Always keep your word, no matter what the consequences

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It’s time to limit the influence of corporate lawyers. Instead of involving them in negotiating a deal, use them for legal advice only and make the other decisions yourself. Above all, make your word your bond.

Too many people feel it is impossible to settle a business deal with a handshake. Instead, they will get the corporate lawyers involved trying to work into any written agreement escape clauses and loopholes that can be exploited should the deal turn out to be a disappointment. This is an unhealthy trend that extends the lawyer’s role well beyond what they are professionally trained to do.

Lawyers are not business people. If you try and negotiate any type of agreement using a lawyer, you’ll find things rapidly spiral out of control as more and more complicated issues get drafted into the discussions. You’ll be far better off keeping lawyers out of any negotiations, and only involving them when expertise in matters of law or language are required.

Why is this? It’s actually not that lawyers are inherently unethical. Instead, they are trained to represent the best interests of their clients, even if that involves acting aggressively or unethically against the interests of the other party to the negotiation. Their narrow focus on generating a favorable outcome without regard to what the other party gets out of the deal makes lawyers very poor negotiators.

Ideally, lawyers work best if you use them for a second opinion. Make your own decisions first on the basis of your business interests and opinions, and then get your lawyers to make you aware of any legal points you need to bear in mind. Don’t take your lawyers along to any of your business negotiations, but simply use them to steer you through the regulations and legal blather that many written agreements will include. Use your lawyers as legal advisors, nothing more.

Above all, remember that you’re the one who is required to make decisions and lead your organization forward. Lawyers are very weak at being team players, understanding entrepreneurial risks, having the vision to see how markets will evolve in the future and moving quickly. Instead, lawyers get bogged down in jargon and detail.

It’s unrealistic to expect corporate lawyers to go away altogether. However, if you trust people more and become increasingly trustworthy yourself, lawyers can go back to providing legal advice rather than being in the thick of every negotiation which takes place. For this to happen to any great extent in the real world, however, you’ve got to be willing to keep your word no matter what the consequences.

One’t word being one’s bond has been replaced with one’s word being subject to legal review.

–Jon Huntsman

We ought to negotiate earnestly and with all diligence for the best possible outcome. When a handshake is given, it must be honored–at all costs. Tough bargaining only occurs before the deal is agreed to. When you shake hands, the negotiating is over. Your word is your greatest asset; honesty is your best virtue.

–Jon Huntsman

Negotiation Approach

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Once you have a reasonable toolbox and a workable framework, the last step in acquiring negotiation genius status for yourself is to understand how to offset all of the little traps that can derail real-world negotiations.

In particular, get familiar with how you can achieve a worthwhile outcome even:

When you believe the other party is incompetent is incompetent or lying.

When you have little power or influence.

When the other side is reluctant to agree to anything.

When it’s necessary to inject ethical considerations.

When you’re dealing with competitors or enemies.

Simply put, the popular notion of always trying to achieve “win-win agreements” in any negotiation just isn’t feasible all the time. In complex negotiations, it sometimes isn’t even possible to tell what “win-win” really means. Such complexities are commonplace, and therefore it’s essential that you have the ability to deal with these issues systematically. You have to presrve the virtues of the win-win mind-set at the same time as you use sound negotiation techniques.

Strategies of influence

Whenever you’re negotiating, be very aware of the fact that the other party will use strategies of influence to try to get you to agree to their terms without improving them. For example, they may:

Highlight your potential losses very vividly.

Aggregate losses but drip-feed in gains.

Make outrageous demands or try foot-in-the-door tactics.

Attempt to leverago social pressures and other justifications.

Use extreme reference stories to make their offers reasonable.

Make token concessions linked to outrageous demands.

To defend yourself against these strategies of influence, there are a few reasonable steps you can take:

Prepare systematically: so you have comprehensive data available to debunk their unfavorable offers. You might even introduce a scoring system for comparing different offers.

Explicitly separate information from influence: before responding. Separate the fact from the fiction and you’re better positioned to respond intelligently.

Regularly pause and rephrase their offer in your own words: because the language you use can have a far-reaching impact. Couch all their proplsals from your own perspective and do a gut check to make sure they make sense before moving forward.

Appoint a designated devocate: someone who will check on the progress of negress of negotiations periodically and point out the weak points you may be tempted to gloss over in your enthusiasm to teach an agreement.

If at all feasible, remove time pressures from your negotiations: because most strategies of influence have a greater impact if you’re forced to respond quickly. Set aside ample time and get comfortable asking the other party or parties to allow time for consideration.

Blind spots

Not all negotiations go smoothly or proceed in an amicable and positive environment. For example, many times organizations and individual negotiators make poor decisions because they overlook other parties who are lurking in their “blind spot.” What these other parties subsequently end up doing can have a dramatic on the success or failure of any specific negotiation.

When negotiatiators focus too narrowly on the information at hand and ighore other obvious considerations, they can create a blind spot. Within this blind spot may be:

Competitors or other industry players who are free to make counter offers that can completely derail any offers you have carefully put together with another company.

Side-bar agreements the other party to your negotiation may have in place but which have not been disclosed to you. For example, if you’re attempting to acquire a company, you may find that the three foumders have a shareholder’s agreement in place that provides veto power over any acquisition proposal you are attempting to negotiate.

Common knowledge within the industry about the imminent release of new technology will completely change the competitive dynamics of the entire industry.

Expert negotiators realize that to be successful, they actually need to have the best of both worlds. On the one hand, they acknowledge the need to focus intently so as to put together an agreement that creates added value for everyone involved. On the other hand, however, they also attempt to broaden their focus and expand their awareness of other elements that typically reside in their blind spot. How can you achieve this?

Try to make an educated guess about what factors will likely fall in your blind spot during any negotiation: and take the to get up to speed in those areas before the pressures of negotiating bulid.

Be vigilant: actively seek out information that would typically fall in your blind spot.

Reflect on your previous negotiations: and identify any systemic errors you made in the past. Then use these hints to enhance and bulk up your information gathering activities.

Enlist the help of others in your organization: get them to expose your blind spots and make certain those key points are taken into consideration. Revise your strategy to incorporate the expertise of other members of your team in these areas.

Approach negotiation as a mystery to be solved: and use the general approach of investigative negotiation.

Identify all your information sources: and make a conscious effort to gravitate towards the sources of information that most negotiators will tand to ignore.

Try to bulid contingency clauses into all agreements: so you can change terms as more information emerges.

Confront deception

Sooner or later, you’ll get into a negotiation where you know immediately or find out later you’ve been lied to. It’s hardly a revelation that people can act unethically when under pressure. The best defense you can mount against lies and deception as an expert negotiator is to eliminate your counterpart’s temptation to lie. Simply put, make it immpossible for them to get a better deal by telling lies.

So how can you achieve this in practice?

Always look and act like you have prepared carefully: because the more prepared you seem, the less likely it becomes that the other party will attempt to lie at all. It becomes too risky for them to even try.

Signal clearly your team’s ability to gather or obtain more information if required: and this will discourage them from making unreasonable demands that can later be uncovered as highly opportunistic.

Ask less threatening indirect questions: rather than point blank demanding that the other party reveal their true costs. If you ask about their supply chain, who their other customers are and what size purchase you’d need to make in order to qualify for a price concession, you can pretty much estimate their costs with a reasonable degree of accuracy.

Never, ever lie yourself: always tell the truth. If you make it a point of principle never to lie, then the other parties don’t feel any need to protect themselves from being the only sucker at the negotiating table. They won’t feel any pressure to lie under the guise of self-defense. You can signal your intentions in this area by revealing to the other party information that is commercially sensitive to you. More than likely, they will reciprocate by treating you openly and honestly in return. You also avoid the possibility of being trapped by your own lies in the future.

To avoid feeling any pressure to lie yourself while negotiating, there are some smart alternatives you would do well to consider:

Always take a long-term view: and incorporate the potential loss of reputation and relationship costs into your calculations. If you lie, you may end up with a short-term gain at the cost of long-term problems in the business relationship. Be truthful even if this costs you money in the short run, because the long-term payoff is worth it.

Prepare in advance how you’ll answer difficult questions: so you don’t get flustered and blurt out something expedient that is also untruthful and likely to be exposed.

Try not to respond to questions immediately: ask for time to get your facts right first.

Be comfortable refusing to answer certain questions: by saying something along the lines of: “As you will appreciate, the answer to your question is commercially sensitive to us. It also depends on a number of variables. I could try to give you an answer right now, but if’s okay with you, I’d like to take some time to get the facts and give you a more complete response later.” Or offer to answer a different question right away if they prefer.

Change your reality so you feel less pressure to lie: do things you can allude to that offset any potential red flags. For example, before a job interview, send out resumes. You can then truthfully state that you have sent out other resumes and expect to be scheduling more interviews soon.

Resolve dilemmas

In order to negotiate successfully, you really need to resolve all your ethical dilemmas and conflicts of interest in advance. There are potential problems ahead as a negotiatior if you cannot look people in the eye and say: “Yes, I will benefit personally from concluding this negotiation, but I wouldn’t try to put together an agreement in the first place if this wasn’t a good deal for you and your company.”

Some of the ethical negotiation dilemmas you need to consider in advance are:

1. You need to be highly vigilant and careful about conflict of interest situations: where you will gain a financial advantage by favoring one party over another. If possible, state your conflict openly and recuse yourself from the decision-making process. At the very least, make cerain everyone else you negotiate with is aware of your conflict of interest. Being aware that your product is of a lower quality than the buyer thinks he or she is buying is also a form of conflict of interest and can be a trap for the unaware.

2. Be aware of the possibilty you may be unconsciously discriminating on the basis of race or gender: and become proactive in reducing your tendency to award business to only those firms you feel comfortable dealing with. Get others involved in the decisionmaking process and audit your negotiations to ensure these kinds of ethical issues are not showing up more than they should.

3. Whenever you’ve created added value in a negotiation, pause and analyze it: identify exactly where the new value is coming from. If you’ve created an arrangement that ultimately means consumers pay more for something than they would in the open marketplace, or that favors special interest niches at the expense of the broader public, there may be problems. At one extreme, your new arrangement may be illegal. At the other end of the spectrum, it may be unwise and unethical. Avoid and negotiations that have the end effect of helping each of the parties charge their customers more.

4. When allocating credit any agreements you negotiate, be careful not to overstate your owe role: or give credit to those you like. It’s a very easy human tendency to overweight those factors on which you perform strongly and underweight those where you perform poorly. Be even-handed about valuing the contributions of others.

5. Keep in mind that you may have to deal with the biases of the other parties to the negotiation: so be prepared to put in place contingency contracts that will require external auditing and verification before enactment. Ask for unlikely claims to be audited by third pafore becoming effective. Ask for the quality of products to be measured and verified before payment falls due. If the other party is being deliberately unethical, these types of contingency contracts will give them cause for concern. If they aren’t aware they are being unethical, this jolts them out of their illusions.

Position of weakness

Seasoned negotiators know won’t always be dealing from a position of strength. Many negotiations will be held in circumstances where the other party literally or figuratively holds all the cards. To improve your prospects of putting together a good deal when you have no meaningful negotating power:

1. Understand that your position may not be obvious to the other side: so don’t reveal that you are weak. Let them figure that out for themselves.

2. Leverage their weak points creatively: because more often than not they will have weaknesses in different areas than you. It’s not unusual for all parties to a negotiation to be equally weak, and the key is to make the other side’s weaknesses assume more importance than your own.

3. Change the game you are being forced to play: by introducing other elements of your value proposition you can leverage into the negotiation. Instead of talking price alone, introduce quality, service and brand assets you bring to the table. Identify and then leverage what you’re good at. Be prepared to submit multiple proposals that integrate these additional factors in varying levels and gauge their interest in broadening their decision criteria.

4. If all else faile, consider relinquishing whatever power you do have: and make a direct appeal for halp. By making it clear you have no intention of fighting, you may find they moderate their own stance and look for ways to work together at a level that is sustainable for all parties. They probably don’t want to drive you out of business, so let them be reasonable.

5. Look at your entire portfolio of customers: and be prepared to take bigger risks to keep the clients who add the most value for you. Be prepared to lose money in some negotiations in order to stay in the game and make much more money in other negotiations.

The other way to approach negotiating from a position of weakness is to find some workable ways to upset the current balance of power. To try and turn the tables around:

1. Consider whether it’s practical to build coalitions with other weak parties: so you can present a unified front when negotiating. Coalitions of this nature make it harder for the dominant party to pit one weak against another.

2. Leverage your own weaknesses: by making it clear you can create more value in the marketplace by working together than by having a monopoly situation. You might be able to convince them you’re a better choice as a competitor than having some other better funded corporate entity be attracted by the hole in the market you would leave if forced out of business.

3. Attack the source power: build your own stronger relationships or lock suppliers into highly attractive multi-year contracts. Get creative and do whatever it takes it takes to dilute the other party’s competitive advantages.

Deal with problems

From time to time, experienced negotiators have to deal with irrationality, distrust, ander threats from the parties they negotiate with. If these situations arise in your own negotiations, keep a few pointers in mind.

When dealing with irrationality:

Assume they are most likely uninformed: so try to educate them on the true facts of the situation before escalating matters. Make sure they understand it’s not in their best interests to act irresponsibly.

Probe whether there are hidden constraints you’re not aware of: and bend over backwards to help other parties overcome those constraints by other means.

Look for hidden interests: and do what you can to structure flexible deals that address their other concerns.

If dealing with an environment of distrust:

Educate all of the other parties intensively.

As a last resort, suggest mediation rather than litigation.

Work to rebuild trust over time.

When dealing with anger:

First seek to understand: the source of their anger.

Articulate their concerns: because by giving voice to their anger, you give them a chance to vent their frustrations and then become prepared to move on.

Sidestep the emotion: by not taking it personally but instead suggesting there are issues that need to be looked at in the future but in the meantime perhaps negotiations should continue so as to create more value for everyone.

Get everyone to focus on their genuine underlying interests: by asking: “Okay, is there anything else you’d like to clarify before we return to the substantive issues you highlighted earlier on?”

If dealing with threats or ultimatums as a negotiator:

Ignore completely any take-it-or-leave-it demands: and come back with responses that soften these statements so they don’t become barriers to making progress in the future.

Pre-empt any additional threats: perhaps by threatening to drag out the negotiations for an extended period should other parties need to get involved as a result of the threatened threatened course of action.

Let them know when their threats are not credible: by pointing out that their own constraints or their own interests would be unlikely to actually let them follow through on what has been suggested.

Provide a way for them to save face: by making statements like: “I realize you’re doing me a great favor by reducing your price beyond what is normally feasible. I appreciate this gesture and want to come up with some practical ways we can acknowledge that in our future dealings with your firm.

Know when to negotiate

To become a negotiation genius, you not only have to know how to negotiate, but also have to understand when to negotiate and when negotiation is not the best option. There are actually five situations in which you’d be better advised not to negotiate:

1. When time is money and the costs of negotiation will far outweigh the amount you stand to gain. Sometimes negotiators get so focused on getting the best dest deal possible that they end up wasting resources on gaining trivial benefits. Skilled negotiators know the value of their time and attention and don’t waste these valuable resources on situations of marginal worth.

2. When your best other alternative stinks and everyone in the negotiation knows it. In this situation, the only thing you can rationally do is accept the offer immediately and then create a situation where the other party values what you do more highly and is prepared to move their offer upwards. This is not negotiation. It’s changing the game in your favor by over delivering and then relying on their sense of fairness to compensate you accordingly.

3. When negotiating sends the wrong signal: perhaps that you’re more interested in money than you are in being part of something influential and far-reaching. If an outstanding opportunity for advancement comes along, instead of negotiating your new salary it might be better to state: “I fully trust you will help make my transition to this new position both successful and mutually rewarding.” That will send the signal that you’re a team player and you trust the management team. If you try to haggle, they may conclude they’ve chosen the wrong person.

4. When strong relationships might suffer which you would prefer to preserve intact and ideally strengthen further. If the potential harm to the relationship would far exceed the expected gain, then it’s entirely reasonable not to try and negotiate. Often your long-term relationship will flourish if you forego the opportunity to aggressively squeeze every last dollar out of every transaction that comes along.

5. When negotiating is culturally inappropriate and it’s more important for you to have solid relationships than it is to worry about whether there are cheaper options worth exploring. If you’re uncertain about local customs working overseas, you may prefer to put in place an initial agreement that strongly favors your local partner as the foundation of attacking future joint ventures with their full and enthusiastic cooperation.

Keep working at it

Experience is a dear teacher, but fools will learn at no other.

–Benjamin Franklin

You will never become a negotiation genius by taking a course, reading a book or even by engaging in similar negotiations over and over. Instead, to become an expert in this field, you need to combine experience with expertise. Not only do you have to engage in negotiations under a broad range of settings, but you also have to be able to infuse your experiences with a strategic understanding of what you’re doing right and what you’re doing wrong.

The path to becoming an expert in negotiation is to think more deeply and analytically about what you’re doing each time you negotiate. You need to leverage both your experience and your expertise. Several ways to do this are:

Decide now that you want to learn more about negotiating and it’s more important that you understand what is happening in a negotiation than it is to simply reach an outcome you feel good about. Commit to analyzing the underlying dynamics and not just the end results.

Realize that someimes being “perfect” can be the enemy of being “good” and if you try and do too much at once, all that will happen is you will become overwhelmed. Instead, recognize the virtue of making ongoing incremental improvements to your negotiating skills.

Make a list of the negotiation and tactics you want to master and then focus on working on just one of these ideas each week. Set aside time to think about this concept and how you can apply it to your negotiations. Tackle no more than one new idea each week.

Have your friends and colleagues critique you periodically so you can assess your progress. Net only will talking to these people help you see things objectively, but they will also point out any mistakes you may have overlooked.

Put more effort into planning your negotiations systematically so you apply additional strategies rather than shooting from the hip.

Debrief every negotiation and write down which strategies you could have applied but did not. Plan how you might get progressively better.

Create an environment where your expanded negotiation skills can find full expression which basically means you look for every feasible opportunity to use your skills at work. Remove any constraints that are unhelpful or at the very least ask your organization’s leaders to help you do that. Become more actively involved in negotiating everything.

Come to view your negotiation skills as a set of basic principles for productive human interaction so they apply in all situations and circumstances.

Negotiators who rely exclusively on influence strategies are likely to achieve only limited success. They forgo opportunities to learn about the other side’s interests and, as a consequence, to create value.

–Deepak Malhotra and Max Bazerman

It is when we overestimate the value of what we know and underestimate the value of what others know that we fall victim to the elements of negotiation that lurk in our blind spot. By adopting an investigative mind-set, negotiation geniuses avoid this fate. Genius, then, is sometimes nothing more than taking the time to see that to which others have turned a blind eye.

–Deepak Malhotra and Max Bazerman

An ethical negotiation genius is one who wants to try to eliminate unintended ethical behaviors along with more obvious intentional ones. Just because many of these unintended unethical behaviors are common does not mean they are ‘okay.’ Ethics is all about actively striving to be a better person, not reaching–and settling for–an ‘acceptable’ status quo.

–Deepak Malhotra and Max Bazerman

While being in a position of weakness is sometimes unavoidable, you will negotiate most effectively when you leverage the fundamentals–systematic preparation and careful strategy formulation. Unfortunately, many negotiators compound the problem of weakness by becoming obsessed by the factors that make them weak. Those who ‘think weak’ inevitably also ‘act weak’.

–Deepak Malhotra and Max Bazerman

Negotiation geniuses approach ‘ugly’ negotiations the same way that they approach ‘beautiful’ ones–with an investigative approach that focuses on each side’s underlying interests. Save the histrionics for the stage, and bring your negotiation genius to the bargaining table.

–Deepak Malhotra and Max Bazerman

More often than not, negotiating allows you to create value above and beyond your alternatives to reaching an agreement. But it is worth keeping in mind that not every aspect of life is a negotiation. By considering the context of the negotiation, the relationships involved, and your alternatives away from the table, you will become adept at identifying when to negotiate, when to accept a deal without negotiating, and when to simply walk away. Some negotiation ‘experts’ will tell you that ‘you can negotiate anything.’ Perhaps you can–but that does not mean you should. Often, there are better things to do than negotiate. Negotiation geniuses are able to recognize and leverage these opportunities.

–Deepak Malhotra and Max Bazerman

Genius is often a combination of natural ability and a lot of hard work. You do have the raw materials needed to become a negotiation genius–almost everyone does. If you now put forth the effort, then you will become a negotiation genius–someone who finds it easy to achieve brilliant results in all types of nogotiations. We hope you put forth this effort.

–Deepak Malhotra and Max Bazerman

Negotiation Framework

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Too many people think of negotiation as being all art and no science. Negotiation geniuses don’t think this way. Instead, they study how people think and then identify their biases. They have practical ideas to stop fuzzy thinking derailing an otherwise sound negotiation stratehgy.

Cognitive biases

In the context of decision-making and negotiation, people tend to make four mistakes that are systematic and therefore highly predictable:

1. The fixed pie bias: they assume there is only a fixed pie of value or resources to go around and that it is therefore necessary to focus exclusively on captuting as much of that pie as possible. The fixed pie bias causes negotiators to ignore options that would have the impact of creating more value everyone could share. It’s far better if you enter every negotiation with the assumption that ways can be found to creatively enlarge the pie for everyone by working together rather than assuming you’re in mortal combat for everything you can get with everyone else.

2. The vividness bias: where people pay too much attention to the vivid or obvions features of offers and not enough attention to the minor details that actually have a greater impact on the outcome of the negotiation. To avoid giving too much weight to vivid information in any negotiation:

Create a scoring system focused around your true interests and cross-check your straegy and your reactions to various offers against your system.

Separate information from influence by asking whether the information is valuable or is just influencing you to act in some way the presenter has a vested interest in.

3. Nonrational escalation of commitment: which occure when competing bidders escalate their commitment to a failing strategy. This sends the dispute spiraling out of control and ends up producing disastrous results for everyone involed. To avoid escalating your problems in the heat of battle:

Always start with a preplanned exit strategy or point at which you will cut your losses and stop bidding.

Have an in-house devil’s advocate who will poenly critize your decisions and find faults in your logic.

Anticipate the escalation forces you’ll encounter and refrain from making any public commitments.

4. Susceptibility to framing: how the situation is described and the reference points that are used as the foundation for any discussion can profoundly impact your negotiation strategy. Framing is completely irrational, because the facts are the same even when differing reference points are used to frame the negotiation. To avoid framing problems:

Be aware of the impact of your various reference points and pick the ones that seem most appropriate for you tather than automatically using those others use.

Evaluate whether your strategy would still make sense if dramatically different reference points were in use.

Before you do something risky (like issue an ultimatum), pause, change your frame of reference and question whether it still makes sense to do what is contemplated.

Motivational biases

These are the mistakes in judgment we sometimes make in order to see ourselves and the world in some particular way. We automatically want to see ourselves as fairer, kinder, more generous and more deserving than others, and this can influence our negotiation outcomes to a large degree.

The seven main motivational biases are:

1. Conflicting motivations: the dynamic between what we want to do and what’s actually good for up. Negotiators need to anticipate this and decide what to do in advance rather than in the middle of a negotiation when emotions are involved.

2. Egocentrism: our tendency to always want to bias all our perceptions and expectations in our own favor. To overcome this, negotiators decide what would be considered a fair outcome if they did not yet know which side of the party they would be representing in the negotiation at hand. This injects a handy veil of ignorance.

3. Overconfidence: the belief that your party to the negotiation can do more than it actually can. Negotiators work hard to offset this by constantly taking off their rose-colored glasses and injecting gteat dollops of reality into discussions.

4. Irrational optimism: the belief nothing bad can happen and that one preplanned course of action will win out regardkess of anything this by being willing to entertain and evaluate alternative courses of action to decide what will be less damaging to the parties.

5. The illusion of superiority: where negotiators view themselves as inherently more “fair,” more “honest” and more “rational” than the other party. Skilled negotiators counter this illusion by considering seriously any all ideas put forward by the other party and treating them equally on their own merits rather than rejecting them out of hand.

6. Self-serving behaviors: which arise when negotiators view the other party as “unethical” or “overly competitive” and therefore feel entitled to act unethically in dealing with them. Skilled negotiators allow for this bias by understanding the need to build trust in negotiations and by taking the time to find out why others act the way they do before reacting.

7. Regret aversion: an emphasis on what might have been rather than dealing with the realities of the situation at hand. It’s often easy to see things in hindsight that are not obvious at the time, so expert negotiaors try and find ways to leverage that hindsight. The best way to do this is by focusing on what has been learned from the past that will help make you a better negotiator in the future.

Rationality

In order to negotiate rationally and manage your own biases, there are three strategies you can use:

1. Use “system 2″ style thinking: where you think things through deliberately and judiciously rather than making quick decisions on the strength of your intuition alone (which is “system 1 ” thinking). Identify situations in advance and then make a deliberate choice to engage in system 2 thinking in that situation rather than stay in automatic system 1 mode.

2. Learn through the use of analogies: debrief important negotiations and analyze what you did well and where what you did left something to be desired. Look for similarities between multiple negotiations and try to draw out keystone principles that would be useful to apply in your future negotiations.

3. Adopt the “outsider” lens: where you deliberately look at everything that happened as if you were a complete outsider with no inside information. It may even be helpful to hire an expert or a consultant and get them to give you their slant on things. When you’re not immersed in a negotiation, things can look quite different.

While it’s certainly helpful to manage your own biases when negotiating, your negotiation outcomes will improve if you also help your counterparts overcome their own irrationalities and biases. There are three strategies you can use to achieve this:

1. Incorate the flow-on consequences of their biases in your own strategy: anticipate the biases they will more than likely bring to the negotiating table and structure your offer to allow for those biases. Creatively structure your offer to accommodate their needs and preferences and you increase your own chances of success.

2. Help your counterpart think more clearly and become less biased: in a tactful way. For example, you know that a negotiator under time pressurs is more likely to make a bad decision than someone who isn’t working to a tight deadline. Ask the other side to think things over rather than give you an immediate answer. Encourage them to explore alternatives so they can be convinced that your offer is superior. Put together package offers rather than force your under-prepared counterpart to weight multiple issues on the fly.

3. Calibrate all information provided by others: don’t rely solely on the input of one party, but ask three or four competitors to bid on the negotiation and provide their datd. This will allow you to tell if someone is being overly optimistic in order to get your commitment only to later scale back their estimates with a claim of being more realistic about the current state of the marketplace. Gather more data at the outset when things can change rather than later when you’re locked in to one particular trajectory.

It’s important to remember that even highly educated, intelligent people who have a desire to be fair and objective are susceptible to psychological biases. We are biased because we are human, not because we are mean or stupid. This means we need to be ever vigilant in our efforts to overcome our biases. It also means that we should be more understanding of the biases exhibited by others–and that we may even want to help others overcome them.

–Deepak Malhotra and Max Bazerman

Negotiation Toolbox

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Negotiation geniuses have a toolbox of comprehensive principles, strategies and tactics they use over and over when negotiating. They don’t rely on gut instincts, winging it or shooting from the hip to carry the day. Instead, they prepare thoroughly and systematically so they can achieve consistently superior outcomes.

Claim value

Value is whatever you perceive as being useful or desirable. It can take many forms and be measured in a variety of different ways, but at the end of the day you generally enter into negotiations in order to end up being better off than you were at the start of the process. Probably the best way to negotiate is to have high aspirations going in (so you bargain tenaciously) but then a low reference point that gets used in hindsight (so you’ll feel satisfied with what is achieved).

It’s easy to go into a negotiation with no preparation and expect to figure things out as you go along, but in reality, the key to claiming more value for yourself in any negotiation is to prepare thoroughly beforehand. This is usually a matter of:

Assessing in advance what your best alternative will be if you can’t reach an agreement in the negotiation.

Working backwards from your best alternative to decide what your reserve value or walk-away point will be.

Analyzing what the other perty’s best alternative will be if they fail to reach a negotiated agreement.

Calculating from that their anticipated reserve value.

Projecting what the zone of possible agreement will be–which is the overlap between your reserve value and the other party’s reserve value. Any agreement will need to fall within this zone to be acceptable to both parties.

Once you know the lay of the land in this way, you can then start negotiating with the objective of claiming as much as possible from the transaction. Be judicious in making a first offer, because that offer tends to establish an anchor point for the rest of the negotiation. It’s smart in this context to always make a first offer that you know they will not accept. As long as you can provide some sort of rationale as justification for your offer, you can then carefully work back to a price that is higher than had hoped but workable. This is the only way you can avoid making an initial offer that is ludicrously low.

Remember to haggle when you negotiate. If you fail to go through an iterative give and take after the initial offer is made, the other party won’t feel good about the negotiation. They will feel uncomfortable that they have left money on the table by conceding too much. You have to make some concessions, let the other party come up with reciprocal concessions and engage in some spirited give and take in order for everyone to feel good about the outcome of any negotiation.

Create value

In addition to claiming as much of the value as possible, your focus as a negotiator should also be to look at potential ways you can create value for all parties. This idea often gets lost in the pressure of trying to claim as much of the value as possible, but if you can get everyone focused on finding practical ways to grow the pie at the same time, spectacular things can result.

In practical terms, the best opportunities to actually create added value through a negotiation are usually:

Instead of negotiating a single issue, negotiate across multiple issues: which enables you to learn the priorities and interests of the other party to your negotiation. If you’re lucky, you might be able to identify something the other party or parties values more highly than you do. You can then give them that item and in exchange take something that has a higher priority for yourself.

Add in more stuff than was originally envisaged: and try to come up with a deal that is more comprehensive. The more issues you have on the table, the easier it becomes to identify those factors that are valued higher by the other party than by you. Instead of just negotiating on price, add in:

1. Delivery dates
2. Exclusivity clauses
3. Financing arrangements
4. Quality checks and assurances
5. Opportunities to further business in the future

Add contingency clauses to you negotiated contracts: which set out how any additional value will be split between the parties if assumptions turn out to be too modest and some future event turns out to be a raging success. Admittedly, contingency clauses can be dangerous if you don’t know what you’re doing, and they can also have the unintended consequence of creating an incentive for the other party not to perform if you’re not careful, so you need to do your homework beforehand. Also keep in mind that you’ll have to specify a scoring system that is impartial and open for contingency clauses to be able to work.

Be prepared and willing to negotiate multiple issues simultaneously because this is usually the environment in which value creation occurs. Sequential negotiations often end up being zero-sum sitations where the only way one party gains something is for the other perty to lose. When you have a number of different issues and packages on the table and under active consideration at the same time, it then becomes easier and likey that different combinations will emerge that nobody had really considered before.

Gather information

Probably the best way to negotiate is to practice “investigative negotiation”–which simply means you approach negotiations in the same way as a detective approches a crime scene. You learn as much about the situation and the players involved as possible in advance, and then negotiate accordingly.

The seven key principles of investigative negotiation are:

1. Always ask “why?”: don’t assume that you know why the other party is acting the way it is until you’ve genuinely found out what they want. Put aside your assumptions and get the facts first and foremost by asking why.

2. Focus on aligning underlying interests, not demands: which happens when you think more broadly and creatively. It’s not always feasible to align everyone’s demands, but interests can be aligned more often than not.

3. Try to create common ground with unlikely or uncommon allies: because doing this can generate some highly cretive ideas and arrangements.

4. Always look at every demand the other party makes as an opportunity to create added value: focus on their needs and then use that information to create more value for you and them. Capture as much of that added value as is feasible.

5. Don’t dismiss anything as being the other party’s problem: because in any negotiation the other party’s problem has a way of quickly becoming your problem as well. At the very least, if they can’t fulfill their obligations, what you have jointly promised to deliver will not eventuate. Talk about constraints and find ways to solve the other side’s problems and you might create sizable added value.

6. Never let a negotiation end with an outright rejection of your offer: always take the opportunity to ask why your final offer was rejected. If you approach the other party and explain you respect their decision and would like to know why they rejected this offer so you can improve in the future, they may well tell you. You may then find there are better ways the deal could be structured that they would agree to. Or you may even be able to submit a revised offer they are more likely to accept. When you hear “no,” that’s a clue to investigate further and not to walk away.

7. Understand the difference between “selling” and “negotiating”: namely, selling means actively promoting the virtues of your product, whereas negotiating entails focusing on the other side’s interests and priorities and structuring something that will create value for both parties. Put another way, selling strong presentation skills, while negotiating hinges on your ability to listen and respond.

Information–>Negotiation Genius

Remember, to take what is there, you must work with the other side to make what is there. And if you care about your reputation and your relationship to the other party, all the more reason to exercise the genius of value creation.

–Deepak Malhotra and Max Bazerman

Negotiation is an information game. Those who know how to obtain information perform beffer than those who stick with what they know. The investigative negotiation approach can help you transfom competitive, zero-sum negotiations into ones that entail the possibility of cooperation, value creation and mutual satisfaction.

–Deepak Malhotra and Max Bazerman

Negotiation Genius

How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond

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Genius negotiators aren’t born–they get to be that way by preparing carefully, using a sound conceptual framework of the negotiation process and by having the insight to avoid the most common errors and biases. They structure and execute negotiations strategically and systematically rather than casually and haphazardly.

If you aspire to join the ranks of genius negotiators, focus on acquiring the components you’ll need:

1. A full toolbox of ideas.

2. A good grip on the overall framework.

3. A sound psychological approach to negotiating.

Negotiation Genius:
1. Toolbox
2. Framework
3. Approach

A sentiment once expressed by Ralph Waldo Emerson captures the essence of our message: ‘Man hopes; Genius creates.’ When the task is difficult, when obstacles arise, when negotiations are unraveling, and when it looks like the deal is lost, most negotiators will panic or pray. Negotiation geniuses, in contrast, will only strengthen their resolve to formulate and execute sound negotiation strategy. We hope to convince you to do the latter, and provide you with the insights and tools you will need to negotiate like a genius at the bargaining table–and beyond.

–Deepak Malhotra and Max Bazerman

Negotiation geniuses do not assume that they are immune from bias. Rather, they accept the fact that their intuition, like that of other smart people, is fundamentally flawed. They attempt to reduce the degree to which they are affected by biases and, when necessary, adopt more systematic decision processes to avoid bias. In addition, rather than expecting rationality from their counterparts, negotiation geniuses anticipate bias in others and use strategies to respond to those biases.

–Deepak Malhotra and Max Bazerman

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