by Marvin Gottlieb and William J. Healy
A Soundview Executive Book Summary
Selected by Soundview as an Outstanding Book for Business People
Soundview Executive Book Summary, reprinted with permission. More Soundview Summaries.
Copyright 1997 by The Communication Project, Inc.
[1] Everybody's a dealmaker. Maybe you acquire office space for your company. Maybe
you're trying to work out a joint venture with a competitor. Maybe you sell copiers and
fax machines. Or maybe you're just trying to get the best price on a new car.
[2] Whatever the situation -- and you make deals daily, whether you know it or not -- no executive who sits down to cut a deal wants to stake the outcome on instinct, intuition, or the force of another's personality and position. You need a plan. Your reputation, and maybe your career, depends on it.
[3] How do you make sure you get the best deal? You've come to the right place. This summary's realistic view of negotiating and the proven techniques it provides will make you more confident and effective in any setting.
[4] First, some background: Did you know that pounding the table and screaming at other negotiators are out? Instead, the better dealmakers now try to create a problem-solving, collaborative atmosphere that produces satisfying results for everyone.
[5] Still, you'll need some ammunition. This summary provides an inventory of tried-and-true strategies and methods that you'll learn to use with maximum impact. You'll also learn how to turn deadlines and the timing of the deal to your advantage, as well as how to gather information that strengthens the deal you bring to the bargaining table.
[6] Does the other side have greater power to reward and punish than yours (as is the case in most buy/sell situations)? This summary shows you practical ways to acquire power and use it -- and how to circumvent the power plays of others.
[7] And since you'll inevitably go up against hard-nosed, positional bargainers from time to time, you'll learn to recognize and counter their "all's fair in love and war" tactics.
[8] We think you'll come to see that win-lose and lose-lose (compromise) negotiation are things of the past. In the best deals being made today, both sides win, and win big.
[9] Life is a series of deals. We buy, sell, and barter for everything from furniture to relationships; we negotiate with bosses, subordinates, colleagues, customers, and even ourselves. This summary outlines real-world strategies and techniques to help you become a more astute negotiator both in business and in other walks of life.
[10] If there's one prerequisite to becoming a successful negotiator these days, it's this: You must see negotiating as a conference, not a contest or confrontation. Seasoned bargainers no longer rant and rave; they enter meetings to resolve common concerns and reach agreement. "Winning," to professional negotiators, means meeting key objectives, not conquering the other side.
[11] In recent years the emphasis in negotiating has thus shifted from tactics (and how to counter them) to a collaborative or problem-solving approach. Even compromise has fallen out of favor; it satisfies neither substantive nor relationship needs and produces, most often, a lose-lose deal.
[12] Negotiators strive to resolve conflict, and a problem-centered, consultative mindset works best. It's especially easy to appreciate that fact when you consider the three ways that negotiations may work out.
[13] Win-Lose. When negotiations produce a winner and a loser, one side goes away feeling it's been had. Win-lose strategies, which have long dominated the bargaining arena, are traditionally compared to gamesmanship. But games assume that both sides are rational, informed bargainers with static goals who negotiate in a vacuum. Clearly, these are not the "rules" of life.
[14] Lose-Lose. This result is more common than you might think. Both parties settle for less than they want because they believe it's the best they can get.
[15] Although compromise may be the best practical result in some deals, a problem-solving spirit can often uncover superior solutions.
[16] No-Lose (Win-Win). This works best simply because both sides pursue solutions that satisfy everyone's needs. It starts with the mindset that by working together, both parties can achieve their goals without compromise.
[17] Here's an example. The management of a major record company's warehouse had a dispute with employees about overtime scheduling. Workers didn't want to be locked into spur-of-the-moment overtime assignments, yet management needed to be sure that the warehouse would be fully staffed.
[18] After attacking the problem (instead of each other), both sides discovered an excellent win-win solution. Supervisors prepared a rotation list, and as workers' names approached the top, they could expect an overtime call. Employees could trade hours among themselves as long as the warehouse was fully staffed. In the spirit of no-lose negotiation, the parties collaborated to produce a unique answer to a unique problem, and neither side lost.
[19] Win-win negotiating challenges both sides to adopt a noncompetitive attitude, mutual understanding of each other's needs and goals, a special set of negotiating skills, and a certain amount of cooperation.
[20] Look closely enough and you will always find points of agreement. Problem solving comes into play when each side's needs don't seem to yield to the same satisfiers. Each round of win-win negotiating should start with mirror statements, which let each party reflect understanding of the other's concerns as well as the nature of the conflict. ("Let me get this straight. You want to pay $12 a square foot and have night-time security thrown in?") Once you've agreed on the conflict itself, you can join forces to resolve it in a way that meets everyone's needs.
[21] Win-win situations aren't always possible. When the situation won't yield to problem-solving techniques, you'll have to resort to compromise. Nevertheless, your efforts haven't been wasted. Honest attempts to try to learn what the other person wants and to satisfy those wants are bound to create a climate of good will and a strong bridge to future negotiations.
[22] Negotiations are framed within four limits. Knowing what they are and their impact on dealmaking helps you turn them to your advantage.
[23] Time is usually either an ally or an enemy. It becomes an issue not only through deadlines but also through your decision about when to begin dealing.
[24] Deadlines. Deadlines are inevitable, and a common deadline (which can be a bigger enemy than the other negotiator) spurs both parties to generate solutions. Hide your own deadlines while looking for the following clues that the other side's deadline is near:
[25] When it serves your purpose, you can create time pressure to accelerate discussion or resolve a deadlock by:
[26] Be careful about creating a false deadline, however. A skilled negotiator may call your bluff by ignoring it and, once it passes, your credibility will go with it.
[27] Time constraints in negotiations, as in other activities, are subject to a form of the 80/20 Rule: 80 percent of concessions tend to be made during the last 20 percent of the negotiating time. This is a strong argument for hoarding your concessions until late in the process. A concession that might mean little to the other side early in the process may become a "sweetener" that closes the deal at the end.
[28] When to Negotiate. Your choice of when to begin dealing can have a material effect on your success. For example, when you buy or sell something, capitalize on market or seasonal trends that will drive prices down or up. You might save as much as five percent on a long-term contract if you buy on the down side of a supplier's business cycle. Delay purchases such as automobiles until the end of a fiscal year, when salespeople are eager to make a quota or earn a bonus.
[29] You need to gather information on (1) the variety of alternative solutions that would meet your needs, and (2) the specific deal you're working on.
[30] Knowing which potential solutions can meet your needs keeps you from being backed into a corner. For example, let's say you want to buy a home in one particular area and must vacate your old home by September 1. If there's only one house for sale in the new location, your negotiating clout is virtually nil. Lacking knowledge of other options that would meet your needs, you're forced into single-issue bargaining over price alone -- a negotiation you'll lose.
[31] Dig up as much information as possible about your options outside the specific deal. Ask, "If not this, then what?" Be sure you have an answer before you begin to negotiate.
[32] The second component of information focuses on the deal at hand. What do you know about your adversary's personal and organizational needs, position, and interests? The side that gathers the most information usually comes out best, so the more you know about your counterpart the better you can anticipate and react to their requests.
[33] Gaining information during the negotiation is even more critical and hinges on your ability to ask questions that delve into what the other side really wants beyond what it's openly willing to admit. Ask what, where, when, how, why, who, and to what extent to uncover hidden agendas and secret needs.
[34] You might answer these questions by talking with the other side's competitors or customers, reading trade reports or recent articles about the other party, or consulting standard business information references. Information also comes by questioning insiders. Be sure to ask the same questions of people at different levels and at different locations to get a comprehensive picture of the other side's real concerns.
[35] It's rare that one side has complete power over the other. In any case, power, like beauty, is in the eye of the beholder. It's influenced by perceptions, and you can diminish the power of another when you refuse to acknowledge it. Furthermore, although your actual power may be minimal, creating a perception of power enables you to command more influence over the negotiation's outcome.
[36] Throwing your weight around unnecessarily can damage business relationships, and the balance of power can shift back and forth during the course of negotiation as internal and external forces (plans, budget, the market, acts of competitors, etc.) change for or against one party or the other.
[37] Power grows from several sources:
[38] Risk-taking power. This is your ability to walk away from a deal. If you can do that, you're in the driver's seat.
[39] Information power. The more accurate your information, the more you can influence the course of the deal. Superior information requires you to take less risk, and merely demonstrating that you have good information can impress your counterpart. Because people tend to defer to those whom they see as experts, gather enough information before going to the bargaining table to position yourself as an expert.
[40] Reward or punishment. This power tends to lie, for example, with the buyer in sales negotiations, although buyers too are subject to rewards or punishments. How might the buyer's boss react if the deal falls through?
[41] Legitimate (positional) power. This power comes with someone's job title or formal position. Parents have it over children; bosses have it over subordinates. Legitimate power is the foundation of our organizational, social, and family structures and hence has an effect in a negotiation.
[42] Identification/association power. This power flows to you from people you know, such as an influential relative in top management. It may also flow from an organization. How powerful would tax agents be without the IRS behind them?
[43] Skilled negotiators consider not only time, information, and power, but also the context within which the negotiation takes place. Excellent one-time deals can often be made thanks to context: a house that must be sold to satisfy a divorce decree, a business for sale by incompatible partners, or a car that's for sale when a dealer's inventory is high.
[44] If there's a potential for future dealings, however, look at the "big picture." You don't want to win the battle but lose the war. Always ask how the outcome of this deal might affect your future relationship with the other side.
[45] Not everyone you deal with is going to share your view of negotiating as an exercise in problem-solving. It's important, therefore, to take an inventory of the strengths you can bring to the table. Each of these strategies will serve you well in certain situations.
[46] Strategy One: Focus on Your Strength. It's easy to underestimate your strength, because you're more likely to worry about how the outcome affects you than how it affects your counterpart. Look again. You probably have more strength than you think, and you can enhance it by believing and feeling that you do. Project that feeling across the table by focusing on:
[47] Strategy Two: Be Patient. Remember the 80/20 Rule (most concessions occur near the deadline). Act as if you have all the time in the world, but watch for clues that the other side's time is running out. These clues might be subtle: uncharacteristic friendliness, a modified tone, sudden deference, or a new willingness to make concessions.
[48] Strategy Three: Explore Options and Make Tradeoffs. When both sides examine ideas that seem to conflict, they tend to move closer to a satisfying solution. Exploring options together builds trust and creates a problem-solving climate in which both of you can reshape your proposals to meet each other's needs.
[49] You make tradeoffs by weighing, sorting, and deciding which options will work most effectively for you and the other side. Value a tradeoff by (1) how it affects other issues you'll be working with and (2) what you'll get in exchange from the other side. Aim for a "quid pro quo" -- something for something -- and don't be quick to trade off an item just because it seems cheap or unimportant to you. If you're going to give, be sure you get.
[50] Strategy Four: Personalize Yourself. Make the people on the other side see you as a person, not a mouthpiece for your company. Let them know you have feelings, problems, and needs just like theirs. Instead of dealing as if you were "The Company," negotiate on behalf of yourself as a representative of your company. This is a subtle distinction, but an important element in the human chemistry of making deals.
[51] Train yourself to say, "I don't know," "I don't understand," or "I need your help" now and then. Done at the proper moment, you'll project a sense of humanness -- without seeming weak -- and reinforce the problem-solving climate.
[52] Strategy Five: Build Bridges. If you anticipate ongoing contact, you need to build a sense of continuity and assure the other party that you'll be there to serve its needs even after this deal is done. Building a good bridge during the first deal saves you from repairing it (or, worse yet, rebuilding it from scratch) when you sit down to renew or modify the contract.
[53] Build bridges by keeping your promise to follow up, delivering what you say you will, and not promising things that are beyond your authority. Be sensitive to the other side's bridge-building efforts, too. If you say, "Don't call me, I'll call you," you'll blow up the bridge.
[54] Strategy Six: Consider Compromise. Although this summary doesn't advocate compromise, it may provide the best alternative. Compromise if it seems thoroughly justified, but not until you've exhausted every effort to produce a win-win, collaborative solution that satisfies both sides' needs without either having to settle for less.
[55] Strategy Seven: Recognize Controllers and Understanders. These are two general types of negotiators you're likely to meet. Knowing which category your opponent fits helps you select an effective strategy to deal with that person.
[56] Controllers need to dominate people. They're determined to gain the upper hand in all relationships because they see others as threats to their security or position. Understanders try to figure out the needs of both sides, and they prefer to minimize conflict. Unlike controllers, understanders enjoy developing close personal relationships. The techniques this summary recommends work best for understanders.
Negotiating Tactics
[57] Although collaborative negotiation is becoming the norm, you're bound to meet negotiators who have succeeded through hard bargaining methods. Their view: "All's fair in love and war and negotiating." Your best defense, of course, is a working knowledge of the tactics they use.[58] Extreme Demands. Hard bargainers may take an unreasonable opening position, hoping to force you to lower your expectations. The sheer weight of such demands -- "We need a five percent rebate on travel," or "This company's only worth half that much to me" -- pushes an unprepared negotiator to make concessions.
[59] When faced with an extreme demand, restate it in terms that are more acceptable to you: "So, you want us to consider a travel rebate?" and "You believe the company's worth less than the asking price?" Reinforce your expectations by saying that you want to reach a fair agreement that satisfies everyone's interests and that such an agreement is necessary "if we're going to do business together." That phrase alludes to your ability and willingness to walk away.
[60] Don't reciprocate by trotting out your own list of demands. Avoiding a position at the outset lets you try to move the other side closer to a problem-solving mode.
[61] Play Acting. Some negotiators will try to shake you up by swearing, screaming, or pounding the table. They may also try to make you feel guilty by accusing you of trying to take advantage of them. Research shows, however, that low-intensity, unemotional messages produce the greatest attitude shift in bargainers of equal power. Yet if one side has more clout than the other, intense language and dramatic actions can be very persuasive.
[62] Don't let actors throw you off guard or make you feel guilty. Your best response is to either (1) say nothing and allow them to continue or (2) wait for the moment to pass, then restate your last point and ask the other side to clarify or expand on the concern just voiced. You can also ask if there are additional objections that account for the intense feelings and request a recess until things can be discussed calmly.
[63] Responding with play acting of your own is almost sure to produce a "conflict spiral" leading to a stalemate. If you're intimidated or make concessions, though, you've allowed the other side to control your response.
[64] Limited Authority. This method surfaces through statements like "It's not up to me," or "The decision will be made upstairs." The other side will often give you a settlement option, hoping that you'll accept it or make a more favorable counteroffer.
[65] Deal with this tactic by clarifying early on whether the other person is really the decision maker. You can also ask how decisions of this type have been handled in the past so you can spot contradictions in how your deal's being handled. If limited authority is a ploy, the other side will often "find" the lost authority. But if a lack of power is genuine, get a commitment to meet with the true decision maker.
[66] In any event, avoid proposing a solution you don't like. Giving in to save the deal shows weakness and a sensitivity to time pressure.
[67] Take It or Leave It. Often couched in terms that imply that a competitor stands ready to make the deal if you don't, this tactic undercuts your feelings of power and lowers your level of expectation. Know your cost limits, and remember that a bad deal for you is probably bad for your competitors, too. Restate the benefits of your deal and note that the other party's offer would be unprofitable and unacceptable as it stands. To be effective against this strategy, however, you must be willing to walk away.
[68] Good Guy/Bad Guy. The other side brings in a person you haven't met before (the bad guy) to tear your offer to shreds, make unreasonable demands, and stalk out of the room. Later, the original negotiator (the good guy) presents a more reasonable proposition that looks good by comparison. The idea, of course, is to force you to make several concessions that the good guy can offer to the bad guy for approval.
[69] Respond by reexamining your prenegotiation plan, perhaps during a recess, but don't make any concessions. You may even bring in your own bad guy. Once you've seen this charade, however, assume that everyone's a bad guy. Try to negotiate a mutually acceptable deal, but don't make appeasing concessions. It validates the tactic and may produce an unfavorable deal for you.
[70] Phony Issues. If the other side seems obsessed with one issue in the deal ("I've absolutely got to have a rebate to make this deal work"), it's often a Trojan horse to lure you into offering concessions on objectives under-emphasized but of greater importance to the other side. For example, if the other party focuses on price, the real issue may be service; if the focus is on financing, the main concern may be the delivery date.
[71] Defend against phony issues by listening carefully and asking yourself what's really important to the other side. Here, as always, it's important to do good research and stick to your prenegotiation plan. Act skeptical. Use mirroring to identify real needs in the deal. Don't be drawn into single-issue bargaining or concede secondary points to appease the other negotiator on the major but de-emphasized issue. Calling the other party's bluff may plunge the two of you into a conflict spiral that may force the other side to seek another deal in order to save face.
[72] Just One More Thing. This ploy shows up in a fait accompli approach up front or a last-minute add-on at the end. For example, the other side may return your proposal or contract signed, but with one or more items deleted or altered to pressure you to take the change instead of reopening negotiations.
[73] Accept this tactic as part of the negotiation process, not a substitute for it. Reexamine all the components in light of the new request, because it may destroy their equilibrium. Treat any change as a counterproposal and respond as if you were in an earlier stage of the negotiation. Remember, a signed contract that doesn't satisfy your interests is a bad deal.
[74] Negotiators generally exhibit one of four operating styles, though everyone can display characteristics of any of the four depending on the circumstances. Research shows that style can radically affect a deal's success, even when all the factual information is identical. The best style depends on the context of the negotiation, although the collaborative style tends to work better than the others.
[75] Recall the discussion of controllers and understanders (see Strategy Seven). Each negotiating style is defined by the degrees of control and understanding that occur in each style.
[76] Competitors tend to dominate and overcontrol the conversation. They're pushy, demanding, and flatly assertive. Although this style can be effective when you need quick action, its aftereffects can damage ongoing relationships. Moreover, competitors are often surrounded by yes-men who fail to give their leader enough information to make a good deal.
[77] Avoiders prefer to deal through blind bid submissions. Their tendency to stay aloof from personal involvement makes them difficult to understand, and they're often more concerned about following policies and procedures than solving problems.
[78] Exemplars of this style may avoid confronting issues in favor of generating new and more harmonious alternatives. Their sidestepping behavior can be good when dealing with minor issues or when conflicting parties need to cool off and regain their perspective.
[79] Accommodators need to involve everyone who might be affected by the outcome. They'll be among the first to make popular concessions as tradeoffs for expected future favors or peacemaking overtures.
[80] People who adopt this style focus on generating goodwill and value the relationship more than winning. Their motto is, "If people like me and feel good about the negotiation, I'll end up with a good deal."
[81] Accommodation may work well when an issue is more important to one side than the other, and a concession may position you for quid pro quo. The other side may try to steamroll an accommodator, however, by pressing for a series of concessions without any reciprocity.
[82] The results-oriented style of collaborators generally works best, especially in high-stakes negotiations with minimal time pressure. Collaborators seek a practical solution that satisfies the issues and builds a bridge to future relationships. Like competitors, collaborators can be as strong and dominant as the context calls for, but they're motivated not by control but by conquering the problem with an integrated solution.
[83] Becoming a better negotiator is like becoming a better runner. You already know how to do it, but you can do it better by enhancing your planning, pacing, and what you know about the field and your competition. This list will help you go into any dealmaking session with confidence. Remember: You can never be overprepared.
[Table of Contents]
[84] Will you be negotiating with another party indefinitely? If so, these guidelines will help you build a successful long-term relationship.
[85] If you're dealing with a tough bargainer whose importance in the negotiation outweighs yours (say your boss or a sales prospect), you're virtually forced to be an understander. Nevertheless, you can offset and resolve the built-in difficulties of this situation by analyzing precisely what (and whom) you're dealing with. Several strategies can help you work your way through this situation to your advantage:
Prospect: "I'm not going to fool around. If I don't get a bigger discount, no liability, and customized reports, we've got nothing to talk about."
You: "Is that all? Just a bigger discount, no liability, and customized reports? Why are you being so easy on us?"
Dr. Marvin Gottlieb is President of The Communication Project, Inc., a Greenwich, CT-based management consulting firm specializing in Human Resources Development, and a Professor at Lehman College, CUNY, where he teaches organizational communication and group dynamics. Dr. Gottlieb has written four books and several articles on the subjects of interviewing, selling, and the effects of corporate downsizing in the workplace. He is a frequent presenter of seminars and workshops on sales, sales-negotiations, interviewing, management development, and teambuilding.
Dr. William J. Healy is President of Princeton Learning Systems, a Princeton, NJ-based company that designs and manages enterprise-wide Internet-based virtual universities to address training, compliance, and certification issues. His twenty-five years of corporate experience include sales, marketing, operations, and human resources assignments with brokerage, financial services, manufacturing, and communication companies. Dr. Healy delivers numerous presentations on sales and service curriculum development, proficiency assessment, certification, and the creation of technology-based learning systems.
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