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50 practical negotiation_tactics

  1. 1. Introduction 1 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 ser- vice, 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 pro- fessional 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.
  2. 2. 2 50 Practical Negotiation Tactics 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 under- stand how to use the tactic.
  3. 3. Introduction 3 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 ques- tions 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
  4. 4. 4 50 Practical Negotiation Tactics 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 home builder • a spouse • a hotel clerk • a child • an electrician/plumber • other family members • a lawyer • a supervisor • a vendor/buyer • a co-worker • a human resource director (who • a salesperson might make a job offer) • a boyfriend/girlfriend • 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.
  5. 5. Introduction 5 • 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 bar- gain. 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 alter- natives?” During an employee evaluation, perhaps the employee can say, “I’d like
  6. 6. 6 50 Practical Negotiation Tactics 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 negoti- ated, 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.
  7. 7. Introduction 7 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 restau- rant, 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? 9. As a parent, spouse, or child, have you ever required a written agreement covering chores, allowance, or division of house- hold 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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  9. 9. The Negotiation Process 9 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).
  10. 10. 10 50 Practical Negotiation Tactics 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.
  11. 11. TheNegotiationProcess11 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 #1– #6 #7– #14 #15– #21 #22– #31 #32– #38 #39– #46 #47– #50 Initiation Phase Negotiation Phase Resolution Phase Key Factors – Time, Information, Power Preparation: Choose Overall Approach to the Process Strategy: Getting Started Initial Offer: The "Give & Take" Counter Offer: Striving for Conclusion Pressure Bargaining: Settlement of Impasse Reaching Agreement: Achieving Progress Key Methods:
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  13. 13. Preparation 13 SECTION III: 50 TACTICS FOR SUCCESS Stage 1: Preparing to Negotiate In 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:
  14. 14. 14 50 Practical Negotiation Tactics 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.
  15. 15. Preparation 15 Tactic 1: Know Your BATNA At what point will you walk away from the negotiation? You improve your posi- tion 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 thou- sand miles away, to a condo in Arizona. The ad he placed in the local newspaper produced only one potential buyer: Patrick Knight. Harvey: Well, now that you’ve checked it out, how do you like it? Mr. Knight: It’s in great condition, just as you described it. Harvey: Any questions? Mr. Knight: Will you take less? Harvey: No. It’s easily worth at least $20,000. That’s the price. Mr. Knight: $18,000, tops! Harvey: No thanks. Mr. Knight: Okay. $20,000. I need it for a new restaurant. Harvey: Restaurant? Mr. Knight: Yes. We cut off the top of the vehicle and people sit in it and get served their meals in our “oldies dream car!” Harvey: Never mind, I’ll keep it. I haven’t maintained it for all these years just so you can destroy it.
  16. 16. 16 50 Practical Negotiation Tactics 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 col- lector 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 Jag- gers 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 SellingtheirbusinesswastheJaggers’BATNA.Whennegotiationswiththeunionbecame hopeless, selling became an attractive alternative to a strike or prolonged battle.
  17. 17. Preparation 17 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, you still interested in my rifle? Tom: Of course. Are you finally ready to sell it? John: Yes, I think so. Make me an offer. Tom: 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 get- ting 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.
  18. 18. 18 50 Practical Negotiation Tactics 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
  19. 19. Preparation 19 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. With- out 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: 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.
  20. 20. 20 50 Practical Negotiation Tactics 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.
  21. 21. Preparation 21 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 negotia- tions 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: Let’s take all our Beanie Babies to my house to trade! Cybil: 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.
  22. 22. 22 50 Practical Negotiation Tactics 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 emotion- ally. 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 cho- sen to return to the table. They had all been replaced after their decision to negoti- ate “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.
  23. 23. Preparation 23 Tactic 4: Use Objective Criteria Use objective criteria to judge the quality of each side’s proposals—you will prob- ably 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 mea- sure 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 any- one 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
  24. 24. 24 50 Practical Negotiation Tactics 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 dis- appointed 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 invest- ment 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
  25. 25. Preparation 25 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 com- missions, 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 pro- duce 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 offi- cer 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.
  26. 26. 26 50 Practical Negotiation Tactics 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 treat- ment. 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!
  27. 27. Preparation 27 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 …
  28. 28. 28 50 Practical Negotiation Tactics 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.
  29. 29. Preparation 29 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 pres- sures 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. Pre- pare carefully, and do your homework. Timing is everything! Example 1 Bob Hillard had been coveting a turquoise 1963 Chevrolet Impala Supersport con- vertible 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: Hello, my name is Bob Hillard. I live a few blocks from here, on Bri- arwood Road. Car owner: Hi! What can I do for you? Bob: I’ve admired your ‘63 Impala for years. Would you possibly be inter- ested in selling it? Car owner: No, I love this car—restored it myself. Bob: Not even for, say, $12,000? Car owner: No. That’s a generous offer, but money doesn’t mean anything to me at this point in my life … Bob: 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.)
  30. 30. 30 50 Practical Negotiation Tactics Bob: Hello! I noticed your FOR SALE sign, and wondered if your ‘63 Impala might also be for sale … Car owner: (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. Bob: Can I see it? Car owner: Sure. Follow me. Bob: (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. Car owner: Well, that’s a fair price. Can you come back on Monday at 10:00 a.m. to seal the agreement at the courthouse? Bob: Sure. Then it’s a deal? Car owner: 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 organi- zation, 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
  31. 31. Preparation 31 deadlock. Both sides caucused: The leaders on each side met to negotiate a com- promise. 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 mem- ber 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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  33. 33. Planning a Strategy 33 Stage 2: Planning a Strategy The 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 bar- gaining 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 pro- cess, 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 nego- tiations between a union and administration negotiators. Third parties sometimes have their own hidden agendas, such as actively trying to keep one of the two par- ties 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 prac- tice 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
  34. 34. 34 50 Practical Negotiation Tactics 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 trans- ferred 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 inves- tigators 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).
  35. 35. Planning a Strategy 35 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 con- siderable 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.
  36. 36. 36 50 Practical Negotiation Tactics 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 part- ners 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: 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.
  37. 37. Planning a Strategy 37 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 reputa- tion 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 with- draw 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.
  38. 38. 38 50 Practical Negotiation Tactics Conclusion Bits & Bites lost an opportunity here because their initial demand was so unreal- istic 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.
  39. 39. Planning a Strategy 39 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.
  40. 40. 40 50 Practical Negotiation Tactics 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 respon- siveness, 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 dam- ages. 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.
  41. 41. Planning a Strategy 41 Miguel: 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. Sandy: Liz, these terms will put me out of business—I’m a small 20-person operation. Liz: 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. Sandy: What can I do? Liz: Let’s try to negotiate something reasonable before Miguel gets back. (Three hours later) Miguel: I’m back. Any luck, you two? Liz: 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.
  42. 42. 42 50 Practical Negotiation Tactics 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.
  43. 43. Planning a Strategy 43 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 pay- ing 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 differ- ent 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? Customer representative: 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.
  44. 44. 44 50 Practical Negotiation Tactics Mike: I would imagine so. But I’m looking at a $500 long- distance bill, which should rightly be $50. I would hope that you would credit my account for this bet- ter 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 retroac- tively, 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 some- one 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. Customer representative: Wait—I’ll get my supervisor. We certainly don’t want to lose you as a customer. 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 cus- tomer 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.
  45. 45. Planning a Strategy 45 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 most- senior 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, less- senior 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 put- ting 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
  46. 46. 46 50 Practical Negotiation Tactics sure these employees can protect themselves? Are you telling me that your employees are being put in dangerous conditions without adequate training and safeguards? Owner: 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. Negotiator: Then you can’t have it both ways; either the employees are properly trained, or they’re not. Either they are prop- erly protected, or they’re not. Owner: 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! Negotiator: (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.) Owner: 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’ negotia- tor 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.
  47. 47. Planning a Strategy 47 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 compensa- tion 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 recommen- dation 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 follow- ing 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 Moth- er’s, I’m willing to pay or let it go for $800.
  48. 48. 48 50 Practical Negotiation Tactics Susan: Well, I choose to buy it. Here is my check for $800. I’ll pick it up tonight. Mike: 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)
  49. 49. Planning a Strategy 49 Howard: Abe, your bid is $170 million; Bobby, your bid is $190 million. Abe, you agree to sell your half-interest to Bobby for $180 mil- lion, and to close within ninety days. Abe: Agreed. I will arrange to sell him my half-interest for $180 mil- lion, and we close by July 1st. Bobby: 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 busi- ness. Bobby was willing to pay more than Abe to remain sole owner. The recipro- cal 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 mil- lion above what he was willing to pay.
  50. 50. 50 50 Practical Negotiation Tactics 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 confus- ing 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 bro- chures 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
  51. 51. Planning a Strategy 51 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 insur- ance 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 insur- ance 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!
  52. 52. 52 50 Practical Negotiation Tactics 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 embar- rassed 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 objec- tives; 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: 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: Russ: I think I should be rewarded with the piece of cake, because I am so con- scientious 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.
  53. 53. Planning a Strategy 53 Bill: 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 favor- ite either. This cake is white cake, and I really like white cake. Russ: 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. Mother: 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 res- idential 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 win- dow. 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.
  54. 54. 54 50 Practical Negotiation Tactics 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. Iden- tifying their shared interests caused the nearby residents and the customers to reach agreement. The shared parking arrangement did work out for Marilyn.
  55. 55. Planning a Strategy 55 Tactic 13: Set a Deadline Be sure you know well ahead of time what the deadline is for completion of nego- tiations. 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 nego- tiation 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: Okay, how should we go about dividing up the furniture and possessions? Everett: I can’t talk about it. Sue: Well, we can each take turns selecting things … Everett: Like each tool or dish. That will take days! Mary: 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. Sue: Well, let’s all take a few hours to look around. Everett: A few hours? I can’t—I’ve got to leave shortly for the drive home. Mary: We just don’t have the time … Jenny: We’ve got to do this—the house is sold! Everett: 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
  56. 56. 56 50 Practical Negotiation Tactics 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? Sue: Okay. Mary: Agreed. Jenny: 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 develop- ment 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.
  57. 57. Planning a Strategy 57 (One hour later.) Allan: 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.
  58. 58. 58 50 Practical Negotiation Tactics 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 informa- tion 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 weak- ness 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 begin- ning of the semester that we were using pretty often. One day mine disap- peared. 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.
  59. 59. Planning a Strategy 59 Jason: Another thing. Since I missed some assignments, I’m getting a D in Span- ish 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. Obvi- ously, my study habits are okay. And I know I have to be better about get- ting 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 deci- sion 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 loca- tion 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
  60. 60. 60 50 Practical Negotiation Tactics 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 com- plained 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.
  61. 61. Exchanging Initial Offers 61 Stage 3: Exchanging Initial Offers Many 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 negotia- tors 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 pro- cess 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: Resistance Point ($25,500) Settlement Range $28,000272625242322$21,000 Resistance Point ($22,750) Target Point ($24,500) Seller Buyer Initial Offer ($21,000) Target Point ($23,000) Initial Offer ($22,750–$25,500) Fig. 2: Distributive Bargaining Process. Adapted from Labor Relations and Collective Bargaining, by Michael R. Carrell and Christina Heavrin. (2004), 190–192.
  62. 62. 62 50 Practical Negotiation Tactics 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 advan- tage: When multiple items or issues are on the table, include others that are actu- ally 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.
  63. 63. Exchanging Initial Offers 63 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 nego- tiating table to confer in private. There are many ways to use this strategy. If nego- tiations 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 par- ties 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 pri- vately, 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
  64. 64. 64 50 Practical Negotiation Tactics 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. Dad: I think we can handle a few more kids—how about 35? And midnight sounds okay. Mom: (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. Dad: Actually, we could rent the VFW hall, and then the number of kids won’t matter. Shelly: (excited) That would be so cool, Dad. I could invite everyone!! Mom: Hold on! I thought we agreed that this was to be a simple party. Shelly: Mom! This is my “Sweet Sixteen” party. It’s special!!! Mom: Well, okay. I guess the VFW will work. We could play records and you guys could dance. Shelly: 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. Dad: That would be great! It would keep everyone entertained. Mom: (shocked) Jerry’s band from down the street? They’re a punk rock band! Their music is totally inappropriate for sixteen year-olds. Dad: Oh, I think the band would be fine. I’m sure we can ask them to tone it down a little. Shelly: And can we bring in pizza? Or maybe one of those “mile-long” hero sand- wiches? Dad: I like those—let’s do the hero sandwiches. Mom: 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 dis- cussion and went over what Shelly’s mom thought they had already
  65. 65. Exchanging Initial Offers 65 decided. When they called Shelly back in, her mom presented the revised proposal.) Mom: 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. Shelly: All right. But we can have the band, can’t we? Mom: No band, but your dad and I agree on getting a DJ to play. That way, we will be better able to chaperone. Shelly: A DJ? I guess that’s okay. Mom: And we’re serving chips and sodas, but we’ll schedule the party for 8:00 p.m. to 11:00 p.m. Shelly: Dad, midnight, please!! 11:00 p.m. is for little kids!! Dad: No, sorry. Your mom and I agree—11:00 p.m. Shelly: Okay, but no Sweet Sixteen birthday party decorations. That’s so lame. Mom: Agreed. Does that mean no presents, too? Shelly: 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 pro- duction. 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
  66. 66. 66 50 Practical Negotiation Tactics 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 pre- pared for new job opportunities. With the cost of college educations so high, many will want to use it for their chil- dren’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 will- ing 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.
  67. 67. Exchanging Initial Offers 67 Union: 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.) Union: 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. Company: Good, and I apologize for explaining it poorly. Conclusion Negotiator #2’s timely call for a caucus so she could explain the miscommunica- tion in private saved the session. Negotiator #1 regained his footing, and the par- ties were able to complete their negotiations.