The following material is the script for a short training demonstration at Money Management International in Houston on August 30, 2004.
The presentation describes negotiations tactics from the book and audio program Secrets of Power Negotiating by Roger Dawson. It also includes material from the audio program, The Art of Negotiating by Gerard I. Nierenberg.. The audio materials were published by Nightingale-Conant of Niles, Illinois.
Good afternoon. My name is Grady McAllister, and I'm going to be sharing some ideas on how to be a better negotiator. Let's start by taking a look at this famous quote from President Kennedy:
"Let us never negotiate out of fear, but let us never fear to negotiate."
— John F. Kennedy. Inaugural Address, 1961
Now let's set that quotation aside, and I will read some biographical material which may seem familiar to you:
On a cold January day, a 43-year-old man was sworn in as the chief executive of his country. By his side stood his predecessor, a famous general. Fifteen years earlier, this general had commanded his country's armed forces in a war that resulted in defeat of Germany. The young leader was brought up in the Roman Catholic faith. After the ceremonies, he spent five hours reviewing a parade in his honor and stayed up celebrating until three in the morning. [The Art of Negotiating by Gerard I. Nierenberg, transcribed from audio version by Nightingale-Conant, 1987]
To most Americans familiar with the 1960's, those words seem to be talking about President John F. Kennedy. In fact most of them do accurately describe Kennedy. However, the fact is that the words even more closely describe Adolph Hitler as he assumed power in Germany on January 30, 1933.
This example shows the hazards of jumping to a conclusion. So, as we get into this subject of negotiation, let's make our starting point the need to avoid assumptions:
1. Don't assume that you can narrow the negotiation down to one issue.
2. Don't assume all people want the same thing.
3. Don't assume money is all-important.
Much of negotiation involves clearing away hidden assumptions:
1. Establish criteria (for both your side and theirs).
2. Get information.
3. Reach for a compromise
The bulk of our material today is based on The Secrets of Power Negotiating by Roger Dawson.
Born in England, Roger Dawson emigrated to America in 1962. For a long time, the American Dream eluded him. During the thirteen years he worked as a manager in a department store, he barely earned enough to support his family. Everything started to change when he suddenly quit his job and entered real estate.
Dawson attributes much of his success to the negotiating skills he acquired.
According to Dawson, power negotiating "leaves the other person feeling that they won. The poor negotiator comes away with the other person feeling that he or she lost."
Dawson says that you should always ask for more than you expect to get. He offers five reasons for this tactic:
1. You might just get it.
2. It gives you some negotiating room.
3. It raises the perceived value of what you're offering.
4. It prevents the negotiation from deadlocking.
5. It creates a climate in which the other side feels that they have won.
The objective is to set up a MPP--"maximum plausible position" during the negotiating process. In doing this, it is important to also imply flexibility. This will help maintain a tone of mutual trust.
Dawson writes that you should "never say yes to the first offer or counter-offer from the other side" no matter how reasonable it appears. Rather than feeling good about your acceptance, they will resent you. This is for two reasons: They will think that they could have done better, and they will start to wonder if something is wrong with what you are offering.
Dawson says the power negotiator will "gasp in shock and surprise" at the other party's first offer. This will often elicit an immediate concession on their part.
Another opening tactic is "feel, felt, found." It is a way of dealing with the objection that your price is too high. Borrowed from sales training, you say, "I understand how you feel. Many people have felt that way. However, they later found…" Then you mention the benefits the other party will receive if they agree to your terms.
Here are some of the other tactics that can occur during a negotiation:
Splitting the difference. Splitting the difference may seem like the fair thing to do. However, if you are the seller, it can weigh the negotiation against you. The reason is that the other person may want to split the difference again, bringing the price even lower. Instead, encourage the other person to offer to split the difference. Once they have set it at the midway point "you can reluctantly agree to their proposal, making them feel that they won."
The set-aside. This is a way of handling an impasse on a particular point: "Let's just set that aside for a moment and talk about some the other issues, may we?"
Good-guy/Bad guy. Also known as "Good Cop/ Bad Cop. We've seen examples of this on numerous TV shows in which one police officer talks tough to a suspect, and then another one walks in who treats him gently.
Dawson offers a political example from recent history. In 1994, former President Jimmy Carter was called to play Good Guy when he and Colin Powell went to Haiti to see if they could get General Cedras to give up power without a fight. Powell was there to impress the might of the armed services upon Cedras. Carter was there to cozy up to the dictator, even suggesting he come to Plains, Georgia, and teach a class in Sunday School.
Withdrawing an offer. This is a tactic that you should only use when the other party is grinding away at you. You back off from your last price concession, or withdraw an offer to include freight, installation, training, or extended terms. To avoid poisoning the tone of the negotiation, you blame the withdrawal on someone who is not present. That person becomes the "bad guy" for your side.
Dawson also describes some of the "unethical gambits" that you may encounter:
The decoy. The other side creates a phony issue to take your attention away from the real one. They may, for example, demand that you meet a deadline that they know is impossible. Your eagerness to keep them happy can lead to concessions that cost you money.
Cherry picking. This happens when someone obtains bids from different contractors and asks them to price each item separately. He accepts the low amounts in each proposal. He then asks each contractor to match their competitors' low amounts. By emphasizing the parts of each proposal rather than the total amounts, he plays each contractor against the others to obtain the best overall bids.
The deliberate mistake. A salesperson writes the contract for the purchase of a car and "forgets" to charge for its CD player. The hope is that the buyer will be eager to get something for nothing and rush to conclude the sale.
Escalation. This happens when someone suddenly wants more after both sides have already agreed to the terms.
The default. This involves a "unilateral assumption that obviously works to the advantage of the side proposing it." For example, a client might send a check that is two per cent less than the amount owed. A note explains that, "All of our other vendors discount for payment within 15 days, so we assume you will too." What they are really assuming is that people will be either too lazy or too busy to take action and will simply let them get away with it.
Dawson states that the way to deal with these unethical gambits is to "call the other side on it and gently explain that you expect to see a higher level of ethics from them in the future."
You have to always be prepared to walk away from a negotiation. Dawson writes:
If there is one thing that I can impress on you that would make your a ten times more powerful negotiator, it's this: Learn to develop walk-away power…There's no such thing as a sale you have to make at any price, or the only car or home for you, or a job or employee that you can't do without.
In his seminars, Dawson often meets people who tell him about a failure in negotiation:
Some place in relating the story, they'll say to me, "I made up my mind that I was going to get it," and I know that was the turning point in the negotiation. It was the point at which they lost.
Dawson believes that negotiation can become the universal problem-solver:
I look forward to the day when all conflicts are avoided because people know how to get what they want with good negotiating skills. I invite you to share this vision with me by pledging now to remove conflict from your life, and the lives of those around you, by always practicing good negotiating skills. The example that you set will help lead us into a bright new future where violence, crime, and wars become anachronisms.
Finally, please let me say to conclude our brief look at this big subject . . .
I don't know how soon you will be putting these ideas to work.
I don't know if it will be in your personal or professional life.
I don't even know when we will meet again to explore this exciting subject.
I do know that a whole new world awaits you put these techniques into practice as you master the art of negotiating.
The Vasthead is the professional web site of Grady McAllister of Houston, Texas.