Notes on Negotiation

Tips on getting what you want, and getting what everyone wants, in negotiations.

When Eisenhower became President, Truman was rumored to have said, “Ike can’t just tell people what to do like he could in the Army. When you are president, you only get what you can negotiate.” Whether this story actually happened is irrelevant. In life, you only get what you negotiate.

Tactics

  1. Limited authority – “Sorry, I don’t have the authority to make that decision. Let me talk to my manager…”
  2. Missing person – “Sorry, the boss isn’t here right now, so I’ll have to get back to you and on what you want.
  3. Good cop, bad cop – One negotiator on the team is rude and demanding, while another on the same team buddies up to you.
  4. Reverse auction – Bargaining down, such as when a man goes to a car dealership with a rock bottom price advertisement from another dealership and says, “how close can you get to this?”
  5. Nibble at the end – One side is just about ready to sign a contract, and then they suddenly stop and say, “You know, if we could just have this last, small item (concession/whatever).”
  6. Take it or leave it – pushing for a final decision or concession in a negotiation. Walk away, but leave your card.
  7. Split the difference – perceived by most people as fair, this is how two-sided negotiations usually end up, more or less. However, this may not be fair if one party has a huge power or knowledge advantage over the other. For example, if a jewelry store is asking $1,000 for a necklace and the real price is $200, selling it for $600, a 200% markup, may not actually be fair.
  8. Funny money – using non-monetary inducements to seal a deal
  9. Garbage on the lawn – often used in real estate and used car negotiations, this entails finding anything and everything wrong about an item and disparaging it to try to get a better price.

Why do most people think that they are not good negotiators?

  1. They fear failure – they fear being taken advantage of.
  2. They have not prepared enough.
  3. They have no good BATNA – best alternative to a negotiated agreement

Motivation – Everyone is motivated by something and for something, but no one can entirely motivate someone else.

Positional Negotiation – avoid these

  1. Taking a position and holding to it doggedly until forced back.
  2. Paying more attention to the position than the people involved and even the issue being discussed.
  3. Identifying your ego, your personal value, with your position (“If I lose this position, I am a failure.”)
  4. Requiring a solution that will “save face.”
  5. This will sometimes result in a mechanical, “splitting the difference” solution rather than a creative, “everyone wins” solution.
  6. Arguing over positions threatens relationships, which are needed for long term stability of existing agreements and the possibility of future agreements.

Key behaviors in successful negotiation

  1. Listening without judging
  2. Knowledge of the subject
  3. Knowing how to expand the pie

Power in negotiations

  1. Each side is always aware of their own limitations far more than the other sides’. Even if they were equally aware, they would think more of their own.
  2. If you think you have no power, you don’t.
  3. You always have more power than you think.
  4. If you have power but aren’t aware of it, you don’t have power.
  5. 75-85% of outcomes in negotiations are determined before the negotiation begins. The military strategist Sun Tzu said the same thing about war.
  6. The first offer and the first concession determine the course of the rest of the negotiations. You can just about predict the final outcome from these.

BATNA – best alternative to a negotiated agreement

  1. Most negotiators have two facts in mind when they enter negotiations, the goal and the walk-away.
  2. Set your facts (goal and walk away) with facts (industry standards, market-based pricing, supply and demand), not guesses
  3. Having a good BATNA is like having a good Plan B – if you can’t get house A for a good price, you may still be able to get house B.

The Psychology of Negotiations

  1. Negotiations are messy, with verbal and emotional twists and turns that seem unnecessary and bizarre. German Prime Minister Otto Von Bismarck said, “Laws are like sausages, it is better not to see them being made.” Negotiations are the same way.
  2. Negotiations are not events, they are processes. Even those not immediately involved in the negotiation are part of the process.
  3. The feeling of participating in the process is one of most important factors in determining if a negotiator accepts a proposal. Book – Getting to Yes.
  4. Don’t offend. Years ago, I was watching a group of American tourists dickering with an Arab merchant over an item. They berated his merchandise (the “garbage on the lawn” strategy) that he became angry and chased them out of his shop. Both sides left grumpy.

Negotiation is about ego, expectation, and satisfaction – not about money, goods, and services.

  1. Ego – As Columbo always said in the police drama, “Looking smart is dumb, but looking a bit dumb is smart.” Try asking “Can you help me out here?”
  2. Expectations – Get the other side to reveal their needs and their deadlines. You don’t get credit for meeting unknown needs.
  3. Satisfaction – You must make the other side feel satisfied with the work they must do to meet your demands. Whenever Person A makes an offer and Person B immediately accepts it, Person A feels let down, like they left money on the table. Don’t let this happen. Even if you love the offer, don’t jump at it. Ask for a little more. Ask for and make concessions in a way that satisfies the other side.

Negotiations are a long-term relationship

  1. Important phrases, signs, and signals in negotiations
  2. That’s a good point – a sign that you are a good and fair-minded listener.
  3. You’re right about that – a signs that you can see other positions and ideas and are open to them.
  4. Please correct me if I am wrong – a sign of humility
  5. Quick negotiations are dangerous to one side. Skilled negotiators have an advantage.
  6. Beware telephone negotiations

Using time in negotiations

  1. “Push” theory of negotiations – if you use all the time available, you usually have a better chance of pushing the other side to the limit.
  2. Bargaining down – Each side will negotiate their side down naturally over time. This means that once a person makes Offer A, he immediately begins to think of why the other party won’t take it. In his mind he consequently thinks Offers B and C, less and less favorable to himself. Wanting to make the deal, he convinces himself to make Offers B or C if A is rejected.
  3. Use body language to pause.
  4. Negotiators will often push deadlines (the “11th hour agreement”) because it appears to their sponsors and other stakeholders that they have done all they can do.

Questions in Negotiation

  1. What do you want?
  2. What do they want?
  3. What could you trade?
  4. What will you trade?

Preparation checklist

  1. What do you want to happen?
  2. What are the negotiable issues?
  3. Rank each “want” in importance to you – high, medium, or low. Set a range for each want.
  4. Entry and exit (“walk away”) limits
  5. Plan how you will describe to the other side what you are seeking (general agreement, detailed agreement, fairness, etc.)
  6. Draft an MOU that you think will cover all of the pertinent points and expected outcomes. Modify this MOU to meet terms agreed upon during the negotiations.

Summarizing during negotiations

  1. Simplify complex issues
  2. Refocus wandering negotiations
  3. Reassures both sides that they are being taken seriously
  4. Gives you time to think

Ending negotiations

  1. Summarize
  2. Write a memorandum of understanding (MOU) that both sides sign

How to save money when shopping

  1. When to buy – end of day, week, month, or year
  2. Businesses have quarterly goals and quotas. Buy close to 31 March, 30 June, 30 September, and 31 December.
  3. If you don’t know what to pay
    1. Bid 40% of list price
    2. Pay up to 60% of list price.
  4. Shopping Discounts – always, always, always ask
  5. Repeat customer
  6. Pastor/Rabbi discount – fake, but funny. Can lighten things up with a store manager
  7. Bulk discount

Negotiation Planning Questions

1.     Issues (Why we are meeting) – Me/Other party

2.     Objectives (What is wanted) – Me/Other party

3.     Perceived Needs and Interests (Feelings) – Me/Other party

4.     Potential Concession (Things I am willing to give up) – Me/Other party

5.     Settlement Options (Possible to solutions to the issues) – Me/Other party

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