155. Negotiation: Common Mistakes, Underhanded Techniques & How to Improve

21 takeaways from this video:

00:01:42 Conventional wisdom about negotiation argues that only the gray-haired, mature and experienced elders make for good negotiators. Consequently, being the opposite can actually be the advantage in the modern world, and in fact not very many people in the business world have been thoroughly trained in the art of negotiation.

00:02:12 Humans often assume that negotiations are one time events, when in fact in today’s globalized environment nearly all negotiations in life will be repeat, serial encounters. This is because it truly is a small world, and people you’ve met in your past, perhaps for one-time negotiations, may and likely will appear at several times during your career, be it days or even decades later. The guy you got into a fight over a girl with at university could become the lead negotiator for a key M&A deal your future self may have to manage. Humans treat zero-sum negotiations completely different than win-win negotiations.

I (Stan Christensen) was in charge of negotiations between Häagen-Dazs and Ben & Jerry’s, two prominent super-premium ice cream makers. During the negotiations they came to the realization that their customers were fully brand loyal, with maybe 10% of their consumers being willing to switch brands. This realization caused them to, rather than fighting over that measly 10% maleable share of the market, created a joint-venture and distribution to block entry for other ice cream competitors wanting to steal market share in the super-premium ice cream market. But before they could actually undergo the joint-venture, they had to first clear the air of all the different times during the years leading up to this realization that they had intentionally screwed each other over.

[EDITOR’S NOTE: For more information on joint ventures, watch Peter Theil’s lecture Competition Is For Losers, Aim For Monopoly hosted by Ycombinator at Stanford University.

Also, for more information on defensive business models, read the book Defending Your Brand: How Smart Companies Use Defensive Strategy to Deal With Competitive Attacks by Tim Calkins.]

Building relationships, even in seemingly one-time negotiations, is a safer bet to your future than violently taking the other side for all they are worth.

00:05:44 Conventional wisdom also argues that negotiation requires an in-born talent. But while natural talent helps, education plays an important role. Therefore since most other people haven’t been properly trained, taking the time to learn just a couple of tricks and theories will put you in the advantage over most other people you may meet and ‘make a deal’ with.

Common negotiation mistakes:

00:06:19 People often focus too much on negotiation tactics – tricks or methodologies- to get what they want from the other side. Negotiation tactics such as:

  • High-balling – starting negotiations out with an extremely high offer and then making small concessions down to ensure you extract maximum worth from the negotiation.
  • Good cop/bad cop – where one negotiator is the ‘tough guy’ and his partner plays the ‘good guy,’ using psychology against you knowing that you will be more open to dealing with the friendly, empathetic negotiator, even if his demands are still a little more than you were hoping for.
  • For more negotiation tactics, refer to Changing Minds.org’s extensive list of 93 negotiation techniques and strategies.

The danger of relying on underhanded tactics is that people who feel they have been manipulated and taken advantage of want revenge. Recall that there is a very likely chance that you’ll run into the other side at some point in the future – directly or indirectly – building a contact directory of people who want revenge on you will not help your career in the long run.

Short-term underhanded tactics don’t lead to long-term relationships.

The more aggressive and hostile you are, the less people want to concede to you and work with you.

The moral of the story is to be aware of tactics so you know when they are being used against you, but don’t use them on others as your primary method of negotiating.

00:07:33 Another mistake is losing sight of your important objectives and focusing on the wrong things. If you’re hired to negotiate on behalf of a party, seeking revenge from a prior loss or making the other side’s negotiator look incompetent isn’t why you are there.

00:09:39 Along the same lines as losing sight of objectives is thinking that your ONLY job as negotiator is getting the absolutely best deal possible from the pockets of the other side. Ideally, you should be open to creative solutions which add value to all involved parties. Think integrative negotiations; not distributive negotiations.

00:09:54 Failing to recognize and address assumptions – beliefs about a company or person based on age, gender, background, religious affiliation, etc. both in yours and the other side’s logic.

It’s already difficult for people to recognize assumptions, even more difficult to question, challenge, and change them. The more time you spend with a person, the harder it is to deny that you do in fact have a lot in common and want pretty much the same things.

[EDITOR’S NOTE: For information on how assumptions are difficult to idenitify, watch the TED Talk Are We In Control Of Our Own Decisions? by Dan Ariely.]

 

00:13:00 Negotiation can be defined as “any attempt to persuade or influence a party to do something.” Rather than thinking systematically about negotiation, they go through life doing the same thing over and over, hoping to get better results.

Effective negotiation really boils down to creative problem solving and effective relationship management.

00:15:10 To be effective at negotiations, you need a framework. Roger Fisher’s book “Getting to Yes” is a great book to read on this subject.

00:18:00 Criteria are “objective standards independent of what either side wants.”

The next time you’re faced with a taxi driver who has gotten lost and taken the long route from the airport to your hotel, whether on purpose or “by accident,” instead of negotiating a price when you have no idea what an acceptable price would be, refer to objective criteria: suggest going into the hotel and asking the front desk what the average price their other guests typically pay. This is a reasonable negotiation request a respectable taxi driver would find hard to reasonably call unfair, and you’re less likely to be taken advantage of.

Think of communication as convincing the other person that you can hear them and that they are being heard. The fact that the other person feels like they are being listened to is the most important part of persuasion.

00:24:00 Relationships can be defined as “the ability to work out differences effectively.” Humans usually have more things in common than they are aware, and so effective relationship management is simply the ability to identify those commonalities.

Even if the other person knows you’re only trying to create a relationship based on commonalities for the express purpose of getting them to do you a favor: for example convincing a cab driver to wait for you outside of a grocery store for 10 minutes on your way to your final destination when the cab driver knows he could earn more money by refusing to wait and picking up another passenger, he won’t mind too much because of the fact that you’ve created that relationship.

If you’re good at relationships, you’re good at negotiation. Cutting off dialogue is the absolutely worst thing you can do to the relationship.

[EDITOR’S NOTE: Recall in Frank Conner’s lecture The Psychology of Love & Phases of The Breakup Process that unhappy couples increasingly engage in demand-withdrawal interactions where one person wants to talk things out, but the other person withdraws. Recall also that argument, when done properly, is a conversation about an issue that you want to resolve.]

5 tips to be a better negotiator:

00:36:05 Prepare. Most people don’t spend the necessary time preparing for their negotiation: identifying commonalities, understanding the other party’s wants and needs, etc. There is a direct correlation between how much time you spend preparing, and how favorable the negotiation outcome is for you.

00:36:43 Never lie. You do better in the long-term if people know you as a trustworthy person with integrity. Develop a brand around being trustworthy, and people will want to work with you.

Employers hire people they believe who will ‘get things done.’

[EDITOR’S NOTE: Recall in my interview with Deputy Managing Director Philippe Torloting that with regard to advertising it’s important to create a network around you to humanize and add personality to your brand and to keep an eye on your industry. Branding yourself has the added benefit of simultaneously working towards an earned media campaign because people will want you to talk and give presentations on their websites and at their public events, in lectures, etc.

Brand yourself in some kind of specialized communication skill that can be transferred: become known as a good presenter, negotiator, event organizer, graphic designer, etc. Something that makes people attracted to you and want you to be around them and are confident in sharing you with their network.]

00:38:03 Apologize. It’s very easy to pass the blame for problems, but this very rarely leads to any positive outcome. Apologizing costs you nothing, and intelligent person will also acknowledge their contribution to the problem.

00:40:11 Stay in the game. Stay persistant and keep trying things. Eventually a thing you try will work. If nothing else, you’ll wear the other party out and a conclusion in your favor will be reached.

00:41:45 Give them extra. You can almost always find ways of making it better for them without necessarily making it worse for you. By merely providing the other party an offer to make the deal ‘a little bit better’ for ther party shows that you’re out for a win-win (integrative) relationship, and they will be surprised, grateful, and then recipricate by figuring out how they can also give you benefits. Again, think integrative negotiations; not distributive negotiations.

00:44:30 Since you can’t always differenciate between an outright liar and a person convinced with his incorrect information, When faced with a difference of information, rather than calling that person a liar say “Wow! What you’re telling me is very different from the data that I have. Let’s compare notes and figure it out.”

This diplomatic approach allows you to:

  • Publically address the person on their lie without making accusations
  • Give the person the opportunity to correct their lie and start telling the truth, or to dig themselves into a whole even deeper
  • Show the other party you are well prepared and are not someone who will be taken advantage of
  • The process of fact-checking and figuring it out allows both of you to test assumptions and can be an opportunity to create a deeper relationship with the person
  • Gain valuable insight into the environment if your data proves to be wrong and the other person wasn’t lying
  • Decide if you want to continue negotiations or walk away if the other party remains stubbornly committed to their incorrect statement

Regardless, you can feel more comfortable in your assessment of the other party’s trustworthiness, or lack thereof.

[EDITOR’S NOTE: Recall in Oussama Ammar’s talk Managing Your Professional & Private Life that as an entrepreneur, it’s your responsibility to be clear, transparent, and fair with the employees you hire who will help you build your business into a successful one, even with those employees who don’t know how to negotiate. The idea of paying it forward, and not burning your bridges or making enemies, is important. Once word gets out that this is how you treat people and do business, nobody will want to do business with you.]

00:44:50 Salary and pay increases basically come down to two things:

  • Have good data about objective criteria. What do other people in your company at your level and in your industry get paid to do the same job? How often do internal employees receive pay raises?
  • Have, alternatives. What are you willing to do if you don’t get the pay increase: change employers? Going into the negotiation with options in your back pocket increases your negotiation strength. Improve your Best Alternative to A Negotiated Agreement (BATNA).

00:48:53 Develop humility and a second-degree. In international relationships especially, rather than acting like you know everything and needlessly making yourself vulnerable to the other side correcting you and proving you wrong, admit your faults and ask for help. The other party will be more forgiving of cultural faux-pas, mistakes and shortcomings.

00:52:34 View all of the negotiation topics to be covered as an entire package rather they trying to reach an agreement issue-by-issue because your positions and needs change relative to the topics previously agreed to.

00:54:53 In mediation you have a natural bias towards the underdog; the weaker party.

View power and leverage differently. Being young, small and lacking resources doesn’t mean having no other option but to give in to the big guy.