How to Negotiate Effectively- Java with Jim

by Apr 22, 2022Java with Jim, Negotiation

Discussing Common Negotiating Techniques That Work

Let’s start with common ground. This idea came out of the Harvard negotiating project with a book called Getting to Yes. The book is 25 or 30 years old, but I tell you, it works. It’s my preferred technique. It’s about interest and not positions, so we’re not going to get positional. Like, you have to pay me a million dollars for the house. So I am sure you are thinking, help me understand why that’s important, right? You want to get to what you are trying to accomplish and what’s essential for the person. Seek to understand first before you go for any solution. Before we get to the negotiation, there’s a lot of learning, understanding, and conversation to be done to learn how to negotiate. That may seem like you’re wasting time, but if you truly understand where the other person is coming from, it is more powerful to craft a solution that works for them and you.

How to Negotiate: Collaborate

A benefit of negotiation is that when you get done with a collaborative process, you have a stable, balanced deal, and no force was used to generate it. That means it’s going to last. If you’ve used coercion to create an agreement of any type, it’s unstable intrinsically. For those of you who have a significant other and if you used force to get something one way or the other that you liked, you’re going to pay the price later for that. Sometimes, it’s a powerful technique to get people back to rationality and go through their best available alternative to a negotiated solution and make sure they understand it.

The other technique you use in this methodology, which I find essential, is the logical consequence of their position. If the other party indicates, they need a million dollars for their house. What happens if we do that? I already told you I could only afford $900,000. Well, then you can’t buy it. Probably, I’m not your buyer, and you’ll have to go to the market and find somebody else. What if I tried to settle at a million dollars? Well, it’d be too much debt. You’d be eating macaroni and cheese for three years. Probably true, yes? I mean, in other words, the idea is that sometimes I take a ridiculous position, and you ask what’s the logical consequence of that position, run them through that. And they go, huh? Well, that doesn’t work.

Adversarial Negotiation

Adversarial is the view that there are winners and losers in negotiations. It’s an adversarial process with winners and losers, where one person dominates the other. There is one winner and one loser. That’s it. The first was we could both win. And there are books about win-win, negotiating, and so forth. And I’m not big on using that phrase. I want to find we’ve met both of our common interests, and that it’s a stable deal. That’s what we’re after here, but adversarial, you will see a lot of techniques. The flinch is vital in a contentious negotiation. No matter what price they mention, you flinch.

The other one that people use is deadlines. I need the offer by Friday at five o’clock, or we’re done. In a couple of decades of negotiating, I can tell you that Friday at five o’clock never actually means Friday at five o’clock, rarely. So deadlines are arbitrary. They use them to put pressure on you to get a deal done. You can essentially ignore them. Once people have decided to do a deal, they can always find a way to make the money work.

Don’t Negotiate With Yourself

I see CEOs do this to themselves, and they negotiate with themselves. It is one of my most common phrases when coaching a CEO through negotiation. I say stop negotiating with yourself. So they say, well, we’re thinking about offering 2 million bucks over five years, and I don’t think they’re going to take it. So I’m going to offer 5 million dollars. I say, “Stop! You’re negotiating with yourself.” Put the offer out there and see what they say. Another one that you’ll see people use is expectation setting going into a negotiation. And what they’re trying to do is set your basis so that you feel like you’re winning when you’re not winning.

Mirroring Technique

Another technique is mirroring their physical presence. Reflecting on the other party physically feels empathetic to the other party. You’ll mirror them, and they’ll feel like you get them physically. You don’t even say anything. Their arms crossed, you crossed your arms. Arms are open, and you open yours; you’re mirroring them. But you want to mirror them verbally because what you need for them to hear is that I get your issue. So you say, you’re right. MBAs have stolen family firms for low prices for hundreds of years. You’re right. MBAs like me sometimes do that. So they think, he’s hearing me, he gets it. He understands what I’m saying. Your goal is to be able to summarize what they said at the end. So I heard you say that people like me steal companies like yours. And they say, yeah, that’s right. At that point, they realized that you got them, and now you can proceed. You have to hear them. If there’s energy like this, you got to get past the energy, or you can’t have a conversation.

There is Pressure on Both Sides

There is pressure on both sides of the deal to make the deal. Everybody thinks all the pressure is on their side to make the deal, but that is wrong. Both sides have pressure. And sometimes, to help myself with that, I think, let me be them for a minute. Why do they need to make this deal happen? So I consider a scenario like this one.   The salesperson needs to make the quarterly quota. It’s the end of the quarter. He’s probably got bills that are due. He needs to pay him. He knows he is going to make a commission on this. He’s the top salesperson. He wants to continue being the top salesperson. He’s got inventory on the lot sitting there, and he wants to move it. He doesn’t want to order me a car. He wants to sell the car on the lot. Even if it’s at a lower price, a lot of that pressure is on the other side of the equation.

It would be best if you remembered that the other side has pressure. When I’m awake the night before a negotiation, I think about the three most likely moves that they’re going to make and what are my three potential responses to their movements. Which one’s optimal? And then how do they respond to that? And then how do I respond to that? So I run the move counter and move three deep on their primary moves. So when they go to a higher authority, I already know what I’m going to do. It’s seamless for me because a lot of it is predictable. Also, where are my gives? What’s important to them? How am I going to tee them up? You’ve almost pre-scripted 80% of that conversation in a good negotiation.

Framing an Alternative Choice

Would you instead do this, or would you rather have this? They’ll say both, and you respond, no, I’m making you make a choice. That help gives you a lot of information in that conversation. I talked about knowledge and asymmetry before and how they know things you don’t know. But the critical thing that I didn’t touch on last time is that I spent a lot of time thinking about what I know that they don’t know is essential. That’s a valuable thing. If I know something that they don’t know, that’s perhaps negative, or that something’s valuable to me, and I don’t want them to know it, that’s important. So think about what they might see that you don’t know, and then think a lot about what you know that they don’t know. It’s vital as you go into a negotiation.

Name Their Biggest Fear

So if they’ve got a magic number in their head, you can use that to get a highly advantageous deal to you. When you’re them, you name their biggest fear in the negotiation. So you say $5 million and say, if I were you, my biggest fear would be that I’m not going to pay you. Then you’d be concerned that you will have sold your company, and you’ll never actually get all this money, and you’ll have been screwed. And watch, they’ll go well, that’s right. So I understand that. We’re going to take care of that for you. We’re going to make sure that the contract makes sure that you’ve taken care of.

For example, we’re heading to the Golden Gate Bridge, and we’re about to go, and I say, Pam, I need to tell you something right now. I’m terrified of heights, and you say, no problem. I’ll hold your hand,  use the railings, and we’ll get you across. The fact that you get it out there, your number one fear, disarms it. It takes power out of it. So when you do it for them, they think, this person gets me, and they are trying to find a deal. Remember that the fear of loss is greater than the desire for gain. The fear of loss is proven in countless economic, psychological, and psycho-economic experiments. There’s Nobel prize work on it. The fear of loss is greater than the desire for gain. So if I can protect your downside, that’s worth more to the seller, let’s say than giving them a little more upside.

Plan For Your Concession

We know companies that wouldn’t bid on an RFQ if they didn’t write the spec. Like in government contracting, they go, if we were not in the development of the spec in the first place, we’re not even wasting our time bidding it because we know that our probability of success when we write the spec is 75%. And our probability of success when we didn’t write the spec is 20%. So we’re wasting no effort going after a pursuit when we didn’t write the spec in the first place. Ideally, when you bid, you leave a give in the deal, particularly when you’re going to procurement. So if you’ve got to have 5.50 a unit, write it out at 6. That way, you got 50 cents to give to procurement because remember what they’re paid for and remember their victory. Their victory is they got concessions.

So the idea is to get a concession that you’re willing to give lined up in the deal. Now look, we’re going to flinch, reflect, and go silent a couple of times before giving them the money.