Bargaining for Advantage Read online

  HIGH EXPECTATIONS

  Research on negotiation reveals a striking fact: People who expect more generally get more. I will discuss the best way to set goals in Chapter 2. To acquire high expectations, you must combine specific goal setting with a personal commitment to performance. Expectations come from your overall attitude about what you are trying to achieve and derive from unstated, sometimes unidentified, beliefs about what is fair and reasonable. Failure to develop explicit expectations is an important oversight in many people’s preparation.

  To improve your negotiation results, you need to get into the habit of thinking carefully about the full range of “fair and reasonable” outcomes for a given problem, then developing an expectation that you should achieve results in the high end of that range. You can always tell, when a negotiation is over, where your expectations were really set. If you feel genuine disappointment that you fell below a certain level, that is where your expectation was set. If you feel genuinely satisfied, you met or exceeded your expectation. The goal of an effective negotiator is to have expectations that are high enough to present a real challenge but realistic enough to promote good working relationships.

  THE PATIENCE TO LISTEN

  It is hard to overstate the importance of listening skills in bargaining. Information-Based Bargaining begins with the idea that information is power. Listening enables you to get information.

  If having high expectations is sometimes a problem for cooperative people, listening requires special effort for competitive types. Aggressive bargainers spend most of their time at the bargaining table either talking about what they want or thinking of something clever to say next that will put the other side on the defensive. As we shall see, the best negotiators follow a different practice: They ask questions, test for understanding, summarize discussions, and listen, listen, listen.

  A COMMITMENT TO PERSONAL INTEGRITY

  Effective negotiators are reliable. They keep their promises, avoid lying, and do not raise hopes they have no intention of fulfilling.

  The research on this is reassuring. Skilled negotiators prize their reputations for straightforward dealing very highly. That makes sense. Given a choice, would you want to do business with someone you could trust or someone who might be trying to cheat you?

  This sounds good, but does it really pay to be honest in bargaining? After all, most people do not candidly disclose all of their information in a negotiation. Does personal integrity require you to reveal your bargaining position? What if the other side fails to ask an important question? Do you have a duty to volunteer an answer? Finally, can you exaggerate the attractiveness of your own alternatives and downplay the other side’s current offer, regardless of your true feelings?

  I will address these and similar issues in Chapter 11. For now, I will simply say, “It depends.” Integrity in bargaining is more than a set of rules. It is, like high expectations, an attitude. Relationships, social norms, culture, and bargaining etiquette all make a difference. Therefore, when I speak of a commitment to personal integrity in negotiation, I mean that effective negotiators can be counted on to negotiate consistently, using a thoughtful set of personal values that they could, if necessary, explain and defend to others. This approach obviously leaves a lot of room for individual interpretation about what is right and wrong. But such differences are an inevitable part of human interaction. The main thing is to attend to your reputation and self-regard. Be reliable.

  From Manhattan to Mount Meru

  Before we leave this chapter, let’s look again at the two deals described at the beginning. Both worked out. We left each story as the parties began to share information with each other.

  Jovanovich’s symbolic gift-giving gesture and welcoming statement sent a clear message to Smith that Jovanovich wanted to act cooperatively to make the deal happen. Smith gracefully accepted both the watch and the tacit admission that Smith had most of the bargaining leverage with reciprocal signals of cooperation. The initial meeting between the two men and their advisers went on through the evening and into the night. Building on the rapport established by Jovanovich’s opening moves and fueled by careful listening, progress was rapid. Jovanovich’s and Smith’s problem-solving styles matched well. Within days, they created an outline of a merger agreement to create a new company: Harcourt General Inc.

  Back in the shadow of Mount Meru, the two farmers went back and forth all day. At length, one of the elders proposed dividing the disputed land along a prominent footpath that formed a natural boundary. Then someone in the crowd called out: “Perhaps someone could find a goat!” There was a murmur of agreement from both groups of supporters. The farmers huddled with their bargaining teams. The social pressure for an agreement intensified.

  The farmer who had demanded the meeting in the first place (the one whose son had been beaten) then stepped into the center of the circle. “For the sake of friendship,” he said, he would offer the gift of a small goat to his neighbor. He added that he would also help pay for his neighbor’s broken irrigation gate and abide by the new boundary.

  The owner of the damaged gate then replied that he would make a gift of “some beer” to his neighbor. He, too, would honor the new arrangement. They had a deal. These public declarations and a ritual feast that followed served to commit the parties. Everyone in the community would remember the agreement and help enforce it if necessary.

  Summary

  All negotiations begin with you. The First Foundation of Effective Negotiation is therefore your preferred bargaining styles—the ways you communicate most confidently when you face a negotiation. Your success depends on candidly assessing your strengths and weaknesses as a communicator.

  Some people have a wide “bandwidth” when it comes to bargaining. They can adapt easily to many different situations and opponents. Others are more limited in their range of effective action. They may be quite strong in situations requiring competitive instincts but weak when it comes to accommodation or compromise. Or they may be strong in cooperative skills and weak if the situation calls for hardball tactics.

  Many negotiation experts try to teach people a single, all-purpose menu of bargaining moves. I do not believe this is either helpful or realistic. People and situations are too varied for such mechanical advice to work.

  Rather, your job as a negotiator is to understand your style preferences, see how they match up with the situation (more on this in Chapter 7), plan your path through the four steps that negotiations follow, and try your best to be effective by preparing, forming high expectations, listening to the other party, and acting with integrity in the process.

  Information-Based Bargaining proceeds from the assumption that you will get better results for yourself and achieve more for others who depend on you by tirelessly searching for key information about the parties and the situation. Your success then turns on using this information skillfully as bargaining goes forward. Now that we have examined the issue of personal styles, let’s move to the critical issue of what you hope to achieve in bargaining. It is time to explore the Second Foundation, your goals and expectations.

  YOUR BARGAINING STYLE: A CHECKLIST

  • Understand your bargaining instincts, including how family, gender, and culture have shaped your preferred styles.

  • Acquire a willingness to prepare.

  • Set high expectations.

  • Have the patience to listen.

  • Make a commitment to personal integrity.

  2

  The Second Foundation: Your Goals and Expectations

  High achievement comes from high aims.

  —KING CHING OF CHOU (1100 B.C.)

  I believe in always having goals, and always setting them high.

  —SAM WALTON , FOUNDER OF WAL-MART

  In 1955, a small Japanese company called Sony Corporation had a new product: a $29.95 miniature transistor radio. The radio was selling well in Japan, but Sony’s energetic leader, Akio Morita, was not satisfied. He wante
d to introduce Sony’s radio to the world’s biggest consumer market: the United States. Morita went to New York City to see if he could interest American retailers in selling Sony’s new radio. He quickly ran into a problem: The tiny radio was unlike anything Americans had ever seen. As Morita would later write, many U.S. companies said, “Why are you making such a tiny radio? Everybody in America wants big radios.”

  Morita was persistent, however, and he soon attracted the interest of Bulova, one of the most respected names in electronics of its day. Bulova offered to buy 100,000 of the radios for distribution through its strong U.S. retail network.

  Morita was stunned by the size of the order. At the price that Bulova was willing to pay, the order was worth several times Sony’s total working capital. This was the deal of a lifetime.

  There was just one condition to the offer: Sony would have to act as an “original equipment manufacturer” in the deal; that is, Sony would make the radios but Bulova would sell them under its own brand name. This condition conflicted directly with an important long-range goal Morita had set for his firm: to establish Sony as an independent, global brand name based on its innovative, quality products.

  Morita cabled his executive board at Sony headquarters in Japan for instructions. The board enthusiastically cabled back its response: Forget about the problem with the brand name and take the order.

  Morita thought it over carefully for a week, then returned to Bulova to continue the negotiations. He told Bulova he would like to make a deal, but he could not accept the condition.

  Now it was the Bulova purchasing officer’s turn to be stunned. Bulova’s condition was standard in this sort of transaction.

  “Our company name is a famous brand that has taken over fifty years to establish,” the purchasing officer urged. “Nobody has ever heard of your brand name. Why not take advantage of ours?”

  “Fifty years ago,” Morita calmly replied, “your brand name must have been just as unknown as our name is today. I am here with a new product, and I am now taking the first step for the next fifty years of my company. Fifty years from now I promise you that our name will be just as famous as your company name is today.” Morita walked away from the biggest deal in his company’s history. Indeed, his board was shocked when he reported his decision and told Morita that he was being foolish.

  Shortly thereafter, Morita received a more modest order from another American distributor, but this one let Morita keep the Sony name on the radio. He quickly agreed, and the miniature radio caught the American public’s eye—along with the name Sony. Of his negotiations with Bulova, Morita later wrote, “I said then and I have said it often since: It was the best decision I ever made.”

  Morita’s decision to reject Bulova’s lucrative offer was risky. But his bargaining stance reflected the strength of his vision for Sony. Morita had a goal: to make the name Sony a household word for quality electronics throughout the world within fifty years. He achieved that goal with time to spare—and made himself a business legend in the process.

  The Second Foundation of Effective Negotiation focuses on your goals and expectations. You cannot know when to say “yes” and when to say “no” without first knowing what you are trying to achieve. And research on setting goals discloses a simple but powerful fact: The more specific your vision of what you want and the more committed you are to that vision, the more likely you are to obtain it.

  As Morita’s story illustrates, goals often dictate the path that negotiations take. Bulova’s purchasing officer faced an unusual man that day in New York, a man whose depth of feeling about, and strength of commitment to, his ambitious goals distinguished him from the average businessperson. But you do not need to be the next Akio Morita to draw a lesson from his story. Research on negotiation confirms that anyone who is willing to take the time to develop higher expectations will do significantly better and do so without putting his relationship or reputation with others at risk.

  Goals: You’ll Never Hit the Target if You Don’t Aim

  In Lewis Carroll’s Alice’s Adventures in Wonderland, Alice finds herself at a crossroads where a Cheshire Cat materializes. Alice asks the Cat, “Would you tell me please, which way I ought to go from here?” The Cat replies, “That depends a good deal on where you want to get to.” “I don’t much care where,” says Alice. “Then it doesn’t matter which way you go,” the Cat replies, cutting her off.

  To become an effective negotiator, you must find out where you want to go—and why. That means committing yourself to specific, justifiable goals. It also means taking the time to transform your goals from simple targets into genuine—and appropriately high—expectations.

  What is the difference between a simple goal and something that has matured into a genuine expectation? Basically one thing: your attitude. Goals are things we strive toward that are usually beyond the range of our past achievements. Such things as investment goals, weight loss goals, and athletic goals are typical. We set goals to give ourselves direction but we are not greatly surprised or disappointed if we fall short.

  An expectation, by contrast, is a considered judgment about what we can and ought reasonably to accomplish. If we fall short of our expectations, we will feel sincere loss and disappointment. It will hurt. We may set a goal of having our children attend an Ivy League college, but we have an expectation that they will attend college somewhere. Our expectation about college affects the way we communicate about the subject with others, including our children. They begin to share our assumption that college is in their future, and their behavior reflects that assumption. And guess who in fact expects to go to college? Kids of parents who went to college. The same pattern holds all the way up to the children who expect to obtain doctoral degrees.

  So it is with negotiation. Our goals give us direction, but our expectations are what give weight and conviction to our statements at the bargaining table. We are most animated when we are striving to achieve what we feel we justly deserve.

  The more time we spend preparing for a particular negotiation, researching what others have achieved in similar circumstances, and gathering information that reinforces our belief that our goal is legitimate and achievable, the firmer our expectations grow. Morita had two important goals for Sony when he headed for America in 1955: to sell a lot of radios and sell them using Sony’s name. Partly as a result of his experience with Bulova, he learned that the “using Sony’s name” goal was more important than the “sell a lot of radios” part. As his goal matured into a solid expectation, he was able to communicate this vision more clearly to his own board of directors and to potential customers.

  What you aim for in negotiations often determines what you get. Why? The first reason is obvious: Your goals set the upper limit of what you will ask for. You mentally concede everything beyond your goal, so you seldom do better than that benchmark.

  Second, research on goals reveals that they trigger powerful psychological “striving” mechanisms. Sports psychologists, salespeople, and educators alike confirm that setting specific goals motivates people, focusing and concentrating their attention and psychological powers.

  Third, we are more persuasive when we are committed to achieving some specific purpose, in contrast to the occasions when we ask for things half-heartedly or merely react to initiatives proposed by others. Our commitment is infectious. People around us feel drawn toward our goals.

  President Lyndon Johnson once said, “What convinces is conviction.” And H. Wayne Huizenga, an energetic American entrepreneur, maintains that one of the secrets of success in business negotiations is having a passionate commitment to ambitious goals. This trait enables effective negotiators to communicate enthusiasm and direction at the bargaining table. Huizenga should know, having built three successful megacorporations from scratch at the same time he was buying or founding three professional sports teams—the Miami Dolphins (football), the Florida Marlins (baseball), and the Florida Panthers (ice hockey). We will encounter some inte
resting stories about Huizenga’s negotiation practices later in the book.

  I have personally observed this “goal effect” in watching some of the best negotiators in the business both at the bargaining table and in executive training sessions. Negotiators striving to achieve concrete goals are more animated, committed, prepared, and persistent. Nor is this effect limited to experienced deal makers. Everyone gains a significant psychological edge when he or she is working to achieve a specific target in bargaining.

  Goals Versus “Bottom Lines”

  Most negotiation books and experts emphasize the importance of having a “bottom line,” “walkaway,” or “reservation price” for negotiation. Indeed, the bottom line is a fundamental bargaining concept on which much of modern negotiation theory is built. It is the minimum acceptable level you require to say “yes” in a negotiation. By definition, if you cannot achieve your bottom line, you would rather seek another solution to your problem or wait until another opportunity comes your way. When two parties have bottom lines that permit an agreement at some point between them, theorists speak of there being a “positive bargaining zone.” When the two bottom lines do not overlap, they speak of a “negative bargaining zone.” This is what happens when a buyer does not have enough money in his or her budget to meet a seller’s minimum acceptable price.

  A well-framed goal is quite different from a bottom line. As I use the word, “goal” is your highest legitimate expectation of what you should achieve. For example, in the case of the used CD player illustrated in Figure 2.1, the seller has a bottom line of getting at least $100, but the seller might set a goal of $130 based on the prices paid for similar CD players in used equipment stores. Bottom lines are vitally important to negotiation theory, but setting and negotiating toward a legitimate goal is the key factor in most bargaining success stories. Let me explain why.