Bargaining for Advantage Page 7

  Summary

  The first important step in preparation is to commit to specific, justifiable goals. Clarity of purpose and optimism are key attitudes to bring to the goal-setting process.

  First, a concrete, challenging goal will motivate you. You will tend to see proposals below your goal as a “loss.” In addition, the intuitive part of your mind—the part that works and learns “below the surface” while you are getting ordinary things done during the day—will become a powerful ally and problem solver. You will become more focused, persistent, and achievement-oriented, and you will be more likely to come up with good arguments and new ideas about how to get what you want. You will also avoid the common trap of becoming focused on your bottom line too early. This “goal focus” gains you a significant advantage over the average person, who is inclined to pay more attention to his or her bottom line than to any other single bargaining point.

  Second, your clarity will communicate confidence and resolve to the other party. You will convey the message that you have high expectations for both yourself and the deal. And perhaps no other personal variable makes such a difference in negotiation as the quiet feeling of confidence, self-esteem, and commitment that emanates from people who know what they want and why they ought to get it.

  SETTING EFFECTIVE GOALS: A CHECKLIST

  ✓ Think carefully about what you really want.

  ✓ Set an optimistic—but justifiable—target.

  ✓ Be specific.

  ✓ Write down your goal and commit to it.

  ✓ Carry your goal with you into the negotiation.

  3

  The Third Foundation: Authoritative Standards and Norms

  The first duty of a wise advocate is to convince his opponents that he understands their arguments . . .

  —SAMUEL TAYLOR COLERIDGE

  A man always has two reasons for the things he does—a good one and the real one.

  —J. P. MORGAN

  In addition to the power of clear goals, negotiations harness one of human nature’s most basic psychological drives: our need to maintain (at least in our own eyes) an appearance of consistency and fairness in our words and deeds. The Third Foundation of Effective Negotiation directs attention to this psychological drive. Let’s begin with an example that shows how the need to maintain consistency with established standards influences virtually all negotiations.

  The Story of the Two Pigs

  In his 1930 book The Halfway Sun, anthropologist R. F. Barton told a story about tribal people in the Philippines with whom he lived for many years. The story, which involves a negotiation between two families over some pigs, teaches a sobering lesson about standards and norms.

  Barton reported that a man of the Ifugao people (the name of the tribe) once borrowed two pigs from his neighbor. Two years later, the man who loaned the pigs asked for the debt to be repaid. His son was getting married, and he needed pigs to give as presents at the wedding. The two men then fell into a dispute over how many pigs were owed.

  Within this tribe, there was a standard “interest rate” for borrowing animals. The standard called for repayment according to the “natural rate of increase” of the animals during the term of the loan. There was general agreement that a two-year loan of two pigs called for a repayment of four—double the original number.

  That was the standard. The problem was implementing it. The lender, an ambitious man who wanted to make a lavish wedding display, insisted that the borrower owed him a total of six pigs. He argued that slightly more than two years had passed and that one of the pigs had been of a special, larger breed that should draw a higher rate of interest. The borrower angrily replied that everyone knew the right number was four.

  Aroused by the lender’s greed, the borrower then escalated the dispute. He suddenly recalled that the lender’s grandfather had, many years earlier, failed to repay a chicken he had borrowed. The natural rate of increase on that chicken, he said, equaled roughly one pig. So he reduced his offer from four pigs to three—to account for the chicken debt. The lender responded that he would accept five pigs, but not one less.

  After much haggling and many insults, the two families engaged the services of a respected elder to act as a go-between. Not long after the elder began shuttling back and forth, however, the lender’s son sneaked into the borrower’s hut and stole the borrower’s most valuable possession, an ancestral gong. That brought the whole negotiation process to an abrupt halt.

  Now the wives got involved. The gong was believed to house the spirits that protected the borrower’s home. The borrower’s wife could not imagine spending even one night without the gong in its proper place. The lender’s wife was also fed up with the dispute; the family’s fields were rotting while her husband fussed over a couple of pigs. Both women told their men to stop arguing and settle the matter.

  The elder finally put together a deal. First, the lender promised to restore the gong. Next, the borrower promised to cancel the chicken debt and pay the five pigs demanded by the lender.

  But there was a twist: The elder passed along to the lender only three of the five pigs paid by the borrower, keeping the other two for himself as his fee. Thus, under this ingenious solution, the borrower paid pigs at the rate last demanded by the lender (five), the lender received pigs at the rate last offered by the borrower (three)—and the elder kept the difference as his tax for restoring the peace.

  From Pigs to Price Lists: The Role of Standards

  What are we to make of this story? Few of us today are busy borrowing and lending pigs. Yet like people in every culture, we are inclined to negotiate on the basis of authoritative standards and norms. And when parties deviate too widely from these norms, they risk irritating others and causing trouble for themselves. They are seen as being unreasonable.

  Standards very similar to the Ifugao natural rate of increase for borrowed animals play equally important roles in our more modern world. Global financial markets set interest rates for borrowing money. Used-car buyers consult a buying guide for average car prices—then negotiate final prices based on factors such as the actual condition of the car, the buyer’s budget, and the seller’s need for cash. Real estate brokers talk about “comparable transactions.” And investment bankers argue over the true value of a business based on discounted cash flows and earnings multiples.

  Such fancy terms and complex analyses are nothing more or less than techniques that help buyers and sellers form opinions about the right price. These standards, like the one in the two pigs story, bracket the bargaining zone and permit all participants to talk about their preferred end of the range without appearing, at least in their own eyes, to be unreasonable.

  Nor are market standards such as interest rates and comparable sales the only examples of normative arguments and formulae that carry weight in negotiations. When children negotiate over who should play with a toy, they argue using norms such as “First come, first served” or “It’s my turn.” When executives argue over corporate strategy, they discuss their positions using norms such as “profitability,” “benchmarking,” and “efficiency.” And when layoffs loom, people negotiate over who will stay and who will go using standards such as “seniority” and “productivity.” Finally, the single most common tactic for closing a negotiation is an allocation formula: splitting the difference.

  Finding the standards that apply in a negotiation and doing your homework on how to make your best case using these standards gives you a “speaking role” in the negotiation process. You have something to talk about beyond your self-serving assessment of what you want. This in turn gives you a fair basis on which to be an energetic advocate for your goal. And you had better be ready to respond to arguments the other side will advance. If the accepted standards lend themselves to a variety of interpretations (and most do), the other party will come prepared to argue the interpretation that most favors him or her.

  In short, as part of your preparation, you must become an advocate for your go
als using the most persuasive standards you can find. Which standards might those be? As my opening quotation from Samuel Coleridge suggests, the arguments the other party accepts as legitimate or has used to his or her own advantage in the past are usually the most effective.

  A Psychological Fact: We All Want to Appear Reasonable

  Why are standards and norms—particularly standards the other side has adopted—such an important part of bargaining? Because, all else being equal, people like to be seen as consistent and rational in the way they make decisions.

  Psychologists have a name for this need-to-appear-reasonable phenomenon. They call it “the consistency principle.” Social psychologists have discovered that people have a deep need to avoid the disjointed, erratic, and uncomfortable psychological states that arise when our actions are manifestly inconsistent with previously expressed, long-held, or widely shared standards and beliefs.

  Most of us have complex “consistency webs” that are interconnected at many levels of our personality. Because we like to keep these webs intact, we rationalize our actions so they appear (at least in our own eyes) to be consistent with our prior beliefs. We are also more open to persuasion when we see a proposed course of action as being consistent with a course we have already adopted.

  Negotiations are fertile ground for observing the consistency principle at work. Whether we are aware of it or not, we sometimes feel a tug to agree with the other party when the standards or norms he or she articulates are consistent with prior statements and positions we ourselves have taken. We also feel uncomfortable (though we may keep this to ourselves) when the other side correctly points out that we have been inconsistent in one of our positions or arguments. In short, standards and norms are—or can be—more than just intellectual pawns in bargaining debates. They can be strong, motivating factors in the way negotiations proceed.

  The Consistency Principle and “Normative Leverage”

  The consistency principle can give you what I call normative leverage in negotiation. Normative leverage is the skillful use of standards, norms, and coherent positioning to gain advantage or protect a position. You maximize your normative leverage when the standards, norms, and themes you assert are ones the other party views as legitimate and relevant to the resolution of your differences.

  If you set up your own needs, standards, and entitlement as the only rational approaches to a negotiation, you will not inspire agreement. Instead, you will have a fight on your hands pitting your principles against the other party’s. The best practice is therefore to anticipate the other side’s preferred standards and frame your proposal within them. If you cannot do this, prepare to argue for a special exception to his standard based on the special facts of your case. Attack his standard only as a last resort.

  Let’s look at a couple of examples.

  Suppose you are involved in a budget negotiation in a hospital system. You are a nurse executive pushing for more money for training and nursing services; others are pushing for more money to increase the number of doctors’ offices in the surgery department. If the top decision makers in the hospital have previously made policy statements about the importance of “quality patient care” in hospital operations, you have some normative leverage in this debate.

  Provided you do your homework, gather data, and make an effective presentation, your budgetary requests will appear more compelling because they will be closely linked to the hospital’s announced priorities. The surgery department’s request, by contrast, will not enjoy this tight linkage. The administrators will then feel constrained by their prior policy statements to make a decision consistent with their policy. The surgeons are powerful players in a hospital, but a well-prepared case for your budget based on the institution’s announced priorities will improve your chances of achieving your goals.

  If the hospital has announced a different goal—such as “attract the best physicians”—then you will need to anticipate how the surgeons will use this standard in their plea for funding. Your best move will be to show how a quality nursing staff attracts more and better physicians than do lavish offices.

  Here is another, harder case. Suppose you are a corporate division chief faced with a downsizing mandate. Each division must slash 10 percent of its staff. You study the situation and determine that, with a 10 percent cut, there will simply not be enough people to do the work. Your initial instinct may be to go to your boss, show her you cannot do your job with the proposed cuts, and request permission to retain staff.

  Will this be persuasive? Probably not. Everyone is going to say the same thing, and she will not make her downsizing target if everyone retains staff. She will counter your “not enough people to do the work” argument with a lecture on efficiency and send you back to find ways of getting more work from fewer people.

  How can you gain better normative leverage for your request? By anticipating what standards and norms the boss believes to be relevant in this sort of situation and making your arguments based on her standards—not yours. If she likes to think about ways to be more efficient, give her arguments based on efficiency. Tell her you have evaluated the assortment of tasks your department is doing and have determined that your group is superbly efficient at tasks 1, 2, and 3 but is ill equipped to perform tasks 4 and 5. Even after a 10 percent cut, you could do considerably more of tasks 1, 2, and 3 if the boss would assign tasks 4 and 5 to other groups better equipped to handle them.

  Alternatively, you might try to demonstrate how, by retaining more of your staff and cutting more heavily elsewhere in the organization, you could sharply reduce the time and cost of an entire business process spanning several divisions. That would save the firm money—which is the underlying point of downsizing—while improving an area on which the boss herself is evaluated.

  Will such arguments carry the day each time you use them? No. But they have a better chance of advancing your goals than arguments based strictly on your own point of view. In fact, none of the Six Foundations alone guarantees success in bargaining. But attention to each one improves your chances incrementally. Effective negotiators move step by step.

  By positioning your needs within the normative framework the other party uses to make decisions, you show him respect and, as a result, gain his attention and sympathy. Because the difference between success and failure in negotiation is often very small, anything that systematically improves your chances of getting agreement to your terms will pay off in the long run.

  Beware of “Consistency Traps”

  Skilled negotiators know about the human need to appear consistent and try to use it as often as they can. Truly manipulative people go beyond identifying their counterparts’ standards for positioning purposes and try to trick their opponents by using what I call consistency traps. The goal of a consistency trap is to precommit you to a seemingly innocent standard and then confront you with the logical implications of the standard in a particular case—implications that actually turn out to run against your interests. This is a form of intellectual coercion, and you should be ready to defend against it.

  Collection agencies, credit card companies, and high-pressure sales companies routinely use consistency traps as part of the scripts they give telemarketing people to read on the telephone when they call you at dinnertime. You can learn to see a consistency trap coming if you know what to look for. The tip-off is when the trapper tries to get you to agree with some statement before telling you why the statement is important. “Would you like to save some money?” says the long distance company telemarketer. “Sure,” you reply. Snap! The trap closes. “Our records of your monthly phone usage indicate you will save more than one hundred dollars by switching to our service. How about starting to save right now?” You are logically committed to saying “yes.” You have to invent some new reason or excuse to say “no,” and the telemarketing company has a well-rehearsed answer for them all.

  At the bargaining table, consistency traps are a favorite of aggressive, competiti
ve negotiators. The pattern is the same as that used by telemarketers. Manipulative negotiators try to get you committed to a relatively innocent-sounding principle or standard (“A fair price for this company should reflect comparable sales of like companies, don’t you think?”), then spring their trap by arguing that your bargaining position violates the principle you just endorsed (“Your proposed selling price is 30 percent more than the comparable sales you just agreed should be the benchmark”).

  How can you defend against consistency traps? By being alert to them. When the person you are negotiating with begins asking leading questions before you know where he is going, slow the pace. Turn the tables on the trapper. Elicit as much information as possible about why these questions are important before committing to anything. If you are nevertheless pressed into agreeing to a standard, qualify it or phrase it in your own words and use the broadest possible terms, leaving ample room for interpretation later. “I believe comparable sales may be relevant to our discussions, although I am not sure just what time frame or industries we should be looking at,” you can say to the competitive negotiator. “Why don’t you show me all your data?”