Bargaining for Advantage Read online

  Even with these precautions, locking horns with a determined consistency trapper can be uncomfortable and unsettling. You have to be alert to every move he makes. If you are caught in an inconsistency, you have two choices. Either you can adjust your position to conform to the standard that you have admitted applies or you can hold your ground, admitting that you made a mistake when you agreed to the standard. This latter move will cause you to lose some face, but that may be less costly than a bad bargain.

  Using Audiences

  Relying on the other side’s standards and norms to frame your proposals is fine, as long as your goals can be positioned within those standards. But suppose they cannot. Suppose the other side’s standard directly contradicts your position and there are no exceptions or interpretations that can save you. Should you attack the standard and try to change the other party’s mind? You can try, but chances are the other party will cling to his beliefs.

  In these difficult cases, you will need to resort to explicit leverage and search for an ally—a third party to whom your bargaining counterpart is answerable and who is sympathetic to your norms. Once you can locate such a person, you need to arrange things so you negotiate in the third party’s presence or under the third party’s protection. Allies serve as audiences or witnesses to guarantee the application of standards that ought, in fairness, to apply. In essence, you leverage the audience’s consistency principles to bypass the party that opposes your goals.

  Mahatma Gandhi Rides First-class

  One way of understanding how audiences can help in asserting standards in negotiations is through example. This one comes from the life of Mahatma Gandhi, the father of modern India. It involves a train ride and comes from Gandhi’s autobiography, The Story of My Experiments with Truth.

  Gandhi’s early life as an activist was spent in South Africa, where he worked as a lawyer fighting for the rights of Indians in South African society. Gandhi had earned a law degree in England. He arrived in South Africa ready to use his knowledge of both English law and English social norms to help in the cause of Indian civil rights.

  South African law required Indians (or “coolies,” as they were called by white South Africans) to travel third-class on trains. The Indians in South Africa were reluctant to challenge this rule, preferring to “pocket the insult” and make their livings in peace. Soon after arriving in South Africa, Gandhi learned firsthand about this rule when he was thrown off a train for trying to ride in a first-class car. It was an insulting episode in Gandhi’s life and made a deep impression on him. What is less well known is that Gandhi immediately looked for a second opportunity to challenge the rule on a train ride from Durban to Pretoria. This time he succeeded. He did so by skillfully using an audience to outflank a negotiation opponent.

  Gandhi’s standard in this negotiation was that “well-dressed and well-behaved people can travel first-class, regardless of race.” He anticipated that the railway company’s standard would be “Coolies must travel third-class.” The law was on the railway company’s side. Gandhi’s step-by-step approach to achieving his goal is a model of effective preparation and strategy in the most difficult circumstances.

  Gandhi’s first move was to locate a decision maker and find a way to present his request for a first-class ticket personally in a face-to-face meeting. He obtained the name of the stationmaster in Durban, the city from which he would be departing, and sent him a letter. Gandhi wrote that he was a barrister who was accustomed to traveling first-class. He said he would present himself personally at the stationmaster’s office the following day to obtain his ticket. By leaving no time for a reply by mail, Gandhi successfully dodged the possibility of getting an easy “no” by mail. The stationmaster would have to discuss Gandhi’s request person to person, and Gandhi knew he would have a better chance if he could plead his case personally.

  Gandhi appeared before the stationmaster the next day in what Gandhi describes as “faultless English dress”: a frock coat and necktie. He wanted to impress the stationmaster with a basic fact—that the stationmaster and Gandhi were from the same social class, even if they were of different races.

  “You sent me the note?” asked the stationmaster when Gandhi presented himself at his desk.

  “That is so,” said Gandhi. “I shall be much obliged if you will give me a ticket. I must reach Pretoria today.”

  Now came a bit of good fortune, brought about by Gandhi’s insistence on a personal interview. “I am not a Transvaaler [a South African white],” said the stationmaster. “I am a Hollander [a native of the Netherlands]. I appreciate your feelings, and you have my sympathy.”

  The stationmaster said he would issue the ticket—but only on condition that Gandhi not involve him if the train conductor later challenged the ticket. Gandhi agreed, although this eliminated an authoritative ally who could have proven useful later.

  “I wish you a safe journey,” the stationmaster concluded. “I can see you are a gentleman.”

  Now came the hard part. Gandhi had to figure out how to persuade the conductor, who would not be from his own social class and who would be a Transvaaler, to let him stay in the first-class car.

  Here is where Gandhi made use of the “audience” principle. He needed to find someone who would be sympathetic to his “well-dressed and well-behaved people can travel first-class” standard and to whom the conductor would feel, in some sense, answerable.

  Gandhi walked along the corridor in the first-class car until he found just the audience he was looking for: an Englishman sitting in a first-class compartment by himself, without any South African whites present. Gandhi sat down, holding his first-class ticket and waiting for the conductor to arrive.

  When the conductor came, he immediately saw that Gandhi was Indian and angrily demanded that he move to third-class. Gandhi showed him his first-class ticket. “That doesn’t matter,” said the conductor.

  Then Gandhi’s “audience,” the Englishman, spoke up. “What do you mean by troubling the gentleman?” he asked. “Don’t you see he has a first-class ticket? I do not mind in the least his traveling with me.” The Englishman then turned to Gandhi. “You should make yourself comfortable where you are,” he said.

  “If you want to ride with a coolie, what do I care?” said the exasperated conductor. The conductor retreated, and Gandhi completed his trip in first-class.

  Gandhi used his Englishman as an audience to (temporarily) overcome the unjust standards of South African law. Later in his life he would use world public opinion as an audience to expose Great Britain’s unjust treatment of the Indian people—and help win India’s independence.

  Standards and Norms in Markets

  Standards and norms rely on the consistency principle for their power in negotiation. But some standards and norms are more powerful than others, especially in market transactions. The strongest market standards act as anchors or focal points in bargaining. The natural rate of increase standard for borrowing animals in the Philippines had this quality. It provided a single, definitive solution to an otherwise negotiable issue. Most market standards are not so preemptive. Instead, they serve as range finders, bargaining devices that bracket the bargaining zone within which parties can haggle to settle an issue.

  Examples of standard terms and formulas that serve as preemptive norms for negotiations can be found everywhere in modern business. For instance, the practice in the residential real estate industry in the United States is for real estate agents to receive a fixed percentage (6 percent) of the selling price of a home. In the literary and entertainment industries, agents receive a standard percentage of royalties and fees (usually 15 percent) earned by their clients. Authors of hardcover books typically collect a 15 percent royalty on U.S. sales based on the book’s retail price.

  These standards are completely arbitrary from a financial point of view. Real estate brokers, book agents, and publishers could negotiate fees on a case-by-case basis and sometimes do in very special situations. But
it would take time and energy to negotiate each and every transaction. The result: Each industry has converged on a payment standard that eliminates the need to negotiate.

  Acceptance of institutionalized bargaining standards is a hallmark of social membership in a given industry or group. A feeling arises that it is slightly insulting or presumptuous to negotiate a variance from the standard. This connection between the standard and group membership gives the standard extra bite—because questioning the standard threatens a negotiator’s status in the group. And that is just the way the groups that benefit from these powerful standards like it.

  When you are new to a market, one of your first moves should be to investigate and abide by the prevailing standards and norms. Otherwise, people will think you are at best clumsy and at worst unreasonable. Similarly, when you are new to a company or institution, you should take time to understand the underlying conventions and norms of that organization if you want to negotiate change effectively.

  Eventually, you may have enough leverage or skill to propose a deviation from an institutionalized norm and get away with it. But such a move is a calculated risk best taken by an experienced negotiator, not a novice. An old piece of wisdom from the American South applies here: “Pigs get fat, but hogs get eaten.” In the “two pigs” story, the lender ended up with an angry spouse and fewer pigs than he was due because he was greedy and tried to vary a preemptive standard.

  Institutionalized standards aside, most norms in market negotiations are contestable. These are the range-finding standards. They provide a basis for arguing in a civilized way about preferred results, but they do not dictate what the final agreement will be. They legitimize offers and demands and narrow the range within which bargaining will take place.

  In many buy-sell situations, “fair market value” is the relevant standard and the market provides abundant, useful data as you prepare to advocate your goals. Facts from published and private sources based on prior transactions are usually critical, and it is no surprise that research confirms that such data significantly affect negotiation results. But fair market value is a relative concept in virtually any purchase or sale.

  The same principle is even truer for less quantitative standards and norms such as quality patient care in health care institutions or undergraduate educational excellence at colleges and universities. People will interpret such standards differently depending on their goals within their institutions, but data can usually be assembled to support linkages between any given proposal and the applicable institutional norm. The better the data, the stronger your argument.

  The biggest mistake you can make with range-finding norms is to come to the table unprepared to argue for your end of the range permitted by the legitimate standards. The better prepared you are and the closer your proposal comes to being viewed as fair within the range described by the standards, the more successful you will be both in obtaining your price and in negotiating additional concessions on important nonprice issues.

  Positioning Themes: “Part-time America Won’t Work”

  A final, powerful way the consistency principle operates in negotiations is through what I call positioning themes. A positioning theme is a crisp, memorable phrase or framework that defines the problem you are attempting to solve in the negotiation. Asserting such a positioning theme early in a negotiation helps the other party see why you are there and what overall interests and norms tie your various bargaining positions together. “We’re buying a vehicle to use as a second car at home,” you tell the car dealer. “We want reliability, small size, and a low price.”

  A good positioning theme not only shows the other party why you are there, but it also helps you keep your eye on your own goals. When the going gets tough and the deadline is approaching, a good positioning theme can hold your bargaining position together just as sturdy ropes and bracing hold together a ship being tossed about by a strong wind.

  Let me give a simple example of how good positioning works.

  Some years ago, the Teamsters Union won a major strike against United Parcel Service of America (UPS), the biggest door-to-door package delivery service in the United States. It was the first major strike won by organized labor in the United States in years.

  What made the difference? The union developed and then repeated at every opportunity a carefully constructed positioning theme: “Part-time America won’t work.” Many of UPS’s 180,000 workers and delivery truck drivers were part-time employees. These workers wanted the company to convert their positions to full-time jobs. The theme resonated with these and other workers throughout the United States who were unhappy about being forced to accept part-time jobs. The union made it appear that everything in the negotiation hinged on UPS’s increasing use of part-time workers.

  UPS tried to counter the union’s theme with a “We must stay competitive” theme of its own, but UPS was unable to match the galvanizing power of the union’s well-prepared attack. “Part-time America won’t work” showed up everywhere: on thousands of placards, in newspaper editorials and stories, on the lips of pundits on television news shows, and on the Internet. The phrase united the 180,000 UPS strikers—no small feat—and appealed to public opinion, a vital audience in a high-visibility strike that would disrupt America’s daily commerce and cause average people a lot of inconvenience.

  The leverage the Teamsters gained from their persuasive positioning ultimately translated into a win for them at the bargaining table. The company agreed to a wage increase; it dropped its demand for control over the workers’ pension fund; and it agreed to promote 10,000 of its part-time workers to full-time jobs over a number of years. As UPS Vice Chairman and strategist John W. Alden ruefully commented after the strike was over, “If I had known that . . . [I] was going to go from negotiating for UPS to negotiating for a part-time America, we would’ve approached it differently.”

  People do not usually think of slogans and themes as being an important part of negotiation. But they can be vital, not only in highly visible events such as the UPS strike but also in more ordinary negotiations. Persuasive positioning of our needs and interests helps us organize our thoughts, communicate consistently, and tailor our message so the other party will be most likely to hear it. If other parties become convinced that you are committed to a consistent position, they will respect that and you will gain important normative leverage.

  The Power of Authority

  In addition to the consistency principle, there is a second psychological lever that makes standards and norms persuasive. This is the human tendency to defer to authority. In negotiations, this tendency can affect both the process and the results of an exchange in a number of ways. Standards and norms have power in negotiation in part because they carry an authoritative message about what the market, the experts, or society has determined to be a fair and reasonable price or practice. In addition, most of us occupy a number of social roles in our negotiations, and we may feel a strong need to act in ways that are consistent with our own vision of what these roles require—including being deferential to people and principles that appear to have high status or enjoy broad acceptance.

  Psychologists have discovered a firm fact about human nature: We are inclined to defer to authority. Some cultures emphasize obedience to authority more than others, but even Americans, who tend to be highly individualistic, defer to authority in many situations. Deferring to authority is useful most of the time. Society would not work well if we spent all our time questioning the boss’s taste in office decor and the various OUT OF ORDER and DO NOT ENTER signs we encounter every day.

  But authority becomes a problem in negotiation in two instances. First, others may seek to exploit our natural tendency to defer to authority by presenting us with unfair terms wrapped in authoritative packages. Second, our deference to authority sometimes inappropriately interferes with our ability to assert our own legitimate interests. Let’s look briefly at each of these authority problems.

  Skilled neg
otiators use a host of ploys to combine the use of standards with our willingness to defer to authority. They present us with dense, authoritative-looking standard form contracts written in unintelligible legalese and resort to other expert talk in explaining what they call the routine aspects of a transaction. Have you ever heard someone you are negotiating with justify their position using explanations based on company policy, standard procedure, and the like? That is a standards-based argument that gains additional power from being combined with an authority ploy.

  Herb Cohen tells a story in his book You Can Negotiate Anything that illustrates in an amusing way just how easy we are to manipulate based on our deference to authority. Candid Camera, a TV show that uses a hidden camera to observe ordinary Americans reacting to set up situations, once placed a large outdoor advertising sign on the expressway between Philadelphia, Pennsylvania, and the neighboring city of Wilmington, Delaware. The sign read DELAWARE CLOSED. The producers placed a staff member near the sign with a lantern to slow traffic.

  The hidden camera then recorded people as they went by in their cars. Some people just drove by, ignoring the sign. But others stopped and inquired. The staff member simply referred people to the sign. One dismayed driver even pleaded, “When do you think it will reopen? I live there, and my family is in there!” Such is the power of the printed word—when you print it in billboard-size letters.

  Next time you are signing a lease you don’t understand or hearing an argument from a supposed “expert” that makes no sense to you, remember this amusing story. The other party may well be telling you that “Delaware is closed,” hoping to trigger unthinking acceptance of his or her unfair or unnecessary demands.

  Our deference to authority can also needlessly interfere with our ability to initiate negotiations or express our points of view appropriately within organizations. For example, health care workers such as nurses sometimes mindlessly defer to physicians’ judgment in the administration of medicines and carry out orders they know to be nonsense, such as putting eardrops into people’s eyes. Virtually anyone who wears a uniform on the job or works in a hierarchical organization must be constantly alert to the possibility that his or her deference to authority could interfere with the proper discharge of his or her duties.