negotiation

The 6 Negotiation Traps to Beware Of

In a perfect world, people would negotiate being fully transparent and no written contracts would even be necessary to be signed. As Warren Buffet once did, he never even had to sign a written contract in a deal with the giant Walmart, because they had an established trusting relationship in place and Buffet “knew that they would deliver, and they did”.

Beware of negotiation tactics in order to better position yourself

Beware of negotiation tactics in order to better position yourself

However, in most situations this is not the case. Yes, you should sign a written contract in order to set the ground rules of the relationship, and yes, you should be aware that there are dirty tricks that are often used in negotiations.

Here I will discuss some of the most famous negotiation tricks and how to avoid becoming a hostage at the table.

1. “Let’s meet up at my place”

The physical surroundings of a negotiation are known to play an enormous role in the outcome of a meeting. Often the other side picks the place they want to negotiate and sometimes this might mean they are setting you up for failure.

For example, if they arrange the negotiation to be taken place at a bar or a noisy place, they are probably trying to make you feel uneasy what will lead you to want to conclude the negotiation as fast as possible.

So, whenever you can, be the one to pick the place. This will make sure that you are negotiating in a place that you feel comfortable at, and hopefully the other side feels the same way. Remember, a good negotiator looks for mutual gains, so take into consideration the other side’s needs.

However, there are times that letting the other side pick the spot is advantageous to you. Stepping into their turf will put them at ease and more open to suggestions.

If you ever get caught up negotiating in a “uncomfortable” place express your concerns and postpone the negotiation to another time and a different place.

2. Personal attacks

This is one of the dirtiest tricks in the book, and often used by people who a poor negotiators.

In this situation the other side will make personal attacks to your appearance, ignore you, make you wait for them, refuse to make eye contact, and more.

A perfect example is if the other side makes a comment about how tired you look. All these comments are intended to put you down and make you feel self-conscious. If you do look tired the other side should not be commenting on it, as this is irrelevant to the negotiation.

Whenever you feel that you are being attacked make sure you mention it to the other side and be hard on the problem. No negotiator should have to put up with such behavior.

3. Threats

This one if self explanatory. If the other side starts making threats of taking something away from you, or doing something harmful, remember one thing: the only reason they are doing that is to build up pressure on your side. Good negotiators don’t cave in to pressure.

On the other hand, warnings are a lot more legitimate than threats. These are realistic potential outcomes that could occur in the case of failing to reach an agreement. For example, expressing that if no agreement is reached, you both should be aware that the media will expose both parties’ inability to negotiate a deal, and no one wants that.

Also, expressing your plan of action in case no agreement is reached could be seen as a warning rather than a threat. For example, “if no deal is reached we will have to go with company X instead, as we absolutely need the material Y in order to produce product Z”.

If you ever feel that you are being threatened you can do any of the following: ignore it, make them unauthorized, make them irrelevant.

Businesses often record phone calls (and express that they are doing so) to avoid either side from threatening each other, forcing them to act in their best behavior.

4. Anchoring

In this case the negotiator will try to “anchor” an initial value proposal to a lower one. For example, if you are selling a house worth $200,000 the other side might make an initial offer of $100,000, what is extremely below your expectations, increasing the amount you have to bargain for.

Anchoring the price means throwing a first desirable price

Anchoring the price means throwing a first desirable price

This technique can be advantageous when the price of a product is unknown to both sides. Letting the other side throw the first price will give you an idea of how valuable this product is to them, and from there you can begin bargaining for your price.

However, if you are aware of how much something is worth (such as the home you are selling), go right ahead and throw the first price. This will allow you to start off with some advantage and have the other side bring the value to their desired range.

Beware that throwing an unrealistic price, such as $300,00 for the house, might make you lose credibility, leading the other side to walk away from the table without even bothering.

5. “Take it or leave it!”

I believe we have all been held hostage of this tactic. When we go to a store, for example, a product has its price tag on it and that is how much it will cost you – no room for negotiation. This is a non-interactive deal making method that is very effective in most developed countries.

If you ever travel to Peru, for example, on the way to Machu Picchu you will encounter a bunch of street vendors that will be willing to sell their products to much less than what they are asking for. This happens because they have a lot more to lose if they don’t sell that product than you do if you don’t buy it.

If you ever encounter a “take it or leave it” situation ignore it at first. Carry on with your principled negotiation trying to get to the bottom of the objective criteria as to how much something is valued at. Try to present different solutions, and if you do bring up that you are aware of such tactic explain to the other side what they have to lose if they don’t make a deal.

At Michigan University, professor George Siedel in his negotiation class asks his students to bargain for a lower price in a “take it or leave it” situation, such as buying a hamburger from McDonalds. And, unlike what most of us would have guessed it, generally over 69% of the class is successful in negotiating a lower price, yielding an average discount of 40% overall.

6. Contrast Principle

This tactic is famously used by real estate agents. It is an illusion that makes things look different when presented in sequence.

Presenting houses in sequence can help boost the value of the final house

Presenting houses in sequence can help boost the value of the final house

For example, when someone is looking for a house, the real estate agent often takes the person to a really run-down house that looks horrible. The person says that there is no way that they would live in there. And then he/she takes the client to another bad looking house – once again it is a no-no. But finally, the real estate agent takes the person to a beautiful looking house – very expensive – and the client often agrees to buy it. The agent has just created the illusion that the last house is a perfect place that is extremely hard to find by presenting bad looking houses beforehand.

Most likely, if those two ran-down houses were not presented beforehand the client would not have bought the last house in the first place, and that is why you should beware of this tactic. Make sure that you always use objective criteria when analyzing a deal and avoid becoming affected by external factors.

Finally…

Becoming aware of these 6 tactics can make you a much better negotiator. It will help you become more knowledgeable of what is really going on and help you stay on track.

You can even use some of these tactics – with the exception of 2 and 3, for obvious reasons – as tools to better your position in the negotiation, as long as these don’t conflict with your ethical standards. Remember, don’t do anything that you would regret later if it were to be shown in the front page of the newspaper the next day.

 

PA

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How to become a great negotiator

Getting to YES is a best-seller that first came out in 1981 written by Roger Fisher and William Ury. It has been used in numerous university negotiation courses and is recognized as one of the ground breaking negotiation books of all time. Since the business world is not the same from 1981, the title has been revised multiple times over the years and still holds strong relevance nowadays.

Getting to YES still is one of the most important negotiation books in modern age

The book is useful for all people, since negotiation takes place every day in our lives. When we are teenagers we negotiate with our parents the parameters of our nights out (curfew, where is it, who is going, how we are getting there, etc.), when we are recent grads we negotiate our salaries and vacation time with our employers, when we are husband and wife we negotiate who is going to take up which section of the closet and our private spaces in the new home, when we purchase a meal at a restaurant we engage in a negotiation of what to order and how much to pay for it, when we are senior executives at major corporations we negotiate high scale international deals with the Chinese, etc…


Shift in Paradigm

Fisher and Ury discuss a method that they have developed over the years that consists of approaching the negotiation table with different lens.

We all have gotten caught up in other people’s attitudes during a discussion, which consequently affected our ability to get what we wanted. We all have dealt with some kind of conflict that has left us with a bitter taste in our mouths. So what have we been doing wrong?

Here are the 4 pillars that every successful negotiator bases his/her attitudes around when faced with conflict:

  • Separate the people from the problem
  • Focus on interests, not positions
  • Generate third alternatives (win-win outcomes)
  • Utilize objective criteria

Separate the People from the Problem

In business, especially, negotiators often forget that they are dealing with humans first. Every person has its own internal conflicts, psychological issues, and desired outcomes. Naturally we have different construals for every situation because our past life events all play a role in how we see things.

For example, a person who grew up in a family of artists will naturally approach problems with a more creative way (most of the times), whereas a person who grew up in a family of business executives will approach problems in a more systematic and organized manner. This happens because our environment and life experiences shape up our way of thinking, and as a consequence no human will ever be the same.

And that is where conflicts are born.

Negotiating with anger will most likely obstruct you from generating positive results for both sides. With that, Fisher and Ury discussed 4 important things to keep in mind that will help you separate the people from the problem:

  • Perception: their thinking is the problem. The reason why people argue is because of the difference in perceptions. With that, is is important to avoid thinking that, whatever your fears are, that is what the other side is trying to accomplish. They have their own interests too and putting yourself in their shoes will take you a long way.
  • Emotions: people often feel threatened in negotiations, and fear generates anger, and vice versa. It is crucial for you to understand your own emotions before coming into a negotiation. Once you have that, it is easier to understand the other side’s feelings. Pay close attention to their core concerns and openly talk about it. And most importantly, do not react to emotional outbursts, these often have nothing to do with you nor the negotiation, so just continue to act nice and the other side will eventually calm down.
  • Communication: without communication there is no negotiation. Most of the time people (including ourselves) listen with the intention to respond. Instead, actively listening to understand will most often lead both parties to the higher road. Acknowledge what is being said and put things into perspective by asking questions about it. And finally, speak to be understood and never speak about the other party. Express your feelings and let the other side express theirs.
  • Prevention: building long lasting relationships will most often cut a lot of the work in a future negotiation. Trust is a huge factor for humans, so investing in the relationship will only do good. People who know each other generally take anything the other negotiator says personal and directed to them. Build your “face” value by facing the problem from the same side of the table as them, both looking at the issue, not at each other.

Finally, by separating the people from the problem negotiators can deal with the interpersonal relationships first and prevent feelings from getting involved with the actual issue in hand. Always keep in mind to be hard on the problem, but soft on the people.

Focus on Interests, not Positions

Prior to any negotiation both parties will have their own interests. In a perfect world both interests would be fulfilled and the parties would walk away from the table with a big grin on their faces. However, that is not how things normally go…

This section is strongly tied to the previous one (separate the people from the problem). When we let our feelings get involved with the negotiation deal we often tend to park our minds on a strong position and fight for our pride. No one gives in, no one wins. Matter of fact, both parties lose.

We are so focused on our positions that we often forget what was our interests in the first place. For example, a couple fighting over who is going to get which side of the bed; on one side there is a lamp and a window that lets cool air in, and on the other side there is just a bedside table. One party wants to be close to the window because it complains of feeling hot during the night, while the other wants to have a lamp by their side in order to read before falling asleep. But they are both so set in stone on which side of the bed they want (the one closest to the window) that they forget that they can actually move the lamp to the other side. They don’t disclose their interests and end up negotiating over which side of the bed they want instead of negotiating over who gets the lamp.

That is a simple example of how tend we bargain over positions instead of interests.

Fisher and Ury recommend identifying the other party’s interests first. Ask yourself “Why have they not made the decision I want, yet?“.

The first mistake we make is assuming that the other party has the same interests as us. As a consequence we end up battling over who gets the last piece of pizza when in reality one just wants the crust and the other just wants the cheese.

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One of the most basic human needs is the one of economic well-being

Another way to identify the other party’s interests is by understanding humans most basic needs; these are often the bottom line of the negotiation:

  • security
  • economic well-being
  • a sense of belonging
  • recognition
  • control over one’s life

Most of the time we overlook these interests and think that the only interest involved is money. Is the mother not lending her son $20 dollars because she needs that money or because she is trying to have some control over her son’s life? She certainly could use that money for groceries but maybe she just does not want her son to use that money to secretly buy booze with his friends.

Finally, once you have identified the interests of each party comes the time to discuss those interests and find a solution to the problem.

It is your job to describe your interests to the highest level of detail so that the other party can see where you are coming from. And it is also your job to acknowledge the other party’s interests.

Often we are so focused on what we want and on our problems that we give little attention to the other person’s problems. People respond better when they feel that they have been understood. This is a win-win situation.

And as human beings, when we feel threatened we focus the problem on what other people have done to us in the past. Forget that behavior. You will not get what you want and on top of that you will lose face with the other person. Only look forward, never backwards.

Generate Third Alternatives

Often we believe that our solution is the only right solution. We tend think that we will either go with our way or the other party’s way, and as natural human behavior we truly consider our position the better one. But what if there was another alternative? This is what we like to call it the Third Alternative.

The Third Alternative is something that neither of the parties has thought of it yet. It doesn’t require anyone to compromise or give in. It is a middle ground that meets both interests in such way that both parties contributed to pave the land.

Fisher and Ury describe four obstacles that inhibit people from generating options:

  • Premature judgment
  • Searching for a single answer
  • Assumption of a fixed pie
  • Thinking that solving their problem is their problem
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Generating new ideas requires a lot of effort and cooperation

It is not natural to invent options. It requires hard and practical thinking. But generally we come into the negotiation table with premature judgments that impedes us from generating Third Alternatives.

For example, as a recent graduate you might be afraid of negotiating your salary with your new employer. You naturally assume that disclosing your desire for more money will jeopardize the image your future boss has of you. However, disclosing why you would need that money would encourage your boss to discuss potential alternatives with you. You might want to say that you want to use the extra money to pay the mortgage on your new house; this will imply that you want to stay with that employer for the long run. With that, your boss might decide the give you small increments of salary over the course of five years, which in the end will account to the amount you had in mind in the first place.

Another obstacle is when we see a negotiation as narrowing the gap between two positions, instead of broadening the options available. It is easy to think that by having a hard time to find an agreement is already a big enough task, so thinking of creative ways to make things work will only cause more trouble. Premature closure will only make the process harder.

Thirdly, we see a negotiation as a fixed pie, from which we will try to divide it evenly. What if you could expand that pie? The slices would end up bigger, would they? That is what Third Alternatives do.

Finally, we tend to feel disloyal when we think of ways to solve the other party’s problems. This psychological attachment to our own interests often impedes the wheels from turning during a negotiation. Detaching from our emotional involvement will make your mind freer to think of new ways to untangle the strings.

In order to generate options it is crucial that we separate inventing from deciding.

An employer, when is looking for candidates to fill a position in the company, puts out a job ad for a number of weeks. This allows enough time for multiple people to apply to that job. The point of doing this is to broaden the employer’s options. If he/she can chose the best from a pool of one hundred candidates why would he/she want to quickly look around his/her network and potentially get a mediocre hire?

It is crucial that we generate as many realistic options as possible before deciding on which one to take. Fisher and Ury recommend going through the following process in order to generate Third Alternatives:

  1. Figure out what the problem is
  2. Analyze the problem through the diagnose of potential causes
  3. Develop theoretical cures to what is causing the problem
  4. Take action by choosing the best option from your pool of cures

Finally, there is no point in negotiating an agreement if there isn’t mutual gain. A successful negotiator measures his/her effectiveness by the quality of the solution to the problem, not by how much he/she individually gained. This not only contributes to a good reputation, but also encourages other people to do business with you. Make sure you put yourself in the other party’s shoes and make their decision as easy as possible. This is what generating Third Alternatives is all about.

Utilize Objective Criteria

Building upon the previous three pillars for successful negotiation, this is the last piece of the puzzle, and arguably the most important one.

When we settle an agreement with someone else often we just agree to something the other party says (which might sound good or bad) without really knowing what thoughts went behind the proposal. For example, when a contractor building the foundations of your home comes and tells you that it has to be done a certain way and this is how much it will cost you, most of the times we assume that this is how things are done and there is no contesting the offer. However, when the price seems a little too high we blindly try to convince the other party to lower it. But unless you are dealing with someone who is going through financial struggles and really just needs the money, this attempt will generally fail.

In order to critically come to a fair deal we must understand the criteria that the opposite party used to make the offer. This is the process of utilizing objective criteria.

Principled negotiation comes from the same grounds of principle-centered behavior, which I discussed in: “Your Personal Constitution: what holds true to you“. It is about acting based upon a well-thought out set of values/principles and, in the case of negotiations, criteria.

During a negotiation both parties need to decide on what are fair standards to base their offers upon. One party wants to sell it at a high price while the other wants to purchase it at a low one, how can they reach a fair price?

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Never yield to pressure, instead insist on using objective criteria

Therefore, before beginning the negotiation both parties need to agree upon fair principles so that no one feels taken advantage of. Once these are clear it will be easier to separate the people from the problem and focus on the interests. It is inevitable that eventually you will run into someone who will try to pressure you or make threats. Never yield to that. Insist on the criteria agreed upon in the beginning and keep looking for that Third Alternative.

For example, you go into a car dealership with the intent of selling your current used vehicle. The other party offers you $15,000. So you ask him why $15,000 (looking for the criteria). He says that they are currently selling the same vehicle in the dealership for that price. So you ask him if that same vehicle is as old as yours and if it has leather seats. The man working at the dealership says it does not, so you inquire about how much leather seats cost and what is the adjusted value for your vehicle with its year taken in consideration. And so on.

By doing this you will be utilizing concrete values (add the price of leather seats and adjust the year value) to determine the value of your vehicle. You might get $14,000 or you might get $16,000 instead, but the important thing here is that you are reaching a fair agreement for both parties, and this is what great negotiators do.

But, what if…

By practicing the four pillars of negotiation you will be able to generate better results and build a strong reputation for yourself. These are the most fundamental shifts in paradigm that will help you become a great negotiator.

However, in real life things don’t always do the way we learn on paper. The other party might be more powerful, have more authority, or simple have more options than you do. In the book Getting to YES, Fisher and Ury address all of those issues and introduce new tools, such as your BATNA (Best Alternative To a Negotiated Agreement), to leverage your position at the table.

There is always a solution to any problem. Negotiating help parties see the problem more clearly and push people to work together to reach win-win outcomes. The only way to get better at it is by constant self-development and real world practice.

But I must admit it, paying someone’s dinner or just buying them a coffee will also take you a long way.

 

PA