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The Negotiation Mentor

Tips from Preston Michie

PLANNING YOUR NEGOTIATION

General Dwight D. Eisenhower once said, “Plans are nothing.  Planning is everything.”  The same principle applies to negotiations.

Skilled negotiators plan their negotiations carefully.  They establish clear objectives.  They research facts.  They decide in advance whether they should open first, and their purpose in doing so (e.g., to gain information, get things going, signal a willingness to negotiate, anchor the other side in their price range).  They plan their concession strategy (timing, sequence, and relative size of concessions).  They identify their walking point. 

They analyze how the other side is likely to approach these issues.  They identify options to explore with the other side that may add value to the deal.  In sum, they focus on the process to increase the odds of a obtaining a better deal.  From preparation comes power.

Having crafted a carefully designed plan, skilled negotiators might be expected to stick to their plan.  Not so.  Skilled negotiators know that plans must change in response to the other side’s strategy and tactics.  No matter how well thought out your plan is, the other side has a nasty habit of not doing what they are supposed to do—according to your plan. 

Your plan called for the other side to bargain hard on price.  Instead, they are reasonable on price, but push hard on terms.  Or they want to change the scope of the deal. 

Skilled negotiators listen to the other side to gain information so they can retool their strategy if necessary to close the deal.  They ask open-ended questions designed to gain information.  Questions like, “Why?”  “Why not?” or “What’s wrong with this approach?”  They know that persuasion, while part of every negotiation, is no substitute for listening, reacting to what your opponent says, reframing your proposal in their terms, and revising your proposal to accommodate the other side’s interests as well as yours.  They patiently persevere to achieve their objectives, but are flexible in achieving them. 

Just like skilled generals, skilled negotiators modify their plans as necessary to achieve their strategic objectives.

FIRST CONNECT AS A HUMAN BEING

Many negotiators do a nice job developing their negotiation strategy. They’ve done their homework. They are focused on the negotiation process. They know what they are trying to achieve and have a plan to get there. They know where they will open and why. They’ve laid out a thoughtful concession strategy. They’ve identified their walking point. All well and good—until they sit down at the table to negotiate.

Having developed a comprehensive strategy, they dive right in to implement their plan to get their deal or better. This is a mistake.

The mistake is not spending enough time building a relationship BEFORE diving into deal making.

The first thing you should do in every negotiation is connect with the other side as a human being. Experienced negotiators know that valuable “small talk” will precede the negotiation. You will frequently be offered coffee, soft drinks, or snacks to make you feel more comfortable and to engage you socially. Inexperienced negotiators see this as a mandatory, unnecessary social gesture that takes place before negotiations begin. They wrongly think they are obligated to engage in “pleasantries” until the time is right to get on with “the real reason we’re here” - to negotiate a deal.

Experienced negotiators know that when all is said and done, negotiation is a social activity that is often influenced by how the two sides feel about each other. Skilled negotiators know that negotiations begin from the very moment you make contact with the other side.

Everything that happens is part of the negotiation process from saying hello, to the firmness of the handshake, to dress, to tone and formality, to seating arrangements, to temperature, to the time of day, and a host of other factors that can influence a negotiation. This part of negotiation is about observation, and being attuned to your environment in ways that may give you useful information. As Yogi Berra once said, “You can observe a lot by watching.”

Connecting with the other side as a human being is about engaging in active listening, searching for common ground, and engaging in “chit chat” designed to gain information, to understand the other side better, and to share strategic information to build trust. People get better deals from people who like and trust them. Liking often flows from common interests. It takes time to find common interests and build trust. Make it a habit to engage socially with the other side at the beginning of every negotiation.
 

OPENING OFFERS

One of the issues that comes up in my negotiation training seminars is who should open?  There is a perception that she who opens first loses.  I don’t buy that logic.

Yes, making the first offer entails risk—you might leave something on the table.  You think, “I’d better let the other side open first to gain some information about where they are.”  This is a sound strategy.  But sometimes the other side is thinking exactly the same thing.  The result?  Stalemate as the two sides wait for the other side to open.  You may have to move first to break the stalemate if you want a deal.  What can you do? 

Recognize that there are several purposes of an opening offer.  By throwing out an offer you do not expect to be accepted, you signal a willingness to negotiate.  You might attempt to steal a good deal by advancing an extreme offer in hopes the other side simply doesn’t want to negotiate for some reason but want a deal.  People sometimes don't negotiate because they don't like to negotiate, because they have other priorities in life, because they are afraid, or because they don't know how.

Your opening offer can anchor the other side in your price range.  Finally, your opening can establish a position from which you concede slowly to create the perception that the other side is creating value by getting you to concede. 

Turn the stalemate to your advantage by making an opening offer to achieve one of these purposes.  Understanding your purpose in making an opening offer can help you decide how to break the stalemate. 

If all else fails, throw out an offer you do not expect to be accepted to signal a willingness to engage—then carefully monitor how the other side responds to gain information about their true position and plan your next move.

GETTING TOO FOCUSED ON YOUR BOTTOM LINE

I always encourage participants in my negotiation seminars to do their homework before negotiations begin to determine their bottom line. Based on their research, I advise them to determine the price at which they will walk from the deal—and then walk out when the price falls below your bottom line, a tactic that often helps close deals at or above their bottom line. In sum, before you engage know your B.A.T.N.A. (Best Alternative To a Negotiated Agreement). After all, if you can get a better price somewhere else, why continue to negotiate?

But I’ve noticed over the years that establishing a bottom line sometimes leads people to intentionally design their concession strategy to do little better than their bottom line, thinking they have done well. The problem with this perfectly acceptable strategy is that you may leave money on the table. Your bottom line is the point at which you should walk; it should not limit your upside potential. Further, this strategy assumes that the other side values things the same way you do, which is not always the case.

You can sometimes do better simply by opening more optimistically than you normally would and haggling longer to try to get a better price. The strategy calls for (1) opening optimistically, (2) waiting to see how the other side reacts, (3) pushing back on their counter offer by complaining about it, and (4) then conceding slowly.

You should expect push-back on extreme offers. If there is no push-back, either: (A) you have insulted the other side with your aggressive offer, and the negotiations have ended; in this case, you are not likely to get a deal unless you change strategy, (B) you are dealing with a rube (not likely), or (C) something else is going on—if you suspect so, you should slow down and ask questions to learn more before proceeding. Push-back, even if delivered in strong language, means engagement—you should interpret push-back to mean the negotiations are on.

If the other side rejects your offer, wait for a counter offer before modifying your position. Do not bargain against yourself by modifying your offer in reaction to push-back, even if it’s a flat out no. No matter what, wait for a counter offer before making another concession. And then push-back on the counter offer before conceding to a fallback position.

As the negotiations proceed, concede slowly, and make progressively smaller concessions. Make your goal to do significantly better than your bottom line. If your strategy fails, a deal can still be salvaged. You can always fold to your bottom line if you must to get an acceptable deal and avoid having to start over with someone else. But you should not fold to your bottom line until you have determined—by asking for more and testing the response with your own push-back and counters—that you can do no better.

BUSTING THE MYTHS ABOUT LACK OF LEVERAGE: SIX TIPS FOR IMPROVING YOUR POSITION

Some people believe you can’t do anything about leverage:  Either you have it or you don’t.  You need the job.  You want that car.  You owe the money.  It may seem like there is little you can do.

This is nonsense.  Even from a position of weakness, you can create leverage in a negotiation, weaken the other side’s leverage, or enhance your own.  Here’s how.

Leverage is the ability to influence the outcome of a negotiation.  In simple terms, the more the other side needs to deal with you on your terms, the more leverage you have.  Leverage is usually a function of the costs to the other side of not dealing with you.

In other words, the other side’s B.A.T.N.A. (Best Alternative To a Negotiated Agreement) is a key to defining your leverage.  You can assess your net leverage by asking a few simple questions:  What’s likely to happen to the other side if there is no deal?  Can they live with that?  What’s likely to happen to me?  Is that OK with me?

Regardless of how you answer these questions, you can usually improve your position through several simple techniques.

First, assess your leverage, which can come in a variety of forms.  Sometimes, people don’t know that they have leverage.  Can you pay cash?  That’s leverage.

The fact that you are customer willing to buy creates leverage.  Simply answering an ad, applying for a job, and visiting a used car lot create leverage.  Woody Allen once said, “Eighty percent of success is showing up.”  The mere fact that you are willing to deal creates leverage.

Second, assess the other side’s leverage.  If you’re not sure about their leverage (or whether they know they have it), ask questions designed to gain strategic information.  One way to do this is to ask open ended questions about the negotiation, such as “What is wrong with this idea?  Why?  Why not?  What if we ...?  What is your reaction to ...?

Third, be prepared.  Preparing for a negotiation improves leverage, increases the odds of a better outcome, and distinguishes mediocre negotiators from skilled.  This includes doing your homework on price, terms, and conditions for similar deals as best you can.  Information is power, aka leverage.

Fourth, know your walking point.  If you’re prepared to walk, no matter how unreasonable that may seem to the other side (who may test your willingness to walk if your B.A.T.N.A. is not good), you gain leverage.  At worst, they have to start over with someone else.

Fifth, if you have leverage, no matter how slight, make it clear to the other side that you know you have it.  Unless you and the other side know you have leverage, you really don’t.  Conversely, there is no money in telling the other side that they have leverage.  Never, ever tell the other side how much you need this deal.  You may be telling them that they have leverage they didn’t know they had.

I’ve seen people give away advantage in negotiations by discussing their worries.  Worry tells the other side about issues for which you are likely to be risk averse.  These are likely to be addressed, but you may pay a high price to solve your problems if you make too much about them.

Sixth, when unexpected “stuff” happens during the negotiation, act like you planned it.  A famous commercial for deodorant nicely illustrates the point, “Don’t let ‘em see you sweat.” 

Negotiations never go quite the way you planned.  You should expect that.  It’s naïve to think otherwise.  Don’t let your feathers get ruffled by unexpected, negative events.  When stuff happens, you must be flexible enough to modify your strategy accordingly. 

When you overreact to a surprise, particularly a disastrous development, you transfer leverage to the other side in the form of information.

When you just grin and bear it, even when you think you’ve just lost everything, the other side may not realize their advantage.  They may take pity on you and not go for the jugular out of respect.  Most likely, if they are at all experienced in negotiations, they’ve been there.

I’ve seen some very skilled negotiators act like things just got better, instead of worse.  It’s powerful stuff, even if the bravado is faked.

WHAT IF YOU HAVE NO LEVERAGE?

One of the most amazing negotiators I ever met was a fast talker who often entered negotiations with little or no leverage or as they say in Texas, “All hat; no cattle.” No matter how weak his position, he acted as though he was in a position of strength. He was unflappable under all circumstances. And he often got amazing results.

People who act like they have leverage, even when they don’t, sometimes create leverage through pure chutzpah. If that doesn’t work, they’re not out anything for trying. And it makes for great fodder for stories to tell your grandkids if your bluff works.

If you pretend you have leverage when in fact you have none, that is, if you bluff, you should expect to get caught once in a while. If you’re discovered, it’s wise to fess up.

While you may lose some credibility for bluffing, many savvy negotiators will respect you for trying. Most experienced negotiators have had to bluff themselves on occasion. They will respect you all the more if you abandon the pretense once you’re caught, and try something else. If you insist on advancing a pretense that is obviously faked, you may lose trust. In extreme cases, you can end up looking like a flake.

You need to move to Plan B − another strategy. If you don’t have a Plan B, make one up.

A simple Plan B might be to acknowledge your lack of leverage, then bravely advance a modestly less aggressive proposal (to signal that you know you’re in a weak position) − but close to your last offer (to signal that you’re not giving up). Just because you have little leverage doesn’t mean you have to give away the whole farm right away.

Hang in there and keep plugging away. Who knows what will happen? You will be surprised how often simply refusing to acknowledge defeat and continuing to plug away, even on a losing cause, creates leverage. Keep your expectations low, but don’t quit until you know defeat is inevitable because you’re tried everything you could think of.

Attitude helps. I once took a college organic chemistry exam that I knew I could not pass because I was woefully unprepared and in way over my head. Rather than leave, I decided to grit it out and do my best. Unexpectedly, I almost passed. My answer to a friend who asked me later how I’d done: “I flunked with dignity!”

When you’re weak it can sometimes help to adopt an audacious “in-your-face” attitude. You might think, “OK, I’m going down, but I’m going down with style!” You might do better than you expect.
 

ABOUT THE AUTHOR

Preston Michie is an attorney, consultant, instructor, entrepreneur, and author of the Fundamentals of Successful Negotiation workshop.  He consults to the Bonneville Power Administration (BPA) and the Pacific Northwest National Labs on electric power policy.  Preston left government service in 2000 after working as an attorney with BPA for 21 years.  Preston's experience at BPA involved a wide array of responsibilities ranging from negotiating contracts through settling billion-dollar plus lawsuits.

Preston owns a consulting firm, Team Soup, LLC that specializes in negotiations, contracts, and other training seminars.  He serves on the Board of Directors of three non-profits (Energy Trust of Oregon, Wetlands Conservancy, and Northwest Hydrogen Alliance), a tropical garden (World Botanical Gardens, Inc.), and a start-up wind company (Ridgeline Energy, LLC).

His formal education includes a JD degree from Lewis & Clark Law School, an MBA from the University of Oregon, and a BS degree in Chemistry from the University of Wisconsin.  Preston is a published author of several legal and scientific papers.

Preston's courses that build negotiation skills:

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