recipient, and it stayed in his office until another Intel executive won the honor of hanging “The Muzzle” behind his desk for an ill-timed remark to the press.

  To summarize: Establishing rapport at the outset of negotiations is a distinct, separate part of the information exchange process. Everyone, no matter how simple or sophisticated, likes to be acknowledged on a personal level. The more genuine this personal acknowledgment is, the more effective it will be.

  Purpose 2: Obtaining Information on Interests, Issues, and Perceptions

  The second major task in the information stage is obtaining basic information regarding the other party’s interests, issues, and perceptions. Who are they? Why are they here? What is important to them? What are they prepared to negotiate? What is their view of the situation? Do they have authority to close? This aspect of information exchange is important in all negotiating situations, but the higher the stakes, the more care you should take to acquire answers to these questions.