Bargaining for Advantage

by G Richard Shell

  These high-profile bargaining contests are important, but they are relatively rare occasions even for the experts involved in them. The real negotiating work most of us do takes place in a myriad of ordinary events that happen every day, mainly out of view except to ourselves and those closest to us. These less visible negotiations include those between medical staffs and patients’ families in hospital corridors over care for loved ones; closed-door battles over control and power between feuding business partners; tense bargaining sessions among corporate executives over which divisions and employees will face downsizing at their firm; and the back-and-forth discussions that take place at kitchen tables as parents and children give operational meaning to words such as “independence” and “responsibility.”

  These negotiations matter just as much as the “big deals” do. And the people involved in them—reasonable people trying to do their jobs and make their lives work—need reliable, expert knowledge about the negotiation process to help them become more effective. That is why I wrote this book—to help you make negotiation a ready tool for achieving goals in every facet of your business, community, and personal life.

  I once received a letter from a former executive negotiation student of mine, a man I’ll call Bill Siegel. Bill, who owns his own small company in the northeastern United States, was a participant in our Wharton Executive Negotiation Workshop a couple of years ago. He had been a genuinely anxious negotiator when he came through the Wharton program—uncertain of his skills and convinced that visiting the dentist was to be preferred to bargaining. Siegel was writing to give me an update on how his negotiation skills were progressing.

  “My ten-year-old still has me against the wall,” he joked, “but business negotiations have actually become challenging and fun.” After commenting on some marketing alliances and partnerships he was putting together, he told an interesting story that illustrates many of the points I have tried to make in the book.

  As a member of a nonprofit organization concerned with revitalizing his community, Siegel had heard that his city was about to spend $450,000 to demolish an ornate, 125-year-old downtown building.

  Bill thought this was a waste, and negotiation training kicked in immediately.

  His first step, of course, was to prepare clear, specific goals. Bill determined that he wanted to save the building, put it to productive use, and, if possible, make a profit for himself in the process. He investigated and found out that, although the city placed a high priority on restoring its commercial tax base, no one in city hall had the time or imagination to salvage this building.

  With this preliminary step behind him, Bill made his first move. He used his relationship network to gain access to the city official in charge of demolishing the building. Siegel convinced this official that, provided Siegel could put together a deal at minimal cost to the city, it would make more sense to give Siegel $450,000 to renovate the building than to spend the money destroying the property.

  With $450,000 in his pocket, Siegel started looking for interested parties who might help him raise further funds. A friend told him there might be state grants available for a downtown renewal project like this, and he soon located $270,000 of state money from a program designed to help preserve historic downtown buildings. Finally, he persuaded city tax officials to provide a generous tax abatement from the city for any commercial tenants he could line up. With the tax abatement as leverage, he landed three prospective commercial tenants and a historical group interested in relocating to the building after it was renovated.

  His last step was to ensure that he achieved his own personal goal for this project—a profit. He negotiated a ninety-nine-year lease on the building from the city for the grand sum of $1. He then sold the whole package to a professional real estate developer for a substantial sum. There was enough money in the deal to make everyone happy.

  The remarkable thing about Siegel’s story is the way his negotiation skills made everyone better off: city, state, tenants, the developer, and him. And he negotiated this deal in his spare time—he is in the consulting, not real estate, business.

  Siegel’s story gives you a sense of what can happen once you learn the basics of how negotiations work and start making a difference in the world. As a teacher, I am constantly reminded of the powerful boost that negotiation skills give people who are trying to achieve their goals, often against major odds. With confidence in your bargaining abilities, obstacles become opportunities.

  A Final Look at Effectiveness

  Let’s see how Bill Siegel’s story can help us review what we have learned about negotiation. To improve the way you negotiate, the first step is to make a commitment to work on this area of activity. Once you have formulated your resolve, there is no substitute for concentrating on the four effectiveness factors I discuss in Chapter 1—a willingness to prepare, high expectations, the patience to listen, and a commitment to personal integrity. These are the best practices of the best negotiators and will improve your results no matter what negotiation situation you face and no matter who you are. Siegel exhibited all four factors in his downtown renewal project.

  The Six Foundations also provide basic, all-purpose touchstones for good execution: Know your style, survey your goals and focus on your expectations, look for the applicable standards, attend to and use your relationships, probe the other side’s interests, and work on your leverage before getting started. Finally, perform a good situational analysis using the Situational Matrix in Chapter 7 and chart your course through the information exchange, opening and concession-making, and closing and commitment stages of each encounter. Choosing the right strategy for the situation and people you face is critical to your success. Have a confident attitude based on high ethical standards throughout the process.

  Before we conclude, I want to put a final item into your negotiator’s “toolbox”: a tailored, operational checklist to raise your bargaining potential to its peak performance. There are two separate performance checklists below: one for people who are basically cooperative and one for those who are more competitive. Pick the one that applies to you, then carry it with you as you go into your next bargaining session.

  Seven Tools for Highly Cooperative People

  If you are basically a cooperative, reasonable person, you need to become more assertive, confident, and prudent in negotiations to become more effective. How can you do this? It is sometimes the hardest thing in the world to gear up for a potentially confrontational negotiating situation.

  Here are seven specific tools to improve your bargaining performance.

  1. Avoid concentrating too much on your bottom line—spend extra time preparing your goals and developing high expectations. As a cooperative person, you often worry about other people’s needs first. You focus on your bottom line and try to do just a little better than that. And guess what? Your bottom line is exactly what you get. Research confirms that people who expect more get more. Refocus your thinking on your goals and expectations. Spend extra time considering carefully what you want and why you want it.

  2. Develop a specific alternative as a fallback if the negotiation fails. Too often, cooperative people leave themselves without choices at the bargaining table. They have no alternatives planned if negotiations fail.

  Take note: If you can’t walk away, you can’t say “no.”

  Remember the story about “Janie Rail” in Chapter 6. A Houston utilities buyer built her own railroad when the rail company she was doing business with refused to give her a competitive price for delivering coal. Lesson: There is always an alternative. Find out what it is and bring it with you to the bargaining table. You will feel more confident.

  3. Get an agent and delegate the negotiation task. If you are up against competitive negotiators, you will be at a disadvantage. Find a more competitively oriented person to act as your agent or at least join your team. This is not an admission of failure or lack of skill. It is prudent and wise.

  4. Bargain on behalf
of someone or something else, not yourself. Even competitive people feel weaker when they are negotiating on their own behalf. Cooperative people think they are being selfish to insist on things coming out their way.

  Fine. Don’t negotiate for yourself. Stop for a moment and think about other people and causes—your family, your staff, even your future “retired self ”—that are depending on you to act as their agent and “bring home the bacon” in this negotiation. Then bargain on their behalf. Research shows that people bargain harder when they act as agents for others’ interests.

  5. Create an audience. Research reveals that people negotiate more assertively when other people are watching them. That is why labor negotiators are so tough—they know the union rank and file is watching their every move.

  Take advantage of this effect. Tell someone you know about the negotiation. Explain your goals and how you intend to proceed. Promise to report to them on the results when the negotiation is over.

  6. Say, “You’ll have to do better than that, because . . .” Cooperative people are programmed to say “yes” to almost any plausible proposal someone else makes. To improve, you need to practice pushing back a little when others make a bargaining move.

  A simple phrase that works is “You’ll have to do better than that, because . . .” (fill in a reason). The better the reason, the better you will feel about it but any truthful reason will do.

  Research shows that many people will respond favorably if you make a request in a reasonable tone of voice and accompany it with a “because” statement. In one famous study, a Harvard psychologist increased the compliance rate for requests by 50 to 100 percent just by giving a “dummy” reason when she made a request. She set up an experiment at a photocopy machine in the library and had her experimenters wait for a line to form, then try to cut into the line to make copies.

  When the requester had just five pages to copy, about 60 percent of the people said “yes” to the question “Excuse me, I have five pages. May I use the Xerox machine?” When the requestor had twenty pages to copy, the “yes” rate understandably dropped to 24 percent.

  Then the requestor added the phrase “because I’m in a rush” to the end of the request. Now it went like this: “Excuse me, I have five [or twenty] pages. May I use the Xerox machine because I’m in a rush?” The success rate leaped to 94 percent for the five-page request and a remarkable 42 percent for the twenty-page request.

  Try this technique at the store, at school, in the airport, on the telephone, everywhere. Then use it at the bargaining table. Remember, the better the reason, the better you will feel about it and the more likely you will be to achieve your goal. And try doing this the idealist way: Make the reason truthful.

  7. Insist on commitments, not just agreements. Cooperative people think others are as good-hearted as they themselves are. They trust others more than is good for them, and they think an agreement is all that is needed to ensure that performance will take place as promised.

  Don’t be so trusting. Agreements are fine if you have a solid basis for believing that the other party’s word is its bond. But be sure you have that foundation before risking all the work you have invested in a negotiation. If you don’t know the people on the other side well or suspect that they may be untrustworthy, set the agreement up so they have something to lose if they fail to perform.

  Seven Tools for Highly Competitive People

  If you are basically a competitive but still reasonable person, you need more than anything to become more aware of other people and their legitimate needs. How can you do this? It is sometimes the hardest thing in the world to overcome your inherent suspicion of others’ motives. And it is difficult to resist temptation when you are dealing with a cooperative person who is naively handing things to you.

  Here are seven specific tools you can use to improve your bargaining performance.

  1. Think win-win, not just win. I know I said at the beginning of the book that win-win is an empty idea. It is—for accommodating and cooperative people. For competitive people, win-win is an excellent reminder that the other party matters. Go for deals in which both sides do better but you do the best of all.

  2. Ask more questions than you think you should. Competitive people like to get enough information to see where an advantage might lie, then pounce and try to exploit the opening. Don’t be in such a hurry. Other people have a variety of needs; they do not always want the same things you do. If you can understand what is really important to them, they will give you more of what is important to you.

  3. Rely on standards. Reasonable people respond well to arguments based on their standards and norms. Don’t be too quick to use a leverage-based approach to negotiation when a standards-based approach will work just as well. Reasoned arguments also work better than power plays when future relationships are important.

  4. Hire a relationship manager. You will do better when the relationship matters if you delegate the relationship management aspect of the deal to someone who is better with people than you are. This is not a sign of failure; it is prudent and wise.

  5. Be scrupulously reliable. Keep your word. You may have a tendency to cut corners when you see victory just ahead. But other people notice if you break your promises, even over little things. And they have memories like elephants.

  Establish a record of scrupulous reliability, and others will trust you more. A lot of money can be made when people trust each other.

  6. Don’t haggle when you can negotiate. You are tempted to haggle over every issue and try to win each one. That is a sure way to leave money on the table in complex negotiations.

  Try integrative bargaining in complex situations: Make big moves on your little issues and little moves on your big ones. Manage your priorities. Package your trade-offs using the “If . . . Then” formulation discussed in Chapter 9.

  7. Always acknowledge the other party. Protect his or her self-esteem. People are proud. They like to hear you say they have some leverage, even when they do not.

  Don’t gloat when you are the more powerful party. Treat people on the other side with appropriate respect. This does not cost much, and they will appreciate it. Someday they will have the leverage, and they will remember you more kindly.

  A Final Word

  In the Introduction, I said my goal in writing this book was to show you how to negotiate realistically and intelligently, without giving up your self-respect. You are now in a position to judge if I have achieved that goal.

  Effective negotiation is, in my judgment, 10 percent technique and 90 percent attitude. To acquire the right attitude, you need all three of the elements mentioned above: realism, intelligence, and self-respect.

  You will not succeed unless you approach the negotiation process realistically. It is best to be prudent and prepared. Unscrupulous people will try to take advantage of you. Don’t let them.

  Bargain smart. Remember that the key to success in negotiation is information. Use the information you gather to negotiate intelligently. Formulate adaptive strategies that fit both the situation and the people you confront. Don’t go into a negotiation with the idea that a single one-size-fits-all strategy will get you through. Use your planning tools and think about what you will do in advance.

  Finally, take the high road. Without self-respect, you lose the will to succeed as well as the respect of others. It requires hard work to maintain your integrity in bargaining but that work is well worth it.

  I study negotiation because it is a fascinating aspect of human social life. It keeps surprising me. I teach it because I feel tremendous satisfaction when I see people like Bill Siegel take negotiation knowledge, make it their own, and start achieving their goals. This book has been part of that effort. Join me in using the laboratory of your everyday life to keep learning more about this remarkable process. You have the tools to improve.

  Now, practice using them.

  Appendix A:

  Bargaining Styles Assessment Tool
<
br />   Follow this four-step process to determine your personal bargaining style preferences.

  1. Without giving the matter too much thought (and without revising your answers for any reason!), please select ONE STATEMENT in each pair of statements below. Select the statement you think is more accurate for you when you face a negotiation or disagreement with someone else—even if you think neither statement is very accurate or both are very accurate. Think about such situations in general—not just ones at work or at home. And don’t pick the statement you “ought” to agree with—pick the one your gut tells you is more accurate for you most of the time. Some statements repeat, but do not worry about answering consistently. Just keep going. All answers are equally “correct.”

  2. After selecting a statement from every pair, go back and add up the total number of As, Bs, Cs, Ds, and Es you recorded. Put the totals in the “Results” space at the end of the survey.

  3. Plot your total scores on the Evaluation Grid provided. Connect each of the numbers you circle with lines to make a simple graph. Your strongest inclinations will plot at the top of the graph while your weakest inclinations will plot near the bottom.

  4. Return to the Chapter 1 text, or continue reading in this Appendix for a more in-depth explanation of your scores and the general subject of bargaining styles.

  STEP 1 : STYLE SURVEY

  STEP 2 : RECORD RESULTS

  Add up all your A, B, C, D, and E answers on the previous pages and put those totals below:

  STEP 3: PLOT YOUR SCORES