Bargaining for Advantage Page 12
Given the importance of focusing on the other side’s interests to create opportunities for favorable trades, how should one go about doing so? The following steps will help you focus your attention on what the other party wants and how these interests can be used to advance your own goals.
1. Identify the decision maker.
2. Look for common ground: How might it serve the other party’s interests to help you achieve your goals?
3. Identify interests that might interfere with agreement: Why might the other side say “no”?
4. Search for low-cost options that solve the other party’s problems while advancing your goals.
Identify the Decision Maker
To understand what the other party needs, you must first identify who the person on the other side of the table—the decision maker—is. Companies and institutions have policies, goals, and relationships, but as my hospital’s dispute with its clinical trials client shows, only people negotiate. The decision makers’ needs, including their status, self-esteem, and self-fulfillment interests, will drive the negotiation. I am amazed at how often people forget to identify these pivotal people before they begin negotiating.
At business school, each entering MBA class starts on a two-year quest with a single goal: to get a good job upon graduation. The students’ second year is often spent interviewing, flying around the country to “call-backs,” and, usually, nailing down the terms of a concrete offer sometime in the spring semester.
Every year I am approached by numerous students who are nervously engaged in the final stage of the job-hunting process. They want advice on how to resolve such negotiating issues as salary, the amount of a signing bonus, relocation expenses, and the like.
My first question is “With whom are you negotiating?” More often than not, they are speaking with someone in a general corporate role, such as a director of human resources or a division recruitment coordinator. These are people who usually implement hiring decisions made by others. I then ask, “Is there a person who has higher decision-making authority who knows you and wants you, not just any recruit, at the firm?” Their eyes light up. They see that they need to take initiative in the negotiation process and select a person to negotiate with who can make or influence decisions and who has a specific need for their services.
One MBA student I counseled several years ago managed to persuade his new employer, a South American firm that had never hired anyone with an MBA before, to pay off his entire business school tuition debt as part of the package of benefits he would receive. He negotiated this extraordinary deal by arranging to meet directly with the entrepreneur who owned the firm in an airport lounge, appealing to the entrepreneur’s own experience as a debt-burdened student, and describing what this payment would mean in terms of the student’s commitment to the company. His appeal was persuasive because he took the trouble to make it in person to the ultimate decision maker and to couch it in terms of the other party’s experience and interests.
Look for Common Ground: How Might It Serve the Other Party’s Interests to Help You Achieve Your Goals?
After you have a clear idea about who is on the other side, think carefully about what his or her needs and interests might be. Do you have any interests in common? Why might a proposal achieving your goal be a good option for this person?
An excellent way to explore the other side’s interests is through a technique called “role reversal.” Let’s say you are in a negotiation with your boss over a promotion. In a role reversal, you pretend for a moment that you are the boss. Then you ask a spouse, colleague, or friend to play you. After briefing your friend on the issues, you stage a pretend meeting in which to discuss the promotion problem. As you sit in the “boss’s” chair, ask yourself, “How might it serve my interests to help this employee achieve his (or her) goals?” When the role play reaches a natural conclusion, write down the reasons why it might make sense from the boss’s point of view to promote you. Talk to your colleague about your conclusions. See if you can discover what the boss might really be thinking.
Usually, there is a solid foundation of shared interests on which you can build a persuasive proposal. In fact, even the most contentious situations harbor a surprising core of common or nonconflicting interests.
An executive I know was recently involved in a tough negotiation among several hospital systems in New England over a possible merger. At the opening meeting, one side brought a large ax and put it on the bargaining table. “That’s what we will be able to use on our competition if we can do this deal,” they said. It is a testament to the brutal competition characterizing the U.S. health care market that an ax was seen as a shared interest, but this gesture got the negotiations off to a focused start.
Take consumer situations. Most of us assume that firms selling us goods and services have interests that conflict with ours over the issue of price. We want to pay less, and the sellers want us to pay more. This is true, but it is not the whole story. Surprisingly, many consumer companies have an additional interest that sometimes trumps their interest in a higher price: They have an interest in maintaining you as a satisfied customer. That is an interest you share with the firms, and it gives you an opening to request all sorts of accommodations.
One of my negotiation students recently undertook an interesting experiment. After listening to my lecture on shared interests, he called the toll-free numbers of all the magazines he subscribed to and asked for a discount. Note carefully: He did not threaten to drop his subscription; he just asked for the best discount the magazine was giving other customers. On several occasions he needed to take his request to a supervisor, but all eventually fell into line and gave discounts. They wanted to keep him as a satisfied customer.
When he reported his success to the class, another student mentioned that he had tried the same experiment, only he had done it at Macy’s department store. He was in a hurry to buy a tie and located one at Macy’s, where he was a regular customer. Mindful of a course requirement I impose to “haggle” for something, he asked for 10 percent off, pointing out that the tie was wrinkled. The attending clerk looked a little concerned and said it was not store policy to grant discounts, but my student persevered very tactfully and quickly received 10 percent off the price. A third classmate then volunteered that his wife had once been employed as a clerk at Bloomingdale’s. Floor clerks, she reported, were authorized to give 5 to 15 percent off many high-end items if the discount was needed to maintain customer satisfaction.
By the end of the semester, the class had something of a contest going to see who could report the best story about receiving a discount for customer satisfaction. One woman in the class took the prize with a $350 discount off her wedding dress in a small upscale wedding boutique.
In the world of business-to-business relationships between sellers and customers, the same principle of customer satisfaction applies with even bigger payoffs. Business Week magazine recently reported that business buyers are becoming increasingly savvy negotiators, asking for and getting such things as long-term agreements with “no price hike” promises, improved quality at no extra charge, free aftermarket service and upgrades, and favorable financing. The shared interest in keeping customers happy in a competitive marketplace is a huge source of value, prompting the magazine to headline its article “Ask and It Shall Be Discounted.”
What are the lessons to be learned from these stories? First, there seem to be two prices for many things in the United States (and everywhere else in the global economy). There is the full price for easy-to-satisfy customers who dislike negotiation, and there is a discount price for customers who are willing to ask for it. Which are you?
Second, you may be entitled to more customer satisfaction of many kinds than you are currently getting simply because you do not realize that for many firms your satisfaction is a shared interest, not a conflicting one. In fact, the best firms with the best products are typically the ones most interested in your satisfaction. No
te that you need not be pushy or aggressive to make your own satisfaction an issue. Just note politely, “I would be a really satisfied customer if you could ______.”
If magazine publishers, department stores, and other service providers have vital interests they share in common with their customers, how much more is this the case for the people and firms with which you work? Do you want to start your new job later rather than sooner? Perhaps your new employer is waiting for an office to open or wants to keep its payroll down for the next quarter and would prefer you to start later. Why not ask? Do you want your new customer to pay that big bill sooner rather than later? Perhaps the division that made the purchase is trying to spend its budget allocation before a new budget cycle starts. It might be happy to pay. You will never know if you do not raise the issue.
Shared interests are the “elixir of negotiation,” the salve that can smooth over the issues which you and the other party genuinely disagree about. The shared interests that are hidden in all negotiation situations are the foundations on which to build your proposals.
Identify Interests That Might Interfere with Agreement: Why Might the Other Party Say “No”?
To be fully prepared to meet the other side’s objections, you must identify likely areas of conflicting or ancillary interest that might cause the other party to resist or reject your proposal. In negotiations, you want to lead with your shared interests, but you need to anticipate objections and problems so you will be able to respond constructively.
During the role reversal part of your preparation, you should spend time asking why the other side might say “no” to your proposal. The answers you get to this question often provide the breakthrough insights that clinch a deal.
Of course, most parties will say “no” because you are not offering them enough on issues where your interests directly conflict: Your price is too high or your bid too low. These are predictable objections, and your response will need to be based on such things as leverage (Chapter 6), prevailing standards (Chapter 3), or relationships (Chapter 4).
However, a surprising number of cases will hinge on some completely separate reason that you had not anticipated and might not even care much about. Often these reasons have more to do with self-esteem, status, and other nonfinancial needs of the individuals involved in the negotiation than they do with the more obvious institutional and dollar issues on the table. Once you bring these reasons out into the open, you can set about to address them.
For example, some years ago First Union Corporation acquired CoreStates Financial Corporation for more than $16 billion, one of the biggest bank mergers up to that time in U.S. history. Near the end of the negotiations, it became clear that CoreStates’ CEO, Terry Larsen, was hesitating to recommend the deal even though First Union’s Ed Crutchfield had come most of the distance to meet Larsen’s financial demands. The problem, as it turned out, had nothing to do with price. Larsen was deeply concerned that First Union, a North Carolina institution, would abandon the many charitable commitments both he and CoreStates had made in Pennsylvania, New Jersey, and Delaware, CoreStates’ area of operation. This would hurt the local community and subject Larsen to the charge that he had sold out the region where he made his home.
The two firms had different charitable giving policies, but they shared an interest in providing corporate support to worthy causes. Once Crutchfield uncovered this issue, he offered to set up a $100 million independent community foundation to be organized by Larsen. The foundation would make grants in the CoreStates area after the merger. This $100 million “extra” totaled only about .5 percent of the $16 billion purchase price, relatively small change for the key that unlocked the deal. With the foundation in hand, Larsen became an advocate for the merger and recommended approval to the CoreStates board. The deal eventually went through.
Search for Low-Cost Options That Solve the Other Party’s Problems While Advancing Your Goals
Once you have determined some of the less obvious reasons why the other side may object to an agreement, think of low-cost options that may address the other side’s concerns while advancing your own goals. Once again, our tendency is to assume the other side is saying “no” because it wants the same thing we do—money, power, reduced risk, and the like. The best negotiators strive to overcome that assumption and search for additional, secondary interests that can be used to advance the deal.
My favorite example of an “outside the box,” low-cost option that broke open a deal for an enterprising negotiator involves the city of Oceanside, California, and its garbage. A young woman named Kelly Sarber, representing an Arizona-based garbage company, was trying to win the contract to be the garbage hauler for the city of Oceanside. Faced with stiff competition from other haulers and the possibility of a bidding war, she managed to get Oceanside to accept her $43-per-ton bid to haul the city’s garbage even though her bid was $5 higher than her competitors’. How did she do it?
An avid surfer in her spare time, Sarber was keenly aware that the beaches in Oceanside, a major source of tourist money and real estate values, were slowly but surely eroding. Her company’s waste dump sites were in the Arizona desert, and if there is one thing a desert has in abundance, it’s sand. Sarber won the Oceanside contract at a premium price by promising that her trucks would not only take the garbage out of town but also return with a load of clean, fresh Arizona sand to dump onto the town’s disappearing beach. Oceanside officials thought they wanted cheap garbage-hauling services, but Sarber was able to win the contract with a premium price by showing the city she understood its beach and tourist problems.
Ms. Sarber’s story is instructive for another reason. If you are able to identify the other side’s interests, you are not far from understanding specifically what it needs that you may have to offer. And as we shall see in the next chapter, the greater the other party’s need for what you have and the more it will feel the loss if you choose to walk away from a deal, the more leverage you have to insist that the other party agree to your terms.
Summary
Finding out what the other party is worried about sounds simple, but our basic attitudes about negotiation make this surprisingly difficult to do. Most people tend to assume that other people’s needs conflict with their own. They also restrict their field of vision to the issues that they themselves are troubled by, forgetting that the other side often has its own problems based on its own worldview.
The best negotiators overcome these assumptions with a relentless curiosity about what is really motivating the other side. Indeed, research suggests that they spend up to four times more time thinking in a strategic way about what the world looks like to the other party than average negotiators.
The lesson here is simple: Find the shared interests that will motivate negotiators on the other side to agree with your proposal and explore why they might say “no.” These inquiries will give you a checklist of questions to ask in the negotiation. Lead with the areas you have in common, then probe for and try to meet the other side’s objections one by one with the lowest cost concessions you can make. As you move into the areas in which you have genuine and significant conflicts, you will have gained the momentum you need to keep talks going. You will also be well positioned to exploit the next subject we will cover: your leverage.
EXPLORING THE OTHER PARTY’S INTERESTS: A CHECKLIST
✓ Locate the decision maker.
✓ How might it serve the other party’s interests to help you achieve your goals?
✓ Why might the other party say “no”?
✓ What low-cost options might remove the other party’s objections?
6
The Sixth Foundation: Leverage
Every reason that the other side wants or needs an agreement is my leverage—provided that I know those reasons.
—BOB WOOLF
You can get much further with a kind word and a gun than you can with a kind word alone.
—ATTRIBUTED TO AMERICAN GANGSTER AL CAPONE
By now you should be feeling new confidence in your understanding of negotiation. You have knowledge about personal bargaining styles, goals, relationships, and interests. But the most important factor for high-stakes bargaining is still ahead of us. It is the Sixth Foundation of Effective Negotiation: leverage. Leverage is your power not just to reach agreement, but to obtain an agreement on your own terms. Research has shown that, with leverage, even an average negotiator will do pretty well while without leverage only highly skilled bargainers achieve their goals. The party with leverage is confident; the party without it is usually nervous and uncertain. Let’s start with several simple negotiation stories to illustrate what leverage means.
EXAMPLE 1: SHIFT THE BALANCE OF NEEDS
A major U.S. airline once faced a big problem. Its fleet of aircraft was aging, and it needed to purchase some of the latest jumbo jets. The trouble? It had recently taken on a large amount of new debt to pay for an acquisition and had no money left to buy new planes. At the time, two U.S. airplane manufacturers, Boeing and McDonnell Douglas, had a virtual monopoly on plane sales in the Unites States, and they were not interested in doing business with a customer that was broke.
But within a few months of confronting this issue, the airline’s CEO proudly announced that his company would be acquiring fifty of the latest jumbo jets in a deal valued at close to $1 billion. How was he able to achieve this remarkable result?
Answer: The world’s third major airplane manufacturer, Europe’s Airbus consortium, had a new jumbo jet ready for sale. But Airbus had gone for an entire year without selling a single airplane. More important, Airbus leaders viewed the American market as critical to its future because airlines from other countries took their cues from sophisticated American buyers.