Do good negotiators take risks?
What types of bargaining are there?
I attended a recent course on negotiation skills. Here (in very rough terms) are some of the main points for me:-
Aside from the desirable qualities of charisma, confidence, and imagination, other qualities associated with good negotiators seem to be:-
- Well prepared as to the likely position of the other side, as well as their own.
- Identify concessions which they can make, and make them at the right moment.
- Maintain trust, and avoid the temptation to stray from the facts, or tell lies.
- Able to hold their nerve.
Know your Best Alternative To A Negotiated Solution, and know theirs.
It is the motivation for you to be negotiating with someone else; it is the motivation for them to be negotiating with you. It is the significance of the transaction to both of you; the thing that keeps you both talking.
It is the cost, risk and consequence to both sides of not doing a deal. What will it cost elsewhere? What might someone else buy for? Might another better deal come along later?
Study both your own BATNA, and also try to predict or imagine the BATNA of the other side.
You want to be able to offer something to the other side which is better than their BATNA, but not worse than your BATNA.
Look to create value, for both of you. Value may not just be in monetary terms.
Equally, if you cannot meet their BATNA, or they cannot meet yours, then you must just accept that there is no reason to do a deal.
Do good negotiators lie?
This was put to the group for discussion.
There was a concensus on not making false statements.
The main question that produced the most controversy was whether morally it was right to fail to disclose that certain information exists, when asked, or otherwise to withhold relevant information which you know might affect the decision of the other side.
It became clear that it was not easy to express general principles. Everyone was able to come up with examples which they felt were on one side or the other, but no one was able to derive a clear general principle from these examples. At least not a general principle which could be expressed in fewer words than a small novel.
It was also noted that before you decide to do any such thing - if you think it justified in your case -, you need to consider the risks:-
- Will it be unlawful? Don't forget that there are laws relating to fraud, misrepresentation inducing a contract, defamation, mistake and the like; so any decision to lie, or to allow another to proceed based on limited or false information, may result in a breach of these laws, and any contract made may be capable of being rescinded.
- Is disclosing your hand necessarily a bad move? Does withholding information mean that you miss an opportunity to do an even better deal?
- Is your withholding of information likely to be exposed at some future point, and would such exposure have any legal or reputational consequences; dare you risk your personal reputation as negotiator, and trust in the negotiations? Are your negotiating colleagues likely to reveal the information accidentially or deliberately, so that you are left as the villain of the piece?
- Are you capable of maintaining your deceit? There may be some, with perhaps more psychopathic tendencies, who may be able to develop and sustain a consistent story. For the rest of us, there would be a significant risk of tripping oneself up.
- Are you clear as to your reasons for withholding facts? Sometimes we withhold information because we feel embarrassed or uncomfortable in raising it.
- Are you dealing with people who are unscrupulous? I.e. has trust already been lost?
We came to the view that the withholding of information probably happened a great deal in practice, even if it was never admitted. This probably proceeds from evolutionary theory, which suggests that there will always be exploiters, and that we therefore have a highly, perhaps even over-, developed level of distrust.
The actual discussions on this point ended up as a sort of Integrated Negotiation cum Political Negotiation, as we seem to feel we needed as a group to come up with a consensus. An Integrated Negotiation should avoid singling out people for their personal views; it should be hard on the principles, not the people. However, the discussion started sliding into a Political Negotiation, where we started singling out people for differing views.
Do good negotiators take risks?
Probably not, if "risk" means promising something you are not sure you can give, or making false statements in the hope that you will not be found out.
I would suggest yes, if the "risk" is that of embarrasment. You have to have the courage to ask for what you want. You have to have nerve.
What types of bargaining are there?
It helps to know what type of bargaining situation you are in, and to adjust accordingly, or to call in negotiators who are familiar with that type of bargaining.
The course identified classic examples:-
The representative example is negotiation to buy and sell a commodity, where there is only one factor: price.
There is usually no other relationship/commitment between the parties (other than the possibility of future transactions) and so:-
- They may see each other as opponents.
- There is usually a Zone of Possible Agreement (i.e. the buyer's higest price is greater than the seller's lowest price).
- The aim is to get the best price for yourself.
- You are not immediately concerned about possible future transactions.
- The parties have differing needs, bringing them to the negotiation, and negotiation of this kind may be a question of fathoming what their need is, whilst concealing your need.
- As future transactions are not guaranteed, or if one of the parties has a stronger position, it may involve threats and dominance.
- Often you will have your preferred price and hold to it, trying to get the other to move (anchoring).
- You will each have a reservation price.
Ultimately, if the otherside know how much you need or want it, they are going to be able to anchor better than you.
The representative example is negotiation for a long term services or supply relationship, where there are multiple factors, including price, service level, etc.
There is usually a longer term relationship and commitment to consider and so:-
- The parties must work together, as the parties may depend on each other in the future.
- Much more good faith, sincerity, sharing of information.
- Need to express own needs and interest.
- More discussion as to principles.
- Hard on principles, soft on people; do not get personal.
- Keeping calm.
- Creativity, lateral thinking, imagination, engineering.
- Focussed on the interests of each party, not their positions.
Any other types?
We discussed whether there might be any other types. There was no real agreement on this, put two possibilities identified were:-
Litigation involve a legal claim being made by one person against another. It is characterised by the fact that it is initiated by one party only and the other party has no desire to participate.
- Requiring the claimant to justify their case (and seeking to avoid disclosure of potentially damaging evidence).
- Assessing litigation risk in terms of certainty of the applicable principles of law, evidence, likely compensation levels, chances of recovering some or all of your costs, having to pay the other side's costs, forced mediation, and the difficulty in enforcement of judgements.
This is superficially similar to Integrative Bargaining except that it is "hard on people" as well.
Aspects of the negotiation
Some of the aspects of negotiation discussed, were as follows (although not all are applicable to each type of negotation):-
- Your first offer to purchase should be as realistically low as you think they can go to.
- Your first offer to sell should be as realistically high as you think they will purchase at.
- There is no real rule as to who starts.
- If you are concerned that you do not have full information or are not being told the truth, try to flush this out by asking questions of the other side (explore and show an interest in their position) and publish minutes putting on record the statements made by the other side.
- Consider what their BATNA really is.
- Look to create value. Not just in monetary terms.
- Look for norms affecting the negotiation. E.g. if one side has a dominant position, should they exercise that dominance? If one side has been altruistic, should you reward that?
- Withholding information is not always the best strategy; sometimes it can be equally powerful to share your true position, as it may force the other side to consider it properly.
- It can be more effective, and indeed helpful to both sides, to "give suggestions, not criticism" (i.e. use what ifs, and how abouts). Being on the receiving end of criticism, it might be argued, makes one become defensive, and less receptive and imaginative.
- Work on building up a general skeleton picture of what any deal might look like and then fill in the numbers. E.g. get some rough proposals on the table first (no commitments) to concentrate the discussion. E.g. we had an exercise where we were negotiating for the return of a failed chef into a restaurant. The structure of the deal was (a) some initial salary, (b) an increase when certain targets were met. With this structure, we could then get down to how much.
- Use silence
- Give yourself time to answer - there is rarely a hurry.
- No outcome can ever be perfect, because no situation can be perfect.
When arranging a negotiation consider:-
- When are you meeting?
- Who will be there and with what authority?
- How long?
- How will you go about formulating issues and making proposals? E.g. will each put something in writing beforehand? Will each come prepared to make an opening statement?
- What will any agreement look like?
- Who will draw it up?
- Are there applicable deadlines?
- Would it help to have an independent third party to review?
- Are there any tools which might help? (TreeAge and Serendip)
The session is largely about Anglo Saxon style of negotiation.
Cultural differences are very important; and our own cultural norms make us blind to other cultural norms, or cause us mis-interpret other cultural norms.
For instance, if someone just keeps talking over me, or does not stop to give me time to speak, is that a cultural norm where they expect me to do the same?
To develop an understanding of when someone is not being frank, see Blink by M Gladwell.
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