Bargaining for Advantage Page 14
Create a Vision That the Other Side Has Something to Lose from No Deal
In a tough negotiation, it is not enough to show the other party that you can deliver things he wants. He will almost always discount this sort of demonstration and raise his demands. To gain real leverage, you must eventually persuade the other party that he or she has something concrete to lose in the transaction if the deal falls through. As the Hanafi Muslim situation developed, the focus of negotiations gradually shifted from the hostages to Khaalis’s interest in Islamic theology as well as his self-image and self-esteem. The authorities wanted Khaalis to realize that his best hope of becoming a black Muslim leader resided in his bringing the crisis to a successful rather than a disastrous close.
During the second day of the crisis, Khaalis requested a face-to-face meeting with the Pakistani ambassador on the main floor of the B’nai B’rith building. This caused a stir in the police camp. How to respond? Sending one person alone into the Hanafi Muslim stronghold simply risked adding a high-level diplomatic hostage to the ones already being held. The Pakistani ambassador felt he had established a rapport with Khaalis, however, and he was ready to go. Eventually, the police proposed and Khaalis agreed to a meeting with all three diplomatic ambassadors accompanied by two unarmed police officials. This face-to-face encounter was to become a turning point in the negotiation, with the personal integrity and credibility of everyone present placed squarely on the line.
The officials sat with Khaalis at a folding table in a first floor corridor. For three hours, the ambassadors and Khaalis discussed Islamic theology, with an emphasis on the role of compassion and mercy in Islamic thought. Then, a little after midnight on the third day of the crisis, the ambassador of Pakistan asked Khaalis to make a gesture of good faith and release thirty hostages.
“Why not release them all?” Khaalis asked. That was the breakthrough.
As tension eased, discussion turned to the terms of the hostage release. To save face with his movement, Khaalis requested that, after being criminally charged later that night, he be released without bail to await trial at his home. Meet that condition, said Khaalis, and the crisis would be over.
This last-minute, unexpected request illustrates nicely how leverage can dictate the last moves in the closing moments of a negotiation. Although Khaalis was clearly at a disadvantage at this point, having signaled his willingness to bring the crisis to an end, his men still had what the authorities wanted—the hostages. With this last move, he offered to give his opponents everything they wanted in return for a relatively small concession. His power to deliver the goods favored him in this trade. Would he give up the hostages if they said “no”? He was not saying. It is a testament to the power of face-to-face human communication that this closing condition sealed the deal. The authorities believed Khaalis would keep his word, and he believed they would keep theirs.
Telephone calls to the U.S. attorney general and a local judge secured, after some heated debate, agreement to Khaalis’s condition. The Hanafi Muslims peacefully laid down their arms, and at 2:18 A.M. the hostages walked free. To the surprise and dismay of some, the authorities kept their promise and let Khaalis return to his home that morning to await trial under house arrest. He caused no further trouble, however, and several months later a jury convicted him and his men of murder, kidnapping, and related offenses. Khaalis will be eligible for release from prison when and if he reaches the age of ninety-six.
What changes in the leverage equation caused Khaalis to relent? First, in spite of his terrorist bravado, he gradually came to see he had more to lose by pressing ahead to a violent death than by resolving the crisis peacefully. Most hostage takers, particularly criminals who take hostages in a panic when their escape route becomes blocked, come to the same realization.
Second, the authorities deftly used the negotiation process to make Khaalis feel his needs were important. He stopped the showing of the offensive movie, at least for several days. Authorities returned the insulting $750 fine. Perhaps most important, the Muslim ambassadors made him feel like a national spokesperson for black Muslims. He began to imagine a future in which he played a meaningful role in the world, even from prison. Meanwhile, the violence of the assault may have sated his rage and need for vengeance. By the time he met with the Muslim ambassadors in the B’nai B’rith building, he had dropped all mention of having his children’s murderers delivered to him.
Many people have taken issue with the way the Hanafi Muslim hostage situation concluded. Public officials at the time were particularly critical of the decision to let Khaalis return to his home instead of going to jail the morning after the event, despite the promise made in the B’nai B’rith building. After all, a promise made under such duress can hardly be said to be binding. And failing to put Khaalis in jail set a dangerous precedent.
But who can say what incentives reliably prompt would-be hostage takers to refrain from acting, or once they have taken captives, from killing their victims? Events like these may not be subject to the usual rules of precedent. Meanwhile, we know for sure that in this case all but one of the hostages walked out of their buildings thirty-eight hours after the assaults. And the perpetrators went to prison for long terms. The officials charged with making decisions in this confusing and life-threatening situation demonstrated a profound understanding both of the leverage positions they faced and of the negotiation process.
The Three Types of Leverage: Positive, Negative, and Normative
Let’s step back from the Hanafi Muslim story and look again at the overall question of what leverage is. There are many ways of thinking about leverage. One common approach is to think in terms of alternatives. Roger Fisher, William Ury, and Bruce Patton speak in Getting to Yes of parties’ having a “Best Alternative to a Negotiated Agreement” (BATNA). As these authors put it, “The better your BATNA, the greater your power.”
They use a simple example of an employment negotiation. If you are negotiating with a prospective employer over the terms of a job offer, you have more power if you have two other job offers than if you have none. If the employer refuses to meet your demands, your BATNA in the former case is to take one of your other offers; in the latter case, your BATNA is unemployment.
There is wisdom in the BATNA conception of leverage because good alternatives away from the table can increase your confidence when you are negotiating. But alternatives do not capture the essence of what leverage really is. Khaalis did not improve his alternatives by taking hostages. Instead, he got people’s attention by making the authorities’ alternatives worse. And the authorities’ alternative to agreement—an assault on the Hanafi Muslims—was very poor and never changed even though their leverage improved as the negotiation progressed.
A better way to understand leverage is to think about which side, at any given moment, has the most to lose from a failure to agree. In the employment example used by Fisher, Ury, and Patton, the employee’s multiple offers will not improve his leverage if he really wants to work for one particular employer, the employer knows it, and that company has a firm policy of never negotiating job offers. The employee has too much to lose from “no deal” to insist on his own terms regardless of whether he has two other offers. So a more basic test for leverage is to ask which side needs the deal more to achieve its goals.
What goes into a good leverage analysis? The Hanafi Muslim example displays three different types of leverage: leverage based on the relative abilities of each party to supply things the other wants, leverage based on the parties’ relative power to take away things each currently has, and leverage based on application of the consistency principle discussed in Chapter 3. I call these three types of leverage, respectively, positive, negative, and normative leverage. Let’s review each type briefly, keeping in mind the overall idea that we are always trying to assess, at each changing moment, which side has the most to lose from no deal.
POSITIVE LEVERAGE
The first and most common type of
leverage in commercial situations is needs-based, positive leverage. Every time the other party says “I want” in a negotiation, you should hear the pleasant sound of a weight dropping on your side of the leverage scales. Your job as a negotiator is to uncover everything the other side wants and to investigate as thoroughly as possible just how urgent are his or her various needs. Donald Trump summed this up nicely once when he said, “Leverage is having something the other guy wants. Or better yet needs. Or best of all, simply cannot do without.”
Janie Mitcham’s story of her crusade to build her own railroad exemplifies how leverage relates to needs. Before Ms. Mitcham built her own rail line, her firm was totally dependent on one railroad company to supply its coal. She needed this railroad, they knew it, and they charged her a premium price as a result. By building her rail connection to a rival line, she reduced her firm’s dependency and simultaneously increased her suppliers’ need for her business as a customer. Mitcham’s case shows how a better BATNA can sometimes increase your power—by adjusting the needs of the parties for things they can offer one another.
In the Hanafi Muslim situation, each time Khaalis asked for something that the authorities could deliver during the standoff, the authorities gained both time and leverage. As the authorities came to understand Khaalis’s underlying psychological drives better, their leverage improved even more. In the end, they were able to deliver what Khaalis craved more than anything: self-esteem as a Muslim leader. With that need met, Khaalis suddenly found he urgently wanted something else the authorities had to offer—a way out of the crisis with his life intact. By that point, the authorities had turned the leverage tables on Khaalis completely.
NEGATIVE LEVERAGE
The second type of leverage is negative, or threat-based, leverage. Khaalis got everyone’s attention by showing he had the power to make his opponents worse off. The Hanafi Muslim situation was an extreme, illegal example of threats, but the same principle applies in commercial settings provided people act within the law.
Because threats often engender ill will, resistance, and resentment, skilled negotiators use them with great care. Unlike Khaalis, they display their power to make the other side worse off with hints rather than shouts.
Let me offer a story about real estate and casino entrepreneur Donald Trump to illustrate how experienced businesspeople make “civilized” threats that preserve their working relationships. When Trump was planning his signature building in New York City, the Trump Tower on Fifth Avenue, he needed the air rights over a small, classic building owned and occupied by Tiffany & Company, the famous jeweler. Trump was willing to pay $5 million, but he was afraid that Tiffany would turn him down in order to maintain the architectural integrity of its section of Fifth Avenue.
An old-style, impeccable New Yorker named Walter Hoving ran Tiffany, and Trump set up a meeting with Hoving to negotiate the air rights. To prepare for this meeting, Trump had his architect construct not one, but two different models of the proposed Trump Tower.
At the meeting with Hoving, Trump presented both models. The first was an elegant, fifty-story building that Trump argued would be a classy neighbor for an upscale jewelry store. That was the building Trump proposed to build if he could acquire the Tiffany air rights. The second was an awful, ugly building—one that Trump said the New York City zoning authorities would force him to build if Tiffany would not cooperate. This building featured tiny lot-line windows covered with wire mesh on the entire wall facing Tiffany. The two fifty-story models sat side-by-side in Hoving’s office. It was Hoving’s choice. He got the message and agreed to Trump’s terms.
Threat leverage gets people’s attention because, as astute negotiators have known for centuries and psychologists have repeatedly proven, potential losses loom larger in the human mind than do equivalent gains. But a word of warning is in order: Making even subtle threats is like dealing with explosives. You must handle threats with care, or you can hurt yourself. You cannot raise a child without a measure of discipline, but a parent-child relationship based on threats is a failure. The police contained the Hanafi Muslim situation by surrounding the hostage takers with overwhelming force, but their success came in never using it. Moreover, if others use threats against you, you should respond in kind if necessary. Highly competitive people, in particular, sometimes need to hear that you can match their threat power “tit for tat” before they will settle down and negotiate based on the merits of a deal.
NORMATIVE LEVERAGE
The third and final type of leverage is normative leverage, which derives from the consistency principle discussed in Chapter 3. This source of leverage played a role in the Hanafi situation in several ways. First, as the Pakistani ambassador drew out Khaalis’s knowledge of and commitment to the Koran, the ambassador laid the groundwork for Khaalis to make a compassionate gesture by releasing hostages. Most religious texts—including the Koran—favor compassion over revenge and love over hate. By the time Khaalis arrived at his fateful moment of decision on the third day of the crisis, the Pakistani ambassador had used passages from the Koran to remind Khaalis that a truly visionary Muslim leader would be a living model of Islamic virtues, not a cold-blooded killer of innocent people.
Second, the authorities found themselves in a consistency trap of their own creation by Khaalis’s surprise request to remain at home under house arrest pending trial. The agreement allowing him to do so was the explicit quid pro quo for releasing all the hostages and, even more important, was made after three hours of discussion about the Koran and the meaning of virtue. To have reneged on this promise would have meant, among other things, loss of face for three distinguished Islamic ambassadors who had pledged their word and risked their lives to resolve the crisis. The authorities felt bound in a moral sense to keep their promise even if they had no legal obligation to do so.
Leverage is a complex mixture of ideas. It includes opportunities that will be lost if the parties fail to reach a deal, threats to each party’s status quo, and possible losses to each side’s self-esteem should their actions appear inconsistent (in their own eyes) with a prior or professed standard of conduct or dealing.
But there is a way to assess leverage in a single, easy-to-remember test: Ask yourself, as of the moment when you make the assessment, which party has the most to lose from no deal. The party with the most to lose has the least leverage; the party with the least to lose has the most leverage; and both parties have roughly equal leverage when they both stand to lose equivalent amounts should the deal fall through.
This way of thinking about leverage also points to more sophisticated ways of enhancing your leverage that go beyond just improving your BATNA. Your goal is to alter the situation (or at least the other party’s perception of the situation) so you have less to lose, the other side has more to lose, or both. You can achieve these goals by gaining more information about what the other side really needs, acquiring credible power to make the other side worse off, framing your needs under principles and norms that are hard for the other side to walk away from, binding yourself to a course of action that forces the other side to concede, and, finally, improving your BATNA, that is, seeking alternative solutions to your underlying problem that do not require the other party’s cooperation.
The Power of Coalitions
One of the most important ways to gain all three types of leverage is by using relationships and shared interests to help you create effective coalitions to support a bargaining position. When you can make common cause with others who share your bargaining priorities, you gain advantage in three important and distinct respects.
First, in multiparty situations, group dynamics often favor those who are first to achieve a dominant position in terms of numbers. Research on American juries suggests that the first verdict to gain a majority vote during jury deliberations ends up being the verdict the jury unanimously endorses.
The same is true at many business meetings. One person makes a suggestion, another picks it up,
and pretty soon it is the consensus even though there may be good reasons for doing something else. You can greatly improve your chances of getting your point of view across to a group if you take the time to assemble a coalition before the meeting starts. That way, your position can gain momentum as the members of your coalition take turns expressing support for their shared goal.
Second, coalitions gain power from a psychological phenomenon social scientists call social proof. In ambiguous situations, people take their cues from what other people do. If you are going down a crowded street and you notice some people looking up in the sky, you will probably look up, too. Then the person behind you will look up, and so on. Negotiations can work the same way if the issues being discussed are complex and others tend to look to experts to lead the way. Your coalition can provide the cues that prompt others to follow.
Finally, coalitions often improve your leverage by either giving you better alternatives, making the other party’s alternatives worse, or both. For example, American cattle ranchers in the mid-1990s were desperate because beef prices were so low that 85 percent of the ranchers in some areas of the Midwest could have qualified for federal food stamp assistance if they had not been too proud to apply. Their problem? A few giant agribusiness firms controlled the meatpacking and slaughtering industry, and the ranchers had no choice but to sell their cattle to these companies. The ranchers were losing $30 for each calf they sold while the meatpackers made $30 in profit on each calf they slaughtered.
The ranchers in North Dakota began digging their way out of this situation when they formed a coalition and started their own meatpacking operation, a cooperative called Northern Plains Premium Beef. When the ranchers competed with one another to sell their cattle to the giant slaughterhouses, they lacked leverage. But by combining with other ranchers and slaughtering their own animals, they gained a way to attract consumer dollars directly to their high-quality, distinctively branded beef. In short, they created an alternative distribution system and, in the process, improved their leverage vis-à-vis both the giant slaughterhouses and the restaurant chains. Cooperatives have been successful in getting contracts from some of the biggest steak house chains in the United States. The big firms are taking notice.