Negotiation

SECTION I: INTRODUCTION

Real-Life Negotiation Situations You feel you’ve been had. Sucker-punched. Taken for a ride. Why? You’ve been talking to your next-door neighbors about their cell phone service, and you find out that they are paying roughly half the monthly rate that you are paying! To make matters worse, you learn that their phone has text-messaging, a camera, no roaming charges, AND e-mail capability! Your cell phone does not have these functions. And the final insult? They didn’t have to sign a contract— and you still have 18 months left on yours. At first you get mad, thinking the phone company made a mistake that is costing you money. After all, you pride yourself on being an informed consumer— how else could this have happened? Then you ask your neighbor how he got such a good deal. He tells you that he and his wife simply negotiated the agreement when they switched providers. Boy, do you feel frustrated and foolish. You realize how easy if would have been for you to have negotiated the same deal, if only you had tried. The fact is that most people miss many opportunities to negotiate in their professional and personal lives. Negotiating is a critical ability that many of us lack, yet anyone can become a competent negotiator. It simply requires (1) knowing when a particular situation is ripe for negotiation; (2) knowing who is able to make a decision for the other party (you often need to ask to speak with the supervisor or manager in charge); and (3) knowing how to negotiate. Read this easy-to-follow book, and learn how to negotiate by practicing a few tactics presented here. As you read, you’ll be amazed at all the everyday situations in which having the ability to negotiate effectively can enrich your life.

Introduction

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Practical Tactics for Work and Life In this book, we provide the reader with 50 proven, practical, and easy-to-apply negotiation tactics. We minimize the jargon and long-winded stories so you can quickly learn how to use each tactic (usually in less than a day!). You do not need to wade through hundreds of pages to find a single useful tactic. In fact, most people find a few interesting tactics right away, and try them out immediately. Each tactic is briefly defined and used in work and life examples—no lengthy anecdotes and no wordy theoretical discussions. Each is written to stand alone; the reader does not have to read and retain many pages of discussion just to understand how to use the tactic.

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50 Practical Negotiation Tactics

Tips on Getting the Most Out of This Book Read the book through, from start to finish. It only takes about two hours. Read all 50 tactics and flag the ones you believe you can use immediately and in what situations. (Or use the Notes pages in the back). For example: • Nickel and Diming (Tactic #43) – Use with copier vendor to reduce toner cost. • Commit the Offer to Paper! (Tactic #50) – Use with kids for household chores and driving privileges. Keep it handy. This book, as the title states, is a resource book. After you have familiarized yourself with the content, keep the book on your desk or shelf next to the dictionary, encyclopedia, and other reference books. Use the tactics! Practice makes perfect. Start with the ones you flagged or recorded in the Notes section. The next time you are about to enter a negotiation situation, refer to the notes you made, and try the tactic. It won’t cost you anything to prepare ahead, and the experience of trying it out will build your confidence. Everyone can negotiate, once they know the tactics and practice them. The first time you realize that using a tactic gave you a significant gain, you will be ready to try more of them. Develop your own style. The fifty tactics presented in this book are not intended to be recipes for success in any negotiation situation. Instead, they are general methods that should be adapted to fit one’s personal style or negotiation circumstance. As you use a tactic, record the results in the back of the book so you can recall how it worked the next time a similar situation comes up. Use the exercise forms in Section IV. They will help you think about how you can use these tactics. On the form, briefly describe the situation; list the parties involved (including the people who can make a decision); describe the issue to be negotiated; and finally, list the tactics that you believe might be especially helpful. Take the Quiz! Can this book help you? Circle yes or no next to each of the ten quiz questions on page 7. Score your answers: one point for each “no” on questions 1, 6, 7, and 10 and one point for each “yes” on questions 2, 3, 4, 5, 8, and 9. Total your points. If your total score is a 9 or 10, you are already a successful

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negotiator! Pass this book on to someone else who needs it. But if you scored 8 or less, start reading! Most people come face-to-face with a negotiation situation of one type or another on a daily basis: on the job, with family members, with neighbors, at a flea market. Unfortunately, few people understand that normal interactions represent bargaining opportunities. Instead, they pay the sticker price, accept what is given, or engage in an unproductive argument. This book is designed to give the reader an understanding of the negotiation process by presenting fifty proven, practical tactics useful in real-life situations at work or at home. Most readers will no doubt recognize some of these strategies; some will in retrospect even remember being the victim of one or two of them. Learning how to use these tactics and knowing when to apply them will make you a more skilled negotiator when you are faced with the opportunity to strike a favorable agreement. Who, exactly, are the negotiators most people deal with each week in their work and personal life? The list will be long: • • • • • • • •

a neighbor a spouse a child other family members a supervisor a co-worker a salesperson a boyfriend/girlfriend

• • • • • •

a home builder a hotel clerk an electrician/plumber a lawyer a vendor/buyer a human resource director (who might make a job offer) • a manager

Most people expect to have to negotiate when buying a car or purchasing a home, but many of us miss the opportunity to bargain in other situations, such as these: • You receive the wrong order at a restaurant. • A co-worker asks for volunteers for a new project. • A child wants a new toy now.

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• • • • • • •

A hotel clerk tells you that your reservation was lost. Your spouse wants to buy new furniture. A service repair person gives you an estimate on some work. A friend is about to select the movie he/she wants everyone else to see. A teenager wants to buy his/her first car. A neighbor wants to remove an old tree on your property line. Your boss reviews your past year’s performance.

All of these situations are opportunities to negotiate. Each one has the five key characteristics necessary for bargaining: 1. Multiple parties. Two or more sides are involved, and each side can involve one person or several people (each representing one “side” of the issue). 2. Interdependency. The parties are interdependent: what one party does affects the other. There must be a conflict in the sense that what one wants is not what the other wants. Therefore, some resolution must be negotiated. 3. Mutual goals. The parties involved are interested in reaching a common goal. Both sides want a settlement. 4. Flexibility. There are flexible elements to the situation, such as price, time, condition, or items of value, that can be negotiated. 5. Decision-making ability. The parties involved can make a decision by themselves. In some situations, one party is only allowed to follow policy or must wait “until the manager arrives.” When you recognize that something can be negotiated, be prepared to bargain. In some circumstances, you must advise the other party of your intention to negotiate. For example, perhaps you can say to a hotel clerk, “Well, since you lost my reservation, what can you do for me?” Or this to a restaurant manager: “This food order is wrong, and I don’t have time to wait for another. What are my alternatives?” During an employee evaluation, perhaps the employee can say, “I’d like

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time to look over this performance review and respond point-by-point, and meet with you again.” To a neighbor you can say, “I see why you want to cut down the tree, but I believe it adds value to our house. How can you compensate us for our loss?” Once you’ve suggested that you see the situation as something to be negotiated, the other party will realize that you intend to negotiate and do not accept the situation. You might need to follow with a statement that clarifies your desire for a settlement but indicates that you are flexible and you do intend to negotiate. You can then use one or more of the tactics presented in this book to achieve the best possible settlement. Once a settlement is reached, negotiations can be concluded with a written or oral agreement. Scenarios based on actual real-life situations are used to show how each tactic can be used in business or everyday situations. Choosing and applying the appropriate tactic to a particular situation will become easier as you begin to use them. Keep this book handy when preparing for any type of negotiation, and use the forms in the back to identify the issues, the parties and their interests, the facts, and the tactics that might move the negotiations along.

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How good are your negotiation skills? Place a check in the box that applies to you. Yes

No







Self-Assessment Quiz



1. In the past, have you ever felt that you were not adequately prepared to negotiate a job offer?



2. Do you routinely negotiate for better accommodations when you check into a hotel?



3. When you purchased your last home or car, do you believe that you negotiated the best possible deal?



4. In the past, have you routinely resolved differences with a neighbor or a friend through a negotiated agreement?



5. The last time you received sub-par service or food in a restaurant, did you request appropriate compensation?



6. Do you wish you could negotiate a change in your job duties or salary?



7. Have you ever found yourself in a negotiation situation in which your best alternative was to walk away, but you did not?



8. When making a major purchase, do you routinely negotiate a last add-on before you close the deal?

  Introduction

9. As a parent, spouse, or child, have you ever required a written agreement covering chores, allowance, or division of household duties, etc.? 10. Do you often refrain from negotiating a better price or service because you believe that you do not have good negotiating skills?

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SECTION II: THE NEGOTIATION PROCESS

Before you begin the process of negotiation, decide how complicated the issue is. If it is a relatively informal situation, the process will be fairly straightforward. The “Quick Model” approach outlined below is good for simple negotiations. On the other hand, if the situation involves a number of detailed or complicated issues or the stakes are relatively high, the process will probably take several weeks or months as the parties move through all the stages.

The Quick Model The easiest way to prepare for a simple negotiation is to identify all the issues, including those that are less obvious. Then classify each one into one of three categories: Compatible (Integrative or Win-Win) Issues: Those issues for which both parties might have the same desirable outcomes. They’re referred to as “win-win” because each side can achieve their goal. Examples: • office location (city, state, etc.) • primary sales territory • a starting date Exchange Issues: Those issues that might be traded, one for another, thus allowing each side to achieve one of their goals. Examples: • a signing bonus (employee goal) traded for an annual travel budget (employer goal). • an allocation for moving expenses (employee goal) traded for a set number of travel days per month (employer goal).

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Distributive (Win-Lose) Issues: Those issues that the parties are directly at odds with. What one side gains, the other side loses. Examples: • an item sold by one party and bought by the other • wage increases won by one side.

The Comprehensive Model Negotiation is more of an art than a science. Depending on the situation and the parties involved, stages can be combined, rearranged, or even skipped altogether. The most typical stages are Preparing to Negotiate Planning a Strategy Exchanging Initial Offers Making Counteroffers (the Give and Take) Applying Pressure Making Progress Reaching Agreement The tactics are organized according to the stage at which they can be used to best advantage and listed as such in the Table of Contents at the front of the book, but feel free to try them when they seem most appropriate to your specific circumstance.

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The Negotiation Process Table 1: The Negotiation Process: Seven Basic Stages

Identify situation as one for negotiation

Tactics to Consider

Stage 1

Stage 2

Stage 3

Stage 4

Stage 5

Stage 6

Stage 7

Preparation:

Strategy:

Initial Offer:

Counter Offer:

Pressure Bargaining:

Key Methods:

Reaching Agreement:

Key Factors – Time, Information, Power

Choose Overall Approach to the Process

Getting Started

The "Give & Take"

Striving for Conclusion

Achieving Progress

Settlement of Impasse

#1– #6

#7– #14

#15– #21

#22– #31

#32– #38

#39– #46

#47– #50

Initiation Phase

Negotiation Phase

Resolution Phase

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SECTION III: 50 TACTICS FOR SUCCESS

Stage 1: Preparing to Negotiate

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n many negotiation situations, the parties have time to prepare for the actual bargaining. In other situations, such as when you’ve been served something at a restaurant that you did not order, there is no time to deliberate. You have to be prepared to instantly recognize that the situation can be negotiated, and begin to bargain. You can have time to prepare if you simply ask for it. For example, at the end of an employment interview for a management position, the candidate was surprised to receive a job offer on the spot. The candidate wanted the job, but wisely recognized that she could negotiate the contract. She said that she was very interested, but needed forty-eight hours to make up her mind. She used the time to talk to current employees, and developed a list of perks and conditions that she then negotiated, before accepting the position. To prepare for a negotiation, do as many of the following activities as you can: 1. Have realistic objectives. Identify everything that can be negotiated, and set realistic objectives for each item. If, for example, price is a factor, determine the desired outcome and set a minimum (or maximum) acceptable outcome, beyond which you will walk away and choose another alternative (see Tactic #1: Know Your BATNA). Also determine your opening offer in light of your desired and your minimum outcomes. It is often helpful to list each specific item to be negotiated and your minimum acceptable offer for it, as well as your desired goal and an acceptable opening offer (see Tactic #5: Listing Items). Thus, for each factor, write down and stick to three figures:

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1. An opening offer. 2. The desired “best” offer. 3. A minimum (or maximum) “worst” offer. 2. Learn about your opponent. By whatever legal and ethical means possible, learn everything you can about your opponent. Talk with friends, neighbors, co-workers, past negotiation foes, even family members. If you are able to guess or find out about your opponent’s real objectives and/or limitations, you can gain an invaluable edge (see Tactic #2: Know Your Opponent’s Real Objectives). 3. Gather all the facts. During the heat of negotiations, presenting critical facts or objective criteria can turn the tide in your favor. You can usually anticipate and collect this critical information in advance during the preparation phase (see Tactic #4: Use Objective Criteria). 4. Set ground rules. In labor negotiations, the parties first agree to ground rules such as where, when, who, and how often the negotiation sessions will occur. Detailed ground rules are not needed in most everyday negotiation situations, but there are times when they help people come to agreement. Agreeing in advance on the location for discussions can give one side an advantage (see Tactic #3: Control the Setting), but in other situations, the critical ground rule will be about timing (see Tactic #6: Timing is Everything), forcing both sides to reach agreement faster. In negotiating with family members, friends, or neighbors, one well-advised ground rule is to stop the talks as soon as anyone raises his/her voice, curses, or makes a threatening comment.

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Tactic 1: Know Your BATNA At what point will you walk away from the negotiation? You improve your position in any negotiation if you can walk in already knowing your BATNA—your best alternative to a negotiated agreement. The BATNA is the outcome you prefer over what the other party has proposed; if you define it at the outset, you are less likely to agree on something during an emotionally charged discussion and regret it afterward.

Example 1 Harvey Huff bought a new 1956 Chevrolet from a local dealer. After forty years, he finally decided to sell the car he had loved and carefully maintained in original condition. Harvey did not need the money, but he intended to move three thousand miles away, to a condo in Arizona. The ad he placed in the local newspaper produced only one potential buyer: Patrick Knight. Harvey: Mr. Knight: Harvey: Mr. Knight: Harvey: Mr. Knight: Harvey: Mr. Knight: Harvey: Mr. Knight: Harvey:

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Well, now that you’ve checked it out, how do you like it? It’s in great condition, just as you described it. Any questions? Will you take less? No. It’s easily worth at least $20,000. That’s the price. $18,000, tops! No thanks. Okay. $20,000. I need it for a new restaurant. Restaurant? Yes. We cut off the top of the vehicle and people sit in it and get served their meals in our “oldies dream car!” Never mind, I’ll keep it. I haven’t maintained it for all these years just so you can destroy it.

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Conclusion Harvey’s best alternative—his BATNA—was simply to hold on to the car for the moment, and either move it with him to Arizona or find another classic car collector who might buy it (perhaps for less) and preserve it, as Harvey had for many years. In this case, his BATNA was not to hold out for more money, but rather what the buyer planned to do with the car.

Example 2 Shari and Jim Jaggers own a successful West Coast pottery company. The $56 million dollar business took them 30 years to grow, and it now employs 230 craftsmen. For the past two months, labor contract negotiations between the Jaggers and a local labor union representing the pottery’s craftsmen have stalled. The union is demanding wage and benefit increases, which the Jaggers believe will cause them to increase prices to the point where they will no longer be competitive with other West Coast firms. With only two weeks remaining before a threatened strike, the Jaggers decided to seek buyers for their land, inventory, and equipment. They learned that their assets would be easy to sell and were worth more than originally estimated. The Jaggers gave the union their “last, best, and final offer,” which was refused. They told the union that their age and the fact that they had no heirs to carry on the business was leading them to seriously consider selling out and permanently closing the doors. The union negotiators thought the Jaggers were bluffing. The owners, as a last resort, notified all the employees of their intentions. The union negotiators convinced the employees that this too, was a power play. The threatened strike became a reality, and the Jaggers decided once and for all to sell their business assets and invest the proceeds conservatively, providing them with a very good income for life.

Conclusion Selling their business was the Jaggers’ BATNA. When negotiations with the union became hopeless, selling became an attractive alternative to a strike or prolonged battle.

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Tactic 2: Know Your Opponent’s Real Objective Each party in a negotiation will know, at some point, what the other party’s desired outcome is. Just as important is the why. You have an advantage and are in a position to produce a better agreement if you understand what motivates your opponent and what “hidden” interests lie behind their position. A person who has to sell her home because her company is relocating her, for example, might not be willing to lower her asking price because she knows that her company has agreed to buy the house if she can’t sell it. This is a good thing to know, because if the company does not provide relocation benefits, she might have to take a lower offer just to be able to move. If you are the party making the offer on the house, it’s to your advantage to know what is behind a seller’s decision to put it on the market.

Example 1 Tom had always admired John’s 1861 Confederate rifle, and told John several times to let him know if he ever wanted to get rid of it. John assured Tom that this would never happen, so Tom was surprised when John called him out of the blue one day with a proposal. John: Tom: John: Tom:

Tom, you still interested in my rifle? Of course. Are you finally ready to sell it? Yes, I think so. Make me an offer. Gosh, I’ll have to think about that. How much are you thinking it’s worth? John: Well, I guess I couldn’t take less than $20,000. It is extremely rare—one of only 100 made with that bore and handle. Tom: $20,000? That’s more than I planned. What changed your mind about getting rid of it? It is still in perfect condition, right? John: Sure, sure, it’s still perfect. I’ve been thinking of getting rid of it for a while. Just running out of space, you know.

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Tom: Okay. Well, let me think about it and I’ll get back to you. (Tom investigated the “market” for a restored 1861 Confederate rifle by calling a few other collectors. One of them mentioned that someone who is negotiating with him to buy a restored Winchester rifle for $18,500 had an 1861 for sale. Was Tom interested? Tom declined, but thought this might explain John’s sudden interest in selling the rifle.) Tom: John, I’ve been thinking about your offer. I don’t think I can go higher than $18,000, but I could get the money to you right away. John: Well, if you could come up a little—say $18,500—we’d have a deal. Tom: Okay, let’s do it.

Conclusion Tom entered into the negotiations suspicious of John’s motives. Without some trust, parties to a negotiation are not likely to reach agreement. When Tom found out why John decided to sell his rifle, it made the negotiations easier. No longer worried about John’s motives, Tom now felt comfortable negotiating the price.

Example 2 Rick, the owner of a small manufacturing company, has begun negotiations to sell his firm to BigManu Company. He is two years away from retiring and does not want his business to fail before he does, fearing that this will put all of his employees out of work. Rick needs to remain president of the company for the next two years, but then he will be happy to retire. He doesn’t want BigManu to know this because he thinks it will hurt his negotiating position, so he is making it a condition of the sale that ALL current employees must be retained for a minimum of two years. The sale price for the company has not yet been agreed to, and now the two-year requirement has become a stumbling block in the negotiations. BigManu: Rick, we really want to buy your company, and we’re committed to keeping it open as a major division of our company. However, we

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cannot guarantee to you that ALL of your employees will be retained for two years. We just can’t make good operational decisions with our hands tied. Rick: These people are the best at what they do. Working as a division of your company, they will make you plenty of money and more than make up for any “operational” difficulties it might cause you. I just want them to have a real chance to show you how good they are. Without this commitment, I just can’t go through with this sale. BigManu: You know we want you to stay on and manage this division for us. You’ll be in place to participate in our employment decisions. Within the parameters of efficiency and effectiveness, you will have a say in how the employees are treated. Rick:

I built this business from the ground up, and I hired every one of these people. I need to give them some sense of comfort if this deal goes through.

BigManu: We just don’t see a way to give you what you want on this. Let’s talk later. (Between negotiating sessions, BigManu’s negotiating team concluded that they were in the dark as to why this two-year requirement was so important to Rick. In hopes of pushing the deal forward, they decided to put their price on the table and revisit the issue after a price was agreed upon. The price they gave Rick was actually more than he had expected, and he accepted it subject to agreement on the two-year employment guarantee clause.) BigManu: Okay, let’s talk about the job guarantee you wanted. We still can’t find a way to do it, and we think it’s an odd request anyway. What is it you’re afraid is going to happen? Rick:

Preparation

I am convinced that with a two-year time frame, my employees will prove to you that they are uniquely able to run this place. I just don’t want it to change after I’m gone.

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BigManu: We intend for you to stay and become a big part of our company. Surely you’ll be able to “protect” your people if they are as good as you say. This wouldn’t have anything to do with your own plans for the future, would it? Rick: Well, to tell you the truth, I’m hoping to retire in two years. I certainly want to do all I can until then to protect my people. BigManu: Why don’t we guarantee to you that you will stay for two years? That way, you’ll have a guaranteed “in” to protect your people, but we won’t be completely tied to operations as they are now. Rick: Well, that might work. Let me get back to you.

Conclusion By masking his real objective (giving himself two more years as president before retiring), Rich almost lost the deal. Once Rick realized that he no longer risked anything at the negotiating table by making his need known, he agreed to allow BigManu to accommodate him without limiting their ability to make business decisions.

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Tactic 3: Control the Setting There is a logical reason why professional negotiators setting ground rules agree to conduct the talks at a neutral site, such as a hotel conference room. Inexperienced negotiators fail to realize that the other side has an advantage if the meeting is held on their home turf: they are more comfortable; they have the information they need at their fingertips; they control the breaks and environmental factors, and so on. (Think of the showroom tactics used by car dealers.) Prepare for the negotiations by controlling the setting—to your advantage or to mutual advantage, but never to THEIR advantage!

Example 1 (Two ten-year-old girls are talking.) Bailey: Cybil:

Let’s take all our Beanie Babies to my house to trade! Okay. (thirty minutes later) Bailey: So, Cybil, I’ll give you my duck and frog for your whale and horse! Cybil: I already told you that I don’t really like that frog much! Jenny: (Bailey’s sister) What? Bailey, how can you trade the frog—he’s your best one! Dede: (Bailey’s other sister) Yeah, the frog is everybody’s favorite. Mother: Hush, girls. Make up your minds, and go play somewhere! Cybil: Well … Okay, it’s a deal. I like the frog, too.

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Conclusion Bailey, although only ten years old, knew that her sisters liked the frog best and that they would help convince Cybil of its “value” and help Bailey make the trade. That’s why she wanted to go to her house.

Example 2 Two five-person negotiating teams had been trying to work out a deal for over a month. The firm deadline was only four days away. Both sides desperately needed to settle a property dispute. The chief negotiator for Team A publicly challenged Team B to “negotiate non-stop, around the clock, until we have a settlement.” The chief negotiator for Team B agreed, as long as they met in the boardroom of Team B. Team A agreed to change the meeting place. About thirty-six hours later, Team A was whipped physically and emotionally. Team B, having set up beds, meals, and other conveniences in the adjoining room, was still going strong. After forty hours of negotiating, Team A agreed to a settlement almost identical to the one rejected days before. Team B had clearly used its home turf to gain a substantial advantage. When negotiations resumed in two months over another piece of property, not one member of Team A was chosen to return to the table. They had all been replaced after their decision to negotiate “around the clock” in Team B’s boardroom became known. They were blamed for accepting the same deal that had been rejected only days earlier.

Conclusion Team A did not realize the practical advantage they gave Team B when they agreed to negotiate in B’s boardroom. The physical and emotional demands of 24-hour, non-stop negotiations wore down the members of Team A, while members of Team B were able to stay fresh, in their own familiar setting.

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Tactic 4: Use Objective Criteria Use objective criteria to judge the quality of each side’s proposals—you will probably improve your chances of coming away satisfied. If you think that the other party knows more than you do, you are likely to resent them for it and hold out, rather than give them the “advantage.” This can hold up an agreement and cost you in the end. Prepare for the negotiations by having an outside authority measure or weigh in on each side’s position, based on objective criteria (think property appraisals in real estate).

Example 1 When Larry’s cousin offered to help Larry finish the renovation on his bathroom, Larry was thrilled. After all, Will is a licensed plumber, and he and Larry have always gotten along. Things turned sour, though, when Will presented Larry with his bill. Larry had expected to pay him for his time, but was shocked at the amount of the bill. It was twice as high as the estimates Larry received from other plumbers before they started the project. This uncomfortable negotiation followed: Larry: Will, about your bill. I was kind of surprised at how high it was. Will: Larry, I gave you my “family” rate. Believe me, I would have charged anyone else much more. Larry: But Will, I did get some estimates from plumbers, and they were much lower than this. Larry: Just make sure you’re comparing apples to apples. When you first told me about your project, I anticipated much less work. When we got into it, it became clear that all of those pipes had to be pulled and new ones put in. Larry: Well, these plumbers certainly acted like they understood the work when they gave me their estimates! Will: Tell you what. Let’s get the guys back in who gave you estimates, and show them the actual work that got done. If they tell us that they either

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disagree on the need for that work or that they would have done it for less, I’ll revise my bill to meet the lowest estimate you get. Larry: That sounds fair.

Conclusion When the other plumbers looked at the work, they had to agree that their early estimates were low. Had they actually prepared bids on the work, they said, they would have had to revise the figures. The estimates would have been higher than what cousin Will charged. Settling on the right objective criteria upon which to base a negotiation requires that both parties think through their options. Comparing the estimates to Will’s actual costs would have been counterproductive, because (as Will pointed out) it wasn’t an apples-to-apples comparison.

Example 2 After Stuart was appointed to the college’s Board of Trustees, he used his financial expertise to analyze the investments of the college’s endowment fund. He was disappointed in the performance of the fund, and decided to bring the matter up at a Board meeting. The college’s budget officer was understandably offended; while she wasn’t an expert, she had been investing the college’s endowment funds for many years, and no one had ever questioned her performance. The chairman of the Board suggested that Stuart and the budget officer meet to discuss the investment policies and practices as they relate to the endowment funds. Budget Officer: I don’t know what your problem is. I have been very diligent about making sure that the fund makes the most money it can without putting us at risk. I find your suggestion to the Board that I haven’t been doing my job right to be very insulting! Stuart: I’m sorry. I certainly didn’t mean to offend you. From a look at the portfolio, my first reaction was that some of the investments

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were stale. I don’t question that they were sound at one time, but some of these stocks have really lost their value. I find that a more aggressive investment strategy produces a better return. Budget Officer: Yes, but such a strategy also increases risk and costs more money to administer, considering commissions and all. As you know, the college is a private institution, and its resources are limited. We just can’t make up losses to the endowment fund without considerable impact on our annual budget. Stuart: Yes, there might be increased risk and some expenses for commissions, but I think they more than offset the gains. I have a suggestion. Why don’t we ask two investment advisors who have some alumni ties to the college to do a mock investment of the endowment fund for a month or two? We won’t tell them about each other and they won’t actually do any real trades, but we can ask them to plan and cost out each move. At the end of two months, if both of them demonstrate a similar strategy and produce better results after expenses, then you and I can talk about changing our investment strategy. Okay? Budget Officer: Okay, but I want to be involved in the discussions with them about what we’re asking. I don’t want you directing how they’re going to go. Stuart: No problem. Now, how can we identify the right parties?

Conclusion The two-month experiment did produce the results Stuart had anticipated, and the budget officer was comfortable that the risk and expense of such a strategy was small and worth the effort. In this situation, Stuart realized that the budget officer needed very-specific “criteria” (such as the actual experience of investing the school’s endowment fund) rather than relying on an investor’s experience, because she did not have the background in investments necessary to trust such advice.

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Tactic 5: List All Items to Be Negotiated Break down the issues to be worked out into separate items ahead of time, and ask the other party to add to the list. Once you both agree on the list of things to be negotiated, you should each put together a “package” of several items on the list and work out a win–win agreement for these things. This strategy can build trust in the negotiation process itself.

Example 1 Shari, a sixteen-year-old who lives with her parents and three younger sisters, has asked her mother for a $10/week increase in her allowance. Mother: That’s a large increase—and we just raised it last year! Shari: Well, I need more money for clothes and CDs, and for going out with my friends. Mother: But your allowance is based on what you earn in your weekly chores, not on what you want to spend. Shari: Well, what else can I do, besides washing the dishes every night and cleaning my room? Mother: You could cook dinners, baby-sit your sisters, cut the grass, wash the cars, clean the whole house—should I continue? Shari: Whoa! I want to stay out longer—past my curfew of 10:00—not work more! Mother: Well, if I give you an increase, your little sisters will want equal treatment. It will cost me more than $10—about $35 per week. Shari: I’m four years older than the next-oldest. You can’t treat me the same! Mother: Well—so we’re talking about several issues, not just an allowance increase! There is: (1) a $10 increase; (2) a later curfew; (3) more chores; and (4) different treatment from your sisters!

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Shari: Right! Mother: So … I suggest no allowance increase, but unlike your sisters, I’ll pay you $10 to babysit every Wednesday night, while your Dad and I go out. And if you clean the whole house on Saturday, you get to stay out an hour later that night. Shari: (pause) I like it!

Conclusion Shari’s mother helped negotiations along by listing all of the items being discussed. Then a “win-win” solution could be determined. Shari got the $10 she wanted and a later curfew, while the mother won a Saturday house-cleaning and a night out each week. An allowance increase, which the other children would have requested as well, was avoided.

Example 2 The union and management negotiating teams opened discussions with a list of 48 demands. The union’s chief negotiator, in the first session, opens by proposing the list of items. Management agrees, since all of their items were included as requested. Now it is time for each side to list their desired outcome for each item. The trading of items (where initial demands are discussed and agreed upon) begins. Union:

We will agree to your proposal on item #6 (the number of paid holidays) and item #14 (the new overtime hourly rate), if you agree to our proposals on item #3 (the paid vacation schedule), item #11 (the clothing allowance), and item #23 (the wellness program voucher). Management: (after calculating the total value of the five items during a break period) We agree to your package of five items. Now we have a package deal to propose …

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Conclusion In most labor negotiations, the two sides will at this point sign and date the list of proposed items, thus removing them from the discussion table. Then negotiations can resume on the remaining 43 items; other trade-offs are proposed and agreed to until only a few items remain.

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Tactic 6: Timing Is Everything The exact month, day, time of day, and general circumstances under which negotiations take place can substantially impact the outcome. The external pressures put on the parties involved (which might not be related to the issues under negotiation) can sometimes be used to advantage if you know about them. Prepare carefully, and do your homework. Timing is everything!

Example 1 Bob Hillard had been coveting a turquoise 1963 Chevrolet Impala Supersport convertible for several years. One day, as he left the supermarket, he saw an elderly man get in his dream car and drive away. Bob followed the man home, which turned out to be only a few blocks from his own house. As the man got out of his car, the following conversation occurred: Bob: Car owner: Bob: Car owner: Bob: Car owner: Bob:

Preparation

Hello, my name is Bob Hillard. I live a few blocks from here, on Briarwood Road. Hi! What can I do for you? I’ve admired your ‘63 Impala for years. Would you possibly be interested in selling it? No, I love this car—restored it myself. Not even for, say, $12,000? No. That’s a generous offer, but money doesn’t mean anything to me at this point in my life … Well, thanks. It was nice meeting you. (For the next three years, Bob made it a point about once a month to go out of his way and drive by the man’s house, just out of curiosity. One day, he noticed a FOR SALE sign in the yard. He stopped and knocked on the door.)

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Bob: Car owner:

Bob: Car owner: Bob: Car owner: Bob: Car owner:

Hello! I noticed your FOR SALE sign, and wondered if your ‘63 Impala might also be for sale … (obviously not remembering Bob) Well, as a matter of fact, I’m moving to California to live with my daughter. I can’t take it with me, so I guess I will be selling it. Can I see it? Sure. Follow me. (after a careful inspection) It’s a very nice car! I’ll give you $12,000, and I promise to take good care of it. Well, that’s a fair price. Can you come back on Monday at 10:00 a.m. to seal the agreement at the courthouse? Sure. Then it’s a deal? Yes. I’ll see you on Monday.

Conclusion While Bob did not achieve his goal during his first negotiation effort, the timing of his second effort was perfect and it enabled him to negotiate for the car of his dreams.

Example 2 It was Sunday, December 31st, and a twelve-member board of a large non-profit organization was holding a special meeting to decide whether or not to enter into a multi-million dollar capital project with a partner organization. The partner organization, for tax reasons, had issued a deadline of December 31st, beyond which the project would have to be abandoned. The board members had met twice before, and the vote was a 6-6 tie each time. A majority was needed to pass the partnership agreement; if a seventh vote could not be found by the pro-agreement side, the proposal would die at midnight. A third vote at 3:00 p.m. resulted in another 6-6

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deadlock. Both sides caucused: The leaders on each side met to negotiate a compromise. That effort failed. Then, during an hour break in the meeting, the leader of the pro-partnership side heard someone say that the meeting needed to end by 5:30 p.m., because one member of the anti-partnership side had to leave at that time to attend a church service he had not missed in 27 years. When the meeting resumed at 4:00 p.m., the pro-project leader told his members to filibuster until he gave a signal and called for another vote. At 5:30 p.m., as predicted, a member of the anti-project group left the room. A member of the pro-project group quickly called for a vote after the leader gave a signal. The measure passed 6–5 at 5:45 p.m., and the meeting was adjourned.

Conclusion The leader of the pro-project group recognized that they might have a unique timing advantage. He planned for it accordingly, and it worked. For weeks, the project had been stalled by 6–6 votes; in the end, timing was everything.

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Stage 2: Planning a Strategy

T

he next stage is critical: Choosing a strategy. Before you can do this, you must first evaluate your needs and those of your opponent, as well as their bargaining history and financial and political positions. Look at the personalities of each negotiator and see which side will be more vulnerable to pressure bargaining (Stage 5). Are there any outside people who might influence the process, such as a third-party negotiator, or someone’s colleague or spouse? Third parties such as other buyers or governmental agencies might have to approve the agreement before it becomes final. Be sure you are aware of this at the beginning, as it can substantially alter the negotiations between two primary parties, such as a buyer and a seller or a city and its union. In some cases, a third party can serve as a mediator (a legislative body, for example, might step in and help settle negotiations between a union and administration negotiators. Third parties sometimes have their own hidden agendas, such as actively trying to keep one of the two parties from winning a contract or influencing a colleague or spouse to accept an offer for personal reasons. Identify all outside influences and hidden agendas before you develop your strategy. After you have evaluated these factors, decide whether the negotiations should be continuous, or one-time-only. Some of the tactics listed in this book are only suitable for single-session negotiations, such as Tactic #19 (Make a First and Best Offer); Tactic #33 (Bluff); Tactic #43 (Nickel and Diming); and Tactic #48 (Walk Away). The overall strategy chosen does not limit the use of other tactics, but in practice it will likely influence the whole process. For example, if you want to begin in a friendly, cooperative manner, Tactic #12: Find Common Interests can be helpful. If you prefer to take a firm and direct approach, then Tactic #13: Set a Deadline or Tactic #11: Have an Expert Witness might be helpful. A neutral, uncaring approach (Tactic #9: Control Your Emotions; and Tactic #10: Make a Reciprocal Buy-Sell Offer) are also useful alternative strategies. A favorite strategy of some successful negotiators is to start with an extremely low or high offer (Tactic #7: Decide How “High” is High) in the hope that the other

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side is either caught off-guard or (in some rare cases) a negotiator will be able to achieve an unexpected fantastic settlement. For example, let’s say a homebuyer new to an area is shown a house that was owned by someone who had been transferred to another country. His teenage sons had “trashed” the house. The buyer loved the location, but the inside was a complete turnoff. Weeks later, the seller’s agent called the buyer about the property. The buyer said he wasn’t interested. The agent explained that the seller was desperate. “Please make any offer—they are motivated!” The buyer responded, half-serious, with “All right. I offer half the asking price.” The agent took the offer to the seller. The desperate owner agreed, and the buyer was able to completely renovate the house and still have a great deal. Another strategy often employed by parents with their children (and investigators with suspects) can be easily used when one side has two negotiators (see Tactic #8: Use the Good Guy/Bad Guy Routine). By assuming opposing roles, two people on the team will be more successful because they evoke different emotions from the other side. If there is a significant weakness in your position, you should consider disarming the other party by acknowledging the weakness at the start so that you can reduce the impact of the weakness if it is used by your opponent (see Tactic #14: Don’t Always Hide Your Weakness).

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Tactic 7: Decide How “High” Is High Your first demand in the negotiation process is the most important decision you will make, so think this through well ahead of time. You are not likely to get more than you request, so do not underestimate what you might be able to achieve. However, your request must not be so low that the other party concludes that you are not negotiating in good faith. Your demand should be high enough to give you room to compromise, but not so high as to end the negotiations before they begin. Be realistic, and then look at the demand from your opponent’s perspective. If you consider the demand ridiculous, it is likely that your opponent will, as well.

Example 1 Carol has been unhappy with the house she and her husband bought six years ago. She has had it on and off the market for the last five years, with no success. Each time, her real estate agent told her that they were probably not going to get a buyer because she is asking too much. Carol wants $160,000, and just refuses to reduce it. Finally, one buyer shows some interest. Buyer: We really like the house, but quite frankly, we think $160,000 is very high. After all, six years ago you bought it for $60,000. The market hasn’t gone up that much in six years. Carol: Maybe not, but the house has increased in value. First, we’ve put a considerable amount of money into a new air-conditioning system and in redecorating. We also think that the neighborhood has improved over the last few years. Buyer: The air conditioning might have increased the value of the house, but the redecorating is of little value. Anyone buying the house would want to change wall colors or add new carpets. And I don’t see a lot of difference in the neighborhood. It’s a good neighborhood, but certainly not exceptional in any way. Surely there’s some flexibility in your asking price. Carol: We really want to sell, but we simply can’t take less than $160,000.

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Buyer: What if we offered you $100,000? Carol: We really can’t take less than $160,000. Buyer: Good luck!!

Conclusion The buyer expected Carol to counter the $100,000 offer by coming down in price at least a little. When Carol refused to budge, the buyer took it as a signal that either Carol didn’t want to sell, or she has unreal expectations. In any event, Carol drove off a potential buyer by setting an asking price that was just too high.

Example 2 The law firm of Bits & Bites was a Sioux City institution, enjoying a statewide reputation for quality representation. Neither Edward Bits nor Edmund Bites, the founders of the firm, were still alive. The firm now had over twenty-five law partners who owned the firm and continued to benefit from the reputation and name recognition of Bits & Bites. A new law partnership from a nearby city contacted Bits & Bites and offered to “buy” the rights to the name to use in their law office in their city. The partners are interested in selling the name, but they have no idea what the value of their firm’s name might be in this nearby city. Inquiries to other law firms were not very helpful because in almost all of the instances, the transaction also included some degree of consolidation of the law firms involved—not just the use of the firm’s name. The other law firm was prepared to pay $100,000 immediately, and then $10,000 or 1% of profits (whichever is less) over the next ten years in order to use the name. Here’s how the initial negotiations went: Partners:

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Well, we are certainly interested in your request to “buy” our firm name to use in your city. We’re curious, though, as to how you think the name is going to benefit you.

50 Practical Negotiation Tactics

New law firm:

We are establishing a partnership of ten lawyers—the top two moneymaking attorneys in each of five local firms. In every instance, one of these two attorneys carries the surname of the firm they are leaving. So, it would be impossible to create a new name out of the names of our key partners. And even though you don’t have an office in our city, you have a very solid reputation there, because you are in the state capital and your firm has handled a lot of high-profile political cases.

Partners:

We should assume, then, that you anticipate to build a very profitable law firm, starting with the ten partners you describe.

New law firm:

Yes, we do. Using the Bits & Bites name can only enhance our profitability. And we, of course, expect to pay for that.

Partners:

Well, we want $500,000 initially, and then 10% of your profits each year for as long as you use the name. If at any time we feel that you have “harmed” our name, we reserve the right to withdraw our permission, but we get to keep all of the money we’ve received up to that point.

New law firm:

(surprised) Well, that is a very high number. We weren’t really thinking about that amount of money. I guess this is just not something we’ll be able to pursue.

Partners:

(concerned about loosing the opportunity) Wait, that’s just our initial figure. What number were you thinking about?

New law firm:

Well, I’m kind of embarrassed now, because we were not even close to that number. To offer it now would be an insult. Let’s just pretend this didn’t happen.

Partners:

We probably won’t be insulted. Give us some range.

New law firm:

I really don’t feel comfortable doing that now. Thanks so much for meeting with me.

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Conclusion Bits & Bites lost an opportunity here because their initial demand was so unrealistic with what the prospective firm thought the “naming rights” should cost. It immediately dropped the idea, rather than negotiate. Both parties were probably at a disadvantage, because there was no “objective” criteria available to help them set a reasonable price. Either side could have asked for too much. In this situation, Bits and Bites should have let the prospective firm make the first offer, since they had initiated the contact. The price they were willing to pay would have indicated what the naming rights were worth.

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Tactic 8: The Good Guy/Bad Guy Routine The “good guy/bad guy” routine is a useful one. One member of your team acts friendly to people on the other side (the good guy) in order to gain their trust and support, while another acts difficult, angry, threatening, etc. (bad guy) and implies that his or her side will hold firm on their demands. Your opponents will want to avoid confrontation and unpleasantness with the “bad guy” and are likely to be more willing to cooperate with you.

Example 1 Peggy:

So, Andy and Paula, you’re really moving! I hate to see you leave. I heard that you want to sell your riding mower. Andy and Paula: Yes, we won’t need it at the new condo. Peggy: So, what’s your price? Andy: $1,200. Half what it cost us new, only three years ago. Peggy: That’s fair, and I know how you take care of things, so I’ll take it. Paula: Go ahead and ride it home. And take the leaf-catcher attachment and the gas can. Andy: No, I want to keep those. I can use them. Peggy: I assumed they went with the mower, since they are sitting out in the driveway with it. Andy: I want them… Paula: Go ahead and take them, Peggy. Andy: No, not for $1,200! We should get $1,400 if the catcher and can are included. They cost about $300. Peggy: I’m hearing one thing from Paula and another from Andy. I don’t know what the deal is now. I’ll go home and you can call me if you two can reach an agreement.

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Conclusion Peggy thought she was getting the old “good guy/bad guy” routine, perhaps even unintentionally. She realized that it put her in an impossible negotiating position. She very wisely recognized the routine and forced Andy and Paula to give her a clear, firm offer if they decided to continue negotiations.

Example 2 Sandy (business owner): Miguel and Liz (representatives of a computer firm), we’re here to negotiate a new service agreement. For the past three years, we’ve been fairly happy with your responsiveness, the quality of the technicians’ work, and your training programs. Miguel: Well, Sandy, your account has taken too much time. You are located outside our primary service area, causing our reps to spend hours on the road. Liz: But we still want to renew your contract. Miguel: But not at this ridiculous rate. And we need to add a clause that holds your company responsible for machine damages. We estimated that it has cost us more than $50,000 in service calls last year alone because your damn people don’t take care of the equipment. And we want to change the 24-hour service response time to 48 hours. And cut the training hours from 55 to 20. Sandy: What? First of all, your rate of $3,000 per month is one of the highest in town. Miguel: I’ve figured $4,200 will be about right… Sandy: I can’t begin to pay that! Liz: Calm down, Sandy. Let’s talk.

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Miguel:

Sandy: Liz:

Sandy: Liz:

Miguel: Liz:

No, I’m going on to lunch. I’ll stop back about 2:00 p.m. I hope you can meet my terms, Sandy. If not, I’m afraid our relationship is over. Liz, these terms will put me out of business—I’m a small 20-person operation. Sandy, I want to keep you as a customer, but Miguel’s right. Our customer base has grown, and it’s not efficient enough anymore for us to handle smaller firms—especially those outside our region. What can I do? Let’s try to negotiate something reasonable before Miguel gets back. (Three hours later) I’m back. Any luck, you two? Good news, Miguel! We’ve worked out a deal I think you can live with. I’ll explain on the way back to the office.

Conclusion Miguel and Liz used the good guy/bad guy tactic in the classic form: Miguel scared and threatened their opponent, Sandy, with a position he knew was unreasonable. Then he left so Liz could convince Sandy that they needed to quietly reach an agreement she could “sell” to Miguel later. Sandy believed that she was able to avoid a terrible deal and negotiate a fairly good one, even though it was far above the previous contract.

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Tactic 9: Control Your Emotions Stay cool. A display of temper or frustration can indicate to your opponent that you are uncomfortable with your side’s negotiating position and they will assume that it is weak. This will put you at a distinct disadvantage from this point on, and might even harden your opponent into an unfavorable position (for you or for both of you). Be sure that the emotion you display is calculated and strategic: A strategic flare of temper at an “insulting” offer made by your opponent can buy you time because you can make an abrupt exit from the room without having to respond to it in any substantial way. Your opponent might conclude that they have made a serious misjudgment and want to make a conciliatory move to get you back to the bargaining table. Control your emotions and use them to your advantage!

Example 1 Mike prided himself on being an informed and educated consumer. He had, in fact, made some very good purchase decisions for his small business, such as deals on computer packages and phone services. So, when he discovered that the long-distance company serving his home phone was charging him four times the rate currently being marketed by that company, he was very unhappy. The fault was partly his because he did not stay on top of changes. He decided that the best approach was to act indignant when he spoke to the company representative. Here’s how the phone conversation went: Customer representative:

Over-the-Air Long Distance. How may I help you?

Mike:

Hello. I have a problem with my recent bill and my billing rate. It seems that the rate you are charging me on my home phone is $1.00 a minute, but I recently was sold a $.10 a minute rate at my office location. I noticed this, because we have had a sick relative out of town and we used long distance a lot this past month.

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I expected the bill to be higher than usual, but this was quite a shock. Customer representative:

Let me pull up your account, Mike. Well, I see that the rate you are being charged is the rate we offer for the type of service you have with us. It hasn’t been increased at any time.

Mike:

I realize that that might be the rate I started paying when I first took your service over eight years ago, and I also realize that if I had examined my bill closely, I would have known I was paying too much. But as a very good customer of yours, I would think you would have given me the best rate you offer new customers.

Customer representative:

The company might have had any number of different introductory rates and incentives for people to buy our service over the course of eight years. Had you brought this to our attention before, we certainly would have discussed your options.

Mike:

(beginning to sound irritated, although he wasn’t really angry) Are you suggesting that it was my responsibility to advise you when one of your “offers” was available to lower my rates? How would such information even come to my attention? More importantly, how would anyone who might only have residential service even know to ask? Well, of course it is not always possible to give existing customers some of the “offers” we have out. But I am able to offer you a $.10 per minute rate on your long-distance service, to begin now.

Customer representative:

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Mike:

I would imagine so. But I’m looking at a $500 longdistance bill, which should rightly be $50. I would hope that you would credit my account for this better rate for past service. I am, after all, a long-time customer of your company, and I should be treated with more respect!

Customer representative:

I’m sorry, but I can’t do that. I …

Mike:

(interrupting and in a stern, controlled voice) I need to talk to someone who can do it immediately. Is your supervisor there?

Customer representative:

I’m certain that he cannot adjust your account retroactively, either. The best we can do is fix the rate for the future.

Mike:

(with a much angrier tone) Madam, don’t think this is directed at you personally, but I am very angry with Over-the-Air Company, and I want to speak to someone in authority so I can terminate my service. If you can’t get me someone to talk to, there’s no reason for this conversation to continue. Wait—I’ll get my supervisor. We certainly don’t want to lose you as a customer.

Customer representative:

Conclusion The supervisor waived the long-distance charges for the $500 bill and adjusted Mike’s rate to $.10 per minute. In doing so, she kept Mike as a residential customer as well as a business customer. Mike’s willingness to show a measured “flare of temper” brought results. He was walking a thin line, however, between controlled, strategic anger and abusive behavior. The latter would not have produced the desired results.

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Example 2 The contract negotiations between the employees of a fireworks plant and its owner had been stalled for about three weeks over the issue of mandatory overtime. The most-senior employees want to have the right to refuse overtime and have those less-senior employees take the overtime. The owner was afraid that if the mostsenior employees routinely passed up the overtime and the overtime pay, they would become dissatisfied with their pay and want their base pay increased. The owner told the employees that he was worried that during the overtime shifts, lesssenior employees might be at greater risk of injury because they have to handle explosives. The employees’ negotiator finally decided to use “indignation” to break the stalemate. Owner:

I’m just not willing to let my best people refuse to work the extra shifts during our busy season. They will be putting the plant AND their fellow workers at risk by not being here. Employees’ negotiator: (with a stern voice) You have been saying this for three weeks, and it’s getting old. Just admit that what you really don’t want is for your best employees to realize how much of their pay is from the overtime they work, and that they should be asking for a fairer base wage for the work they do for you. Owner: Now, that’s just not fair, and it’s not what we’re even talking about. Working with fireworks is working with explosives, and you just can’t be too careful. On those overtime shifts, I’ve got to have the employees with the most experience to protect this place. Negotiator: (now beginning to get irate) You talk about the risk to your plant if the less-experienced workers are there on overtime shifts without the senior employees. Where are your managers? Where is the training necessary to make

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Owner:

Negotiator:

Owner:

Negotiator:

Owner:

sure these employees can protect themselves? Are you telling me that your employees are being put in dangerous conditions without adequate training and safeguards? No, not at all. But the fireworks business is a business that involves risk. No one who takes a job with us can be unaware of that. But we protect our people. Then you can’t have it both ways; either the employees are properly trained, or they’re not. Either they are properly protected, or they’re not. All I’m saying is that the most-senior employees have to be on the overtime shifts. That’s all. The safety of the plant demands it! (standing up to leave) This is just ridiculous. You are not addressing the real issue for you: money. Until you’re ready to talk about that, I’m not coming back. (He begins to walk out.) Now, now, don’t be so hasty. Sit down, sit down. What if we were to agree that the senior employees could refuse half of the overtime offered to them, but not all?

Conclusion The owner was on shaky ground with this one. After the employees’ negotiator threatened to walk out, he became more reasonable. The negotiator was also running a risk with his flare of temper. Had the owner let him leave, the negotiator would have had to find a way back into the negotiations without losing ground. The end result was that the most-senior employees did win the right to refuse overtime. In practice, though, most of them continued to take all the overtime they could get.

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Tactic 10: The Reciprocal Buy-Sell Offer What do you do when both sides seek to own something when there is only one and it can’t be divided equally? You have three options: 1) Both parties can “bid” to own it, with the highest bidder paying the amount to the other side in compensation for their loss. 2) They can flip a coin, with winner taking all. 3) They can agree to sell the object to a third party, and split the proceeds. A fourth option, called the “Reciprocal Buy-Sell Offer,” is the recommendation of Howard Raiffa, a well-known negotiations professor from Harvard University. The first party decides on a price for which he or she will either buy or sell the object to the second party. The second party then decides to either buy it at that price and pay the first party, or sell it to the first party and consequently receive the full amount from the first party—thus giving up the object. The following examples explain how it works:

Example 1 Susan and Mary Anne learned from their brother Mike that their recently departed parents’ estate included a somewhat valuable antique coffee grinder. Both sisters covet it. All the rest of the estate has been divided among the family. Mike, the executor of the estate, has decided to use the “reciprocal buy/sell offer” process to settle this last piece of the estate. Mike:

Mary Anne, you’re the oldest, so you set a price at which you agree to buy or sell the coffee grinder. I’ll give you 48 hours to decide the price. Then Susan, you will decide if you want to buy it for that price or receive that amount from Mary Anne (but lose the grinder). (two days later) Mary Anne: Well, Susan, my kids and I looked on eBay and everywhere else and found out that coffee grinders in perfect condition sell for about $500. However, since this one is in perfect shape and it was Mother’s, I’m willing to pay or let it go for $800.

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Susan: Mike:

Well, I choose to buy it. Here is my check for $800. I’ll pick it up tonight. Thanks for making this last step as easy as possible.

Conclusion The “reciprocal buy-sell offer” process caused both Mary Anne and Susan to research the market value of the coffee grinder, and then decide how much more “emotional value” it held. They thus were able to determine the highest price each was willing to pay for it or receive for it. Both sisters felt that the process enabled them to resolve the issue fairly.

Example 2 Howard Raiffa described a consulting situation in which he used the “reciprocal buy-sell offer” process in his book, Lectures on Negotiation Analysis. Two business partners had been working together for ten years to build a successful business, but each partner had grown to dislike the other and wanted to end the partnership (but continue to own the business without a partner). Both came to Raiffa to help negotiate a settlement. They accepted his suggestion to use the “reciprocal buy-sell strategy.” Howard:

Since in this case you are talking about a multi-million-dollar business, I suggest a slight modification to the process. You will both agree, in writing, to submit a sealed offer to buy/sell the business sixty days from today. After I open the bids, the lower bidder must agree to sell his half-interest to the higher bidder at a price that evenly splits the difference between the two bids. Agreed? Abe and Bobby: Sounds good! Let’s draft and sign a written agreement detailing the process, which will bind us to the outcome. (sixty days later)

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Howard:

Abe: Bobby:

Abe, your bid is $170 million; Bobby, your bid is $190 million. Abe, you agree to sell your half-interest to Bobby for $180 million, and to close within ninety days. Agreed. I will arrange to sell him my half-interest for $180 million, and we close by July 1st. And I will arrange financing to pay you $180 million to become sole owner.

Conclusion Both parties wanted to keep the business, but only if they could become the sole owner, and both men had carefully estimated the market value of half the business. Bobby was willing to pay more than Abe to remain sole owner. The reciprocal buy-sell tactic enabled one of them to achieve his goal of sole ownership and allowed the other to feel that he had an opportunity to purchase sole ownership. The partner who was out-bid in a fair process received a fair settlement: $10 million above what he was willing to pay.

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Tactic 11: Use an “Expert Witness” Establishing yourself as the expert on a certain topic in order to get what you want can be an effective tactic in the appropriate situation. It can also work in reverse: establishing the other person as the expert, and forcing him or her to control the discussion of the issue.

Example 1 A young couple were discussing a possible purchase of new furniture for their living room. They both expressed an interest in finding a couch that offered the most “interior” space. The wife was determined to buy the least-expensive brand rated excellent by consumer publications. They knew that sitting on dozens of couches in a single day would be confusing and would make it difficult to determine which one is the most comfortable and roomy. The couple decided to limit their selection to those rated “excellent,” but there were substantial differences in price—differences that the wife did not see as a problem. The husband found the dimensions of the couches in the brochures and Web sites, and created a spreadsheet to compare the five best-rated couches on their list. Based on seating capacity, the one he wanted (one of the least-expensive) was superior. When it came to comfort, the one that was the most expensive was superior. Looking at these statistics, he decided upon a strategy: First establish himself as the “dimension expert,” and then argue for the frugal alternative. When he showed his wife the detailed spreadsheet, she glanced at it and immediately deferred to his opinion. This strategy worked, and the husband felt like he saved them hundreds of dollars.

Conclusion The husband became the “expert” in this situation by doing the homework. He thus ended up having greater negotiating power. This approach can also be reversed: The wife in this situation is a banker, so when the husband wants them to make an

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investment decision or deal with an error in a bill, he argues that she is the expert, and should therefore handle the problem. He claims to lack the knowledge or insight to do the work—which he is then able to avoid!

Example 2 A negotiator can often gain a valuable advantage on issues such as medical insurance or labor contracts by doing the homework and becoming an “expert.” If you spend many hours learning about Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point of Service (POS) plans, you gain an edge when negotiating a new plan for your company. Many bargainers on the other side will not know their HMOs from their PPOs or their POSs and are likely to leave important details up to “the expert” to decide—just as the negotiator planned! After explaining in some detail what each of these three types of insurance plans are, a negotiator in a similar situation was able to get the other side to agree to include a plan that they had opposed only days before!

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Tactic 12: Find Common Interests You are more likely to come away with a satisfying outcome if you and the other party set the stage for agreement. This is done by deciding at the outset what you both have in common: You both want to reach an agreement; you both want to complete negotiations by a certain date; neither of you want to be embarrassed at the outcome; you want to reach an agreement that is favorable to an outside party; and so on. These positive things are part of your goals and objectives; point them out at the very beginning of negotiations and refer to them throughout the process, particularly when things seem to be at a standstill. Be clear on what you have in common at the start.

Example 1 When Russ and Bill got home from school, they saw that there was one piece of cake left over from their mom’s bridge party. They immediately began to fight over it. The two boys fought over the last piece of everything, and their mother was tired of it. Usually, she made them share whatever it was, and neither boy was very happy. This time, she decided to try something different. Mom:

Russ:

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I’ve decided that I’m not going to cut this piece of cake in half and give you both some. That simply rewards your continual squabbling. Unless you can convince me otherwise, the last piece of cake will get thrown away. The boys quickly huddled, and then asked their mom for a chance to negotiate with each other. When they boys returned, here’s what they said to her: I think I should be rewarded with the piece of cake, because I am so conscientious about my paper route. I also took out the garbage last week without being asked twice, I missed dessert the other night because I had to get to baseball practice, and I really love the banana/butternut/ sour cream frosting on this cake. If this was chocolate icing, like we usually have, I wouldn’t care so much.

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Bill:

Russ: Mother:

I think I should be rewarded because I cleared the table for Russ the other night when he had to get to baseball practice. I got an “A” on my book report that I really had to work hard on and when you got home from the store last week, I helped with the bags without being asked twice. The last cake we had was chocolate cake, and that’s not my favorite either. This cake is white cake, and I really like white cake. We realized that if we cut the cake lengthwise, I can have the part with the icing and Bill can have the part with the cake and filling. That sounds like a wonderful solution.

Conclusion Once the boys realized that they had a common interest—not letting the cake get thrown away—they were able to negotiate a solution both of them could live with.

Example 2 Marilyn’s Memorabilia Store was located along the main commercial street of a residential neighborhood. It was the type of shop the nearby residents preferred, and better than a fast-food restaurant with late-night hours and a drive-through window. Marilyn originally set her shop’s hours for 10:00 a.m. to 3:00 p.m. because there is no parking along the street during morning and evening rush hours, and her children were in school, so these hours worked out well. Now that her children are in college, she opens her shop at 7:30 a.m. and keeps it open longer so she can attract customers on their way to and from work. Customers have started to park in nearby apartment lots. One day, she got a visit from some of the residents. Residents: Marilyn, your new shop hours have caused your customers to park in our parking spaces. We really want you to go back to your original times, so that your customers can park on the street.

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Marilyn:

I’m sorry this is happening. But I really am increasing my sales by being open longer hours. I really need that extra income to stay in business. Can’t you post signs that tell non-residents not to park in the lots? Residents: The problem is that for the signs to be very effective, we have to be willing to tow the cars that violate it. It is very costly to have cars towed, and usually the car is gone by the time a tow truck shows up anyway. And we don’t think you want your customers’ cars towed. Do you? Marilyn: No, I don’t think that would be very good for business. Okay, let’s see what the options are. Between 7:30 a.m. and 9:00 a.m., and between 4:00 p.m. and 6:00 p.m., my customers can’t park on the street. The parking lot used for apartment residents is probably full from 7:30– 9.00 a.m. if residents haven’t left for work yet, and is probably empty in the afternoon if they haven’t gotten home yet. So, if I go ahead and open the shop at 7:30 a.m. and I close at 4:00 p.m., the off-street lots probably won’t be used by my customers. But in order to keep my new customers, I have to convince them to come before work, rather than after work. Do you think the residents of the apartment house would agree to let me advertise that my customers can park in their lots between 7:30 a.m. and 9:00 a.m.? Residents: We certainly want you to stay in business here. If you need to have the shop open more hours, then we’ll try and accommodate you. Most of our residents are gone by 8:00 a.m. or so anyway. We think they’ll be agreeable to the morning parking. Lets try it, and see if it works.

Conclusion Marilyn needed the extra parking, and the residents needed Marilyn’s shop. Identifying their shared interests caused the nearby residents and the customers to reach agreement. The shared parking arrangement did work out for Marilyn.

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Tactic 13: Set a Deadline Be sure you know well ahead of time what the deadline is for completion of negotiations. Deadlines can be imposed externally (such as the government’s deadline to get a tax break) or internally (set by one side, such as a deadline beyond which the union will strike or the date that an outside party has set to withdraw an offer that is in both your interests). Deadlines can also be set by both parties to a negotiation when they want to put some pressure on themselves to come to agreement as quickly as possible. A deadline can help you make the best possible agreement in the shortest amount of time, but it can also work against you if you set one that is unrealistic or you fail to plan for it adequately.

Example 1 Four adult children have gathered at the home of their recently deceased mother. Jenny: Everett: Sue: Everett: Mary: Sue: Everett: Mary: Jenny: Everett:

Okay, how should we go about dividing up the furniture and possessions? I can’t talk about it. Well, we can each take turns selecting things … Like each tool or dish. That will take days! I haven’t been in this house for twelve years. How can I do that? You all live in this town and you know this house. I don’t. Well, let’s all take a few hours to look around. A few hours? I can’t—I’ve got to leave shortly for the drive home. We just don’t have the time … We’ve got to do this—the house is sold! Okay, let’s all take two hours to look around and make a list of things we might want. Then we can sit down at this table at 3:00 p.m. and start choosing things, one at a time: the youngest, the first, etc. But at

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Sue: Mary: Jenny:

5:00 p.m., if we are not finished, we all leave. Sue, being the oldest, can sell or give away what is left. All of us must come back before Saturday to take what is ours—agreed? Okay. Agreed. Okay.

Conclusion The mutually agreed-to process and self-imposed deadline was a fair method of negotiating—a lot better than the four of them arguing over their mother’s possessions.

Example 2 Allan:

As the negotiating team for the city, we cannot agree to these development plans submitted by your company until we have reviewed how they will affect the historic buildings. David: I understand your concern, and I appreciate your interest in the historic structure. However, this is December 29; if I cannot carry a negotiated and signed deal to my board by noon on December 31, then the whole deal is lost because my company will lose $10 million in tax benefits under a federal law that expires on midnight, December 31. Allan: What! Why did you not tell us this before? David: We never thought you would take three months to get to this point. And besides, your attorneys know the tax laws. Allan: Let me confer with the city attorneys.

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Allan:

(One hour later.) I understand the December 31 deadline, and I don’t like it. Obviously, we can’t get the reports we wanted in 48 hours. Let’s continue.

Conclusion Knowing the external deadline gave David a significant negotiating edge. He waited to bring it up until it was clear that doing so would help him get the settlement his side desired.

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Tactic 14: Don’t Always Hide Your Weaknesses Be sure you know what your strengths and weaknesses are, as well as those of the other side. The objective is to negotiate from a position of strength, and this usually means having all the right information. Have a clear goal in mind AND all the information you need to make your points, but remember that both sides have weaknesses, as well as strengths. There will be times during a negotiation when you will want to catch your opponent off-guard, and one of the ways to do that is to reveal a weakness at the beginning, before your opponent tries to catch you off-guard. Control the use of the information, and you can neutralize its effect on the negotiations.

Example 1 Jason likes to play video games as soon as he gets home from school and do his homework later, while watching TV. His mother disapproves of his study habits, but his grades are good, so he was able to prevail upon her to let him continue. Unfortunately, first-quarter grades are coming out at the end of the week, and Jason knows he is getting a D in Spanish. He knows that a D will mean that he will have to change the way he studies. He decided to preempt the discussion in order to make the best deal. Jason: Mom, we need to talk. Now, don’t get mad, but I have a problem in my Spanish class. Mom: What’s that? Jason: A few weeks ago I lost my workbook, and I missed some assignments. Mom: I gave you money to buy a workbook a few weeks ago. Did you buy it? Jason: Yes, but that was actually a different workbook. We had one at the beginning of the semester that we were using pretty often. One day mine disappeared. I bought the second one, and we used it a couple of times. Then the teacher went back to the first one. I’ll need to buy it again. Mom: All right, I’ll give you money for it. But don’t lose it again.

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Jason: Another thing. Since I missed some assignments, I’m getting a D in Spanish for the first quarter—but it’s not because I’m studying in front of the TV. It’s because I didn’t have the book. The work I did turn in was fine, so there’s no reason to think I need to change my study habits. Mom: Well, I’m sorry, but I think you do need to change your study habits. I don’t think you’re taking your schoolwork seriously enough. Jason: Spanish is just one class, and the D is directly related to my losing the book. All of my other classes are A, B, or borderline B- (maybe C+). And those are hard classes—Algebra, Environmental Science, English. Obviously, my study habits are okay. And I know I have to be better about getting in all of my assignments. I think you need to give me the rest of the semester before making me change the way I do my schoolwork. If I don’t pull the D up to a C or better, then I’ll agree to make changes. Mom: Well, all right. I’ll give you more time. But that Spanish grade needs to come up to a B!! Jason: Okay, I think I can do that. Thanks, Mom.

Conclusion All of Jason’s grades did improve over the next quarter. Although his Spanish grade was only a C+, he was able to continue to study the way he wanted to. Jason’s decision to warn his Mom ahead of time rather than have her see the D on his report card gave him an advantage in the negotiations about study time. His explanation made sense, and since he offered her the information up front, she trusted it more.

Example 2 Jane once owned a piece of property she wanted very much to sell. The location was ideal for a convenience store or a fast-food restaurant. Pizza Boy was interested and had even made inquiries about the property. Its owners found out that at least three other buyers had been in contact with Jane, but all three deals

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had fallen through. The Pizza Boy people figured that Jane’s asking price must be too high or that she is unwilling to negotiate. The real problem, however, was that Jane’s neighbor had contacted each of the previous potential buyers and complained about their plans to use the property. The neighbor’s attitude suggested that there would be major resistance in the neighborhood if Pizza Boy tried to put in a commercial establishment. This is how the negotiations went: Jane:

Pizza Boy, I’m very happy you’re interested in my property. I’ve got to warn you—you might hear that there is neighborhood resistance to your putting in a pizza restaurant. Actually, it’s only the neighbor to the right of the property who has a problem. When she contacts you, though, she will want you to think it’s the whole neighborhood. Pizza Boy: We’ve checked the property out, and it’s zoned for commercial use. What are her grounds for complaining? Jane: She doesn’t have any, really. But unlike your company, the other interested buyers already have businesses in the neighborhood. They decided not to fight a disgruntled neighbor. Pizza Boy: Well, we’re not interested in neighborhood fights, either. Jane: Oh, I know. I think you’ll find that this is only one person, however. You are a big enough corporation to withstand her objections, I’m sure. Pizza Boy: Well, let’s assume that you are right. What are you asking for the property?

Conclusion Jane told them her asking price, which was way below the price they were actually willing to pay. A tentative deal was signed. When the neighbor heard about the new buyer, she started her campaign to keep them from closing the deal. Pizza Boy was prepared for her call, and was able to politely ignore her. Jane’s up-front disclosure of a potential problem allowed Pizza Boy to weigh the negatives with the positives. Furthermore, since they were well aware of the negatives, there were no unpleasant surprises to stop the deal.

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Stage 3: Exchanging Initial Offers

M

any offers and counteroffers are made during a typical negotiation—sometimes even hundreds. None is as important as the first one. The initial offer sets the tone of the negotiations and reveals something about the strategy of each side. Many negotiators make their initial offer the highest acceptable offer (Tactic #19: Make a First and Best Offer). The negotiator firmly states that it is their best offer in an attempt to gain a nice, quick agreement. Another common strategy is to start with the status quo, such as proposing to continue at the current rate or price. This is a practical starting point that will not anger the other side (and might even be expected). Perhaps the worst-case scenario with initial offers is when a negotiator has his or her initial offer immediately accepted and ends up feeling that he or she could have negotiated a better settlement if the initial offer had been lower or higher—the so-called winner’s curse. Experienced negotiators often view negotiations as a process in which the goals of one party are in direct conflict with the goals of the other party. “Distributive” bargaining (“win-lose” or “zero sum”) is used, for example, in negotiating a labor agreement or the price of goods or services: The monetary gain realized by one party is also the monetary loss of the other party. The initial offers of both parties are usually set reasonably above or below what each believes to be the settlement range, as illustrated in the following figure:

$21,000 22

Buyer

Target Point ($24,500)

Resistance Point ($22,750)

Seller

Initial Offer ($21,000)

23

Target Point ($23,000)

24

25

26

27

Initial Offer $28,000

Settlement Range ($22,750–$25,500) Resistance Point ($25,500)

Fig. 2: Distributive Bargaining Process. Adapted from Labor Relations and Collective Bargaining, by Michael R. Carrell and Christina Heavrin. (2004), 190–192.

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In this example, each initial offer ($21,000 and $28,000) is reasonable, yet is positioned well above or below what the party believes to be the opponent’s resistance point (thus avoiding the so-called winner’s curse). After initial offers are exchanged, the process quickly narrows to the range between the initial offers; these points have set the outer limits. Resistance points are the maximum or minimum beyond which a negotiator is likely to consider an offer unacceptable (and possibly walk out). A target point is the desired settlement value a party has set as a goal when negotiations begin; usually, the other side does not agree to this value). In the example, if the buyer’s initial offer was $25,000, the seller would immediately accept it because it is greater than the target point and the buyer would suffer a winner’s curse. The settlement range is the distance between the resistance points, and is the range in which most negotiations actually occur. When the two parties agree to a price within the range, it is termed the settlement point – not the “right price” or “fair price,” but the settlement price. You can use a tactic in making your initial offer that will give you an advantage: When multiple items or issues are on the table, include others that are actually of no value to you in your initial offer (Tactic #16: Use Throwaway Items) to hide the true items of interest and show that you are willing to give in on some items. The most common method of negotiating more than one issue or item is to combine two or more in a deal that gives each side something (Tactic #17: Package Items), thus producing a true “win-win” negotiation. Experienced negotiators will begin the negotiation of several items by quickly proposing such a package, thus starting out on a positive note. See Tactic #18: Agree on Something As Soon As You Can. Two extremely helpful tactics to be used immediately after initial offers are made are Tactic #15: Caucus and Tactic #20: Posturing. Both of these tactics give experienced negotiators an edge when they face novice negotiators who are more likely to rush the process and expose their position.

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Tactic 15: Caucus If you are part of a negotiating team, make use of the opportunity to call for a caucus. A caucus is when a negotiating team calls for a break and leaves the negotiating table to confer in private. There are many ways to use this strategy. If negotiations seem stalled, call a caucus so both sides can brainstorm new solutions to keep the negotiations going, without revealing their ideas to the other side. If the negotiations have suddenly gone in an unanticipated direction, it gives the parties an opportunity to reassess where they are and determine if everyone involved agrees that they should be heading in this direction. If the negotiations are heated, a caucus can be used as a break to calm the situation down. If the team is feeling pressure to concede on certain items, calling for a caucus gives you a chance to get your team to recommit to a particular course of action. A caucus is certainly called for if individual members of the team become agitated or express frustration with the progress of the negotiations, or if a member takes on a role in the negotiations that has not been assigned to them. A caucus gives you an opportunity to work out problems with your own team in private. To do so in front of your opponent would obviously undermine your team’s position in the negotiations.

Example 1 Shelly’s “Sweet Sixteen” party was coming up, so her parents sat down with their daughter to discuss the details. Her mom and dad had already talked about it privately, and presumably had an agreement. Unfortunately, the negotiations got out of hand when Shelly’s dad forgot what had been decided. Mom:

We’re planning on having your party here on Saturday night, Shelly. You can invite up to 20 of your friends. We’ll just have chips and soda. We don’t want it to be a late evening, because it might disturb the neighbors, so we’ll have the party from 7:00 p.m.–10:00 p.m. Shelly: Twenty friends? You’re kidding! I’ve just started on my list, and I already have 25 names. And that’s just my friends from school! I haven’t started

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Dad: Mom:

Dad: Shelly: Mom: Shelly: Mom: Shelly: Dad: Mom: Dad: Shelly: Dad: Mom:

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on the friends I’ve made over the summer at the pool. And they can’t go home at 10:00 p.m.—that’s so “baby.” They would never expect a party to end before midnight. I think we can handle a few more kids—how about 35? And midnight sounds okay. (with some irritation) I’m not sure. That sounds like too many for here at the house. Your dad and I already talked about this and agreed that 20 guests would be the limit. And midnight is definitely too late. Actually, we could rent the VFW hall, and then the number of kids won’t matter. (excited) That would be so cool, Dad. I could invite everyone!! Hold on! I thought we agreed that this was to be a simple party. Mom! This is my “Sweet Sixteen” party. It’s special!!! Well, okay. I guess the VFW will work. We could play records and you guys could dance. We’ll get a band—everyone does. In fact, Jerry from down the street is in a really good band that all of the crowd likes. That would be great! It would keep everyone entertained. (shocked) Jerry’s band from down the street? They’re a punk rock band! Their music is totally inappropriate for sixteen year-olds. Oh, I think the band would be fine. I’m sure we can ask them to tone it down a little. And can we bring in pizza? Or maybe one of those “mile-long” hero sandwiches? I like those—let’s do the hero sandwiches. Time out! Dad, we need to talk, alone. Shelly, we’ll call you when we’re ready. (During the caucus, Shelly’s parents reviewed their first planning discussion and went over what Shelly’s mom thought they had already

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Mom: Shelly: Mom: Shelly: Mom: Shelly: Dad: Shelly: Mom: Shelly:

decided. When they called Shelly back in, her mom presented the revised proposal.) Okay, we’re going to rent the VFW hall, and you can invite more friends. But you are limited to 40, and we will need to approve the list. All right. But we can have the band, can’t we? No band, but your dad and I agree on getting a DJ to play. That way, we will be better able to chaperone. A DJ? I guess that’s okay. And we’re serving chips and sodas, but we’ll schedule the party for 8:00 p.m. to 11:00 p.m. Dad, midnight, please!! 11:00 p.m. is for little kids!! No, sorry. Your mom and I agree—11:00 p.m. Okay, but no Sweet Sixteen birthday party decorations. That’s so lame. Agreed. Does that mean no presents, too? No way!! I want presents!!

Conclusion In spite of their prior planning, this mom-and-dad negotiating team became unglued during the negotiations, causing them to lose control and make compromises they hadn’t intended to make. Mom’s call for a caucus gave them a chance to regroup and re-state their original objective, which was to make sure Shelly’s Sweet Sixteen party was a fun and safe evening, and not a huge production.

Example 2 The contract negotiations between the company and the union had been going on for days. The item currently on the table was the company’s offer to give each

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individual member of the bargaining unit the option of being in the health insurance plan offered in the contract or receiving the same amount of money the company pays for health coverage as a tuition reimbursement benefit for the employee or any member of his or her immediate family. The union’s lead negotiator misunderstood the proposal, and thought he was being asked to choose between a health insurance plan and a tuition benefit plan for all members. The company’s negotiator didn’t recognize the misunderstanding, and the following conversation occurred. Union: You’re offering a choice between health insurance and tuition payments? What kind of a deal is this? Company: Hey, it’s a good proposal. A lot of employees have spouses who can get health insurance coverage through their work. The tuition benefits will encourage the workers to be prepared for new job opportunities. With the cost of college educations so high, many will want to use it for their children’s education. Union: Why are you so concerned about new job opportunities? Are you holding out on us? Company: No, I’m just saying that tuition benefits are sometimes a good substitute for health insurance. Union: (angrily) I’m not presenting this proposal to my people. Tuition in place of health insurances? They’ll think I’ve lost my mind. What is this, some attempt to undermine me with my members? Company: I don’t know what you’re so worked up about—we’re willing to spend the same amount of money!! Union negotiator #2: Can we take a break? Union: We don’t need a break—we’re not discussing this stupid proposal. Union negotiator #2: Please—just a moment outside.

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Union:

Union:

Company:

Okay, we’ll be back in 5 minutes. (After Negotiator #2 explained that the choice of tuition or health insurance benefits would be an individual choice for each unit member and not a change in the contract for everyone, the parties returned to the room.) I’m sorry. I didn’t understand that your proposal was to allow each individual member to choose between the health coverage or the tuition benefit. I thought that the contract would cover one or the other for everyone. I think that what you’re proposing is a really good idea. Now, let’s move on. Good, and I apologize for explaining it poorly.

Conclusion Negotiator #2’s timely call for a caucus so she could explain the miscommunication in private saved the session. Negotiator #1 regained his footing, and the parties were able to complete their negotiations.

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Tactic 16: Use Throwaway Items Identify ahead of time what you place a high value on and what you are willing to give up easily—your “throwaways.” Throwaway items are those things that hold little or no value to you. However, you don’t want your opponent to know what these things are, so be sure you present them in a way that suggests importance. Here’s how it works: Party A exchanges the item for something of true value, not revealing that the item exchanged is a “throwaway.” Party B thinks that A has sacrificed one important objective to gain another, but in reality, A has gained something of true value and given up nothing he values in return. It is a useful tactic in any negotiations, but the key to making it work is to include the throwaways in an initial list of demands OR add it in at a strategic time.

Example 1 The buyer, Mr. Hobbs, quickly checked the dealer’s inventory of sport utility vehicles in stock, and noticed that none of the vehicles have a green exterior. He doesn’t really care about the color of the new vehicle, but he makes a mental note to use color as a “throwaway” item. At a point late in the negotiations, when the two sides are only a few dollars apart, this conversation takes place: Hobbs: Yes, it’s a great car and a fair deal, but … Salesman: But what? Hobbs: Well, according to my figures, you are making $200 profit over the true dealer’s cost, according to the Consumer Reports listing of the cost of the vehicle. Salesman: Well, we’ve got expenses and we need to make some profit. Hobbs: Yes, I know. But for this price, I can go to another dealer and get a green exterior—the color I like best. Salesman: Let me talk to my manager. I’ll go get him. (Salesman returns with manager)

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Manager: Hobbs:

Manager: Hobbs: Manager: Hobbs: Manager:

We are offering you a great deal. Why didn’t you mention the color before? I didn’t expect to actually buy a new car today (note: not the truth), but you’ve made me a fair offer and you have been pleasant to negotiate with … Then why not buy the red one you drove—the one we based the figures on? I keep cars 8–10 years, so I might as well get the color I want! What if we offer you the red one for $100 less? Is the color worth $100? I - - - - no it’s not. I’ll take the red one for $100 less. Then we have a deal.

Conclusion Mr. Hobbs successfully chose color as a throwaway item. At the very end of the negotiations, he brought it up and convinced the salesman and manager that it was an important item to him—possibly even a deal-breaker. The manager was convinced enough to sacrifice a final $100 for the throwaway.

Example 2 The office supervisor told the three internal sales representatives (Jenny, Miguel, and Carolyn) to develop a mutually acceptable (to the three of them) holiday schedule in which at least one person will cover the office on each of nine “slow” days. Employees will be paid time-and-a half for each of these days, and seniority will be used to determine who gets to choose the first day. All three employees must agree to the schedule. The three are sitting at a lunch table to discuss the schedule. The days in question are:

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November 25 (the day after Thanksgiving) December 23, 24, 26, 27, 30, 31 January 1, 2 In the first round of negotiation, each made a first choice of days they will work. A second and third round produced the following allocation: Jenny: December 23, December 27, December 31 Miguel: November 25, December 26, January 1 Carolyn: December 24, December 30, January 2 None of the three are totally happy with the results. They have decided to start over. Carolyn has decided to use as a “throwaway” the number of days she will work (previously, it was assumed that each would work three) in order to have December 24 and 26 off to be at home with her children. She would actually prefer to work the extra days and get paid time-and-a half, but that is a secondary consideration. She proposes to work five days, if they let her choose the two days she will be off and the five days she will work. This would allow Jenny and Miguel to each work only two days. They agree, and each chooses their days to work: Carolyn: December 27, 30, 31; January 1, 2 Jenny: December 23, 26 Miguel: November 25, December 24

Conclusion Carolyn has achieved her objective: She will be off December 24 and 26. She got what she wanted by giving up something she did not value: the two other days. Jenny and Miguel feel that they received something of value from Carolyn: She must work two more days than they must work, in exchange for giving up earlier choices due to seniority. They all agreed to their schedules.

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Tactic 17: Package Items In a negotiation where there are multiple issues or items to be negotiated, it is often helpful to package the items in distinct groups and then deal with each package separately. For example, one might package all of the financial issues in one group and negotiate on that package as one issue, realizing that the total cost of a deal might make or break the agreement. The process of grouping items can be an educational exercise because the response to one party’s suggested packaging of items might reveal how the other party views the various items on the table. A reluctance to include one particular financial item with other financial issues, for example, can indicate that something you think is minor is really a major concern to your opponent.

Example 1 When their mother died at age 82, Anne and her sisters, Autumn and Angela, were faced with the task of selling the house and disposing of their mom’s personal belongings. Their mother’s will was very clear: the three daughters were to all have an equal share of her estate. The estate’s assets included a checking and savings account totaling $450,000; 300 shares of stock in a pharmaceutical company; a house valued at $250,000 with no mortgage on it; and a collection of antique furniture. In addition, their mom left specific pieces of jewelry and art in the will to each of the girls. The house was closed up at the time of their mother’s death because she had been in a nursing facility for a couple of months. When the girls decided it was time to talk about the estate, they met at the house. Anne:

As I see it, we need to sell the house, the antiques, and the stock and distribute the proceeds, along with the cash, three ways. Autumn: I don’t have any objection to selling the stock and distributing the proceeds and the cash three ways, but I’d like to talk about the house and the furniture. The house and much of the furniture has been in the

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family for years. Mother was born here and grew up here. I’d like it all to stay in the family. Angela: Now’s not a good time to sell either the stock or the house and antiques. It’s a buyer’s market now, and if we wait a couple of years, we’d get a lot more for them. In fact, I’d like to talk about the art works Mom left each of us. I’d really be interested in talking a trade for some of them. Anne: I’m not sure I’m comfortable talking about trading the jewelry and art Mom left to each of us. There was a reason why she gave us what she did, don’t you think? Angela: Maybe, but the operative word is “give.” She gave those things to us, and now that we have them, we’re really free to do with them what we want. Autumn: I think its awfully soon to be making these kinds of decisions. What would you think about agreeing today to distribute the cash and stock three ways, and letting everything else wait for another discussion. If Angela wants to hold on to her stock, she’s free to do so. If we want, we can sell ours. Anne: But that means we have to continue to take care of the house and its contents. With no one living here, it’s a magnet for vandals. Angela: I live close by, so I will be able to keep tabs on it. Frankly, there’s a lot of work that needs to be done to get it ready to sell or to make it livable for one of us. Why don’t we leave some of the cash in the bank, and use it to fix the house up? Then when we make a decision, we will have a more valuable asset. Autumn: Sounds good to me. Anne: Okay. So we agree: We’ll leave $30,000 in the bank and distribute the remainder three ways. We’ll split the stock three ways. And we’ll fix the house up. Soon, we’ll discuss again what happens to the house and the antiques. Angela: And we can talk about the art and jewelry?

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Autumn: I can agree not to do anything with the jewelry and art Mom left me before we talk, but I’m making no commitment to trade. Anne: Same with me. Angela: That’s fine.

Conclusion Autumn’s suggestion to package the money and stock because they can be easily divided by three made agreement on those items possible. The negotiations on the other items—the house, the antiques, the jewelry, and the art works—will be more difficult. Waiting to make decisions on those items until some time has passed gives the women an opportunity to look at a number of options.

Example 2 The attorneys and staff of the local Legal Aid Society formed a union and were about to negotiate their first contract with the executive director. The following tasks needed to be a accomplished: establishing basic pay schedules; deciding whether there would be annual wage increases as well as merit increases; deciding to base the increases on a percentage or equally distribute the funds for increases among the professional and clerical staff; and establishing a work schedule to accommodate evening and weekend clients. Several issues also needed to be addressed: the ability of employees to move up through the organization; tuition benefits; health benefits, including benefits for partners in non-traditional relationships; what kind of paid leaves there will be (personal, vacation, sick, funeral, etc.); and the assignment of the limited number of parking spaces. Employees:

We’ve got a lot of items to cover. May I suggest that we divide the items into three areas, and deal with one area at a time? The first: Wage issues (pay schedules and the annual and merit raise issues). The second: working conditions (work schedules and promotional opportunities). The third: Ben-

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efits (health insurance, tuition benefits, paid leave times, and the parking spaces). Executive Director: I think it’s a good idea to group items together, but I’d change your list. Wages should not include merit pay raises, because they’re really an incentive for better performance. I would include that under the Working Conditions category. And paid leave clearly belongs with Wage issues and should be discussed with the pay schedules. Employees: I’m surprised that you would take merit increases out of a general discussion of wages. Executive Director: Well, to be honest with you, we are an agency supported generally by public funding, so there’s not going to be a lot of discussion on what our pay schedules and annual increases can be. Also, the paid leave categories are pretty clearly defined. There is more flexibility to use non-public money sources to reward employees who will cover night or weekend hours or who qualify for merit increases. So I’d like to see us get through the wage issues quickly and then move on. Employees: Okay, that makes sense. I think it also makes sense to include tuition benefits in the Working Conditions category, as well. That’s a program that can have a lot to do with how employees are able to increase their worth to the organization. Executive Director: Sounds like a good agenda. Let’s get started.

Conclusion The executive director’s request to move merit raises out of the Wage category and move paid leave into that category because there is little flexibility to finance those areas allowed the parties to resolve the wage issue first. Later negotiations were difficult, but the parties were able to come to agreement because the wage issue had been resolved.

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Tactic 18: Agree on Something As Soon As You Can Negotiations are more successful if both sides can agree on something—anything—almost immediately. An initial agreement, no matter how insignificant, sets the stage for mutual respect and communication. It indicates to your opponent that you are a reasonable negotiator, and that you are entering into the negotiations with the intent to reach agreement. Consider starting things off by presenting your opponent with a proposal you feel confident can be agreed upon without argument. You can also make an effort to agree on something your opponent offers early in the negotiations, without suggesting any changes or modifications.

Example 1 Tim and Kathy, after a brief marriage, are divorcing. They have no children, and both have good jobs. Kathy was asked by her employer to relocate to another city, and she agreed. The couple hoped to do the divorce without involving lawyers in order to save money. They were in the middle of buying a house, and they were making payments on school loans (for his undergraduate degree and her undergraduate and graduate degree) and on two cars. They had also furnished their house on credit. Their “property division” was mostly about dividing their debts, rather than disposing of assets. The discussion might become very heated, because Tim felt that Kathy had taken advantage of him during the marriage. They met and married in college. Tim began working right after graduation. Kathy borrowed more money to go to graduate school full-time. Kathy’s first job paid more than Tim’s because she had a graduate degree. It was her idea to buy the house and go into debt to furnish it. Now, with her promotion sending her out of town, Tim worried that he would be stuck with all of the debt, and might not even be able to keep the house. Tim:

You might be leaving town, but don’t think you’re going to stick me with all of the mortgage and credit-card payments. You signed those papers, too.

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Kathy: Hey, hold on. I don’t intend to “stick” you with anything. The first thing I’d like to talk about is what we are going to do about the cars. When we bought them two years ago, as you remember, we decided to each pick out our “dream car” and that we would not overrule the other’s choice, as long as the cost was approximately the same. I got my convertible, and you got your sports car. The monthly payments are about the same, even though the convertible is being paid for through a 48-month loan and the sports car through a 36-month loan. I say we agree to transfer the convertible loan to me and you take over the loan on the sports car. Tim: Well, yes, I think that makes sense. Okay. Kathy: I suppose we should look at the school loans next. If both of us had been working the year I went to graduate school, we would have paid down our school loans more. Frankly, I think it only fair that I take over repayment of all the school loans. Tim: Okay. I can hardly argue with that. Kathy: Now, about the house and furnishings. What do you want to do about them?

Conclusion Having agreed to two items very quickly, Kathy and Tim were able to agree that Tim would take over paying for the house and furnishings and Kathy would get 50% of the equity accrued by the time of the divorce. They also agreed that Tim wouldn’t have to pay her that amount for five years, and he could pay it in annual installments over a five-year period.

Example 2 ABC Company, a wholesale art dealer, and XYZ Co., an art gallery, entered into a contract through which ABC sold to XYZ twelve works of art by 19th century American painters of modest talent for a post–July 4th sale. ABC usually uses UPS

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to ship artwork, but XYZ asked specifically that a little-known company specializing in shipping art known as WeCanShipArt be the shipper. The artworks filled four boxes, and arrived on time and apparently in good condition. They arrived right before the holiday weekend began. Unfortunately, XYZ’s manager failed to open the boxes or remove the artworks. Holiday weekend storms caused the electricity to go off for different periods in different parts of the city. The other times this happened, water from the gallery’s air conditioning unit pooled on some of the surfaces of the warehouse area. There was no indication that the gallery’s electricity had gone out over the weekend, and the boxes showed no external damage. However, when the boxes were opened on Monday, it was obvious that the art in one of the boxes had suffered considerable water damage. XYZ contacted ABC immediately, and put the company on notice that it was not going to accept the order because the planned sale needed a dozen works of art to make it profitable. ABC’s position was that the artwork was fine when it left their location, and that XYZ needed to either go to the shipping company or its own employees for compensation for the damage. ABC refused to pay WeCanShipArt until it received payment from XYZ. WeCanShipArt claimed that the boxes were not damaged in shipment—the artwork was already water damaged, or else the box was damaged in XYZ’s warehouse. XYZ decided to cancel the promotional sale that was to start on Wednesday, and began preparing to return all of the artwork to ABC. The three parties agreed to hold a conference call late Monday afternoon to try and resolve the dispute. ABC:

XYZ: ABC:

Before we begin, let me make XYZ an offer: We will deliver three additional artworks to you by the end of the day tomorrow so you can conduct your promotional sale as advertised. We’ll expect you to pay for the 12 works that will be in your show, and we will continue to discuss who is liable for the three water-damaged works. You can get the three new artworks here so that we can hold the sale as scheduled? Yes, but only if you let us ship it UPS.

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XYZ: Agreed. WeCanShipArt: Wait a minute. You can’t just ignore us. The artwork was not damaged while in our control, and if word gets out that you think it was, we’re ruined. We can guarantee that we will deliver the new order in perfect condition by 5:00 p.m. tomorrow and we’ll wait for payment on both shipments until we resolve how the artworks were damaged. If we don’t make the deadline, regardless of where the original three artworks were damaged, we’ll take responsibility for all of the consequences: the lost sale to ABC and the lost promotional sale by XYZ. And we’ll eat the cost of shipping. ABC: Well, that’s okay with me if it’s okay with XYZ. XYZ: Okay, I can’t see how I can refuse that. Now, how do we resolve the issue of the damaged artworks?

Conclusion ABC’s decision to offer a solution to XYZ’s immediate problem, at its financial risk, generated a like offer from WeCanShipArt and a reasonable response from XYZ. Having reached an amiable solution to the immediate problem, the three companies were able to agree to undertake an investigation within each company to determine when the artworks were damaged. They also agreed that if the investigations are not conclusive, they will split the cost of the three damaged pieces three ways.

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Tactic 19: Make a First and Best Offer If you want to cut a deal but you don’t like the “give-and-take” negotiation process, consider using the “First and Best” tactic, but ONLY if you have a bottom line or definite point at which you will accept an agreement and you believe the other party will make a reasonable offer. It is important that both sides know that there is no negotiating beyond the single “best offer”—that the first offer will either be accepted or rejected, period. You must mean what you say and be prepared to walk away from an unacceptable offer.

Example 1 Colleen: Ann, we plan on selling our Ford tractor when we move. I know you and Jeff said you’d like one because you have about five acres. We plan to put an ad in the paper next week, but if you’re interested, we’ll sell it to you. Ann: Thanks! We really need one. Jeff spends many hours mowing the yard every week, and even more hours in the fall picking up leaves. What do you want for it? Colleen: Well, we paid $5,000 for it six years ago, and it came with the bush hog and the leaf pick-up. Ann: Well, I don’t want to quibble. Why don’t you give me a price? Colleen: Oh, I don’t have any idea. Can you check others in the paper and just give us your best price? We will either take it or advertise the tractor in the paper. Okay? No quibbling, no hard feelings either way. Ann: That sounds great! I don’t want this to affect our friendship.

Conclusion Ann and Colleen did not feel like negotiating over the tractor and running the risk that it might affect their friendship. The “first and best” tactic enabled them to settle the matter easily.

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Example 2 Archie:

Well, I think we have agreed to all aspects of the job offer, except salary. I want the job, and you know my current salary. I expect a fair increase, but I don’t want to start off in a new job by negotiating with my boss! So, how about you making your first salary offer your best one, and I’ll take 48 hours to consider it. I’ll either accept it or reject it, no questions asked. Okay? Vernon: That sounds good. I don’t like negotiating over salary either. We want you, but we have internal budget considerations and we must consider equity with other employees. So, I’ll get back to you in three days. (three days later) Vernon: Archie, as we agreed, I came up with the best salary offer I can make. Here it is, on this slip of paper. Archie: Thanks. I’ll discuss it with my wife and get back to you in 48 hours.

Conclusion Archie accepted the job offer, because it was several thousand dollars above what he decided was the minimum it would take for him to change employers. He also started the job with a positive working relationship with Vernon, who admired the way Archie negotiated his starting salary.

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Tactic 20: Posturing You might have to do a little acting at the beginning of the negotiations. This is called posturing—presenting your position strongly and completely, and in a favorable light. It might be your only opportunity to explain your position without interruption. Present your position and demands as if yours is the only logical position, and ignore or deny any weaknesses in it. (Once negotiations get underway, you will probably have to modify some of your positions if you are to reach agreement.) During the posturing phase, look for indications from your opponent as to what he or she believes is their best position. Posturing is indeed “acting,” but it is also a source of valuable information that can help the negotiations proceed to a successful conclusion.

Example 1 Kevin, 17 years old and a junior in high school, was dating a senior. His girl friend’s Senior Prom was coming up and Kevin obviously wanted to stay out beyond his usual curfew time of 1:00 a.m. He knew his parents would not agree to let him stay out all night, but he figured “all night” was relative. He and his date had decided that as long as they could join their friends for breakfast after the prom, a 4:00 a.m. curfew would be okay. Kevin had “negotiated” with his parents before, so he knew that he would have to sell them very quickly. Kevin: Mom and Dad, Sally’s Senior Prom is coming up, and we’ve made a lot of plans with our friends that I need to talk to you about. First, you know that Sally is really looking forward to this; you only have one Senior Prom in your life. Second, since Sally is going away to college next year, we’re not going to be dating exclusively after this summer, so the prom is a pretty big deal to both of us. Third, I’m the only junior in the crowd, and it really wouldn’t be fair if I wasn’t able to go along with the rest of the group. Fourth, we’re all meeting at Donna’s so we can share a limousine. First we’re going to dinner, then the prom, and then to breakfast at “Timothy’s.” As you know,

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Mom:

Kevin: Mom: Kevin:

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Timothy’s usually isn’t open early in the morning, but because the owner’s daughter goes to Sally’s school, they will be open for the Prom crowd only. Finally, the limousine will take us back to Donna’s house to spend the night. Donna’s parents will be there, so there will be plenty of chaperoning. And if we don’t spend the night, we’ll have to get in our car and drive home very early in the morning, which could be dangerous. Fifth, I know you trust me and that I’ve earned the trust. I’ve never missed my curfew, I don’t drink or do drugs, and the crowd we hang with doesn’t either. So, I think I ought to be able to stay out all night. Sally’s parents trust us and have already said yes to her. You make some good points. However, remember that when you started dating Sally and hanging out with an older crowd, we told you that we would not be changing our rules to accommodate that older group. Second, you will have another Senior Prom—yours—so we don’t think you will be “missing” that much if you don’t stay out all night. We are, of course, happy about your plans to use a limousine so you kids aren’t driving, but to use that as a reason to stay overnight doesn’t make sense. I believe you can pay a little more and have the limousine bring you both home. And, yes, you have been fairly good about making your curfew—most of the time. We’re just not convinced that your entire group has been alcohol- or drug-free. That’s asking us to believe a lot. Also, Donna’s parents are not as strict as they could be when a bunch of you are there. We’ve heard that they allow kids to drink, and we’re just not happy about that. From where we sit, this prom is a one-night thing—a dance that is dressier than you’re used to, for sure, but it should not be oversold. Things can happen on a night like that that adversely affect you for the rest of your life. We think that after the breakfast, you and Sally need to call it a night (or really a morning). You realize that this could be as late as 4:00 a.m. Yes, we know. That’s the deal then? Okay.

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Conclusion Kevin’s strategy to hit his parents with all of his very good arguments at the outset gave him an advantage, because his parents could not disagree with such wellthought-out ideas. Sally and Kevin had a wonderful night and were quite happy to have the evening end at 4:00 a.m.

Example 2 Tencro Company decided to modernize and expand its business. It currently employs 800 people, but it could easily add another 500 if it had the space on its assembly line. The assembly plant is out-of-date, and a new, one-floor operation would be very profitable. Tencro has approached the state’s Office for Business Incentives to see what, if anything, the state can do to help the company expand and rebuild. Tencro is not going to leave the state, regardless of the incentives, and it does not really need any help. Nevertheless, other companies have received incentives and Tencro certainly wants all it can get. The company approached other states to see what incentives they might offer Tencro to locate in their state, but was disappointed to learn that they offer very few incentives. Tencro approached the state’s Economic Development Officer, and had this conversation: Tencro: We really want to keep our company here and expand it, but we’re getting a lot of interest from other states willing to help us relocate. We need to find out what you’re willing to do to keep us here. EDO: Well, we’re of course interested in keeping you here, but there are limited options available. Tencro: Let me just remind you of what our company means to this state. With 800 employees, we are one of the largest employers in this county. If we can expand here, we’d be adding at least 500 new jobs. The spin-off business from our operations is huge, and it will grow—everything from sub-parts manufacturing to the shipping business we generate. Also, our

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employees pump money into the economy by buying houses and cars, paying taxes, etc. We think that we’re the reason XYZ and ABC companies located here and we believe they are likely to leave if we do. We need certain incentives, or else it will not be cost-effective for us to stay here. EDO:

Well, what do you have to have?

Tencro: We need a new location—20 acres or so—to build our new plant. And we’ve been offered land practically free in the neighboring state, so we’d have to have it free here. We need help in the cost of attracting and training the new 500 employees. That might involve the state building housing for them at a reduced cost and providing them with some retraining. We need a rebate on the local income taxes to help pay off the loan to build our new building. And, if the new location is at the local industrial park, we will need the two-lane entrance expanded to four lanes, and traffic signals. EDO:

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The state has very limited resources to pay for economic development incentives, now that the economy has improved. There are more residents in the state demanding more public services: road improvements, schools, additional police, etc., and we’ve had to divert funds from business incentive programs over to basic services. Also, while we value your company as a long-time corporate citizen, moving to a new location will raise a lot of questions from neighbors about the increase in traffic and pollution that might be generated by your plant. Certainly, any plan by the state to build housing that is subsidized by tax dollars will draw a great deal of criticism. Just increasing the workforce by 500 will pull new people into the community and cause housing costs to rise—something our citizens on fixed incomes are very much against. The industrial park land can’t be “free” because we have agreements with other companies that had to buy the land. We can’t possibly give it away to other companies coming in behind them. We do want you to expand your plant, and we are willing to offer some training dollars for the new workers. We

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agree that the road into the industrial park must be widened and a traffic light installed at our expense. However, we’re just not in a position to offer more than that at this time. Tencro: Well, let us go back and take another look at our options. EDO: Get back to us as soon as you can.

Conclusion The posturing by both sides could have caused the whole negotiation process to bog down, but for the fact that each party did its homework and was aware of the true facts. Future negotiations continued, and the state did end up participating in a housing subdivision in order to keep the purchase price down for the new employees. Other than that, the training and the new road improvements were all the incentives offered to Tencro. Tencro bought land in the industrial park, borrowed money for the new building, and hired 500 new employees. The new set-up was so profitable, Tencro was able to pay off the borrowed money in half the time.

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Tactic 21: Avoid the “Winner’s Curse” It is often quite difficult to make the first offer, particularly if you don’t know the other party’s “settlement range.” The perfect first offer, of course, is the most (or least) the other side will accept, because you have settled quickly, at minimum cost. The worst first offer is the one that is so high or so low that the other party jumps on it immediately—known as the “Winner’s Curse.” (You have won a settlement, but you feel cursed because you gave away too much, and you cannot withdraw it in good faith.) To prevent this from happening, either: 1) Let the other party make the first offer (this means that you will be giving up the chance to focus the negotiations on your figure, which can be very useful); 2) Start out with an old number, such as last year’s price; or 3) Make an unrealistic offer (i.e., offer $150,000 for a house that sold for $185,000 three years ago). The other party will probably come back with an equally ridiculous offer, thus requiring greater concessions on both sides. Avoid giving away too much at the outset; think things through before you make or accept the first offer.

Example 1 Jay and Sue are looking to buy a house in a specific neighborhood because it has a good school system. They found one they both like that lists for $325,000. Their realtor told them that it sold for $290,000 two years ago, and that two similar ones on the same street sold for $330,000 and $337,000 this year. Sue: Let’s offer $325,000, before someone else does. That’s a fair price, and houses in this area sell fast. Jay: No, never give them their asking price. The sellers must be willing to come down a few thousand … Sue: Well, then $320,000. Jay: No. We don’t know how anxious they are to sell or if they know the market. Let’s low-ball them and offer $290,000—what they paid for it.

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Sue: Don’t be crazy. That’s an insult! Jay: Well, then let them make a counteroffer. Sue: Then you do it. I can’t tell our realtor $290,000. (the next day …) Jay: They made us a counteroffer of $307,500—half the difference! Sue: Great. Let’s accept it!

Conclusion Jay and Sue avoided the so-called winner’s curse by making a low (but reasonable) first offer, and the offer was based on fact: the prior negotiated price. The buyers were very motivated to sell, since they had already bought another house. Both parties felt that they made a good deal. If, as Sue had first suggested, they had offered $325,000, the sellers obviously would have accepted and Jay and Sue, realizing they offered too much, would have suffered the winner’s curse!

Example 2 Bob Myers and Frank Costello made a presentation to the top management of a paint company. They outlined how they would develop a new employee performance-appraisal system, as requested by the human resource director. Lyle Foxworthy, the company president, was very impressed with their presentation. Lyle: So what’s your price? Bob: Can you tell us what you have budgeted for this project? Lyle: No. Give us your lowest price. (Bob and Frank meet privately to discuss the situation.) Bob: I’d do it for $3,000 for each of us—$6,000 total. Frank: Me too, but who knows what they are planning on offering.

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Bob: Lets make them give us a price! (Bob and Frank return to the meeting room.) Lyle: Okay. We’ve waited long enough. What’s the cost? Bob: We want the job, but we know you must have an amount budgeted for this and we are willing to do it for that amount. What is it? Lyle: Why don’t you give us a price? Bob: We can’t use our daily rate because it might be too high for this work, and it would not apply. Lyle: Okay. I’m out of time, and you two come highly recommended, but we can’t pay more than $18,000. That is all that’s left in this year’s training budget. Bob: That’s fair. We’ll do the job.

Conclusion Bob and Frank avoided the winner’s curse by forcing Lyle to make the first offer. They also ended up getting three times ($18,000) their minimum price of $6,000.

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Stage 4: Making Counteroffers

T

he heart of the negotiation process is the give-and-take. Skilled negotiators such as salespeople, labor negotiators, and attorneys use tried and true tactics in giving and receiving offers. It has often been said that the key to negotiations is to be flexible (see Tactic #25), because if you do not at least appear to be flexible, the other party, seeing no common ground, is likely to pull away from the table. Experienced negotiators also know that proposing multiple options (see Tactic #22) and offering a tradeoff (see Tactic #23) are useful when more than one issue or item is to be negotiated, which is often the case. When the other party makes an offer, do not dismiss it because it is not all you want, and do not flatly reject it because it is not your offer. Instead, carefully evaluate an opponent’s offer. One or more parts might be acceptable or indicate movement from their previous positions. Wait to counter (see Tactic #24) because this will give the opponent the sense that you are serious about bargaining. Experienced negotiators seldom reveal their exact priorities and objectives, which would most likely weaken their position (see Tactic #26: Keeping Secrets). Use a prolonged period of silence (see Tactic #29) to convey something at a strategic moment. In some negotiation situations, what appears to be an outer limit of the settlement range when the process starts can, in fact, be enlarged (see Tactic #27: Expanding the Pie). Expect that the “total pie” will be different from what it was at the outset, and remain open to offers and options that you did not originally expect (see Tactic #30: Always Leave Room for Dessert). Also, be prepared to divide an offer into smaller ones to make it appear to be more reasonable to the other party (see Tactic #31: Cut Salami Slices) or offer two or more alternative proposals of equal value to you, but possibly of different values to your opponent. This can produce a negotiated solution without giving up your priorities (see Tactic #28: Fixed Alternatives).

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Tactic 22: Propose Multiple Options The shortest distance between two points is a straight line, except when you’re negotiating. Proposing only one solution to a problem, while it may be your best option, gives your opponent little maneuvering room and might even prolong or damage the negotiations. Proposing multiple ways to reach your goal can get you to the same place, and quicker. The effort it takes to come up with multiple options (all of which are acceptable to you) reveals additional ways in which you see yourself “winning” in the negotiations. The reciprocal opportunity to review and select among options rather than accept one (“take it or leave it”) also gives your opponent a way to win.

Example 1 Jerry, 19, completed his first year of college and came home for the summer around the middle of May. His brother Sydney, 15, finished his freshman year of high school at the beginning of June. Jerry had already started his summer job. In mid-June, their parents began discussing a family summer vacation. Jerry pointed out that he is expected to work until July 31st, and that he already made plans to visit with college friends on the East Coast for the two weeks after that. He planned on being home for one last week before having to pack up and go back to college. The week he would be home would be the first week of school for Sydney. Here’s the discussion that followed: Mom:

Well, it looks like we can’t really plan a vacation for all four of us. Dad, what say you, Sydney, and I try to get to the South Carolina beach for a week in July? Sydney: I’m not going to the beach with my parents! I’ll just stay home. Jerry will be here, so you can go without me. Dad: Wait a minute. I don’t want to give up on a family vacation that quickly. Let’s see what we can work out. We have four options. Option 1: No family vacation. Option 2: Mom and I go before Jerry leaves on August 1.

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Option 3: Mom, me, and Sydney go to South Carolina before his school starts. Option 4: Jerry doesn’t return home the week between his visit to the Northeast and returning to school; we meet up with him that week for vacation. Sydney: Don’t I start school that week? I don’t want to miss school. Mom: Well, actually, you have a half-day orientation on Wednesday. Classes don’t start until Friday. If we started the vacation on a Thursday, we could return home on Thursday and still get a week’s vacation. Jerry: My friends and I have plans through Saturday of that week, so I won’t be able to meet up with you until Sunday. Sydney: So what you’re suggesting is that the three of us are on vacation from Thursday to Sunday. Then Jerry joins us until Thursday, when we come home. And I miss orientation and start school the next day? Dad: That’s an option. It’s not perfect, but it should work out all right. Sydney: Okay, if it’s okay with Jerry. Jerry: Okay with me. Mom? Mom: Let’s do it.

Conclusion The goal was to have a family vacation. By proposing numerous options, they were able to make that happen and not interfere with or argue about the merits of each other’s individual goals.

Example 2 Joe is an attorney whose job responsibilities include managing three other attorneys (Andrea, Bob, and Carl); one paralegal; and one secretary in his litigation unit. Joe has no say in who was hired by the corporate legal office to work in his unit, but he can discharge employees for poor performance. Andrea considers

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herself to be a professional, and resents any attempt by Joe to supervise her work. Her job performance was acceptable, so Joe took a “hands off” approach. In the last month, however, she made a two glaring errors in judgment, which forced Joe to take action. Joe: Andrea, we have a very big problem. Andrea: Wait Joe. Before you start, let me say that I’m handling the missed deadline on the pleading. The attorney for the other side has agreed to give me the additional time to file it. Joe: That’s all well and good, but it doesn’t solve the problem—nor is it the only problem. You had no authority to agree to settle the Stites case without clearing it with me. Andrea: Well, I thought I had cleared it with you when I told you what I thought they ought to offer and you said that sounded too good to be true. Joe: Come on, you know that wasn’t an okay to settle. It was just a comment. We have a formal procedure that you just don’t like to follow. Andrea: We’re hired for our expertise, and I don’t see why we don’t have more independence. If you don’t like the way I do my job, why don’t you just move me to another unit? I’m certain Bill thinks I do good work and would be happy to have me in his group. Joe: That is certainly an option, isn’t it? But I don’t think just moving you really solves the problem. To put it as bluntly as I can, Andrea, you have a job-performance problem. It is to the corporation’s benefit to address that problem here and now, rather than to put it off on someone else or for some time in the future. I really see your options as follows: You can leave the corporation; you can agree to a demotion so that your areas of responsibility are lessened to that of a paralegal; or you can work out a “supervision” agreement with me so that I can better monitor your performance. Andrea: You didn’t list moving to another unit as an option.

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Joe:

That could be an option, but it would still require some change in the way you work: either a demotion, or I would advise your next supervisor to put you on a very formal approval program. Believe it or not, my goal is the same is yours: to create an environment where you can perform to your full potential. But in fairness to our mutual employer, the needs of the corporation have to come first. Andrea: Well, I want to stay with the firm. If you are convinced that I have to undertake an “approval” program, then it would save face for me if it comes with a move to another unit, rather than my staying here. If that option is okay with you, lets talk to Bill about the move. Joe: That’s fine with me. I hope we can work it out.

Conclusion Joe’s willingness to offer more than one solution gave Andrea a way to look at this unfortunate situation as an opportunity, and propose an acceptable alternative. Andrea’s move and subsequent “approval” regime did, in fact, improve her work performance. It also changed her attitude about being both a professional and a team player in a corporate office. (Adapted from The Mind and The Heart of the Negotiator, by Leigh Thompson.)

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Tactic 23: The “Win-Win” Approach (Identify Issues as Compatible, Exchange, or Distributive) The “win-win” approach to negotiations is a basic tradeoff strategy of seeking maximum gains for both sides. It is used only when each side has several demands. It goes like this: Organize the joint list of demands into three categories: 1) compatible items (those items that both parties can quickly agree on because they share the same desired outcome); 2) exchange items (those that can be easily traded off—one item for another item of equal value, etc.); 3) distributive items (those items for which the two parties have exactly opposite interests, thus making it necessary to find a middle ground on each. These items often involve money). With distributive items, one person’s gain is another’s loss—zero-sum. For example, if a buyer negotiates a $500 reduction of a contractor’s bill, then the contractor has lost $500 in revenue. This approach is an important tactic, because it can speed up negotiations and produce a more desirable outcome. Avoid assuming that you both differ on every issue (in which case you might be making unnecessary sacrifices) by first identifying items for which both sides have similar desires; then those which can be easily traded; and finally, only those with polar-opposite interests that must be divided. In essence, three strategies are used.

Example 1 Brooks and Maureen Wilson have just finished building a new home. They have a fixed amount of money—$14,000. They both agreed that this is the maximum they will spend on “extras” before moving in. They each agreed to list the items they want and then to negotiate whether or not they will be purchased. Maureen: First, let’s see if there are any items we both want. (She looks over the list.) Yes, we both want the sod, the fencing, and a home theatre. Let’s agree to those things. Brooks: Right. Let’s see, that’s $9,500. Wow! We are off to a good start.

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#

Item

1 Sod 2 Trees (3) 3 Berber carpeting 4 Lighting upgrades

Brooks

Maureen

“Win-Win” Category

$1,500

X

X

Compatible

$500

X

Cost

Exchange

$1,200

X

$200–$2,000

X

5 Third garage

$5,000

6 Tile entry

$2,500

X

7 Designer drapes

$2,000

X

8 Deluxe home theatre

$3,000

X

9 Extra sidewalk

$1,000

X

10 Custom chandelier

Distributive

X

X

Compatible Exchange

$500

X

11 Whirlpool bath

$1,500

X

Exchange

12 Fencing

$5,000

X

Compatible

X

Maureen: Well, I’ll trade your sidewalk and trees for my whirlpool bath, which takes another $3,000! Brooks:

Good, that makes sense. These are all permanent immediate needs, and we both get things we want. We have $1,500 left, which I’d like to keep in the bank.

Maureen: No, I’d like to spend some of it on lighting upgrades. Can we split it evenly? Brooks: Okay. $750 for lighting and $750 in the bank.

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Conclusion By taking the time to list all the items each person wanted and their cost estimates, Maureen and Brooks were able to identify those things they both wanted (the compatible items) and then trade some items of equal value (the exchange items), finally agreeing to split the difference on the remaining amount (distributive items).

Example 2 Ohio Metals Company and Local 56 of the Primary and Sheet Metal Workers of America-AFL-CIO have had a generally positive labor relationship for over fifty years. During that time, management and union negotiators found that a “winwin” approach to negotiations worked well, even in difficult years. This year, both sides exchanged lists of initial demands at their first meeting. All items to be negotiated and their desired outcome for each item were put in writing for review. The combined lists total thirteen different items: Desired Outcome No.

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Item

Management

Union

Win-Win Category

1. Length of Contract

3 years

3 years

Compatible

2. Pension Increase

None

2%

Exchange

3. Wage Increase

1%

5%

Distributive

4. Profit-Sharing

10% of net

12% of net

Exchange

5. Drug-Testing Program

For cause only

For cause only

Compatible

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6. Health Insurance

Employees pay 20%

Continue cur- Distributive rent program co-pay

7. Overtime Assignment

Based on senior- Voluntary ity

Exchange

8. Paid Funeral Leave

2 days

3 days

Exchange

9. No Strike/No Lockout 10. Shift Differential

Continue current provision 10%

Continue cur- Compatible rent provision 15% Exchange

11. Subcontracting

10%

15%

Exchange

12. Job Security

No provision

No layoff provision

Exchange

13. Clothing Allowance

$50/month

$100/month

Exchange

In their second meeting, the negotiators agreed that they had compatible positions on three items: (#1) length of contract, (#5) a new drug testing program, and (#9) to continue the often-discussed no strike/no lockout provision. They proceeded to draft the language to settle these issues. Next, they began to trade off the exchange issues of similar value and nature. First, they accepted the union job security proposal (#12) in exchange for the management subcontracting proposal (#11). Next, they exchanged the economic issues of approximately equal cost: the union pension increase proposal (#2) for the management shift differential (#10); and the union clothing allowance proposal (#13) for the management funeral leave proposal (#8). Finally, the management profit sharing plan (#4) was exchanged for the union overtime assignment plan (#7). At this point, eleven of the thirteen original issues to be negotiated had been agreed to, signed, and removed from the table. This gave members of both sides a sense of accomplishment as they began to discuss the remaining two issues for which they must find a middle ground. Because they held opposite positions on these issues, one

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side’s gain is the other’s loss. These two distributive issues—wages (#1) and health insurance (#6)—were the most challenging to settle, but a middle ground was eventually found on each and negotiations ended.

Conclusion This tactic is simple, but it can be very effective when a negotiation situation involves several issues. Both sides first agree that all issues to be discussed will indeed be listed and openly discussed. They then identify each as compatible, exchange, or distributive so that the negotiations can begin in an organized manner. The tactic offers several advantages: First, when you agree on the items where both parties have similar desired outcomes, negotiations begin on a positive “win-win” note. Second, when you exchange items so that each party achieves their desired outcome on one of the two, you can use the process to settle many of the other issues on the table. Third, the most difficult issues (often involving price or some other economic measure) can be negotiated because you know that most items have been settled successfully and only a few remain. A middle ground often must be found on each of these distributive issues if you are to reach an agreement. Sometimes the classic “split-the-difference” method is helpful in locating a middle ground, if both parties start from reasonable positions.

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Tactic 24: Wait to Counter As the negotiations begin, each side is expected to put an offer on the table. It is especially important that you do two things: take your time before rejecting any offer from the other side, and from a strategic standpoint, do not offer a counterproposal right away. A counterproposal delivered too quickly tells the other side that you haven’t or won’t even seriously consider their offer, and looks like you are belittling them. Waiting a respectful amount of time to counter, even if you aren’t going to accept their offer, will make your opponent feel good about the process. You can reject the offer and offer a counterproposal after it is obvious that you have taken the time to consider the merits of it. Mutual respect must be part of the negotiation process, and can help you reach your goal.

Example 1 Jasper and Rob met when they were assigned to the same dorm room their freshman year in college. Since they didn’t know each other well, they decided to establish “room rules” so that they would both be comfortable with the room assignment. They agreed on which part of the room each would have; the location of the TV, stereo, and refrigerator; and on what would be considered acceptable “sharing” of each other’s junk food supplies. The final issue had to do with “lights out” and quiet times for studying. Jasper studies during the day and early evening and likes to stay up very late watching TV and visiting with friends. Rob stays busy all day and evening with other activities, and studies late into the night, so he wants a quiet room late at night. Here is how the last issue was handled: Rob:

Okay, last item: I’d like it quiet in the room at night, so I can study. So when’s a good time? Jasper: (without hesitation) No way. This isn’t high school, you know. Rob: Wait a minute. Let me finish. Jasper: Finish or not, I’m not interested in a curfew.

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Rob:

(Rob was about to suggest midnight on Mondays through Thursdays, but changed his mind when he saw Jasper’s attitude.) Listen, I want a 10:30 p.m. curfew on TV and other noise every night, and that’s not negotiable.

Jasper: (without taking a breath) At best, midnight during the week is the only thing I’ll consider. Rob: (there is no hesitation in this voice) No, 10:30 p.m. is all I’ll consider. Jasper: Midnight, and that’s it. Rob: I’m going to look for a new roommate!! Jasper: Fine!!

Conclusion It was clear that neither Rob nor Jasper was seriously considering the requests and suggestions of the other person. Failure of both young men to allow one another to have their proposal considered caused the relationship to break down. No agreement was reached.

Example 2 ABC Company’s management was being restructured and compressed in order to facilitate its new “just-in-time” manufacturing philosophy. Under ABC ‘s contract with the union, employee grievances had to go through four levels of supervisory review and appeal: a) verbal complaint to the non-union crew leader; b) written complaint to a floor manager if the matter is not resolved in 5 days; c) a formal “meeting” with plant manager if the matter is not resolved in 10 days; and d) a hearing with company owner if the matter is not resolved in 20 days. Under the restructuring, the positions of non-union crew leader and floor manager would both be eliminated, and the union foreman would report directly to the plant manager. The appeals procedure would have to be altered to reflect the restructuring. The union contract required that management renegotiate this change in the grievance procedure with the union. Neither side anticipates that there would be

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any objection to the change. In fact, the union arrived at the meeting prepared to support a streamlined process that called for the employee with a grievance to discuss it first with the union foreman. If the union foreman felt that the grievance had merit, the employee and the foreman would meet with the plant manager and attempt to resolve it. The union was prepared to accept the plant manager’s position as final, rather than go on to appeal it to the company owner. After initial pleasantries were exchanged, ABC Company’s negotiator explained the management changes soon to be implemented, and began the negotiation session concerning the grievance procedure. Company: Here’s the new draft of the grievance procedure. We’ve simply eliminated the first two steps, because those management layers are gone. An aggrieved employee can make a request for a meeting with the plant manager. If in 20 days he/she has not been satisfied, he/she can take the grievance to the plant owner for a hearing. Union:

As you know, our grievances often signal to management that there are real problems on the shop floor. Our guys are prepared to accept a shorter grievance procedure if we can find a way to ensure that you’ll take our grievance issues seriously. We’ve got a couple of alternative models for you to consider.

Company: (rather abruptly) Let’s not drag this out. The redraft is simple and straightforward. We just cut out two steps, and everything else stays the same. Certainly, no one can complain about that. Union:

Hold on. We think that this is an opportunity to eliminate some of the adversarial aspects of the grievance procedure. We’d like you to consider the plant manager’s role as a problem-solver, rather than as a judge on the merits of the grievance.

Company: (no hesitating) Trust me, this redraft is a very simple change to the contract, and I’m certain your members will be okay with it. Union:

You obviously didn’t come here to negotiate, but to dictate. (Note: An attitude change sets in.) We’re just not happy that you are proposing a

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two-step grievance procedure instead of a four-step procedure, and we’ll strike if we have to, to prevent any change!

Company: (surprised) What? Why would you object to this? Your guys will get a final decision in 20 days, rather than in the 35 days the current system provides. You can’t be serious. Union: We’re very serious. We’ll see you on the picket line.

Conclusion ABC Company’s failure to take adequate time to consider the union’s offer or even act as if it was considering the offer prolonged the negotiations unnecessarily. After a cooling off period, the two parties did meet again. This time, the company entertained the ideas the union had tried to propose before, and actually accepted a three-step procedure.

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Tactic 25: Be Flexible A negotiation begins with both parties having some idea of where they hope to end up. They’ve done the research, established goals, and identified the range of options they feel comfortable with negotiating. But after the negotiation gets started, successful negotiators remain flexible because new solutions to old problems often surface during a negotiation. If you are flexible, you can adjust your demands or goals to include such new ideas. Be open minded, and do not dismiss something said by your opponent just because it came from the opponent.

Example 1 Sue and Bill have been married four years, and now have a new baby girl. The couple used to have Thanksgiving dinner at both families’ homes. Sue’s family (parents, four brothers, one sister, their spouses, and ten nieces and nephews) always ate around 5:00 p.m. Bill’s family (parents, two brothers, two sisters, and at least five aunts and uncles) ate around 7:00 p.m. Even before the baby’s arrival, the Thanksgiving marathon caused problems: They would have to leave Sue’s family’s celebration before the “traditional” after-dinner trivia games (which Sue really enjoyed). Arriving late at Bill’s family gathering caused him to miss the “traditional” pre-dinner pro-football game on TV (which he had grown up believing was the real reason for thanks at Thanksgiving). Sue and Bill decided that they had to begin alternating their Thanksgiving Day visits between the two families. They flipped a coin to see who “got” them and the new baby this year. Bill’s family won, and Sue called her mother to let her know that they would not be coming for Thanksgiving dinner this year. Sue’s sister Nancy called her to talk her into coming anyway. Nancy: Sue, Mom says you, Bill, and the baby aren’t coming for Thanksgiving dinner this year—that you’re going to Bill’s parents’ house. Sue: Yes, it’s just too much to do both, and we’re really not able to enjoy either one. Next year, we’ll get to our side.

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Nancy: It just won’t be right without you guys. Mom’s very upset, but she won’t tell you. Sue: Next year, we’ll come to Mom’s. Bill won the coin toss for this year. I thought of asking Mom if she could move dinner up to noon or so, but then I realized that the rest of you already go to your in-laws earlier in the day. So that doesn’t work. Nancy: What if we did Thanksgiving on Friday? Sue: What? Nobody does Thanksgiving on Friday—that’s un-American! Anyway, some people have to work on the Friday after Thanksgiving. Nancy: If we keep the time at 5:00 p.m., I bet everyone could make it on Friday. I know that I would rather not do two Thanksgiving dinners on Thursday, either. Sue: I don’t know. Thanksgiving is Thursday. Celebrating the next day seems odd. I mean, the holiday will be over. There’s nothing “special” about Friday. Nancy: We’d make it special by all of us being together. Isn’t that what Thanksgiving is about—taking a day to give thanks for our blessings with the people we love? We’ll just arrange it so we do it two days in a row! Sue: Well, it’s okay with me if you can sell it to everyone else. Nancy: I’ll let you know.

Conclusion Nancy’s goal when she called Sue was to talk her into coming to their Mom’s Thanksgiving Dinner on Thursday. When that goal looked out of reach, she suggested a unique alternative. By being flexible, Nancy was able to accomplish the real goal of the negotiations—to make sure that the holiday would be celebrated with the whole family present. Everyone in Sue’s family liked the idea of celebrating on the Friday after Thanksgiving, and it became the family’s new tradition.

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Example 2 Kids’ Home, a non-profit organization for orphaned children, had been negotiating with a foundation to become its major benefactor for a new building and to supplement the organization’s annual operating budget. Estimates for building a new orphan home ranged from $12–$15 million, depending on the cost of the land. Kids’ Home hoped to get $500,000 a year for operations. The foundation has a substantial endowment fund, but the principal of the fund can’t be touched. Each year, the interest income of around $6.5 million is available for distribution to numerous charities. Unfortunately (for Kids’ Home), the foundation’s regular annual grants come to roughly half of their available funds. Kids’ Home and the foundation have decided that a parcel of city-owned land would be ideal as a site for the new building. They are meeting with the city to ask that the land be donated by the city for the project. Kids’ Home is also hoping to get the city to encourage the foundation to commit to full funding of the building project. Kids’ Home: As you know, we hope to break ground early next year for the new orphan home. We need the city’s help by allowing us to get the city land donated to us (for free). City officals: We can probably give you the land for free, but we need some assurance that you will be able to build and operate the orphan home at that location. Kids’ Home: That’s why we brought the foundation’s officials with us. We’re hoping to get a commitment from them to build and help fund the operations of a new facility. Foundation officals: Oh, we’re committed in theory, but we can’t fund all of the $12 or $15 million. We only have maybe $2 million a year to put toward this charity. City: Can’t you borrow the money from a bank to build the facility, and raise the money to pay it back? And can’t the foundation grant you money on an annual basis?

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Kids’ Home:

Borrowing the money gets very expensive, and really taxes our ability to raise funds. If we borrowed $15 million at 10% interest, it could end up costing double that amount. And “donations” aren’t a very safe collateral for any bank that wants to loan us money.

Foundation:

We’ve never committed our funds to pay back a bank loan. We probably would not be able to participate. We wouldn’t want to make such a commitment to a bank. We’re a nonprofit group.

City:

Why not ask the state to issue no-interest bonds? It can do that for non-profit organizations. The commitment by the foundation to make the annual bond payment debt backed by the foundation’s endowment fund should be sufficient collateral to get such bonds issued and purchased.

Foundation:

We’re not familiar with that program, but we’re willing to look at it.

Kids’ Home:

I’ll contact the state tomorrow.

Conclusion By exploring alternative financing plans suggested by the city, Kids’ Home was able to acquire state-issued no-interest bonds backed by the foundation’s pledge of interest income to build the new orphan home.

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Tactic 26: Keep Few Secrets One of the most difficult skills to master in a negotiation is how to be candid, yet not reveal all of your goals and objectives. In order for a negotiation to be successful, each side has to know generally what each other wants to accomplish. However, you might not want to reveal all of your priorities at first, and you probably won’t identify your throwaway items or tell your opponent your bottom-line. At the same time, you should be careful not to misrepresent your position to such an extent that your opponent will feel that you have lied. It is perfectly acceptable to say that you are not ready to reveal certain things; it is not acceptable to lie. Successful negotiations depend on trust, and trust can only be established if all parties interact truthfully.

Example 1 Soon after the Jones family moved in next door to the Smiths, the neighbors began to have problems. The Jones’ two younger children—boys in their mid-teens—hit baseballs into the Smiths’ yard and scared the Smiths’ dog. The Jones family let their tree branches hang over the Smiths’ back fence and rub against the Smiths’ garage roof. The Jones’ two older children—girls in their early 20’s—often had friends over on Friday and Saturday nights. These parties could get rather loud, and often lasted until 2:00 or 3:00 a.m. Before the Jones family moved into the neighborhood, the Smiths could count on parking their car directly in front of their house. But the Jones clan had four cars altogether, and often took up all the space along the street in front of the two houses. The Smiths called the police to complain about a late-night party, and asked the officers to cite the Jones kids for parking too close to a corner. The Jones family suspected that the Smiths called the police. They asked to meet with the Smiths to talk about these disagreements. Mr. Jones: We’ve obviously gotten off on the wrong foot, and we would very much like to talk about how we can resolve these issues. Mr. Smith: We don’t know what you’re talking about.

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Mr. Jones: Well, we thought you might have called the police about our kids’ party and our cars. Mr. Smith: No, that wasn’t us. Mr. Jones: Okay, but we do know that someone has complained. If you can tell us all the things that we have done or are doing that have caused you to be inconvenienced, we would like to work out some solution. Mr. Smith: Well, since you’ve asked, the late-night parties are a problem. Also, we’d like to be able to park our car in front of our house. At our age, we have a problem walking long distances in bad weather. Mr. Jones: We’ve already talked to the girls about the parties, and they won’t be having friends over more than one night a weekend from now on. And the music is to be off at midnight. In good weather, if they are outside, then they’ll need to come in at midnight so that their talking doesn’t disturb you. And we’ll make sure none of our cars are parked in front of your house. So, we’re good now? Mr. Smith: Yes, fine. In spite of the Smiths’ assurances, the next time the boys were out playing and the ball came into the Smiths’ yard, they kept it. Jones came to see what the problem was, and was met with the following: Mr. Smith: You know that your boys are causing our dog, Muffin, a lot of problems. Almost every day, they’re hitting baseballs into our yard. It is really very disturbing. Mr. Jones: I wish you had mentioned that the last time we talked. I’ll talk to the boys and we’ll make sure they play baseball in the park, and not in the back yard. Is that everything now? Mr. Smith: Well, yes. I guess. (A week later, the Jones were visited by a city inspector because of a complaint from the Smiths about the tree branches hanging over the fence and brushing against the garage roof.)

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Mr. Jones: (at the Smiths’ door, irate) I can’t believe you people called an inspector on us. We would have fixed the tree if you had asked. Why didn’t you tell us? We can’t read what’s on your mind! Mr. Smith: Well, the tree was clearly over the fence. You could have seen that yourself. But we didn’t call the inspector. Mr. Jones: Sure, you’ve said that before. You obviously don’t want to be “good neighbors.” Forget all we’ve agreed to do—we’ll just enjoy the use of our property, and too bad for you!

Conclusion The disagreements and unpleasantness continued until the Smiths finally sold their house and moved into a condominium. The Jones’ effort to sit down and negotiate the problems with the Smiths were thwarted by the Smiths’ reluctance to put all of their concerns on the table and their failure to admit that they were the ones who made the formal complaints.

Example 2 Neno Enterprises is a shipping company with extensive global operations. Its local headquarters has a union to handle its international shipping, although none of the facilities outside the U.S. have labor unions. Neno has been negotiating the sale of its business to a British company, and the deal is close to being final. The British insist that a very strict confidentiality provision be part of the negotiating process. The union laborers walked off the job on Friday, because they didn’t like a grievance decision. Unless Neno can get the Union members back to work on Monday, the British firm will walk away from the deal, but Neno cannot tell the union this, or the deal is off. The union knows that the company is up for sale. Union officials are afraid that a Japanese company might purchase it. Japanese companies often do not “recognize” labor unions the same way U.S. or European companies do. Neno’s president and the Union representative met to discuss the walkout.

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Neno:

You know this is a wildcat strike and that it is in violation of our contract. I need your guys to come back to work on Monday. If they do come back, no harm-no foul; I’ll forget all about the strike. Union: We think that the grievance decision affects our wages. Therefore, this is a legal strike under the contract. Our guys are prepared to stay out a lot longer than Monday. Neno: Look, I know it’s not news to you that this business is up for sale. Anyone who buys the company will have to honor the contract we have, so the union won’t be hurt by the buyout. And one company that is interested has a really good track record on expanding the businesses they buy. You don’t want to mess up our negotiations, do you? Union: No, we don’t. But we also need to make it clear that we expect you and whoever might buy your company to take our contract seriously. We can’t put up with the kind of decision we got on our grievance. I’m certain that if we can sit down and talk next week, maybe by next Friday or the week after that we’ll have our guys back to work. Neno: Look, any interruption in our shipping could affect how these buyers look at our business. We’ve not had a labor shutdown in 20 years. It’s not the time to have one. If everyone is back on Monday, the slowdown as a result of no one working Saturday and Sunday won’t be noticeable. But if your guys are out past Sunday, it will impact our marketability. You really don’t want to do that. Union: What aren’t you telling me? A labor shutdown, whether it’s for one weekend or a week, is still a labor shutdown. If that’s going to have a bad effect on your being able to sell the business, I think it already has. Neno: All I’m saying is that there is a difference, and if the guys are back on Monday, then there’s probably no harm done. I can’t really be more explicit than that at this time. Have the guys back on Monday. We’ll meet with all of the parties on the grievance first thing Monday. I promise you, we will resolve it to your satisfaction by the end of the day. But I have to have everyone back on Monday.

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Union: It’s that important to you? Neno: Yes, and it’s that important to you as well. If I could, I would be more specific. But I can’t. Union: Okay, I’m going to go along with you because you’ve always dealt straight with me. But I need to tell my guys that this is important to them as well. Can you assure me of that? Neno: Yes, I can. Union: Okay, we’ll be back to work on Monday.

Conclusion On Monday, while the grievance was being resolved, the sale was finalized. Neno called the union negotiator in and briefed him on the sale. He told him that it would mean that the union would not only keep its jobs here, but the British firm will allow them to organize at their foreign locations, as well. Because the parties had dealt honestly with each other in the past, the union was willing to trust Neno—even though he couldn’t tell them everything. Neno’s decision to respect his confidentiality agreement and simply tell the union that he couldn’t disclose all the information, rather than make up reasons, was the right decision to make.

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Tactic 27: Expand the Pie In some negotiation situations, agreement can be reached by increasing the total pool of resources available to all the parties involved. While this is not practical in every situation, a relatively minor increase in the resources available might allow both parties to reach a solution. Resources should be as broadly defined as possible—money, people, time, etc.—when considering how a “fixed pie” might be expanded.

Example 1 Alexis, age 7, did not want to practice her violin for an hour today, but she promised her parents that she would practice an hour each day if they bought her the instrument. She really wants to visit her friend Michelle and spend the night.

Mother: Alexis, our agreement was one hour a day, every day! Alexis: I know, but if I’m going to play with Michelle, I’ve got to go with her now! She only has two hours before her game and then her mother is taking us shopping. Mother: That’s too bad. Alexis: Can’t I miss one day? Mother: No, you promised to practice every day to learn to play. Alexis: Could I practice two hours tomorrow when I get home? Mother: One in the morning and one at night? Alexis: Yeah. That would be easy. And I would still get in three hours of practice this weekend. Mother: Okay. Then you can go with Michele.

Conclusion Alexis’s proposal expanded the resource of time to find a solution, and her mother agreed to it because her objective (for her daughter to get in enough practice time) was met.

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Example 2 Supervisor: Peggy and Kim, you’ve both had a great sales month and you both earned that trip to Hawaii, according to the promotion program. The cost to send both of you and your spouses exceeds the budget by $1,200, however, so we’ll need to negotiate something. Peggy: Like what? Supervisor: Well … I could send one couple this year and the other next year, since I’ll have a new travel budget by then. Kim: That doesn’t seem fair. We both earned it this year, and we want to take it this summer! Peggy: That’s right! Supervisor: I’m sorry. We never expected to have six people qualify for the trip this year, and the budget is simply not large enough. Peggy: Well, that is your problem. What other ideas do you have? Supervisor: You can each pay half the cost of the flights. Kim: Why should we pay for part of a bonus we earned? Supervisor: Let me talk to the department head about this … (The next day) Supervisor: I spoke with the department head, who explained that if we keep spending the office-supply budget at the current rate, there should be enough left over for me to transfer some money to the travel account to cover the trip for you and your spouses. Will you both help me control supply expenses? Kim: Sure we will, and thank you for finding a solution so we can all go on the trip! Peggy: Yes, we can keep supply expenses down. Thanks for thinking creatively.

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Conclusion The supervisor in this situation quickly recognized that no negotiated settlement would satisfy Kim and Peggy. Their morale was important to her, so she sought to “expand the pie.” She did so without increasing the total annual budget, which was why the department head agreed to the one-time budget transfer.

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Tactic 28: Offer Fixed Alternatives You might be more successful if you present several alternative positions to the other side. One party can present to the second party two or more proposals of equal value to the first party. This gives the second party the option of choosing one of the multiple offers. The second party is more likely to respond positively to this strategy because (1) people generally prefer having more choices; (2) one of the offers might be of greater perceived value to the second party; and (3) most people prefer to have input into a decision—even if it’s only choosing one proposal out of two.

Example 1 Colleen’s fifteen year-old daughter hates cleaning her room. She usually lets it get quite messy, like most teenagers. On Friday afternoon, the following negotiation takes place when Amber arrives home from school: Colleen: Amber, you must clean up your room. We are having an open house on Sunday, and the house will never sell with your room like it is now! Amber: Oh, Mom … Tonight’s the big sleepover at Chelsea’s house and tomorrow (Saturday) I have a basketball game. Colleen: Amber, I’ve been telling you for three days to clean your room! This is it! You are not leaving this house until it’s clean. Amber: That’s not fair! Last Saturday, you said I could go to Chelsea’s sleepover! Colleen: That was before you kept putting off cleaning your room. Amber: All my friends are going … (pause) Colleen: Okay, Amber, here are your choices: One. Clean your room right now and I’ll take you to her house after you finish. Two. Come home tomor-

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Amber:

row before your basketball game, and clean it. Three. Clean it after your game, but no TV or anything until it’s done! (pause) Okay, I’ll do it now. I have three hours; that is enough time.

Conclusion At first, Amber resisted the chore she hated. But when her mother laid out the schedule and gave her alternatives, she chose the one she most preferred, keeping her Saturday free.

Example 2 Roberto: I can’t properly advertise this new program with a $5,000 budget! I need at least $20,000. Felipe: (Roberto’s supervisor) Sorry, but the company president does not share your optimism on this program. Roberto: But it will never generate enough interest if no one knows about it. Felipe: Well, I’m not going back to him again to discuss this program. Take it or leave it. Roberto: But I need to start the direct mail and newspaper ads within two weeks, or we lose a whole year. Felipe: Sorry, I can’t help. (long pause) Felipe: Let me give you three options: A. Use the $5,000 in the budget; B. I’ll approve $15,000 for advertising, but I will cut your staff by one part-time person (or $15,000); or C. I’ll approve $15,000 for advertising, but I will cut your travel budget out completely. Roberto: Well, I can accept B. I’ll find a way to do without one part-time person. At least this way the program will have a chance to succeed!

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Conclusion Felipe was willing to think “outside the box.” He offered Roberto three alternatives of equal cost, thus achieving his goal of not having to ask for a larger budget. One alternative, Roberto believed, would enable him to adequately promote the program, which was his goal.

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Tactic 29: Prolonged Silence When negotiations have hit a critical stage, one of the wisest things you can do is to keep silent—particularly when the parties have met several times and identified many areas of agreement, but one side comes back with a non-negotiable demand. If his opponent cannot agree to the demand but does not want to end the negotiations, he can make an open-ended statement, inviting a response. The negotiator for the other side says nothing. After a few minutes of silence, the negotiator who feels the most uncomfortable with the silence will fill the gap and most likely make a concession in order to get the other party to speak.

Example 1 Susan, nearing her third year with the company, received a glowing report from her boss on her job performance. This should have resulted in an automatic promotion and a sizable pay increase. Unfortunately, the promotion had not yet been approved, and the annual merit raise she was getting from the company was the same 3% other employees were receiving. It was 16% less than she had been led to believe she would be getting. Susan knew that she was considered a valued employee and that her boss would want to do the best he could for her. But she also knew he would have to be willing to go to bat for her with his superiors if she was to get her advancement. She was determined to hold her ground for at least a 13% pay increase and a promotion. Here’s how the negotiations went. Susan: Mr. Jones, I very much appreciated the fair job performance review you gave me. You know my commitment to this company. Jones: I certainly do; you are a valued employee. Susan: I hope so. I have to tell you that while I appreciate what you have done for me, I am very disappointed in the company’s decision not to promote me and to limit my merit increase to 3%. I think you would agree with me that I have performed well above expectations this past year, and

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Jones:

Susan: Jones:

Susan: Jones:

Susan: Jones: Susan: Jones:

that I deserve more consideration. Promotions of this type are all but automatic around here, and I think that I really haven’t been dealt with fairly. I would very much appreciate it if you could ask the company to reconsider. Well, of course I will be glad to do that, but I don’t think management will be willing to give you an additional 10% pay raise AND a promotion. If there is some flexibility in your request, it could help. I must ask you to try to get both, because I feel my future with the company might be at stake here. I really want you to stay with the company, and I’m sure management will agree. I suppose I could get the promotion approved with the proper presentation, but a pay increase of that size might be more difficult. (says nothing) If I can’t get that pay increase approved right now, I could probably find a way to phase it in over a two- or three-year period, and sell it to management that way. (says nothing) Or, if management can see their way to giving you the pay increase now, maybe we can talk about the promotion later in the year. Okay? (says nothing) Let me check it out and I’ll get back to you.

Conclusion Mr. Jones went to management and convinced them that they should give Susan the promotion and the 13% raise. Susan’s silence prompted Mr. Jones to continue to offer solutions. Once he acknowledged that both items might be awarded sometime in the future, the company’s refusal to grant them now was a harder position to support.

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Example 2 Two local governments entered into a tax-sharing arrangement in order to provide joint services to citizens in a more efficient manner. The term of the original agreement was nearing its end, and representatives of the elected officials of the two towns were meeting to renew and possibly expand the agreement. The end of the agreement coincided with the election cycle for the two towns, but the officials had hoped to complete the negotiations prior to anyone involved announcing for office. The parties agreed to continue the previous terms of the agreement, and were trying to settle on new and expanded areas when one of the elected officials (Ms. Mayor) said that she was considering running for office. The office she was thinking about was the office held by her counterpart in the neighboring community (Mr. Town Council Chair). Mr. Town Council Chair’s representative believed that the ability to expand on the agreement was critically wounded by the uncertainty as to which office the mayor might seek. He decided to push for a simple renewal of the original terms. The mayor’s negotiating representative wanted to complete the negotiations on the expanded agreement. This is how the negotiations went: Town Council Representative: Well, I think you’ll agree with me that the announcement your boss made about maybe running for Town Council Chair has dealt our negotiations to expand the agreement a fatal blow. Mayor’s representative:

No, I don’t think it’s a problem. She has not decided what she’s running for, and until she does, her plans really don’t have any bearing on these negotiations.

Town Council Representative: I think you’re wrong. The mayor, by saying that she might run for Chair, has colored these negotiations. My bosses might not have been inclined to expand the agreement anyway, but now they’ve got to ask what Madame Mayor’s motivations are. Also, the people Madame Mayor currently

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represents have to worry that her desire to switch governments might taint the negotiations. I think we really have to drop back and just propose a renewal of the tax sharing agreement without adding any new items. Mayor’s representative:

Well, I hate not to attempt to add some additional areas to the agreement.

Town Council Representative: (silence)

Mayor’s representative:

I would think that at least the proposals that don’t involve budget changes could be pursued.

Town Council Representative: (silence) Mayor’s representative:

I think it would look very bad for both of us if we spent all of this time negotiating and we don’t end up with anything new.

Town Council Representative: (long silence) Mayor’s representative:

(after an uncomfortably long silence) Well, I’ll go back and tell Madame Mayor your position. I don’t know what her reaction will be.

Conclusion By remaining silent, the Town Council’s representative left the mayor’s representative with no room to maneuver. He either had to end the session or figure out what to say to reengage the other side. In the end, the Town Council representative’s position prevailed, and the agreement was renewed with no new provisions.

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Tactic 30: Always Leave Room for Dessert Negotiating is the art of give-and-take. It calls for compromise. You are more likely to be successful if you identify a range of options that fall within your comfort zone than if you have a fixed bottom line with little wiggle room. Obviously, you should always enter the talks with a good idea of what you are willing to agree to. Having an iron-clad demand probably won’t give you enough room to reach an agreement. This range for maneuvering is not the same thing as the list of items you make at the outset—it’s the last space separating you and your opponent, when one of you might say, “I have to have this, or we will be at an impasse.” Avoid making that “necessary concession” too narrow: It should be large enough for both of you to step into comfortably.

Example 1 Madeline bought an old farmhouse outside of a small town, and began to renovate it as a home and a pottery shop. The property came with three acres of forest alongside a meandering brook. As was sometimes the case in these parts, the brook was the property line separating her property from a neighboring farm. Madeline built a gazebo about 500 yards from the brook, in a small clearing. One day, after the gazebo had been there for about five months, she noticed that the brook came within 100 yards of it. She traced the brook back along its course to see why and where it had changed its path. She discovered that a rock barrier, which an upstream neighbor had built, had redirected the brook further into her property. She went to discuss this problem with the upstream neighbor and had every intention of demanding that the barrier be removed immediately. Madeline: Hi, Joe. I have a problem. Your rock barrier has sent the brook onto my property and it is too close to my gazebo. You will have to remove the rock barrier. Neighbor: Well, Madeline, the brook and rock barrier are on my property. The reason I built it was so that I could protect my patio. The brook

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extended right up to my back door when the rain was heavy. I couldn’t have that. Madeline: But by diverting the brook, you have not only threatened my gazebo, but you’ve changed the boundary line of my property. I’ve lost 400 yards of property on my three acres. My neighbor on the adjacent farm wants to sell part of his property for a housing development. This will put these houses right next to me. Neighbor: I’m sorry, but I don’t know what I can do about it. I can’t have the brook in my house. I won’t remove the rock barrier. Madeline: Well, what I need is to protect my property line and my gazebo. What if you removed the barrier for a short time, and allowed me to have a survey done so that my deed can be corrected to describe the “existing brook” boundary line by other landmarks. Then, if the brook is redirected, at least I’ve maintained my property line. Also, I ask that you allow an expert to suggest the best way to provide for the diversion of the brook to protect your house and my patio. It might not be necessary to make such a dramatic change. Neighbor: I can do both of these things, but only if I have a clear understanding with you that the barrier will be rebuilt to protect my house. Madeline: Yes, I understand that.

Conclusion Madeline’s objective when she met with her neighbor was simple: Have the rock barrier removed, and return everything as it was. When she found out that this was not going to solve her neighbor’s problem, she widened her range of options. By expanding the range of options available to resolve the dispute, Madeline was able to protect her gazebo, restore her property line, and allow the neighbor to protect his home. She left room for a compromise, which enabled her to achieve her goals.

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Example 2 The contract negotiations between the pilots and the airline had been going pretty well, with all wage and operations issues resolved fairly early. However, the discussions of the employee benefits package bogged down on the issue of health insurance costs and pension benefits. Over the last five years, the airline paid a total of $200,000 to cover the premiums for dependent coverage. The projections for the next five years were that these costs would increase to about $1,000,000. The company wants to trade paying for dependent coverage for better pension benefits. The pilots want dependent coverage paid for by the company, as it has always been, and are willing to keep pension benefits the same. Everyone was afraid that the dispute would cause an impasse and a possible strike. Pilots:

Look, we know that health insurance premiums might skyrocket, and we know that with this new contract term of five years, you are taking a risk on the costs increasing. But only a few of our people are close to retirement age; what they really need is for you to cover the costs of dependent coverage. Company: This could not come at a worst time for us. The airline industry is in a slump, and the premiums for health care just keep going up. With long-term planning and investments, the company can make your pensions much better. This is just a cash-flow problem that your members have to understand. Over the next five years, dependent coverage could cost us $1,000,000. If we invest the $200,000 (which we reasonably should have expected to pay in premiums) in the pension account now, then the pension benefits overall will increase by $10,000,000. This would be a better benefit in the long run. Pilots: So you are projecting that the increase in dependent coverage premiums will average $200,000 a year over the next five years? Company: Yes. As best as we can tell, that would be the minimum increase. And we cannot afford that $1,000,000 figure.

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Pilots:

But you do have the $200,000 to either pay one year of the premiums, if they were that high, or invest in the pension plan? Company: Yes. Pilots: Since the concern is about agreeing to a 5-year commitment without knowing the increases we might have in health insurance costs, can we agree to a year-to-year agreement on dependent coverage, with a cap of $200,000? Once the cap is met, the company will not be expected to give us this benefit. Company: If the company spends the $200,000 the first year on the premiums, then those funds will not be available to invest in the pension plan. Are you willing to risk not having an opportunity to increase pension benefits? Pilots: Yes, we are. The dependent coverage is more important to us now than the pension benefits. If we can get two or even three years out of the $200,000 available, that would be worth it. Company: Then it’s okay with us.

Conclusion The company was committed to limiting its exposure to $200,000. It initially believed that the only option was to put that money into pension benefits. The pilots expanded the range of options, however, by agreeing to let the company cap its exposure for dependent health coverage. The $200,000 actually carried them through four years, so the decision to be flexible was a good one. The health insurance market stabilized, and the pilots knew what to ask for when the contract expired.

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Tactic 31: Cut Salami Slices One way to overcome anticipated or exhibited resistance to a proposed cost is to cut it into smaller units or “slices of salami.” Salesmen use this standard tactic with “big ticket” items: They present the total cost in small enough pieces to sound reasonable to the other party. Phrases such as “for only pennies a day,” “affordable weekly payments,” and “low monthly rates” are examples of the salami tactic. If you are on the receiving end of such a tactic, be sure to add up the total cost, and compare it to your strategic objective.

Example 1 Car buyer:

What, $45,000 for a Volvo? I bought the one I’m driving for $19,500!

Saleswoman: Yes, I recall the day you drove it out of here, but that was several years ago. Buyer: Yes, but the Consumer Price Index has not gone up 150%—nor has my paycheck! Saleswoman: So, do you want to look at something else? Buyer: No, I love this car. I just can’t imagine the monthly payment on a $45,000 car. Saleswoman: With your 740 in trade, I guess it would be around $600 per month. Buyer: Way too much! Saleswoman: Well, what monthly payment did you have in mind? Buyer: More like $300 per month. Saleswoman: I’ll be right back.… (20 minutes later) Saleswoman: So, if I can give you this car with a $300 monthly payment, it’s a deal?

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Buyer: I don’t see how you can do that. Saleswoman: Simple. Instead of a three-year lease, it will be a five-year lease, with your car and $6,000 down. You can do that, can’t you? Buyer: Yes, but let me see the numbers. (looks at the numbers) That looks good. I can afford $6,000 down and $300 a month!

Conclusion The saleswoman knew the buyer was suffering from “sticker shock.” She decided to cut the $45,000 price into “slices” the buyer thought reasonable. Once the buyer volunteered that $300 was an affordable “slice,” she had him—she worked around the $300 slices, and added the trade-in, down payment, and payout slices to reach the total price she wanted.

Example 2 Cable representative: Owner: Cable representative: Owner: Cable representative: Owner: Cable representative: Owner: Cable representative: Owner:

Yes, you can get the Disney channel for only $5.00 per month, as promised. But my neighbor pays $39.00 per month for your service. I can’t afford that much. I can’t discuss another client’s account. Let’s see, do you want Disney? Yes, but what else must I buy? Only the basic service for $8.99 per month. Great! So, do you want HBO? How much? $5.00 per month. Sure.

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Cable representative: Owner: Cable representative: Owner: Cable representative: Owner: Cable representative: Owner: Cable representative: Owner: Cable representative: Owner:

The Sports Combo–ESPN 1, 2, 3, and SI 1, 2? How much? $8.99 per month. Yeah, I really want the sports channels. Disney is for the kids! The sports channels are for me. Any other kids’ channels? Yes, they asked about the Cartoon Network. That’s another $5.00 a month. Okay, and my wife wants the old movies. That’s $5.00. What about the music package? Yes, we had that before. But that’s all! Then we’ll hook you up on Monday. The total is $38.00 per month. Great. Thanks.

Conclusion The owner thought his neighbor’s service at $39.00 per month was far too much, but he agreed to six “salami slices” for a total of $38.00! Why? Because he judged the per-slice price to be reasonable, and probably felt much better about the total negotiated package because it was presented in modest individual slices, instead of one total amount.

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Stage 5: Applying Pressure

P

ressure tactics are generally used in situations where one side firmly believes that it holds the upper hand or simply convinces the other side that it does. When both sides believe that each has equally strong positions, pressure tactics should probably be avoided. A negotiator who contemplates using pressure tactics must first realize that he/she has increased the probability that negotiations will end without an agreement because the other side objects to the excessive pressure and simply walks away. For example, the traditional car salesperson might tell the buyer, “I can only guarantee this price until 6:00 p.m. today, so are you ready to make a deal? This might convince a few buyers, but others will walk out the door, turned off by the tactic. Tactic #33 (The Bluff) is a classic pressure tactic. It should be used with caution: It can end negotiations immediately, and it can destroy your credibility. In some cases, however, it is effective. Tactic #35 (Applying Excessive Pressure) is a similar tactic that should also be used with caution, but it can be used effectively when one party clearly has an edge. Some less-obvious and more easily accepted pressure tactics are to use visuals to control the negotiation talks by focusing discussion on subjects that favor your side (Tactic # 34). Tactic #36 (The Element of Surprise) can catch an opponent off-guard and cause stalled negotiations to move forward. Other less-obvious pressure tactics include Tactic #37 (Divide and Conquer), which can be successful if the opposing team has two or more members who hold different views of an issue, and the use of humor. Humor might not look like pressure, but in tense, angry negotiations, an unexpected element of humor can break the tension and encourage a person to calmly get back to the issues.

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Tactic 32: Don’t Exaggerate It’s always acceptable in negotiations to put your best case forward and present your position vigorously, but it is not a good idea to exaggerate what you are offering or what you are giving up. Such exaggerations are easily revealed or uncovered, and they will weaken your credibility. Your opponent will consider you untrustworthy and might even be insulted by your attitude.

Example 1 Don and Abby went in on the purchase of a sailboat with their friends Lacey and Chloe. The two couples used the sailboat a lot the first couple of years, together and separately. Don and Abby now use it less and less. Lacey and Chloe didn’t know that Don and Abby were, in fact, getting a divorce and each moving away (and would have no more use for the sailboat). When Lacey found out that his employer was transferring him to another city farther down the coast, he and Chloe wanted to buy out Don’s and Abby’s interest. Lacey: Don, big news! I’ve been promoted, and we’ll be moving south in the next month or so. Chloe and I would like to take the sailboat with us, and we need to talk to you about how we can buy you guys out. Don: Wow, Lacey. I don’t know. Abby really loves that boat. We’d hate to give it up. In the last couple of years, boat prices have really gone up. I don’t see how we could buy a boat or even a half-interest in a boat for what we put in on this one. Lacey: I know. I think Chloe and I would be willing to pay more than just the money you guys put into it. Although I do think there ought to be some consideration for the two years you had use of the boat. Don: Absolutely. And we don’t want to be unfair, but Don, I can’t tell you how many times Abby has said how happy she is that we have the sailboat. It

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is just about the most important thing we own. Let me talk to her, and I’ll get back to you. (Around the same time, Abby is having this conversation with Chloe) Chloe: Abby, big news!! Don got his promotion, and we’re moving farther south. Abby:

Well, I have big news too, though it’s not so happy. Don and I are getting a divorce. We’ll be leaving here for the Midwest, but separately.

Chloe: Oh, I’m sorry. I was afraid something was going on when you all-butstopped joining us on the boat. Abby:

That boat. I’ll be glad never to see it again. It just reminds me of how happy Don and I used to be.

(After Lacey and Chloe had a chance to talk, Lacey and Don’s negotiations changed considerably.) Lacey: Don, I’ve been thinking. I think it would be fair to pay you and Abby half of what you originally put into the boat for your 50% share. After all, the boat has depreciated, and neither of us put much in for upkeep. It’s about time now for some major investment, which you would have to share if you want to retain half-ownership. Don:

Lacey, I’m surprised by your attitude. I thought you understood how important this boat is to Abby. Lacey: Cut it out, Don. Abby told Chloe about the divorce and about how she never wants to see the boat again.

Conclusion Don got a lot less than he could have from Lacey because he found out that Don exaggerated the importance of giving up the boat. If Don had not exaggerated the importance of the boat and dealt with Lacey honestly, he likely would have found himself in a stronger negotiating position.

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Example 2 Aimes Manufacturing had experienced major ups and downs in the price of its stock for the last two years. The current stock price is the lowest it has ever been. And while these fluctuations have little to do with the health of the company itself, the company president decided to use the stock price as a negotiating tool during the current union contract talks. Here’s how these negotiations went: Company president: Well, the situation in the stock market is not good. I’m afraid that with this current information, we will need to make drastic cuts in our operating costs just to survive. I think you’ll have to agree with me that wage increases in this next contract will not be available; in fact, I’ll be looking to you to make some major wage concessions on this upcoming contract. Union negotiator:

The stock price might be down right now, but this has been such a crazy situation. I read in the papers every day that the market is still strong, and that the economy is strong. I can’t see how today’s numbers really impact the long-term profitability of this company. Telling me there’ll be no wage increase and asking for wage concessions now is a little premature.

Company president: Well, I’m telling you the stock price is having a huge impact on us already. When I go to the bank for the Letter of Credit to keep our cash flow uniform while we switch from one type of production line to the other, they will make their decision based on a review of the stock price that day. And as you know, in this global market, our production line changes at least three times a year. I’ll be going back to them as soon as next week. I’ll have to show them

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that we’ve cut expenses to counter the losses in the stock market. Union negotiator: Well, okay. If you put it that way. Give me your proposal for wage concessions, and I’ll have our people look at it. Let’s get back together next week. (In the interim, the union checked into the Letter of Credit transaction with some experts in banking. They told union officials that it would be very rare for a bank to make its decision solely on stock price; they would do a thorough analysis and look at the health of the company over the long haul. When negotiations resumed, here’s what happened.) Union negotiator: I’m sorry, but your proposal to cut wages is just not going to fly. Company president: What? I thought you understood that it is essential that we get concessions on this if we want to stay afloat. Union negotiator: I know that’s what you told me, but I checked it out and it’s not totally true. If the stock goes up next week, this week’s price would have little or no effect on your ability to get a Letter of Credit from the bank. We think this company is very healthy and can withstand the temporary downturn. So, no concessions! In fact, we’d like to reopen talks on next year’s pay increase. Company president: All right, let’s talk about it.

Conclusion Because the company’s president over-emphasized the impact of the market on the company, he lost the trust of the union. The union became hardened in its position that the employees needed wage increases in the new contract. When the market took a swing up during the negotiations, the company’s position was weakened even more, and the union ended up with a substantial increase in their contract.

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Tactic 33: Bluff! Bluff with caution. Poker players know all-too-well-that bluffing can be very costly. If one party threatens to walk out of the negotiations if a demand isn’t agreed to, and they really have no intentions of doing so, they are bluffing. There is a chance that the tactic will work and that both sides will agree to the proposal on the table, but you always run the risk of having the opposing party call your bluff and end the negotiations without reaching agreement. If you subsequently agree to begin talks again, you will have lost credibility with your opponent. This can come back to haunt you.

Example 1 Christy and Tom had been dating for about a year. Christy thought that their relationship was exclusive: She hadn’t gone out with anyone else, and she didn’t think Tom had, either. The couple had not discussed marriage, but Christy thought the relationship was heading in that direction. Both of them were still in graduate school and worked full-time, so their “free” time was very limited. Christy was surprised and hurt when a friend of hers mentioned that she had seen Tom at the movies with his former girlfriend, Charlene. Christy realized that asking for a commitment from Tom at this stage would be a very serious discussion. She knew that if she made such a demand and threatened to leave him unless he made a commitment, it might backfire. Here’s how the discussion went: Christy: Tom, Sara said she saw you at the movies with Charlene yesterday. Tom: Oh, yeah. I knew you had a class, and I really wanted to see the new Lenny Bruce movie. I called Charlene and she was available. You’re not upset about that, are you? Christy: I don’t want to be, but I really am. I guess I’m just surprised. We don’t have that much free time together. I really hate it that you chose to see the movie with Charlene.

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Tom:

She’s a friend who happens to be a girl. It really wasn’t a “date”—we just saw the same movie together. Actually, she paid her own way. I just thought of her because I knew you weren’t available. Christy: I just can’t see it that way. It’s made me realize that I want us to have an exclusive relationship. If that’s not possible, then I’m afraid I want us to stop seeing each other. Tom: I have friends of long standing who are women. Going to a movie with one of them to me is the same as going to the movies with one of my male buddies. I’m not “dating” anyone else. Christy: What I’m saying is that I can’t accept that you are going out with a “friend” who is a woman—not at this stage of our relationship. I need to have your commitment that you won’t do that. I’m willing to risk losing you, if you can’t make that kind of commitment. Tom: You’re serious? It’s that important to you? Christy: Yes. It is. Tom: Okay, I certainly don’t want to lose you. I won’t go out with any woman friend.

Conclusion Tom didn’t want to lose Christy, and at first he thought she might bluffing. Since he wasn’t sure about that, he had to make a commitment or risk losing her. If Tom had “called” Christy’s bluff, Christy would have had to decide whether or not she was indeed bluffing or if she would really end their relationship. She convinced Tom that her feelings were strong. He believed she was sincere, so he didn’t call her bluff.

Example 2 Nexon and its union had been negotiating a new contract for the past couple of weeks, but very little progress had been made. The union negotiators,

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believing that Nexon would not risk a strike, decided to threaten to walk out of the negotiations and have the membership vote on a strike unless Nexon made some concessions at the next meeting. Nexon negotiators did not believe that the workers would actually strike this early in the negotiations. Here is what happened at the next negotiations session: Nexon: I’m sorry, but the company cannot offer the same benefits to the parttime workers as it offers to the full-time workers. First, it will cost too much. Second, we want the part-time workers to apply for and fill fulltime positions as they become available. Union: You don’t seem to understand. This is something we just have to have. Many of our union members who are working part-time hope to work full-time, but working without benefits is simply not acceptable. We need some agreement on this today, or else we’ll be asking the membership to strike. Nexon: I’m sorry. We’re not going to reach agreement on this at all, much less today. And I don’t believe you’re going to go call for a strike over this. Union: You’re wrong. This is a critical issue to us. Nexon: We’ve got lots of issues to discuss. Why don’t we put this one aside for now, and try and reach agreement on the cost-of-living increase you’re proposing? Union: No, we’re really prepared to go the distance on this benefits issue. If we’re not able to reach agreement on this, then all of our other demands will change. We need an answer today. Nexon: I’m just not prepared to give you one. (The union negotiating team left the bargaining session and called for an emergency meeting with all union members. The union members ended up voting not to strike at this time. Another bargaining session was scheduled.)

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Union: Okay, we’ve decided to put aside the part-time benefits issue for now. We’d like to discuss the cost-of-living request today. We’re looking for a 5% increase for all employees—full-time and part-time. Nexon: I’m afraid that a 5% increase is out of the question. Inflation has been very low this year, and we’ve certainly not increased our prices by 5%. We’re only in a position to offer a 2% increase, and we believe your membership will accept that. Union: 2%?? Are you crazy? Our people will never accept that!! They’d sooner strike!! Nexon: Fine. Ask for another strike vote and get back to me. Union: Wait, wait. Let’s be reasonable.

Conclusion Negotiators for the company knew the threat of a strike was only a bluff, because the union did not have member backing. When they tried to bluff the first time and failed to convince the members to strike, their ability to successfully bluff again was lost. They had a very difficult time in the subsequent negotiations, because Nexon was able to call their bluff numerous times.

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Tactic 34: Control the Forum with Visuals Some tried-and-true strategies used for meetings and presentations can also be effective during negotiations—particularly those that help you get your points across to the other party. Even the best negotiators have trouble keeping a discussion focused, which is why they make good use of visual aids. In many situations, including negotiation sessions, a person or team is trying to communicate ideas and persuade others to accept their position. Maintaining control of a lengthy discussion and keeping everyone focused on one’s presentation is often difficult, but it is critical to successful communication and persuasion. This control of the “forum” or general discussion, if attempted solely by dialogue or handouts, can be difficult for the best negotiators. Thus, a tactic that will help keep the discussion focused on one’s arguments and presentation can be extremely helpful. An easel and flipchart, a chalkboard, or a PowerPoint presentation can be very effective in controlling a forum. By only showing one part of a presentation at a time, you can focus everybody’s attention on one page of a flipchart or one slide (or even just one line of text). People won’t be able to flip through pages or discuss other parts of a handout (this often occurs when the entire proposal is given out at the start of a session), and the presenter won’t lose the audience’s attention. It is also more difficult for people to go back to earlier parts of the presentation, because the text no longer appears on the screen or flipchart. A negotiator who presents new proposals or information with well-developed visuals can more easily control the forum or focus of the group discussion.

Example 1 Dinnertime at the Gronefeld house was usually loud and chaotic. The parents and six children had dinner together most evenings, but it was understandably hectic; multiple conversations were going on at the same time. One night, Aime (age fourteen) tried to present an argument about allowances and the division of chores among the children. Constant interruptions from other children and a general inability of all eight people to follow one dialogue simply caused her to give up her

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idea. The next night, however, Aime came prepared with a piece of construction paper and a gavel she had removed from a plaque in her father’s office. On the construction paper were three columns: Person; Chores; Allowance. The written specifics were covered up with pieces of construction paper. After everyone took their seats at the dinner table, she banged the table with the gavel until all were silent. “I have a proposal for a new division of chores and new allowances,” she began. “Please let me explain this one person at a time, so we can agree on that person’s chores and allowance, and then move on to the next person.” Aime now had everyone’s full attention, because they were curious about what was covered up on the chart. Aime had sucessfully focused everyones attention on her chart. The parents, impressed by her work and specific proposals, agreed to her suggestions with only one change. Person

Chores

Allowance

Conclusion Aime realized that she would never achieve her goal unless she could command everyone’s attention and focus the dinner-table talk on her concerns. She was able to control the dinner forum with a gavel and a chart. The key to her success was that she unveiled only one line at a time, thus focusing the discussion and reaching agreement on each child. This stopped the confusion.

Example 2 A committee of three members of a governing board of twelve people is responsible for developing and presenting the annual budget recommendation for

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the organization. A majority of the board members must vote for the proposed budget for it to become effective. Past committee meetings dealing with the proposed budget have been chaotic, long, and usually heated. The typical format for the meeting is for the chair to hand out a copy of the entire proposed budget at the start of the meeting, quickly provide an overview, field questions, and then try to negotiate for the seven needed votes for passage. Steve, one of the budget committee members, has decided to try a new approach: focusing discussion on one budget at a time to prevent people from discussing several items at once. Steve:

Ladies and gentlemen, to help us review this budget proposal in an organized fashion, I have outlined it on the pages of this flipchart. Each section of the budget appears on a single page. I’ll go through it one page at a time. Please ask questions only on that section or page. This will keep all of us discussing the same budget issue. Agreed? Board chair: Does everyone agree to this proposed budget-review process? All in favor say agree, opposed no. Seeing no opposition, it passes. Steve: Let’s begin with the capital budget for the Fifth Ward … Allan: Steve, I have a question about this year’s budget for health insurance … Steve: That’s Section 7 on page 7 of the flipchart. Allan, please hold your question until we get there. We will review and discuss all of these items one at a time, in the order they appear on the chart.

Conclusion Although several sections of the budget proposal sparked spirited debate, Steve was able to control the discussion and focus the meeting on one issue at a time by effectively using a visual aid. The meeting was much shorter, more productive, and less acrimonious than in prior years.

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Tactic 35: Apply Pressure (when you have the leverage) Analyzing a situation and applying pressure in order to achieve your goals when you have leverage over the other party is a commonly used tactic in negotiations. It is sometimes referred to as “pressure bargaining.”

Example 1 We have all been at the mercy of someone who uses pressure bargaining. Try bargaining with a plumber! This homeowner, not blessed with many household repair skills, once had to call a plumber in for emergency repairs. Since his toilet had overflowed and water was continuing to run all over the floor, the guy was in no position to dicker over the price of the repair. The same kind of thing happened a couple of years before that: In the middle of August, his air-conditioning unit went out. He was at the mercy of the company that could install an appropriate unit the fastest, and was forced to pay whatever they demanded. On the other hand, there were times when there was no pressure and no emergency. Since the heating and air conditioning company held no leverage over him, he was able to successfully bargain for other services. Many companies sell “tune ups” and routine seasonal checks to keep their people busy all year. They are more flexible on price and service when they know the consumer is not under any pressure to buy the service being offered.

Example 2 Let’s face it: Sometimes one party holds all the cards. It’s easy to prediet the outcome in collective bargaining talks if one side is clearly in a very favorable position, while the other is not—that is, when one side has “leverage” over the other. Unions can strike at any time to achieve their goals if they have some leverage, such as the advantage of time. If the employer is a shipping and express mail company, for example, its union has the advantage in the weeks just before Christmas, because this is the busiest time for that industry. The owners of professional sports

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teams are generally more vulnerable to pressure from the players’ union several days before the season begins, but they are less willing to negotiate several months ahead. (Team owners are notoriously unpredictable, however.) The leverage of supply is also very powerful: If a jeweler has an exclusive contract to sell a ring everyone wants, she has leverage and can more likely hold firm on her price. If you have a special skill that an employer needs and few others have that skill, then you are in a position where you can set reasonable demands on wages, benefits, etc. On the other hand, if the unemployment rate is high and jobs are few, the employer has the advantage: a supply of jobs. This gives it the upper hand in negotiating with employees, either individually or through collective bargaining. Many labor contracts were agreed to when unemployment and inflation were high and employees felt pressured to accept the demands of the employer. When the employer proposed adding duties to the job classifications, he didn’t have to be flexible because the employees believed that they had no alternatives. The employees had no power to resist the demands of the employer. When one side places undue pressure on the other side, there are likely to be long-term repercussions. Employers who refuse to give in on issues of high importance to employees and exert pressure on unions to accept their terms, despite strong resistance, can suffer repercussions in the form of sabotage, low employee motivation, and other undesired outcomes. Other employers find themselves in situations that actually reverse the leverage (when, for example, unemployment is low and jobs are plentiful, it is the union’s turn to hold firm on its demand). What goes around comes around.

Conclusion “Pressure bargaining” is a way to achieve objectives that are greater than what is deserved or desired by the other side. A note of caution: Circumstances in one round of negotiations might give one side an advantage, but before you choose such a tactic, consider whether or not the two parties will likely meet again in the future to negotiate. If so, will what goes around come around?

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Tactic 36: Surprise! Never underestimate the power of surprise—particularly when things have bogged down and both sides are simply repeating their positions without making any headway. Consider making a suggestion or a proposal that completely surprises your opponent, but use this tactic judiciously, because you will probably only get to use it once. Why? A sudden surprise can disrupt the dynamics of a negotiation.

Example 1 A father and his two daughters were on their way to visit the grandparents. Almost from the beginning of the three-hour drive, the girls had been fussy. They stopped for lunch at a fast-food restaurant and shared a children’s meal that came with a small doll. About an hour into the drive, the little girls began to fight over the doll. Their dad tried to reason with them, and here’s how the “negotiations” went: Dad:

You two stop fighting. We’ve got a long ride ahead of us, and I can’t stand it. The doll can be shared. You’re driving me nuts. Andrea: The doll is mine; I took it out of the box. Tell Susie to let me have it. Susie: The doll belongs to both of us. Mom said so. Just because you saw it first doesn’t make it yours. (Their dad pulls to the side of the road and turns to face them in the back seat.) Dad: Stop it right now. I can’t drive if you keep this up. Just share the doll. Andrea, you have it this part of the trip, and Susie, you have it when we drive home. Andrea: Okay. Susie: Okay. (In a few minutes, the fighting starts up again. This time, the argument is over the doll’s shoes; Andrea had taken them off the doll, and Susie hid them under the seat.)

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Andrea: Give me the shoes back. Dolly has to have her shoes. Daddy said I got the doll on the way to Grandma’s house. I want the shoes. Susie: Daddy didn’t say anything about the shoes. Dolly doesn’t need shoes on in the car. She can have them later. (They continued to argue and whine and pinch each other. Dad tried correcting them a few more times, to no avail. Finally, he slowed down, and reached back for the doll. He grabbed it and threw it out the window.) Dad: Now there’s no more fighting over the doll.

Conclusion Dad’s use of a “surprise” tactic was extreme, but nothing else up to that point was working, so it was worth the risk. Both Andrea and Susie were so shocked by their dad’s action, they didn’t say another word. The tactic was so successful, in fact, that they never fought over a toy in the back seat of the car again!!

Example 2 The editor of a local newspaper was planning on writing an editorial critical of a locally elected auditor who had filed a very nasty lawsuit. The auditor asked to meet with the editor to explain his position. The auditor’s job was to make sure that tax dollars collected for the local education system were appropriately handled. He initiated the litigation against the local school board members and several banks that invested the money for the board, charging that they breached their duty in their handling these funds. The defendants contended that the auditor’s actions were politically motivated, and that they had invested and spent the tax dollars wisely. The litigation itself had been going on for more than three years, at great expense to the auditor’s office and the school board. The local newspaper was prepared to urge the auditor to end the litigation. Here’s how the meeting went: Auditor: I appreciate a chance to talk to you about this litigation. I think I have acted properly, and I hope I can convince you of that.

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Editor:

I’m certainly willing to listen, but I have to warn you that from what I’ve seen and heard so far, this case needs to be dropped. The school board members make a very good argument that their practices regarding how the funds were expended are not just adequate, but actually superior to some other entities you supervise. They are very persuasive that this is just a political battle. Auditor: I appreciate their arguments. They’ve been making that same argument from the beginning. My frustration is that they have refused to provide our office with sufficient information to back up their contention that what they are doing is best for the schools. That’s really the reason this has gone on so long. Editor: Well, perhaps you should just cut your losses—and just drop the suit. I really think the community would be better off. From what I can see, there’s just nothing to back up your allegations, and it is costing your office money and good will. Auditor: Well, as a matter of fact, I think I have something here that will convince you otherwise. This morning, one of the banks settled with my office, and a significant amount of money will go toward the tax fund. Obviously, the bank would not have done that had we not proven our case. Editor: (surprised) Really? They settled? This is public information? Auditor: Yes. Here are the papers. Your reporters will probably want to follow up on it. We believe the other defendants will soon follow suit. Editor: Well, I guess we’re finished here. Thank you for coming in.

Conclusion The editor wrote an editorial urging a resolution for the good of the community, but recommended that the parties reach a settlement, rather than drop the case. The auditor successfully used the element of surprise in announcing the settlement and thus changed the direction of the editorial.

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Tactic 37: Divide and Conquer Certain negotiations lend themselves to a divide-and-conquer tactic. If the other side involves more than one person, you might be able to dilute their power by identifying their different interests and addressing them separately. If the negotiating team sitting across the table from you seems to be divided on a subject or one of the team members seems to be more sympathetic to your arguments, try to focus on that subject or address that member directly to get them to be more amenable to your proposal.

Example 1 Tina’s husband Mike wants to buy a pool table for their family room. Tina and their son Kevin are against the idea. Tina is against it because she doesn’t think it will be used that much and it will take up a majority of the floor space in the family room. Kevin is against it because he is turning 16 years-old soon, and a car is more important to him than a pool table. Mike knows he needs to get either his wife or his son on his side. Tina: I’m really against this pool table idea. Kevin: So am I. Mike: I know, but I think it will get a lot of use. I can remember spending hours playing with my friends and family when I was growing up. I know we’ll all enjoy it, especially Kevin. Kevin: I don’t really care about a pool table, Dad. I want to talk about a car! Mike: It’s really not one or the other, although getting your license and getting a pool table are connected. Tina: What do you mean? Mike: When Kevin and his friends get their licenses, they’ll be mobile! The last thing I want is for them to be out cruising around, night after night. I’d

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like them to hang out here more. A pool table could attract them here. Kevin, don’t you think you guys would use it? Kevin: I guess so, some. But I’m not going to hang out here all the time. And I really do need a car! Tina: Do you really think the guys would use it? I would rather have them here than out getting into trouble. Mike: I really do. Tina: Well, then maybe it’s not such a bad idea.

Conclusion Mike found an argument that divided Tina and Kevin. Instead of both opposing the idea, only Kevin did. Once Mike convinced Tina of the idea’s merits, she joined his side of the debate. They bought the pool table, and Kevin and his friends use it often.

Example 2 Negotiations on a new union contract seemed to be going quite smoothly. A number of contract changes have already been worked out and Wylma, the chief negotiator for the company, has just presented the company’s initial wage offer. Tom, the head of the union negotiating team, received it without comment. Wylma was surprised the next day when Tom started the meeting off with an out-and-out rejection of the wage offer and made a demand for a wage increase of four times the company’s offer. She noticed that Jim (another member of the union’s negotiating team, who was studying the company’s financial records for the team) became uncomfortable when he heard Tom’s demand. Here’s how the negotiations went. Wylma:

Tom, I’m surprised. I thought we were making real progress. What happened?

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Tom: Wylma:

Nothing happened. This is just what we think is fair. But Tom, you certainly are aware of our financial situation. Your demand is totally unreasonable. Tom: We don’t think so. Wylma: Jim, you’ve seen our sales projections and production costs. Do you think this is reasonable? Jim: (looking uncomfortable) Well, you’ve heard our demand. Wylma: Let’s take a break. (When they resumed, Wylma distributed copies of financial data that showed the company’s current condition.) Wylma: Now Tom, as Jim can point out to you, these are our actual accounting figures. Right, Jim? Jim: Yes, these are accurate. Wylma: Tom, I think you need to rethink your demand. Let’s start again tomorrow morning.

Conclusion Wylma’s appeal to Jim’s knowledge of the actual financial situation of the company worked to divide the union’s negotiating team, forcing them to reconsider their demand. When the negotiations began again, Tom had reduced his wage demand significantly, but he added some workplace changes that Wylma was comfortable negotiating.

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Tactic 38: Break the Tension Tension is inevitable in most negotiations. Tempers flare and people say things they shouldn’t out of anger or frustration. Stay alert and watch for clues that a negotiation is about to get out of hand, so you can find a way to quickly neutralize it. Humor often works to break the tension of the room, but it should never be at anybody’s personal expense. That will just make a bad situation worse.

Example 1 The four Jones kids grew up, married, and had children. It was a tradition in the Jones family to spend Thanksgiving dinner arguing about how the family wanted to celebrate Christmas. When all of their children were small, it was easy to agree on just giving presents to the children, but as the children grew up and had families of their own, some of the siblings decided they liked giving presents to one another, so pressure grew to draw names and exchange gifts. Sometimes the argument got heated, especially between Madison and Cory, the oldest and youngest Jones children. Madison: Okay, I want to say something. I know that you all think I’m silly about wanting to exchange Christmas presents among the adults, but it is really important to me. Ever since Mom and Dad died, I don’t feel Christmas in the way I used to, and it makes me very sad. Cory: Madison, get over it. You are almost 40 years old. When are you going to grow up? Madison: (very emotional) I can’t believe you can say that to me! Christmas should mean something! Cory: It’s just silly for adults to exchange presents. We can’t afford to buy each other things we really need, so what’s the point? I don’t need another tie! Madison: It’s not the gift, but the thought that matters.

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Cory:

You can say that, but everyone is disappointed when they receive a cheap gift, even if they won’t admit it! Madison: Why are you being so stubborn? You’re just ruining everything! Cory: (also emotional) Look, if you have to receive presents in order to feel that it’s Christmas, we can all just give you presents! Madison: (without hesitation) Okay! I can live with that!! (Everyone laughs.)

Conclusion Madison’s quip diffused the emotions of the parties. Cory, while very angry, was surprised by Madison’s answer, and was able to laugh. With that, other family members joined in the discussion and they agreed that those who wanted to participate in the gift exchange would. Those who didn’t, wouldn’t.

Example 2 Jay believed that the new home-theater system he bought was a lemon, but he had very little success in getting the salesman to take responsibility. The salesman agreed to have every complaint looked at by a service technician, but the technician always gave the system a clean bill of health, which infuriated Jay. Jay finally asked for a meeting with the store’s owner, fully intending to leave the meeting with a full refund. Jay:

Mr. Owner, I’m very serious when I say that I will not keep this system. It is a lemon, and you know it. Either the sound or the DVD or the picture is always off. Owner: Now Jay, there are some problems with the system, but nothing we can’t fix. Let me turn it over to my best technician, and he’ll be right over to fix it. Jay: We’ve been down that road already. The system has been on the blink 20 out of the last 30 days.

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Owner: You’ve had a loaner TV/VCR while yours was being worked on. We’ll be happy to loan you one again whenever you need it. Jay: (becoming annoyed) That’s not the point. I bought a new home theater system and I want to use it! I’m very frustrated by your attitude. Temporary fixes aren’t good enough. Owner: Well, we are attempting to fix the system. You’re the only person who’s had this kind of trouble with one of our new ones. Maybe you’re just having “buyer’s remorse” and really don’t want the system anymore! Jay: (very irate) I can’t believe you said that! This system is a lemon, and you’re trying to blame me! What a crock! What kind of business are you running here? You’re a bunch of crooks. Owner: (now also irate) Just hold on there! I run a respectable business, and I resent your attitude. We’ve bent over backwards to check out each of your complaints, none of which were found to be major defects—just things that needed adjustments. Jay: (very angry) That’s not true. The surround-sound speakers never work at the same time. You don’t call that a major defect? Owner: (realizing he needed to break the tension) Well, my 30-year old Sony TV only has one 3” speaker, but I still watch it. Jay: (pausing and calming down) Yes, my first TV was a Sony. Owner: Look, I’m sorry we’re at this point. Let me take this to my top technician and your salesman, and we’ll fix it. Give me one day. Jay: Okay, but just one day!

Conclusion The owner used a joke to interrupt the angry negotiations that were going nowhere. He exchanged Jay’s surround-sound system for another new model. The system Jay rejected was sold as a “used” one and never came back in for repairs. Jay’s new system worked fine, and he ended up becoming a repeat customer.

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Stage 6: Making Progress

M

aking and reviewing proposals and counter proposals will not always close the gap between the two parties’ positions and gain a settlement. Progress might be made, however, by invoking a certain tactic at a critical time, particularly Tactic #39 (Compromise). Often believed to be the key to successful negotiations, compromise is not giving in; instead, it is the ability of a negotiator to prepare a settlement that represents some concessions on the part of each side, but that will also help gain a proposal that is acceptable to both parties. Other key tactics that can move the negotiations to a settlement include the presence or use of an unexpected friendly personality to disarm an opponent (Tactic #40: Be Friendly!) Bringing to the table a person who is highly respected by the opposing team is a good move; such an individual might be able to gain their confidence and support your position (Tactic #44: Make Use of a Positive ‘Halo Effect’). One tactic that never fails is the classic Split and Choose (Tactic #42), which goes like this: One side divides the item into two parts, and the other side gets to choose which part they prefer. Parents have used this tactic to divide the last piece of pie or cake between two kids for decades! Additional key methods that move things along include the chilling effect of one party unexpectedly tape-recording meetings (Tactic #41) or presenting facts (Tactic #45) that unexpectedly support their position. Experienced negotiators also achieve progress by asking probing questions (Tactic #46), which can reveal or point out flaws in their opponent’s position or by using a period of prolonged silence right after a heated exchange. Experienced negotiators often achieve a final gain in a settlement by nickel and diming (Tactic #43) over small items.

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Tactic 39: Compromise Negotiations are successful when all parties walk away with an agreement they are satisfied with, and that doesn’t happen without compromise. It is the give-andtake of a negotiation: one party agrees to give up one of its demands in exchange for something of value from the other party. (In a successful negotiation, the exchange will be between things of equal value. If there is resistance to compromise, the individual might be afraid that the exchange isn’t equitable). At some point, each side must decide whether or not one more compromise will produce an agreement that they will later regret. When that point is reached, it is better not to compromise.

Example 1 Julie and Dara both attend a local preschool. One day, they were the last children left in the playroom for the remaining two hours of the day. Julie wanted to play “dress-up,” but she needed Dara to play with her. Dara, however, was ready to color. The day-care worker wanted to take them outside for a while so that he could visit with his friend, who was outside with older children. Both of the little girls liked to play ball when they were outside, but since the other children in their room were not there, they would have to play ball with older children. Mr. C.: Julie: Dara: Mr. C.: Julie: Dara: Julie:

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Girls, how about going out to the yard for a while? You can swing or play ball. I want to play “Princess” and I want Dara to be the “Prince.” Can I color now? You said we would color later. Isn’t it “later” yet? Right now would be a good time to go outside. I want to play “Prince and Princess.” Dara, don’t you want to play? We could color before your mom comes, or maybe tomorrow. If I can be the Princess, not the Prince. Then we can color. Okay.

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Mr. C.:

Julie:

Hey, wouldn’t you like to go outside first? After you swing for a while or play ball, you can come back in and play “Prince and Princess.” No. We don’t want to go outside. We want to play dress-up and then color.

Conclusion The children stayed inside and played dress-up, and they still had time to color. They did all the compromising they were willing to do. Mr. C. failed to offer the children something that was as important as the plans they had made.

Example 2 The owner of a small strip mall in the heart of a residential neighborhood was planning to add a small movie theater to the other businesses in the mall. The existing parking lot didn’t meet the current parking standards for that size theater, however. According to the city’s zoning laws, the owner had to supply additional parking, or apply for a variance. The owner decided to try for a variance. When his variance application was made public, neighbors became concerned about the changes to the mall. They were worried about the increase in traffic through their neighborhood and the possibility that the few scarce on-street parking spaces would be used by theater patrons. They were also concerned that teenagers would congregate outside the theater at all hours and there would be more litter and trash around the mall’s parking lot. The owner and a small group of neighbors met to talk about these problems. The neighbors:

The neighborhood has four concerns: Theater patrons will be taking up scarce on-street parking spaces; there will be an overall increase in traffic coming through the neighborhood and vehicles will be turning into and leaving the parking lot; the parking lot will start to look trashy; and teenagers attracted by

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the theater will start to hang around and maybe wander around our yards at night. Owner:

You know that there’s always plenty of parking in the south end of the mall’s parking lot. With the Comedy Club and the grocery store on that end, the north lot is used more, but it’s not ever full. So, even though I’m not adding any parking, I’m certain the lot will accommodate the theater crowd without increasing the parking on your neighborhood streets.

The neighbors:

We hope you’re right. We’re just not convinced. Right now, with your plans to put the entrance of the theater on the east side of the mall, the closest parking to it is along Elm Street. All a patron has to do is park on Elm and walk beside Joe’s yard through the small alley there, and break in his door. We’d really like to block off that cut-through and have the theater face the south. And, as you said, the south parking lot has not been used much, and we’d like to keep it that way. Many of our homes back up to that lot; lights in and out at night can be very annoying. We’d like you to prohibit cars from entering or leaving from the south lot. You could have all of the traffic enter from the north lot; only when that lot is full would cars come around the mall and park on the south side.

Owner:

Not having in and out traffic to the south of the mall is just not very practical, I’m afraid. In fact, if I agree to move the theater entrance to the south side, not having direct access to the south lot from the street would be unworkable. Right now, driveways on the south side of the mall are along the east and west side of the parking lot. What if I changed the entrance to the middle of the lot? That way, I could put a privacy fence along the east and west—at the backs of your yards. The fence would shield neighbors from the lights from the vehicles and block the walking access through the alley.

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The neighbors:

Owner:

The neighbors: Owner:

But we use those side drives to get to our garages. If the fence was set back the width of a driveway onto your property, there could still be access from the street to our garages—just not to the main parking area. The fence would help with the vehicle lights and buffer this noise from the kids who hang around. But you’re going to have to have some kind of security as well. Teens can form into gangs if left unwatched. Now you’re talking about considerable expense. If I agree to move the theater entrance to the south, add a new entrance into the south lot, put a privacy fence along both the east and west sides of the south lot, set back a driveway width, and make sure the parking lot is kept clean, then will you agree not to push for increased private security? Yes, but the privacy fence has to be landscaped so that it doesn’t look like a ghetto wall. Agreed.

Conclusion Both sides had to give up something on certain items in order to reach agreement. The compromises were what everybody could live with, however. And a year after the theater opened, the neighbors reported that they were very happy with the way it all worked out. The fences created a buffer from the lights and noise, and they discouraged patrons from parking on neighborhood streets.

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Tactic 40: Be Friendly Being polite, respectful, professional, and pleasant always enhances one’s ability to reach an agreement, but going out of your way to be friendly is an especially helpful tactic. If your opponent is aggressive or angry, your friendliness might disarm and relax them to the point where they begin to talk about their priorities and objectives. They might even start to underestimate your negotiating skills. Take advantage of any confusion about your friendliness to try to get them to agree to some of the easier things you have to work out. Your opponent might give in readily, thinking that you will be just as easy to work with on the sticky issues. This gives you an advantage, because you are the one to set the tone for agreement. Present your position forcefully, but be friendly.

Example 1 Joan was new to the neighborhood, so her neighbor’s barking dog came as an unpleasant surprise. Joan had a new baby, and sleeping at night was already a difficult proposition! When the neighbor’s dog began to bark at 3:00 a.m. and didn’t stop until 6:00 a.m., Joan was already pretty tired, and started to get upset. She sought advice from the family on the other side of the neighbor with the barking dog to see whether this 3:00 a.m. incident was usual or unusual, and what kind of complaints might have already been made. She learned that everyone in the neighborhood had complained at least once, and that as angry as they were, they had gotten nowhere. The dog was Mrs. Lonely’s only companionship, and because she was hard of hearing, she just didn’t think it was a serious problem. She didn’t believe her neighbors ought to complain about the barking. Joan decided to at least try and talk to the neighbor. Joan: Hi, Mrs. Lonely. I’m Joan, and I just moved in next door. Mrs. Lonely: If you’re here to complain about my Rocky, just forget it. Close your windows at night and don’t listen.

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Joan:

Mrs. Lonely:

Joan: Mrs. Lonely: Joan:

Mrs. Lonely: Joan:

Mrs. Lonely: Joan:

Mrs. Lonely: Joan:

No, not at all. I just wanted to come by and introduce myself. I’d like to introduce you to my new baby, too. Maybe I could come back tomorrow and bring him? Oh, sure. I guess so. (Joan’s sleep was disturbed by another night of barking, but she took her baby and went to visit Mrs. Lonely again.) Hi. Here’s my little angel, Mikey. Why, isn’t he cute! He’s a handful, though. He’s been keeping me up at night. I sure hope he starts sleeping through the night soon. When he does, I might have to talk to you about Rocky. Who, by the way, is a really sweet dog. I stopped by and visited with him over the fence this morning. How long have you had him? Almost eight years now. He’s a real comfort to me. I know that some of these people around here don’t like him. Well, it’s probably because they just haven’t had the time to get to know him. The barking at night has been mentioned to me. Do you think his age has contributed to some of that? You know, I’ve got a friend who is a veterinarian, and I’d like to have him stop by and look at Rocky—would that be okay with you? Well, I can’t pay for something like that. I’ve only got my Social Security. No, no, don’t worry about that. My friend wouldn’t charge anything for talking to us about Rocky and maybe giving us some advice. I guess that would be okay, then. Well, I need to get the baby home. I’ll see you.

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Conclusion Joan’s friendly approach enabled her to understand Mrs. Lonely’s needs and arrive at a workable solution to the problem. After Joan’s veterinarian friend visited with Mrs. Lonely and Rocky, he prescribed medicine that gave Rocky a more regular sleep schedule. The barking all but stopped. Joan took up contributions from the neighbors, and Mrs. Lonely didn’t have to pay for the medicine she could not afford.

Example 2 Company ZZZ planned to close its manufacturing plant and lay off 300 union employees. Under its new corporate structure, its 150 management and sales employees could continue to work in Happy City, U.S.A., overseeing a factory in Mexico and selling products in the states. Company ZZZ was not able to meet with local elected officials regarding the status of their operations before the press reported the layoffs and the uncertain future for the 150 white-collar employees. When he heard the news on the radio, the mayor called and asked for a meeting with Company ZZZ officials. Company ZZZ, recognizing that the layoffs would be an issue in upcoming local elections, agreed to meet with the mayor. They anticipated that it would be an unpleasant meeting. Here’s how the meeting went: Company ZZZ: We’re very sorry, of course, that the press got hold of the story of our company’s activities before we could call you to let you know. Hearing about this from the press obviously puts you in a very embarrassing situation. Mayor: (very friendly) I understand how these things happen. It’s very difficult to make a move of this type without having it leak out. I think that if you could have let me know ahead of time, you would have. Company ZZZ: (surprised) Well, that’s very understanding of you.

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Mayor:

I wanted to meet with you so we can take the necessary steps to keep the 150 jobs here. We recognize that your new corporate owner is a large company located in Malaysia, so we need to understand how we can affect their decision on keeping an office here. Company ZZZ: I’m not sure what to tell you on that. We just haven’t heard anything yet. Mayor: Please let me know as soon as you can, because I’d hate for us not to make an appropriate pitch to them. By the way, the city has a potential buyer for your plant building. The buyer is a “disadvantaged business” we have been working with for some time. They need a really good deal on the plant price. It’s possible that some of the 300 laid-off employees will find work at this new endeavor. I am certain that you would like that kind of “good” publicity coming quickly after the recent bad publicity. Would you be in a position to talk to me about such a deal, or would we need to involve the Malaysia group? Company ZZZ: Certainly. I think I can prevail upon the Malaysia group to let us handle the disposal of the property in such a way as to repair some of the damage our layoffs have created. You’ve been very understanding about this, and I want them to know that. Mayor: Great! Let me know when we can talk again.

Conclusion The mayor’s strategy was to disarm the company with his friendly attitude and in return get a favorable response to his proposal to buy the property in question. This strategy worked. The mayor was able to broker a deal for the “disadvantaged business” to buy the plant and convert it to a different widget maker. Many laid-off employees did indeed find new jobs at the plant, and the mayor was reelected. Unfortunately, the 150 management/sales jobs did end up moving to Mexico.

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Tactic 41: Record the Meeting The climate of a negotiation session can be “chilled” in an instant if one side unexpectedly brings a tape recorder to the table. The effect on the other party might be even more substantial if lies, threats, or simply “bad faith” methods have been used by the other party. They might worry that the tapes will be made public or given to others, thus becoming a source of embarrassment, or used to pressure the other side to agree to certain demands.

Example 1 Susan, age 15, and Alexis, age 14, were on vacation with their parents in Myrtle Beach, South Carolina. The two sisters had saved up a little money so that they could buy souvenirs. Alexis, the younger sister, had $40.00 to spend, but Susan had only $20.00. Susan wanted to negotiate with Alexis to “pool” their money so they could buy something together. Alexis agreed, until Susan said they would evenly split what they bought. Somehow, Alexis knew this was not fair. She borrowed a tape recorder so she could ask her father if this was a fair deal. Susan repeated her demand, this time in front of a hidden recorder. Alexis then played the tape for her father, who was disappointed to hear that she might propose such a deal. He asked his elder daughter about the arrangement. Susan denied it. Then he played the tape.

Conclusion For the first time in her life, Susan understood the impact a tape recording can have when it reveals a lie. She agreed that her proposal was not fair and that she had tried to take advantage of her younger sister.

Example 2 Three men were meeting to discuss a charge of sexual harassment that had been made against Stuart Jones. Fred Adams, the investigator, Michael Wood, Jones’s supervisor, and Jones, the accused, are talking about a possible settlement of the issue.

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Adams: Jones: Wood: Jones: Wood: Jones: Wood: Jones: Wood: Jones: Adams:

Jones: Adams: Jones: Adams:

Tell me again, Stuart, exactly what you said to Ms. Starr. And please describe your general manner. I simply asked her to make copies for me as quickly as possible. And you did not threaten her job if she did not, to quote you, “Do what I want,” meaning something other than copies? No. You never touched any part of her body? Not even accidentally? No. Your request, stares, and gestures did not have a single hint of sexual implication or innuendo? None at all. No one could have possibly misunderstood your intentions? No reasonable person. Well, Mr. Jones, you are aware that the next step in this process is to ask witnesses to come forth. Mr. Ruiz and Ms. Appleton both claim they saw the incident and will testify. So, I’ve brought a tape recorder with me, and now I’ll ask you to repeat your answers—on tape. (a long pause) I want to see my lawyer. So you refuse to repeat the answers you just gave us? Yes. I think I can write my recommendation.

Conclusion Jones had knowingly lied when he denied the charges. He failed to think about what might be the next step. When Adams set the tape recorder on the table and revealed that he had witnesses, Jones suddenly realized that his strategy would not work. But by refusing to repeat his answers, he also lost his negotiating position.

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Tactic 42: Split and Choose When two parties both desire something that can be shared or divided between them, the classic “split and choose” tactic might be the best way to settle the issue. Many of us learned this one from our parents: After two people agree to the strategy, one person is given the task of dividing the object(s) into two parts. The second person then chooses which of the two parts they will receive, with the remaining part going to the person who did the dividing. Realizing the potential of getting the “smaller half,” the divider, of course, is usually careful about dividing the object into two equal parts.

Example 1 Maria (age 8) and Roberto (age 6) are arguing over who should get the jumbo-size Snickers candy bar their father brought home. Their dad instructed them to share the candy bar, which certainly is large enough (he naively thought) for two young children to easily share. Maria:

We can’t share it! It’s in one piece!

Roberto:

I’ll eat half and give you the rest.…

Maria:

No way!

Father:

Haven’t you two heard of ‘split and choose’?

Maria and Roberto: No. What is it? Father:

It’s a fair way to divide things. Maria, take this knife and slice the Snickers into two halves. Roberto will get to choose which half he wants, because you did the cutting.

Maria:

Oh, so I’ve got to cut it into two equal pieces or else he will choose the bigger one?

Father:

Exactly.

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Conclusion When two people desire the same object and it is something that can be divided in some way, both parties, even children, quickly recognize the fairness of the divideand-choose method.

Example 2 Two friends and business partners, Clarence and Archie, jointly purchased fourteen acres of lakefront property several years ago. Archie is ready to build a retirement home on the property, and wants to divide it into two separate parcels. Clarence agrees to divide it, but is not sure how to arrive at a fair split. They have a recent appraisal that values the property at $150,000, but the appraiser pointed out that the seven one-acre lakefront lots are considerably more valuable than the other seven lots. Lots must be at least one acre to be developed, according to county deed restrictions. Archie:

Here is the map. There is only one place for an access road that must serve all lots. Clarence: Right. I don’t really care which lakefront lots I keep. They all have a great view and are equally desirable to build on. Archie: I really don’t care either. The problem is that one of us will get four lakefront lots and the other will only get three lots. Clarence: But some of the lots away from the lake have been partially cleared and are flatter than others. That makes them more desirable. Archie: That’s true, so we should be able to divide the property fairly. I propose that you divide the fourteen acres into two parcels that you believe are about equally desirable: one parcel with three lakefront lots and the other with four lakefront lots. The remaining lots should be distributed between the two parcels to make each parcel as equal in value as possible. Then I will choose which parcel I want. Deal? Clarence: Sure, that sounds fair. Give me the map and a pencil.

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Conclusion Clarence divided the fourteen acres into one parcel with three lakefront lots and six other lots, and the second parcel with four lakefront lots and one other lot. Archie chose the parcel with the three lakefront lots, and both men were happy with the arrangement. Which would you have chosen?

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Tactic 43: Nickel and Diming Insisting on the addition of a small item (a “nickel or dime” item) as an inducement to help settle a more-important item being negotiated can change the negotiations in a significant way. What started out as a single issue is now a combination of a major issue and a much smaller issue, because a “nickel” item has been added to negotiations about a much more significant item costing “dollars,” thus extending the scope of the negotiations.

Example 1 Brenda Davis is always thinking about the repairs that might be required on an item. Her husband Jason, supposedly the bargainer in the household, is expected to dicker over the price. They recently purchased a new bedroom suite after they carefully priced comparable furniture all over town. The suite they liked best was already at the lowest price in town (the retailer was having a real sale). Jason was having a hard time getting the salesman to lower the price. However, Brenda did her part when she said, “Okay, we’ll take the suite if you’ll throw in free delivery and set up the furniture.” Under store policy, delivery was limited to a small geographical area, miles from their home, and the delivery carrier doesn’t set up mirrors, attach legs, etc.

Conclusion The amount the couple spent was fairly large, so the salesperson delivered the suite himself. With a great deal of effort, he also set up all of the furniture in a second-floor bedroom. His tactic was to throw in a “nickel” in order to make lots of “dollars.” Many people have witnessed or used this effective negotiating tactic.

Example 2 An experienced and skillful union organizer liked to tack on a tiny less-significant item each time a company and its union negotiated on a large and

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important item. In one case, the two sides had been engaged in considerable bargaining over an improved medical insurance plan (“Health Plan A”) costing hundreds of thousands of dollars. This experienced bargainer said, “Okay, we’ll agree to Health Plan A with another ½ cent on the pension fund.” The company negotiator yielded to this small-potatoes counteroffer in order to win agreement on the health plan. At the end of negotiations, one member of the management team commented on the move: “This guy has nickeled and dimed us a total of thirteen times—and for a lot of money! Next time we can’t give in on those small add-ons.”

Conclusion The nickel and diming tactic is a classic negotiation tactic used successfully in a variety of situations. If used correctly—at the very end of a negotiation—the tactic can usually provide a small gain. If one party misjudges the situation, it can be a dealbreaker, so be prepared to withdraw the nickel and dime item at the hint of trouble.

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Tactic 44: Make Use of a Positive “Halo Effect” It is common in interviews, decision-making meetings, and performance evaluations for people to come across as likeable, trustworthy, or knowledgeable. People tend to make an effort to put their best foot forward, thus creating the impression in others that the good qualities they see are present all the time. This creates what is called a “halo effect.” Having a member of a negotiating team whom the other side thinks can do no wrong might prove to be advantageous.

Example 1 Donna: Mom said to take what we want from the old house and toss out the rest. Kathy: I suggest we take turns choosing which of these things we want. You can go first. Donna: Okay. I’ll take the color TV. Kathy: I’ll take the pool table. Donna: I’ll take the bar with stools. Kathy: Then I’ll take the couch and love seat. Donna: No way! These are the last two pieces of furniture, and all the rest is small junk. Kathy: But they are a matched set. Donna: They match, but they are two pieces of furniture. Kathy: Well you took the bar and four stools as one item! Donna: They are part of one set. Kathy: Not if you accept your logic! (Pause) Donna: You’re not being fair…

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Kathy: Donna: Kathy: Donna: Kathy: Kathy: Donna: Kathy: Donna: Kathy:

You’re not! (Pause) Well, what can we do? Give me the couch and love seat! No, I want the love seat. I want the stools. (Pause) We’ve got to settle this today and get this stuff moved. Let’s call Johnny Ryan. He’s our cousin, and he has always struck me as an honest person. What for? Tell him the situation, and ask him if the couch and chair should be one item or two, and if the bar and stools should be one item or two. Good idea. I trust his judgment.

Conclusion Kathy and Donna needed an arbitrator to settle their disagreement. Johnny had the “halo” of an honest person. He might or might not have also been a good arbitrator, but Kathy and Donna assumed that one positive quality (honesty) would carry over to other areas.

Example 2 During a heated labor negotiation, the team representing the city management found itself unable to convince the union negotiators that their newly proposed staffing plan would provide adequate personnel for each firehouse. The union negotiators, with a record of labor involvement that included three recent strikes,

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simply did not trust the management team, even if the proposal appeared to be valid. The teams took a weekend break from the stalled negotiations. During the break, the management team hired Sam Boston, the former union president, as a consultant to review their proposal. Boston was widely known as a totally honest man who speaks his mind, without any reservations. On Monday, Boston went to the negotiation table with the management team. He solemnly told the union negotiators that he had been hired to review it, and that he did. He said he believed that it would work as presented by management. The union accepted the proposal. Two weeks later, when negotiations again stalled on a retirement plan issue, the city management again hired Boston. This time, the consultant did not speak, but his mere presence caused the union leaders to accept a management point as valid, thus bringing the negotiations to a conclusion.

Conclusion The union leaders gave Boston a great deal of respect (even in areas such as budgeting and actuarial tables) because of his former position. They might have stretched his halo farther than his expertise and experience warranted, but the power of the so-called halo effect was great.

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Tactic 45: Use Facts Fact-gathering must be part of the preparations for every negotiations session, but the key is to gather facts that you might need—not just the facts that you will need. Being able to present them at the most appropriate and critical times has made the difference in countless negotiation situations. Sometimes, the other party will ignore or refuse to believe the information, but the right facts presented at the right time can chill or astound and completely turn things around.

Example 1 Henry and Maria Lopez are interested in a house that lists for $275,000. They believe it is overpriced. The owner, Sam Jones, has owned the house for 24 years and is downsizing to a condo. Henry Lopez: Sam Jones: Maria Lopez: Sam Jones: Maria Lopez:

Sam Jones: Sam Jones:

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We love the house and have made a written offer of $240,000. What? That’s $35,000 under the listing price! We realize that, but we feel that it’s a fair offer. How can you say that? We went to the county courthouse and looked up the real estate transactions for all the houses in this neighborhood that were sold over the past two years. Here’s a list of the five that are about the same size as yours. They sold for: $225,000; $229,000; $235,000; $237,000; and $237,500. This offer is for more money than any four-bedroom houses on this neighborhood list. We love your house, but you’ve priced it way too high. I’ll get back to you. (Next day) We’ve reviewed the records you’ve produced, and we are countering with an offer of $250,000.

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Henry Lopez: Sam Jones: Henry Lopez: Sam Jones:

Let us discuss this for a minute. Well… We have a written counter of $245,000. We accept.

Conclusion The Joneses had based their asking price on the advice of a friend, who was not particularly knoledgeable about real estate. The facts presented by Henry and Maria Lopez caused Jones to re-counter their asking and likely sale price.

Example 2 Supervisor: You know the policy. You can’t pay more than $1,600 for a computer. Hatfield: My staff has done a lot of research, and we know that only this model will meet our needs. We’ve talked with purchasing and we have the authority to buy seven for $2,400 each. That’s the bottom price. Supervisor: If I okay this purchase order, I’ll get called on the carpet. No one can go over $1,600 unless the company president approves. Hatfield: While I was at purchasing, I asked for a list of all new PCs bought this year. Here it is. The last 20 were over $2,000 each. Supervisor: Well, I’ll be… Okay, if other departments have ignored the policy, let’s not worry about it. Order the new computers.

Conclusion Hatfield had anticipated what his supervisor’s position would be, and did his homework. He found facts that supported his position, and wisely chose exactly when to present them in order to make his point.

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Tactic 46: Ask Probing Questions Ask probing questions and follow-up questions. They can help you identify or better understand what the other side really wants, reveal misperceptions or lack of knowledge about positions that can be corrected, and help you point out inconsistencies in a position that might “lead” the other side to change theirs. The effective use of probing questions can help achieve a favorable settlement.

Example 1 Maureen: What, I can’t check out these four books? Jenny (Librarian): That’s the policy, Maureen. A maximum of three books can be checked out to a person at any one time. Maureen: The policy limits a person to only take out three books at the same time? Jenny: Yes. Otherwise, some people would have forty or fifty books out at the same time, and they would all be unavailable to others. Maureen: Well, you know me. Would I do that? Jenny: Maureen, I’m sure you would not, but I don’t set the policy and I can’t make exceptions. Maureen: So you trust me with the books, but you don’t want to jeopardize your job? Jenny: Yes, I trust you. But I can’t break the limit rule—it is an absolute rule here. Maureen: Well, I want two of these, and two are for my husband. If you trust me, can you check out two on a card for him? Jenny: Well, yes. I can do that within the rules.

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Conclusion Maureen used probing questions to uncover a way to solve her problem and make it easy for Jenny to stay within the library rules.

Example 2 Jack: Mark: Jack: Mark: Jack: Mark: Jack: Mark: Jack: Mark: Jack: Mark: Jack: Mark: Jack: Mark: Jack:

Mark, are you sure I can’t get your information technology people to give us direct information on product sales? No, we can’t do that. Why? Some policy? Yes. What’s the policy number or date of approval? I don’t know. Can you get me the number? Sure. (Next day) Do you have the policy about giving out product sales information? No, I couldn’t find anyone who knew it. They say it’s a security issue. Security? Right. If that data ended up in the wrong hands, it could kill us. But this forces us to make decisions without complete information! Yes, but it’s because you don’t have access clearance. Who does have access clearance? Mike, Brooks, Babu, Sue, Jay, Mary, and Kenzie. Mary and Kenzie? They are 2-3 pay grades below us, and they don’t even have a use for the sales data.

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Mark: Well, that’s been the policy since I’ve been here. Jack: Can you ask your V.P. if we can have access? Mark: I guess so.… (Next day) Mark: The vice president said you can have access if you sign a security card like everyone else who has access clearance. Jack: Here, I’ll sign now. When can I get the data? Mark: Today. I’ll get it for you ASAP.

Conclusion Jack continued to probe by asking why and who in order to find out more about “the policy.” He intended to do this until he hit a dead-end or was able to find a solution to his problem. Once he discovered that employees in lower pay grades had access clearance, Jack was able to receive clearance as well. His probing questions turned up a critical fact.

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Stage 7: Reaching Agreement

T

he final stage! It might come minutes, hours, days, or even months after the first offer is presented. When two parties believe they have an oral agreement, Tactic #50 should always be used right away: Commit the Offer to Paper! Even small issues negotiated among friends can cause problems if people rely on memory and assume that both parties have “heard” the exact same conditions. If people are not willing to take even a few minutes to write down the terms that have been agreed upon and sign the paper, how solid an agreement can it be? Even parents negotiating chores and other aspects of life with their teenagers have found it useful to have their children write down and sign the list. They bring it out when a dispute arises, and the child learns an important lesson about life. Other final-agreement tactics include Tactic #47 (Giving Premature Congratulations) to make the other side feel good about having achieved an agreement (while you spring another condition on them), and the classic Walk Away (Tactic #48), which is used only when a negotiator is prepared to end negotiations without an agreement and you want the other party to make a final concession to reach a settlement. If both parties desire a settlement but cannot seem to reach it through the usual give-and-take process, Tactic #49 (Final-Offer Arbitration) should bring about a settlement. In this process, the two parties agree to let a third party render a decision on unresolved issues and agree to accept the arbitrator’s decision as final and binding. When multiple issues are at stake and most have been agreed upon during negotiations, this process can easily result in a final settlement. If friends or neighbors need to settle something but prefer to avoid the negotiation process, this tactic can produce an agreement.

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Tactic 47: The Premature Congratulation This tactic draws its strength from timing. The bargainer skillfully 1) begins the congratulation sentence “I agree…”; 2) allows the other side to feel the release that comes with completing the bargain; 3) and adds one last key demand to the congratulation sentence.

Example 1 Many husbands and wives have different ideas about how they’ll spend their vacation. Larry Snyder gets bored staying in any one place for many days, but his wife Nancy likes to stay put and relax. They both have stressful jobs and look forward to their annual vacation together. After days and weeks of on-again, off-again discussions, Nancy brought up the subject of vacation again after dinner. She said, “I’m thinking of agreeing to your plans for vacation. Let’s do go to Virginia Beach and Washington D.C.…” Larry was very pleased that his wife was agreeing to the idea he had been trying to sell. As he hugged her, she continued to speak: “…as long as you agree to drive us to visit my mother on her birthday.”

Conclusion The husband was so excited about visiting Washington, D.C. and Virginia Beach —his plan—that he let the euphoria of the moment cause him to agree to a trip he dreaded and in fact had successfully avoided all year. His wife had carefully planned her exact “premature” vacation agreement.

Example 2 Negotiations can take a long time and incorporate many issues. Weeks of stressful meetings cause both sides at the bargaining table to look forward to its conclusion. Near the end of a particularly anxious bargaining session when there was little time left to negotiate, one exhausted negotiator saw that his team was equally weary and

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almost willing to accept any deal. (This is a bad position to be in, because it makes you pretty vulnerable. One of the best pieces of negotiation advice is to remain fresh, fit, and rested.) Here’s what happened: Bob: I knew that the other side was similarly harried, but also that they sensed the weariness of my team. In our last offer, we made some small concessions on financial matters, but held firm on remaining operating principles. One operating issue involved the probation period for new employees. The old agreement specified a 30-day period, but the other side continued to ask for 60 days. My team had convinced me that doubling the time frame would create a real problem on the shop floor. Therefore, we held firm on this and did not discuss the probation issue and many other “dead” issues for days. When the chief negotiator emerged with his team and headed toward my team, I felt the tension in the room. We all knew that it could come down to agreement or strike. It was so close. However, as the negotiator came closer, he turned on a large warm smile and extended his hand to shake, symbolizing that he was agreeing to the entire final offer. Ted said, “It was hard for us, but we agree to everything in your final proposal…” Members of my team shouted hooray. There were grins and handshakes coming from the other side. The celebration had begun. Most people didn’t notice that the negotiators had not finished their hand shake… Ted: Then Ted continued his sentence with, “…as long as you give us a 45-day probation period.” Bob: Ted timed this perfectly. My team was afraid we would not even come to an agreement; and this skillful negotiator let them feel the happiness and security one feels when the fear vanishes. It took only a few minutes of caucusing for my team to convince me that a 45-day probation was costly, but acceptable.

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Conclusion This “premature congratulation” tactic can only be used successfully at the very end of an unsure and shaky negotiation. The negotiator makes a big show of agreeing and allows the other side to bask in the glory of a deal completed. However, the negotiator skillfully finishes his words of congratulations by inserting one last key demand, knowing that it will probably be agreed to in order to continue in the euphoria of the moment.

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Tactic 48: Walk Away Walking away from the table in the middle of negotiations is a risky tactic that should only be used when you know you have a good alternative to what is on the table AND you believe that the other party will think that you really are serious about quitting for good. Your opponent will have to either let you go and run the risk that things are really over, or go after you and perhaps make a new concession in order to get you back to the table. Whether you are really bluffing or you are serious, be sure you think this through beforehand.

Example 1 Jay Vahaly has purchased three new Toyotas from Pembroke Toyota over the past twelve years, all from Sue Wilson, a veteran salesperson. He stopped by Pembroke one day to look at the new models. Jay: Hi. My name is Jay Vahaly. I’ve worked with you before. Sue: I remember you, Jay. You bought your wife a new van just last year, right? Jay: Yes, and the lease on my Avalon is about to expire. I like it, but I thought I might want to try a new Highlander. Sue: Let me get you the keys so you can take this one home overnight to see how you like it. (Vahaly drives the new Highlander home. He really likes it, but his Avalon has been a good car, and he can simply buy it when the lease expires. The next morning, the following exchange occurs.) Jay: Sue, here are your keys. Sue: Well, Jay, how did you like it? Jay: Okay, but my Avalon is a good car, too. I don’t want to negotiate. You had time to assess my car; if I roll over the lease to a Highlander, what can you do on a 36-month lease?

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Sue: Give me a few minutes and I’ll find out … (20 minutes later) Sue: Well, Jay, you can turn in the Avalon and get the Highlander for only $249 dollars more per month. Jay: What? I was thinking the lease payment would be, at most, $100 more. Sue: Sorry. These Highlanders are hot items! Jay: Well, I’m disappointed. I thought I’d get a fair deal. Please go back and work out a lower lease payment. Sue: I’ll try. (15 minutes later) Sue: Well, Jay, they came down to $199 more on a thirty-six month lease. Jay: I guess I’ll go to Dixie Toyota and see what they will do for me. (He walks away) Sue: No, Jay—wait. Let me try again. (Jay got in his car and drove home. Sue called him as soon as he walked in the door and offered another $50 break on the lease. Jay accepted. That was the figure he was looking for. He was prepared to keep his Avalon if the lease was even $1 more than his limit.)

Conclusion Jay knew his BATNA (best alternative to a negotiated agreement): to go somewhere else if the deal isn’t good enough. He effectively used the walk-away tactic to let Sue know that he was firm on the price.

Example 2 Larry and Judy Bizannes own the Bizannes Music Mart, a successful musical instrument sales and rental store. They’ve talked about retiring in recent months, but

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both of them love their store. One day, Michael Roberts, a local developer, visited their store. He met with Bizannes twice before. Michael: Good morning, Larry. How’s business? Larry: Great! I’m surprised to see you again. Michael: Well, Larry, I still want to develop this block, and I only need your building to own it. Larry: Yes, you’ve already told us that, and we gave you our price. You rejected it, so why are you here? Michael: I’ve discussed it with my partners, and I’m prepared to offer you $4.5 million, today, with a certified check. Larry: Judy, come out here! (Judy comes out from the back room.) Larry: Michael is here again, and he is offering us $4.5 million for the building. What do you think? Judy: Larry, our accountant said it’s worth $6 million, and I’m not interested in less. Michael: I have a check right here for 4.5 million. Judy: Larry, let’s eat lunch. Larry: Michael, go back to your office. (Judy and Larry walk into the back room and close the door. Two months later, after no contact from Larry or Judy, Michael calls on them again with a check for $5.5 million, which the Bizannes accept.)

Conclusion Larry and Judy used the walk-away tactic and stayed away for two months in order to convince Michael that they were firm on their price. In reality, they were prepared to accept $5.0 million, but their continued walkout convinced Michael that they would hold firm.

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Tactic 49: Final-Offer Arbitration Mediation and arbitration are two well-known ways of resolving sticky disputes. Both involve the use of third parties who are objective. In mediation, which is generally voluntary, the mediator works with both sides to resolve certain issues but has no authority to make binding decisions. In arbitration, the arbitrator is given the authority to make the parties comply with the final and binding decision. In most arbitrations, both sides have agreed in writing to accept the arbitrator’s decision. In final offer arbitration, each party submits their final offer on each unresolved issue (usually in writing) and the arbitrator chooses one as the final settlement as it has been submitted (no changes or compromises). Each party wants their offer chosen, so they generally give up some ground and try to make the offer appear as fair and reasonable as possible.

Example 1 Jenny and Lynne are sisters. Jenny has an antique Singer sewing machine, which she has kept in a barn for over ten years. One day Lynne dropped by for a visit and the discussion turned to the old Singer. Lynne told Jenny that she and her husband Gary have restored two other Singers, and would be able to restore hers as well. Jenny told Lynne she could take the old Singer that she has no interest in (and doubts that it is worth restoring). Six months later, Lynne and Gary bring the restored Singer to Jenny’s house. They inform her that they put the machine on e-Bay and have an offer of $1,000. Jenny told them to sell it. Lynne responded that this was their intention, but they wanted to give Jenny $500 for her “share” of the machine. The following discussion occurs: Jenny: The old machine wasn’t worth $50 when you took it. Keep the $1,000. Lynne: No. We have a few dollars invested in parts and we had fun working on it. Let’s split the money. Jenny: No, I won’t take it. I offered it to you for nothing. That was the deal. Lynne: No! I suggest that we each write down our position and let Dad choose one of the two as the final decision. But he isn’t allowed to try to find a “middle ground”—just to choose one position or the other.

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Jenny: Dad:

Okay. I’ll buy that. (One week later) I think Jenny’s position is the most reasonable. At best, the old machine was only worth $50 when Lynne hauled it away. Any increase in value was due to the work of Gary and Lynne. They should get the other $950.

Conclusion Jenny’s final position was that she receive $50—the maximum possible value of an old “junker.” Lynne proposed a 50-50 split. Their father found Jenny’s position to be the most reasonable; he did not need to “haggle” with them, since he could only choose one offer.

Example 2 Ralph:

Well, Tina, after six weeks of negotiating, we are down to only three unresolved items. Tina: Yes, but we’ve made no movement on any of them since we started. I can’t see any way to reach an agreement. Ralph: I know. My troops are getting restless, so I am invoking the finaloffer arbitration ground rule we have in place. Tina: Good. Then we both submit our final offers to Judge Ryan within 48 hours, and meet back here in 72 hours—3:00 p.m. on Friday. Ralph: Right! (Friday at 3:00 p.m.) Judge Ryan: Here is my written, binding decision on the three items. As a brief explanation, first on the health insurance co-pay, I have chosen management’s offer to keep it as it is under the current contract. The union’s position could have run into millions of dollars, based

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Ralph: Tina:

on last year’s data, and an item that large should have been negotiated at the table. Second, on the clothing allowance, I have chosen the union’s final offer. It will only cost $120,000—less than 1 percent of the total package. No increase has been given for six years. Finally, on the merit pool distribution method issue, I have chosen management’s offer because the union did not justify why the past practice should be changed, nor why their method was superior. Well, I’m not happy with your decisions, but we agreed to this process. Now let’s get a signed contract. Ralph, I’m sure you realize that we could have taken six more weeks to reach the same point. At least we both saved time, money, and stress.

Conclusion The final-offer arbitration process enabled the parties to gain a fast, reasonable resolution to their last three unresolved issues, and peacefully finalize a contract that contained several important gains for both sides.

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Tactic 50: Commit the Offer to Paper You can often control the progress and direction of a negotiation by writing down the agreements or understandings as they are being reached. During a discussion, everyone is busy grappling with the details of the negotiations. The party who writes down what has been agreed upon right away might have some advantage in precisely wording the agreement to that party’s advantage. At the very least, seeing the agreement in writing will force both sides to acknowledge what has been said and agreed to in the negotiations. The goal of recording the precise details is to either avoid any misunderstandings or address them before the talks conclude.

Example 1 Bill and Paulette had been house-hunting for some time. They finally looked at a house they really liked. The owners were selling the house without a real estate agent, and while Bill and Paulette had been using an agent to help locate houses, they looked at this particular house on their own. They saw the “For Sale” and “Open House” signs, and decided to stop by to see if they liked the house. They were not the only couple to come to the open house, however, and one of the other couples looked very interested. Bill and Paulette fell in love with the house, and felt that they would have to work fast to make an offer before someone else did. Bill pulled the seller aside. Bill:

Can we talk to you a minute? What’s your asking price?

Seller: We’re asking $152,000. Bill:

And that includes the appliances in the kitchen? And all of the drapes and blinds?

Seller: Yes, all the usual stuff in a sale. Obviously, not the furniture. Bill:

Okay. We’d like to make you an offer of $150,000. If we shake hands on it right now, we won’t be involving our real estate agent.

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Seller: Just a minute. I think we can work something out, but I’d like to make sure there are no misunderstandings. Let me just get the standard “offer of sale” form and fill out what I hear you saying. (The seller recorded the offer of $150,000. Under the section for appliances to be left on the property, he listed the stove, the refrigerator, and the garbage disposal. In the section for fixtures and miscellaneous items to be left on the property, he listed an attached hutch in the kitchen, all window blinds and drapes, and two area rugs.) Seller: So, look this over. If it’s what you meant, then we have a deal. Bill: (pleasantly surprised to learn that the garbage disposal, the hutch, and the two area rugs were specifically included, since he probably would have missed them) Yes, that’s what I meant. Seller: Okay, the house is yours. Sign here.

Conclusion The seller had always intended to leave the garbage disposal, the hutch, and the two area rugs, and had been prepared to drop his price to $145,000. When he had the chance to put the deal in writing, he left the price at $150,000 and added the additional items to “sweeten the pot” and give Bill and Paulette a deal they couldn’t refuse. It worked.

Example 2 Monica brought a sex discrimination charge against her employer, a public agency. In her complaint, she said that her supervisor had repeatedly asked her out, and when she refused, he began to have “problems” with her job performance. The supervisor assured the employer that there was no basis for her complaint, and that the problems with her job performance were, in fact, real. The supervisor pointed out that he had a staff of 20 or so women, and that no one would ever say that he was guilty of any type of sexual harassment or sexual discrimination. The employer’s affirmative action officer looked into the charges and determined that

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there was little basis for the complaint, but said that fighting the charges would be a long, drawn-out, and expensive matter. Monica had, by this time, found a new job and wanted compensation for “embarrassment” and lost wages in the amount of $100,000. The supervisor insisted that if the employer felt he had to settle, then Monica had to acknowledge that the supervisor did nothing wrong. The employer’s lawyer told Monica’s lawyer that the employer was ready to settle the deal for the $100,000. He offered to send settlement agreement papers to her. Monica’s lawyer (She): Employer’s lawyer (He): She:

He:

She:

He:

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I was surprised by your settlement documents. Why’s that? Well, you didn’t mention in the agreement that in exchange for the $100,000, my client is supposed to formally withdraw the complaint rather than just settle it, and must agree not to tell anyone about the $100,000. She thinks the withdrawals and the secret settlement will be seen as some kind of admission on her part that she shouldn’t have brought the claim. Withdrawing, settling—What difference does it make to her? She’s getting her $100,000 without actually having to prove anything. And the confidentiality clause is standard. It might be standard when there’s a settlement, but it’s not standard when a complaint is formally withdrawn. You’re just trying to make it seem as if your supervisor did nothing wrong, even though you are paying Monica because we can prove he did do something wrong. Look, the supervisor says he did nothing wrong and that Monica just misinterpreted what he said. He’s happy to prove that in court. But the employer doesn’t want to go through the expense and publicity of a trial, even though we’re certain we would prevail. I’m

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She:

authorized to pay $200,000, but that’s under the same conditions—the claim must be formally withdrawn and Monica can never reveal the amount of the settlement. I’ll take your offer back to her and let you know.

Conclusion The decision by the employer’s lawyer to send a written agreement that did not reflect the actual agreement of the parties caused the negotiations to resume, to his disadvantage. Monica accepted the $200,000 and the conditions of the offer. There was a confidentiality agreement, but word did get out that a public agency paid $200,000 when all that was asked for was $100,000. It was made clear that the employer had paid the additional $100,000 just to get the employee to “withdraw” the complaint. It would have been a better strategy in this situation to raise the issue of withdrawing the complaint during the actual negotiations.

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SECTION IV: PUTTING THE AGREEMENT IN WRITING

A

s you can see, reaching an agreement is sometimes a long and difficult process. Unfortunately, operating under an agreement after it has been reached can be even more difficult. As these examples of personal and business negotiations show, it is much more effective in the long run when the parties enter into “win-win” agreements; when they engage in honest “give and take” negotiations; and when they agree to solve problems together, rather than attack each other. Reaching an agreement is the first step; then the parties have to abide by the agreement. One way to help the parties abide by an agreement is to put it into written form. Putting an agreement into writing serves three purposes: communication, commitment, and contract. The degree of detail and formality of a written document will, of course, depend on the kind of negotiations in which you are involved. When two friends agree on what movie to see, a written document is hardly necessary. A union contract, however, most certainly needs to be in written form. However, even an informal agreement benefits from some type of written documentation. In Tactic #17 (Package Items), the three sisters reached an amiable agreement, but some of the decisions were put off for a couple of months. If the agreement reached at the time had been put into writing with all three sisters signing it, it would have been easier to resume negotiations at a later date.

Communication Hearing is not necessarily the same as listening. Think of how often you have said to someone, “Oh, I thought you said something else.” By the same token, talking is not always the same thing as communicating. Certainly someone has said to you, “That may be what I said, but it was not what I meant.” Clear communication is essential if you want to reach an agreement and have it abided by.

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Communication is a process that involves a sender and a receiver. The sender wishes to convey an idea, seek information, or express a thought or emotion through words, pictures, sounds, or movements. The receiver has to decode the message being sent by trying to understand and interpret the words, pictures, sounds, or movements being used by the sender. And because the sender and the receiver are two unique individuals, the message being conveyed and received might be understood differently. When communication is limited to the spoken word only, the opportunity for the sender and the receiver to misinterpret is greater than if the communication is first spoken and then written. Writing an agreement down gives the parties an opportunity to use more-specific or precise language and eliminate some of the emotion that might have accompanied the negotiations. Negotiations are often necessary because there was a “misunderstanding” that could have been avoided if the parties had put their agreement in writing. In Tactic #4 (Use Objective Criteria), Larry wouldn’t have had to argue over a bill for the plumbing work his cousin Will did if he had asked for Will’s estimate before accepting his offer to help.

Commitment Reducing an agreement to writing often forces both sides to truly commit to the agreement. When you create a written record of the details of an agreement, you have created something tangible that can be referred to in the future when memories become fuzzy. Oftentimes just seeing the agreement in black and white conveys its import as well as or better than hearing about it. Who isn’t excited about buying a brand new SUV or truck? Until, that is, the price is spelled out in the loan document as “twenty-two thousand, nine hundred and forty-four dollars—$22,944.” In Tactic #14 (Don’t Always Hide Your Weaknesses), Jason agreed to change his study habits if he couldn’t pull his grades up by the end of the semester, a couple of months away. His mom could more easily enforce the agreement if she had it in writing. If Jason fails to live up to his side of the deal, he can be reminded of the details because it’s all there in black and white.

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Contract Finally, pulling an agreement in writing, dating it, and getting all the parties to sign it usually creates an enforceable contract. You can informally enforce an agreement just by showing the individual(s) the signed copy as a reminder of the substance of the agreement and their commitment to it. You can do this more formally by taking them to court (perhaps as a last resort). In either case, protect yourself by having a written, signed, and dated agreement. When you are ready to commit yourself in writing, ask yourself the basic questions of who, what, why, when, where, which, which kind of, how many, and how much, and put that information into the document. Here’s what we mean. WHO? Provide of the full names the parties necessary to the agreement. If you have agreed to pay someone to house-sit while your family is on vacation, have your spouse also agree to the details of the agreement, in writing, before the trip. Your spouse will share some responsibility for failing to make that duty clear in the agreement if, say, your plants die because the house-sitter wasn’t told to water them. WHAT? The written document should clearly describe the item(s) covered by the agreement. Failure to do so can lead to big problems, as many people learn when they purchase a home. Generally, the real estate contract includes information about the buyer and seller, the address and description of the real property, and so on in standard contract form. However, details such as what fixtures stay or what appliances go can be easily overlooked, leading to misunderstandings and contract disputes. Carefully and completely describe the subject matter of the agreement. WHY? The “why” of an agreement is generally the explanation of the mutual obligations or advantages the agreement represents—the reason why the parties began negotiating in the first place. One party wishes to buy what the other wishes to sell; one party will work if the other party pays for the work; one party will change behavior in exchange for something of value from the party who wants the behavior changed. Both parties must receive a benefit or something they personally consider of value, or it isn’t an agreement—it’s merely the conveying of a gift.

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The remaining questions fill in the details of the agreement, depending upon the deal: when or where, which one or which kind of, how much or how many. The more-specific and clear these details are, the better. Putting an agreement in writing, dating it, and having all parties sign it ensures that the parties have, in fact, agreed to the same thing. It gives the parties an opportunity to really buy into the deal. And it can create a tangible reminder of the deal (or an enforceable agreement, if that becomes necessary).

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Personal Negotiations Negotiation situation:

Parties involved:

Issue:

Tactics that might be helpful, and how they can be used:

Exercisethe Forms Putting Agreement in Writing

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Business Negotiations Negotiation situation:

Parties involved:

Issue:

Tactics that might be helpful, and how they can be used:

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Name of Negotiation Tactic

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REFERENCES Carrell, M. and C. Heavrin. 2004. Labor Relations and Collective Bargaining: Cases, Practice, and Law. 7th ed. Upper Saddle River, New Jersey: Prentice-Hall, Inc. Cleary, Patrick J. 2001. The Negotiation Handbook. New York: M.E. Sharpe, Inc. Cohen, Herb. 1980. You Can Negotiate Anything. New York: Bantam Books. David, M., E. R. Eshelman, and M. McKay. 1988. The Relaxation and Stress Reduction Workbook. Oakland, Calif.: New Harbinger Publications, Inc. Domenici, K. and S. LittleJohn. 2001. Mediation. 2nd ed. Prospect Heights, Ill.: Waveland Press, Inc. Fisher, Roger, and S. Brown. 1989. Getting Together: Building Relationships As We Negotiate. New York: Penguin Books. Fisher, Roger, W. Ury, and B. Patton. 1991. Getting to Yes: Negotiating Agreement Without Giving In. 2nd ed. New York: Penguin Books. Fiske, C. and J. Clark. 1996. Negotiation Skills. University of Missouri: Columbia Press. Fuller, George. 1991. The Negotiator’s Handbook. Upper Saddle River, New Jersey: Prentice-Hall, Inc. Gotbaum, Victor. 1999. Negotiating in the Real World. New York: Simon and Schuster. Kennedy, Gavin. 1987. Pocket Negotiator. New York: Basil Blackwell, Inc. Lewicki, R. J., D. M. Saunders, and J. W. Minton. 1997. The Essentials of Negotiation. Chicago: Richard D. Irwin. Maddux, R. 1988. Successful Negotiation: Effective “Win-Win” Strategies and Tactics. Los Altos, Calif.: Crisp Publications, Inc.

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Nierenberg, Gerald I. 1981. The Art of Negotiating. New York: Simon and Schuster, Inc. Raiffa, Howard. 1996. Lectures on Negotiation Analysis. Cambridge, Massachusetts: PON Books. Raiffa, Howard. 1982. The Art and Science of Negotiation. Cambridge, Massachusetts: Harvard University Press. Shell, G. R. 1999. Bargaining for Advantage. New York: Viking Press. Stulberg, J. B. 1987. Taking Charge/Managing Conflict. Lexington, Massachusetts: D. C. Heath and Company. Tsogas, George. 2001. Labor Relations in a Global Economy. New York: M.E. Sharpe, Inc. Thompson, L. 1998. The Mind and Heart of a Negotiator. Upper Saddle River, New Jersey: PrenticeHall, Inc. Ury, William. 1991. Getting Past No: Negotiating with Difficult People. New York: Bantam Books. Weeks, Dudley. The Eight Essential Steps to Conflict Resolution. 1994. New York: Penguin Putnam, Inc. www.negotiationsources.org

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ABOUT THE AUTHORS

M

ichael R. Carrell is Dean of the College of Business at Northern Kentucky University, which is located in the greater Cincinnati area. He received his doctorate from the University of Kentucky, and MBA and B.A. in Economics from the University of Louisville. Most of his professional career has been spent in the Louisville area and has included positions as a personnel director and labor negotiator. These positions enabled him to build a sizable management consulting practice while teaching at the University of Louisville. In addition, he was elected to the City of Louisville Board of Aldermen for five terms, and served as President of the Board and Mayor Pro-tem for three terms. Dr. Carrell has held academic positions at California State University, Bakersfield; The University of Nebraska-Omaha, Marshall University, Morehead State University, and the University of Louisville. He has authored over 50 scholarly works in some of the leading management and human resource journals including The Academy of Management Journal, The Academy of Management Review, Organizational Behavior and Human Performance, Personnel Journal, The Personnel Administrator, HR Magazine, Labor Law Journal, Business Forum, Personnel, The Journal of Accountancy Training, and Public Personnel Management. Books published by Dr. Carrell are in the fields of collective bargaining and labor relations, organizational behavior, Human Resource Management, and negotiations. During his academic career he has received awards for both outstanding research and teaching.

Christina Heavrin J.D. has practiced law for 28 years primarily in the public sector as an attorney for local government in her hometown of Louisville Kentucky. In addition to negotiating numerous litigation settlements and contracts, she has helped negotiate a number of major agreements such as a multi-million dollar property exchange that relocated major industries and railroads from the City’s downtown wharf resulting in the development of both an award winning public

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park and a successful industrial park in the City’s enterprise zone; an agreement between the State of Kentucky, Jefferson County, the City and a for-profit hospital for guaranteed indigent health care services for city residents; a tax sharing agreement between the City of Louisville and Jefferson County that enabled the two governments to share revenue of over two hundred million dollars and to combine their economic development programs; a multi-million dollar expansion of Waterfront Park that included a major environmental clean up and the construction of a Minor League Baseball stadium in downtown Louisville. Recently voters approved the merger of the City of Louisville and Jefferson County Governments. Ms. Heavrin is serving as Special Counsel to the first Mayor of the Metro Government where her duties include negotiating initial labor agreements between the Metro Government and its unionized employees.

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