The Intelligent Negotiator (13 page)

For example, you are meeting with investors for your fledgling company. Your common ground is that both sides want the company to grow solidly toward the IPO stage. You propose to hire more staff in order to build a solid operations base, but your investors are pushing for you to spend less money. In cases such as this, look for ways to expand the overall pie. Since most negotiators value the various items being discussed quite differently, trade-offs can usually be found that simultaneously benefit both sides. In this situation, you might explore the possibility of a more ambitious IPO than originally planned—one that includes a stronger, more solid operations division for your company (a better value for shareholders). Or perhaps as founder you will explore the possibility of taking less personal compensation in exchange for a greater number of shares once the company has gone public.

Once the participants have identified their respective underlying interests, they can begin to search for mutually beneficial settlement terms. Through brainstorming, the parties can look for new options that effectively enlarge the pie. But before you engage in brainstorming, be sure to establish some ground rules. Encourage each side to suggest possible alternatives the participants think would enhance the underlying needs of each party. Neither party should be allowed to criticize specific proposals until both sides have had the opportunity to disclose all alternatives they may be contemplating. This encourages complete openness.

Felicia puts many bargaining strategies into practice in her negotiations with Andersen. After Vice President Solomon and Felicia exchange pleasantries, he describes the present situation at Andersen. Their retail stores are doing well, and catalog sales are increasing each year. Although their dot-com business has been going on for a little more than a year, they are doing better than initially anticipated. They need a network manager who can manage their warehouse inventories and help them expand their business. Solomon acknowledges Felicia’s excellent educational background, and admits that her high school teaching experience is viewed positively since she would have to interact with many people who are not techies. His directness puts Felicia at ease. She indicates how pleased she is to have an offer from such an outstanding firm. The fact they are expanding their e-business is especially attractive to her.

Solomon says that he doesn’t like to haggle too much about salary levels, and says he would like to begin the discussions with an offer of $58,000. Since Felicia had expected him to begin in the $55,000 to $57,000 area, she feels optimistic. His “begin the discussion” language suggests some degree of flexibility regarding salary. She casually indicates that other firms are paying network managers in the $70,000 range—to place that figure in his mind. She then asks about fringe benefits. Solomon says they would provide complete health coverage, two weeks of vacation, and contribute 8 percent of her salary to a pension fund. He emphasizes that the network manager generally works from 8:30 a.m. until 5:15 p.m., except on rare days when real network problems are encountered. In addition, the network manager has two assistants who help keep the various systems operating.

Felicia asks if Andersen covers new employee moving expenses, training courses, or the cost of a company car. He responds that they have no specific policies pertaining to moving expenses or training programs, but notes that no workers are provided with company transportation. She asks whether Andersen ever provides “signing bonuses” to new employees and is pleased when Solomon says they “are not inclined to do so.”

Solomon asks Felicia what salary she would need to accept the Andersen position. She doesn’t wish to give him a definitive figure at this early stage of their interaction. She thus replies that she is looking for a salary in the mid-$60,000 range. When he does not immediately reject this stated goal, she begins to think she might obtain something approaching $65,000.

Felicia asks Solomon if Andersen has a stock option plan or performance bonuses. He says that they have a stock option program enabling employees to purchase stock at preferred prices. He also indicates that store salespeople work on a commission basis, and suggests that other personnel could receive performance-based payments.

S
UMMARY
P
OINTS

• During the Information Exchange, the parties try to determine what is available to be exchanged.
  

• Focus on what your counterpart really wants. The best way to elicit such information is to ask broad, open-ended information seeking questions and listen actively. Negotiators may do this by listening for “verbal leaks” that inadvertently disclose important information about speaker positions and priorities, and looking for nonverbal signals that convey important information and may suggest the presence of deceptive behavior.
  

• It is beneficial to get your opponent to make the first offer, to see how he or she views the relevant circumstances, and to allow you to “bracket” your goal with an opening offer that places your goal halfway between the opening positions of the parties.
  

• When multiple-item negotiations are involved, skilled negotiators begin the serious discussions with less important items to encourage quick agreement on these items and generate a joint psychological commitment to agreement.
  

• Proficient negotiators disclose their important information in response to opponent questions to enhance the value of what they are disclosing, and they use “blocking” techniques to avoid answering sensitive questions.
  

• Skilled negotiators seek common ground, going behind the stated positions in search of the interests underlying those positions, so they can explore alternative solutions that may be mutually beneficial.
  

• Good negotiators realize that most bargaining encounters do not involve fixed pies; they seek ways to expand the pie and simultaneously enhance the interests of both sides.
  

C
HAPTER
5
S
TAGE
T
WO:
T
HE
D
ISTRIBUTIVE
S
TAGE

T
he focus of the discussion now changes from what your counterparts wish to achieve to what you hope to get for yourself. You are entering the Distributive Stage of your encounter, where you begin to divide up the items on the table. While the Information Exchange you just completed in Stage One consists of
value creation,
when the parties determine what is available be divided up, stage two represents
value claiming,
when you and your counterparts claim the items you found during the first stage.

T
HE
C
OMPETITIVE
N
ATURE OF THE
D
ISTRIBUTIVE
S
TAGE

The transition between these two stages, creating and claiming value, is usually easy to spot. Each bargainer begins
talking about his or her own side’s needs. Often negotiators’ body language changes from relaxed and cordial to less relaxed and more aggressive. Be alert. You are about to enter the stage of the bargaining process that determines what each side ultimately receives. The distributive stage is the most competitive part of the bargaining process because both parties are claiming the items on the table. And rarely are the participants trying to divide the available items in a wholly equitable manner. Negotiators using an adversarial negotiating style often have an advantage here. Cooperators need to adapt their style during this stage because emphasizing the win-win approach essentially ignores the distributive nature of the bargaining encounter. The Cooperative Problem-Solving technique is effective with respect to the less controversial items, but it works poorly with the terms that
both sides
want. There is no way these conflicted issues can be completely shared; you must compete for these terms. If a Cooperator naively considers the process a pure win-win endeavor and is too open with an adversarial counterpart, he or she is likely to be cleaned out during the bargaining process. It would be like two people playing a game of poker in which one has to play with his cards face up during the betting while the other is allowed to hide her cards! The best style in this highly competitive stage is a hybrid style such as that of the Innovator who will match his or her counterpart’s level of information disclosure.

Objective standards that you can use to determine exactly what each side “deserves” are seldom available. Moreover, individuals tend to seek more than their fair share. While the most equitable solution might be to divide the items equally, this ignores the fact that participants rarely possess equal bargaining power and identical skill. Negotiators with greater strength and ability will almost
always be able to obtain better terms than their weaker adversaries. For example, someone might be trying to sell a house during a poor economic cycle. The house cost the owner $250,000 to buy, plus he has since added $200,000 worth of improvements. The owner would feel satisfied if he received $350,000 for it, but realizes that there may be no buyers willing to pay that price. Would it be inappropriate for a prospective buyer to offer $300,000 if she considered that a reasonable price in light of the other houses currently on the market? Should she be morally obliged to offer more just because the seller would lose so much on a sale at that price?

One mode of thought suggests that negotiators should attempt to come out in the “middle.” The problem with this strategy is that it assumes each side has equal merit—financial, social, moral, and otherwise. This is rarely the case. For example, if an employer has refused to hire someone because of his or her race, gender, age, or disability, should the victim of this discrimination have to accept less than full lost wages to make the final settlement “fair” to the discriminating firm?

Let Objective Criteria Guide You

An infinitely more fair, useful, and effective distributive standard is to create solutions based on principle, evaluating items and their distribution by objective standards. Objective standards could be market value, scientific standards, governmental standards, legal decisions, or community standards of fairness and reciprocity, to name a few.

Take the example of the house sale mentioned above. If the participants were to use objective standards that conversation might go like this:

B
UYER:
We are willing to pay $300,000 for this house.

S
ELLER:
I appreciate your offer. However, we have added $200,000 of improvements here over the past ten years. Even if we get $350,000, we will never recoup that.

B
UYER:
Your improvements are solid and certainly enhance the value of this house, although you must admit that some of them were long overdue. We happen to know that comparable houses are priced at $300,000.

S
ELLER:
I know that, too. But there is no way we can let our house go at that price.

B
UYER:
Hmm. This house really fits our needs. If you agree to sell it to us for $325,000, we have a deal.

S
ELLER:
All right.

Both parties acknowledge that the relevant value of this house is determined by what the market price is, and allow other considerations to flow from that figure.

The use of objective criteria can be so effective in a highly competitive stage because it lessens our reliance on hard bargaining, and provides a rational basis for the exchange agreed upon by both parties.

Create a Concession Strategy

If you are to walk away from the table with the terms you really want, you need to plan your position changes so they are carefully formulated and strategically disclosed. This planning will be your concession strategy. The concession
strategy serves as a blueprint, allowing you to determine ahead of time the size and timing of your position changes, what your rational explanations for these changes will be, and whether you can anticipate making several larger concessions or a series of smaller changes.

The elements of a successful concession strategy include consistent use of principled positions, a self-confident approach, prior knowledge of the size and timing of your position changes, and your own as well as your counterpart’s non-settlement alternatives.

Know the Importance of Self-Confidence

Self-assurance is a common attribute among successful negotiators. They always appear to be in control of themselves and their bargaining encounters. How do you accomplish this display of confidence? Carefully evaluate your non-settlement options before meeting with your opponents. Once you know your options, you will not be afraid. Your fellow negotiators are likely to be influenced by your inner confidence. If your counterparts begin to think that their own non-settlement alternatives look a lot less rosy than the options available to you, they are likely to feel greater pressure to reach agreements. That’s when they start to make more and larger concessions.

When self-confidence wanes, as it does even with the most self-assured among us, and you doubt your own bargaining power, you should do two things:

1. Ask yourself what weaknesses your opponents have that they are hiding. They are projecting their strengths, and you must try to estimate the weaknesses they are concealing.
   

2. Reassess your own circumstances to ask what strengths
   you
   are projecting. If you are doing a good job of disguising your own problem areas, your adversaries may believe you possess more power than
   you
   think you do! Reconsider your own non-settlement options, and try to refocus on the alternatives that are available to your opponents. Try not to attribute imaginary strength to your adversaries.