negotiationNegotiation Skills

The 6 Steps To Negotiation (part 2)

3. Know Your Opponent

Jon Gruden is a successful football coach by almost any standard. He has achieved the highest level of accomplishment in the sport of professional football: in 2003, he won a Super Bowl Championship at the youngest age (at that time) of any coach, 37.  He is respected by his colleagues, fans and his teams.  When asked about his secret to achieving greatness, he answered with one word: preparation.  Specifically, Jon arrives in the office at a time when most people are still sleeping and spends countless hours just watching video of his upcoming opponent.  He studies their offensive schemes, their defensive personnel, the likely plays that they will employ when in certain situations.  He reads everything he can about the opponent’s head coach and other coaches.  Then, get this, he even studies the referees that are scheduled to be officiating his games.  He learns their names in case he needs to plead for a call to go his way and in case he might have a slight edge by calling the Referee “Bob” or “Jim” or whatever.

 Why does he do this?  Because he knows that when you face an opponent, you need every edge that you can get.  Since he doesn’t have to analyze his opponent as much during the heat of the battle, he can concentrate on coaching using the information that he has already learned and incorporate into his practices, enabling him to perform at his highest potential.

Never trust your assumptions or perceptions

By waiting until you arrive at the negotiation session, you are forced to rely on one set of input variables, those that you gain from the session itself, likely from your opponent.  Your opponent views you as his opponent as well.  He will be positioning his language, his case, his personality, and even his appearance in order to achieve his desired outcome.  He will probably be spinning and selling you.  If you are not prepared, you have only his “acting” to re-act to.  However, if you know other things about your opponent, you will not be swayed by the information that you receive at the negotiation session alone.  You will be able to assimilate all the information in order to really know what your opponent is likely up to.  Your assumptions and perceptions gained in the heat of the battle are likely tainted by your own emotions and the dynamics of the battle itself.

For example, if your company is negotiating a merger with another company, and prior to the negotiation you discover that the owner must sell his company because his health is failing, then, your opponent telling you that he is “healthy as a horse” in the negotiation session can be discounted in the face of the other information that you already know.  This puts you in a much better negotiating position.

Research

So, what is the best way to gather information and prepare?  The best way is to make it an essential step in your negotiation preparation.  If you have a negotiating team, delegate the duties and have them assist you in researching not only the competition, but likely scenarios in the negotiation.  Remember, the more information that you have, the more the advantage that you will have.  Information is power.

The more information that you have, the more creative choices that you can propose, AND the more in-control you will be of the process.

Information = Power = Advantage

This article is information

By the way, just the fact that you are taking the time to read this post is helping you to gather information. If for nothing else than about how to negotiate and what techniques your opponent may use in your dialogue.  Congratulations!  Most people never take the time to understand the basic concepts of negotiation. Successful negotiators understand that they can be great because they simply take the time to learn how to negotiate.  If you are interested in furthering your negotiating skills, we have seminars and workshops where you will learn the nuances of negotiating.  Imagine being able to not only learn from great negotiators, who will be your coaches, but to actually practice with them and hone your techniques. 

The three-quote system

When I was growing up, I remember my father always obtained three bids on any work that he was having done to the house. To me, this seemed like a waste of time.  My folks had to arrange several meetings in order to see all of the potential contractors who wanted the job. This took several hours before a decision was made.  “Why not just make a decision based on the first reputable guy,” I thought.  But, now I understand.  My father was gaining information power.  The more he knew about how the job would be done, when it would be done, and how much it would cost, the better he could negotiate with the contractors.  He usually got a great result, although he certainly invested his time up front in order to do so. 

Have multiple ways to meet your goal.

4. Understand Time & Patience

I have seen hundreds of negotiations fail because of the misunderstanding of one of the most crucial negotiation building blocks: the use of time.  If utilized properly, time can be a great ally.  Used improperly, time can be your worst enemy.  So many other cultures understand this, and since most Western cultures are not adept at negotiation, negotiators from these cultures frequently out-negotiate their Western counterparts.

Bill was a salesman in a large aluminum tubing company based in the US.  One of his best prospects was located in Japan, and was negotiating a large order of his extruded pipes.  In order to secure such a large international order, Bill would have to travel to Japan and close the negotiation there.  Bill had better products at better prices than any other bidders for the Japanese company’s business, and he thought so, but did not know for sure.  He planned a week in Japan: 2 days for presenting the product; 1 day for negotiating the deal; and 4 days for sightseeing, all of this before he had to return for a 4-day Elk hunting trip in Idaho with his buddies.  Before he left, Bill told his Japanese hosts that he was planning to be in Japan for a week but he had to be home for his vacation immediately following the trip. 

When he arrived in Tokyo, he was greeted by 8 people from the Japanese company, who showered him with flowers and gifts and gave him quite a welcome to their country.  Bill was ecstatic.  He was really going to like doing business in Japan.  For the next two days, Bill was taken on tours of the company and was treated to fancy lunches and dinners.  He was taken to Karaoke clubs.  He met many nice people, each of whom was excited about him and interested in stories about the US.  Yet, after the second day, Bill started to ask when they were going to talk business.  The Japanese executives admonished, “we like to get to know our business partners before we talk business.”

Since Bill did not want to hurt his host’s feelings, he complied.  On the third day, Bill was greeted in his hotel lobby by a beautiful Japanese hostess who took him on a tour of the Shrines and Temples of Tokyo and on the bullet train through the Japanese countryside.  Since he did plan on spending time sightseeing, he wasn’t worried that his time was being used up and no business had been discussed.  Again, on day 4, he asked his hosts over dinner when they would talk business.  Again, he was told that there would be plenty of time, since he had a full 3 days left on his trip. 

However, just to appease Bill, the Japanese set up a conference room in the office the next day so that Bill could present his products.  The presentation went well, but when Bill wanted to move to a negotiation over price and terms, the Japanese said that they would prefer to do so on the following day, Day 5, when the Vice-President would be able to attend. 

The next day, Bill showed up in the office ready to consummate his deal.  When he asked what time the negotiation meeting would be held, the Japanese informed him that, regrettably the Vice-President, Mr. Nakashima, would not be able to come to work that day, and would he mind if they waited until the following day when Mr. Nakashima would surely be able to attend.  Bill agreed, although he was starting to worry that his company had spent a great deal of money on Bill’s trip, yet Bill still did not yet have a deal.  Worse yet, Bill could not cancel the hunting trip, nor did he want to, because he had arranged the trip and the equipment and his buddies were already en route from different areas of the country.

On Day 7, Bill arrived with all of his paperwork, his samples, and a deal ready to be signed.  All that was needed was an agreement on the price and terms.  “What time is the meeting,” he asked.  “We are very sorry, Bill-san.  But Mr. Nakashima is out again today.  However, could you please leave all of the paperwork and we will see to it that Mr. Nakashima signs it when he returns?” 

Bill was furious.  “Isn’t there something we can do?  Can’t we call him?” he pleaded.  “Sumi-masen (sorry), Bill-san.  It is a family illness and there is nothing we can do.  If you want the business, you will have to wait.”

The flight home was the longest for Bill.  For 14 hours, he rehearsed what went wrong, and what he would say to his boss about his trip. 

Bill did eventually get the deal, but at a price and terms which were his absolute rock-bottom.  Had he played his time-card properly, he would have likely been able to procure a better result.

What did Bill do wrong when it came to time?  Well, first he informed the Japanese exactly how long he would be visiting.  Next, he told them that there was no possibility of extending his trip.  Finally, he allowed the negotiation to be put off repeatedly, until the face-to-face negotiation – which never took place.

Let’s look at what the Japanese did right.  First, they discovered how much time that Bill had planned for the negotiation.  Next, they delayed the negotiation until the very last minute, knowing that Bill probably couldn’t go home without a deal and knowing that the longer that they waited, the more desperate Bill would become.

Had Bill understood the Japanese cultural use of time, he would have planned differently.  He might have told the Japanese that he would only be there for 2 days and that he would arrange for his own transportation to and from the airport.

The 2004 Hockey Lockout

In 2004, the National Hockey League (NHL) experienced a lockout resulting in the cancellation of its 88th season.  For the first time since 1919, the Stanley Cup was not awarded.  It was also a historic event in that it was the first time that an entire professional sports season had been cancelled due to a labor dispute. The lockout started on the day after a collective bargaining agreement, between the owners and the players, expired.

Obviously, there were a great many details that went into the story of this negotiation.  However, it essentially came down to money, some benefits, and a lot of face-saving issues.  The NHL as a whole was losing money mostly due to inordinately high player salaries, with several franchise teams filing for bankruptcy.  The NHL owners wanted to implement a salary cap like many of the other professional sports leagues.  The cap would allow the owners to contain and predict costs and make each team comparable with the others in the league.  The players did not want a cap and wanted increased retirement benefits for the players.  The negotiations went on for many months and finally the NHL cancelled the season. At cancellation time, the NHL wanted a $42-million cap per team and the players wanted a $49-million cap.  The next year, the league was still faced with the same issues.  One year of revenues had not been made and a year of player salaries had not been paid.  Nobody was winning.  The sides negotiated for many more months and finally came to an agreement where the league imposed a $39-million salary cap and some additional terms and benefits.

Both sides had time pressure, but since the NHL had teams that were unhappy because they were losing money, cancelling the season wasn’t such a bad BATNA.  For the players, they needed to be paid.  Sitting out a year did not help their situation.  In fact, the NHL achieved a win-win outcome by waiting for another year to implement the salary cap, which was now negotiated down by $10-million per team.

Time pressure and patience were used by both sides, and a negotiation that could have taken a few days to conclude, went on for many months.  Short term, it was essentially a lose-lose, where the entire season was cancelled.  Long term, it became a win-win and today the NHL is a thriving league that has mostly happy players and teams making money.

Ways to Get Time on Your Side

  1. Be patient.  Remember that the most patient negotiator wins.  Most negotiations conclude in the last 20% of the time allotted, so save your real firepower for that time.
  2. Try to make your timeline longer than your counterpart’s.  If your adversary is planning to conclude the negotiation at 5PM and you envision the negotiation going into next week, then you will likely get a better outcome because the longer your relative timeline, the more time pressure that your adversary will feel.
  3. Understand that deadlines can be changed (there are no real deadlines).  Deadlines are simply made up lines in the sand.  Yet, would anyone really walk away from a million dollars at 5:30 if the negotiation was supposed to end at 5:00?  A deadline can be moved, and if you understand this concept and your counterpart does not, you will gain the advantage.
  4. Move Slowly, Confidently, and Diligently.  Understand that the longer that a negotiation carries on, the better the chances are for a resolution.  This is because the parties feel that they have invested in the outcome, and their barriers begin to break down as they begin to share information.  Knowing that giving up little in the beginning while keeping the other party interested, gives you the best chance for a better outcome.

Acceptance Time

When making offers and counter-offers, the need for acceptance time must be understood.  People need time to adjust to new ideas.  Oftentimes, an offer is made which initially sounds unreasonable, but after some time and in considerations of the other alternatives, the offer becomes more palatable.  Time has a way of making things more acceptable.

Don’t Have a Deadline

Do you want a guaranteed way to mess up a perfectly good negotiation?  Make sure that you do everything that you can to set a deadline and then meet it.  I am not saying that you shouldn’t position the negotiation to end at a certain time, just be sure that that time is much earlier than the time that you really set as your deadline, and be sure to not let the other party in on your little secret.

So, let’s examine how this works in a real negotiation.  At or before your first meeting, tell the other party that you must conclude this negotiation by a certain time, let’s call it 3PM.  Now, you really don’t have to conclude at 3PM, you just want the other party to have the feeling that you must have reached an agreement by then.  That way, the other party will feel that he has to make significant progress some time before then in order to conclude the agreement.  As we will explore later, this might encourage your adversary to make some pretty big concessions at closing time or he might be faced with losing all progress on the entire negotiation.  Carrying on with this example, at 2:30 you really start to apply the pressure, stating that you must get this concluded in the next half hour or you will have to start the process over again at another time.  Hopefully, your adversary will make some pretty good concessions to you at this time and you can use these as a great starting point and a reason to excuse yourself to make “a phone call” to buy some more time.  You are now in control of the negotiation as you come back in and say that one more hour is all that you really have.  Again, you will hopefully be able to get larger concessions from your opponent until you finally close the deal.

Had you told your opponent that you had to leave at 5PM, and you really did, you then would be faced with a negotiation that went unresolved, or YOU might be the one giving the bigger concessions in hopes of an agreeable conclusion.

Never plan for a negotiation to be fast

One of my clients was involved in a lawsuit over a contract dispute.  She thought that the ordeal would be concluded in just a few months.  Once we met, I convinced her that she needed to become more patient and that the time to a successful outcome could reach in the years, not months.  Once she adjusted to this idea, it seems that I created a monster, which was great for her cause.  She started to gain the upper-hand in the lawsuit, which made her adversary more uncomfortable and more inclined to settle the suit.  Yet, any time that her adversary would want to come to the table to negotiate, she simply sent back a message that she would rather take her chances in court since she had received no “reasonable offers.” 

As the court date arrived, she finally agreed to sit down and negotiate and she did end up with a settlement that was far greater than it would have been had she lost her patience and accepted the first offer that came her way in the interest of being fast.