Bargaining for Advantage Read online

  We Americans tend to be slightly disdainful and even a little suspicious of the idea that people get ahead through their “connections.” In our public ceremonies and rhetoric, we honor people based on what they achieve rather than who they know. In the Western news media, the Chinese idea of guanxi carries the smell of corruption and unsavory business practices. What Asians and Latin Americans think of as “gifts,” we sometimes see as “bribes” or “kickbacks.” Where they see public officials exercising discretion, we see violations of the rule of law.

  Yet in our own way, we Americans believe in the power of guanxi, too. We are just less forthright about it. One of my first jobs out of college was at a fund-raising consulting firm that published what amounted to an American “Guanxi List.” My firm compiled an annual directory listing the names of every trustee, board member, and executive director of every major foundation and nonprofit funding source in the United States. The directory included every scrap of personal information we could glean from public sources about the people on the list: their spouses, where they had gone to college and graduate school, their clubs and other affiliations, their interests and hobbies.

  The programs these foundations funded dealt with high-minded issues such as world hunger, human rights, and curing cancer. But the directory sold out every year because it provided hints about the guanxi networks of the elite decision makers who distributed grants. Fund-raisers could then find out where their own institutional guanxi networks crossed paths with the donors’ networks. This was the starting point for strategic planning to approach a funding source. Other examples of American guanxi include college alumni networks, relationships gained through community activities, mutual acquaintances made through children and family, and so on.

  Relationship Traps for the Unwary

  Relationships are critical to negotiation success in all the ways I have discussed, but they pose significant risks, too. Fair-minded, reasonable people in particular can fall prey to tricks and traps set by “sharks” at the bargaining table. When the stakes are small, being victimized by such tricks becomes a simple learning experience: Pay for your mistakes and be more careful next time. When the stakes are high, however, you may not be able to afford the lesson. Here are a few common traps to watch out for.

  TRUSTING TOO QUICKLY

  Cooperative people assume that most people, like them, are fair and honest. Not wanting to appear greedy or suspicious, they take big risks too early in a bargaining encounter. This can happen when negotiators on the other side ask for substantial sums of money or performance commitments up front without sufficient assurances that they will fulfill their side of the bargain.

  The solution here is to take your time and build trust step by step. It helps if you can use your relationship network to check the other party out. If this is not possible, take a small risk before you take a big one. See if those on the other side reliably reciprocate in some little matter that requires their performance based on trust. If they pass the test, you have a track record on which to base your next move.

  RECIPROCITY TRAPS

  Sharks can manipulate the norm of reciprocity, triggering a feeling of obligation in well-meaning people when none is appropriate. Many of us have experienced this in everyday encounters with various con artists. How about the people at the airport who give you a flower and then ask for a donation to their charity? You try to give them the flower back, but they insist you keep it. You feel angry, but you also feel obligated. This is nothing less than a well-crafted reciprocity trap designed to trigger donations that far exceed the flowers in value.

  At the bargaining table, watch out for people who make small concessions and then ask for much bigger ones in return. Similarly, beware of those who reveal a little information of their own and then ask you to disclose your entire financial position and cost structure.

  These are patently unfair exchanges, but the norm of reciprocity is so strongly ingrained in many of us that we respond to the form of the exchange more than the content. Once those on the other side make a cooperative move in our direction, we feel compelled to reciprocate, and we sometimes do not pause to consider whether their suggestion about how to do so is really prudent or appropriate.

  If you feel yourself feeling pressured to reciprocate when it does not feel quite right, take a break and consider the overall situation before making your next move. Do you really owe the other party something, or are you falling into a reciprocity trap?

  NEGOTIATING WITH FRIENDS WHEN THE STAKES ARE HIGH

  As was mentioned earlier, friends and lovers make bad bargaining partners when the stakes are high. People in very close relationships tend to rely on equal-split norms to make divisions. In the $100 “ultimatum game,” they split $50-$50 in round after round.

  But as many a broken business partnership can testify, very high stakes can bring out the shark in even a close friend or associate. Suppose the ultimatum game involved a final round in which the stakes were raised to $10 million. Your friend now has a choice of what to offer you. Do you think he might be tempted to offer you $1 million or even $500,000, figuring you could not say “no” to that kind of money and deciding that for $9 million he can live without your friendship? It may not say much for human nature, but many people would yield to this enticement.

  When the stakes rise, people in close relationships are well advised to seek help in negotiating tough allocation issues. Equity norms (such as “To each according to his inputs” or “To each according to her risk”) might become more appropriate division norms than simple fifty-fifty splits.

  Even if both parties are operating in good faith, equality norms tend to leave large areas of potential value unexplored. Energetic problem solving can sometimes bring these opportunities for gain to light better than simple compromises. Letting relationship concerns overwhelm the negotiation may eliminate these potential gains.

  When the stakes are high, therefore, it is often wise to delegate the bargaining task to professional advisers. If this sounds too confrontational, finding a single adviser trusted by both sides to act as a mediator or go-between might help. Such neutral parties can ensure that the maximum amount of imagination is brought to the transaction without endangering future cooperation between the principals.

  Summary

  The relationship factor is a critical variable in your ability to succeed as a negotiator. Here are some tips that will help you get the most from relationships every time you negotiate.

  THE RELATIONSHIP FACTOR: A CHECKLIST

  ✓ Gain access and credibility through relationship networks.

  ✓ Build working relationships across the table with small steps such as gifts, favors, disclosures, or concessions.

  ✓ Avoid reciprocity and relationship traps like trusting too quickly, letting others make you feel guilty, and mixing big business with personal friendships.

  ✓ Always follow the “Rule of Reciprocity”:• Be reliable and trustworthy.

  • Be fair to those who are fair to you.

  • When other parties treat you unfairly, let them know about it.

  5

  The Fifth Foundation: The Other Party’s Interests

  It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interests.

  —ADAM SMITH (1776)

  If there is any one secret of success, it lies in the ability to get the other person’s point of view and see things from that person’s angle as well as from your own.

  —HENRY FORD

  Effective negotiators exhibit a very important trait: the ability to see the world from the other party’s point of view. To succeed at negotiation, you must learn to ask how it might be in the other party’s interests to help you achieve your goals. Then you should determine why the other party might say “no” so you can remove as many of his or her objections as possible. Understanding what the other party really wants is critical to Information-Based Bar
gaining, and it is not as easy as it sounds.

  I once advised a U.S. hospital that was conducting a clinical trial of a new drug for a foreign pharmaceutical firm. These tests form the basis for new drug applications to the U.S. Food and Drug Administration (FDA). The overseas drug company was refusing to follow an FDA recommendation about how the trial should be conducted. The FDA wanted one sort of informed consent form used with patients taking the experimental drug, and the foreign firm was adamant that it would use its own form. The disagreement was threatening the whole project because the FDA might ultimately reject all the findings in the study if the wrong form was used.

  The issue was all the more bizarre because the hospital and the foreign firm shared significant interests. Both wanted to see the project through to a successful conclusion, and millions of dollars as well as the professional reputations of both parties were at risk.

  This negotiation had all the earmarks of a disaster until I asked the hospital’s research director to identify the specific decision maker at the drug firm who was saying “no.” This question forced the executive to focus his attention on a specific person instead of “the client.” It turned out that a foreign-trained physician with no U.S. medical experience was calling the shots. Then I asked why this particular physician might be saying “no.”

  All of a sudden the ideas started popping. First, the foreign physician’s experience was with his country’s version of the FDA, and that agency would not throw out a study based on this sort of issue. Next, the hospital was being represented in the negotiation by a midlevel project manager who was not a physician and who lacked professional credibility with the foreign doctor. Physicians are professionally oriented toward hierarchies, and the foreign physician’s national culture reinforced his tendency. Finally, the research director speculated that the specific form the foreign firm wanted to use might be linked—at least in the physician’s mind—to the firm’s success in enrolling patients in the study, a critical factor.

  From these ideas, none of which had to do with any conflicts between these parties, came a series of recommendations for action. The problem was now framed as one of persuasion. A particular foreign physician working for the client had to be given compelling arguments by a credible source (preferably a physician from his own country who was familiar with U.S. drug approval processes) that the FDA was serious about its recommendation. The hospital had physician contacts abroad. The wheels began to turn. The negotiation gridlock was broken, and a strategy for going forward emerged.

  Discover the Other Party’s Goals

  The CEO of one of America’s fastest-growing banks once explained the best way to prepare for a negotiation: “You have to get outside your own wants and needs and learn all you can about what’s meaningful to the other person. And it’s not always another billion dollars.” Entrepreneur H. Wayne Huizenga follows a similar approach. As one colleague has described Huizenga’s preparation process, “He is good at acquisitions because he knows how to treat people. He studies or thinks about the other side of the table a lot, and he may change his opinion from one day to the next because he’s thinking about the other side ...”

  Effective negotiators draw from a wide range of talents. From effective leaders they borrow the habit of committing themselves to specific, ambitious goals. From good advocates they get the skill of developing arguments based on standards and norms. From effective salespeople, they acquire the gift of valuing relationships and seeing the world as the person they are trying to influence sees it. Research suggests that the ability to understand your bargaining opponent’s perspective may be the most critical of these skills and one of the hardest to use in practice.

  Why is it so hard to get into the other party’s shoes? For three reasons. First, most people suffer to greater or lesser degrees from a common human limitation: We see the world through the lens of our own interests. If we favor welfare reform, we tend to notice stories about how people are cheating the welfare system. If we oppose it, we notice the stories about how bad homelessness is and how much worse it will become if welfare policies change.

  Negotiation theorists call this having partisan perceptions. This was the main problem with the clinical trials team at the hospital. They assumed they were “right” and the client was “wrong.” They needed to step back and take responsibility for failing to understand the client’s frame of mind. Whatever the problem in a negotiation, it is usually a safe bet that both sides are contributing to it.

  Second, even the most accommodating person brings a somewhat competitive attitude to negotiation. There are, by definition, conflicting needs on the table. This leads us quite naturally to focus on divergent interests in our preparation and to sift what the other side says and does through a competitive filter. The hospital’s executives assumed there must be some conflicting interest that was holding up the study on the other side of the table. They were stuck because they could not imagine what it could be. Only when they asked the open-ended question “Why are they saying no?” did they start to identify the personal interests that were causing the delay.

  Negotiation scholar Max Bazerman has documented people’s tendency to fixate on the competitive aspects of negotiation in a series of research studies. Bazerman and his colleagues have shown that people assume negotiations center on dividing a fixed pie. However, by looking for common ground and nonconflicting interests, there is often a chance to make the pie bigger. The collaborative approach to the chair situation in Chapter 1 is a good example of making a bigger pie. By seeing past the obvious compromise solution of splitting $1,000 to the possibility that both parties could make $1,000 if they moved quickly enough, the problem solver created value for both sides. In Chapters 8 and 9, I explain the bargaining processes that will help you create more value for both parties.

  Third, the dynamics of the negotiation process itself often work against finding shared interests once discussions begin. Professor Leigh Thompson and a colleague analyzed thirty-two different negotiation research studies involving more than five thousand participants in an effort to see whether people are good at finding shared priorities and interests in complex negotiations. The results were striking: At least in a laboratory setting, people failed to identify shared goals in negotiations about 50 percent of the time.

  Most of this confusion arose because the parties were bluffing each other during the negotiation process, pretending they were compromising when they were really getting exactly what they wanted. Some additional confusion came from people not being explicit about their real interests and motivations. In such cases, it was up to the other side to actively seek the common ground. For example, one could hardly have expected the foreign physician in my example to say, “I am not listening to you because you lack the proper cultural and status credentials to meet my demanding standards.” It took an imaginative effort by the Americans to uncover this problem. They needed to note their own frustration, see the discomfort the foreign physician was exhibiting, and move toward some possible hypotheses to explain his behavior. Many people are not willing to take these extra steps.

  With all these barriers, it is not surprising that people have trouble focusing on the other party’s interests in their negotiations. Is it worth the substantial effort it sometimes takes to locate the common ground? The research evidence suggests very strongly that the effort pays big dividends, as long as you do not forget your own goals in your enthusiasm to accommodate the other person.

  The Planning Behavior of Skilled Negotiators

  The Rackham and Carlisle study of English negotiation professionals discussed in Chapter 1 supports this point: The more skilled the negotiator, the more likely he or she was to focus during planning on possible areas of common ground between the parties, including feasible options for settlement. This study was unusual in that researchers actually listened in on real planning sessions involving real deals conducted by fifty-one different negotiators over fifty-six planning sessions. The subjects
had previously been identified as having a high degree of experience and bargaining skill. The sessions involving the skilled group were then compared with planning sessions led by negotiators who were rated by peers as average.

  Note well: Both the average and the skilled groups spent more time focusing on their own goals and the areas of potential conflict with the other party than they did looking for the bigger pie. But the skilled negotiators focused nearly four times more of their time during the planning sessions, 40 percent in all, on possible areas of shared or complementary interests—the common or at least nonconflicting ground between them. The group of less skilled negotiators focused on the common ground only about 10 percent of the time and spent the remaining 90 percent figuring out how to make or defend against demands arising from conflicting positions on issues such as price, power, or control.

  The skilled negotiators’ focus on areas of common ground led to another significant difference between the groups. The skilled negotiators developed about twice the number of possible settlement options in their planning as did the less skilled group and appeared to try harder to anticipate options the other side would suggest. One area the groups did not differ on was their formal education—neither group had many people with advanced degrees from business or law schools. In short, being a skilled negotiator did not require education. Instead, it required experience, judgment, and imagination. Laboratory studies have confirmed that people who are able to judge their opponents’ interests more accurately achieve consistently better outcomes than those who focus solely on their own goals.