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WISDOM IN A NUTSHELL

BARGAINING FOR

ADVANTAGE

Negotiation Strategies for Reasonable


People

By
G. Richard Shell
Penguin Books, June 2000
ISBN 0 14 02.8191 6
286 pages

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Bargaining For Advantage Page 2

The Big Idea

This book is a guide to better negotiation practice, not a substitute for it. It will
show that while negotiation is not a rocket science, it is not simple intuition either.
No matter who you are, your intuition will fail you in important bargaining
situations. To improve, you need to shed your assumptions about the process
and open yourself to new ideas. The approach to negotiation this book uses is
called Information-Based Bargaining. This approach focuses on three main
aspects of negotiation: solid planning and preparation before you start, careful
listening so you can find out what the other side really wants, and attending to
the “signals” the other party sends through his or her conduct once bargaining
gets underway.

PART I: THE SIX FOUNDATIONS OF EFFECTIVE NEGOTIATION

CHAPTER ONE: THE FIRST FOUNDATION: YOUR BARGAINING


STYLE

A Story
Two men entered a conference room in an office tower high above Lexington
Avenue in New York City. On one side of the table sat Peter Jovanovich, the
Chief Executive of Harcourt Brace Jovanovich (HBJ), a company now on the
edge of financial ruin. As the son of one of the firm’s founders, Jovanovich was
deeply committed to preserving the family’s legacy. Across the table sat Dick
Smith, the aggressive leader of General Cinema, a large conglomerate probing
for a corporate foothold in the publishing business. Both sides have carefully
prepared their “scripts” for the opening of the negotiation. Smith was to be a
suitor and had planned a detailed presentation on General Cinema’s financial
strength and reputation. Jovanovich’s team, was also very positive about the
deal, and prepared Jovanovich for the role of “listener.” He would be interested
but noncommital. He would not tip his hand or show his urgency.

On cue, Smith began his opening speech, but within seconds Jovanovich
interrupted. The HBJ advisers stirred. This was not in the script. Jovanovich
spoke and placed a small box on the table between him and Smith. “My father
always gave a watch like this to his partners at the beginning of a new business
relationship,” he said. “This is meant to signify my sincere belief that General
Cinema is the right buyer of HBJ.” It was a risky admission, and both men knew
it.

The anxiety in the room eased.

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What is Negotiation?
A negotiation is an interactive communication process that may take place
whenever we want something from someone else or another person wants
something from us.

The Five Basic Bargaining Styles


Behind the bewildering array of personality differences, psychologists have
isolated five basic negotiation personality types based on the way people prefer
handling interpersonal conflict. The five types are, in descending order of
aggressiveness: competitors, problem solvers, “compromisers,”
“accommodators,” and conflict “avoiders.” No system of categorization is perfect,
but this one is better than average because the potential for interpersonal conflict
is what gives negotiation its characteristic “edge.”

Your Bargaining Styles


All negotiations begin with you. The first foundation of effective negotiation is
your personal bargaining style – the way you communicate when you face a
situation containing interpersonal conflict. Your success as an effective
negotiator depends on candidly assessing your strengths and weaknesses as a
communicator.

Some people have a wide “bandwidth” when it comes to bargaining styles. They
can adapt easily to many different types of situation and “opponents.” Others are
more limited in their range of effective action. They may be quite strong in
situations requiring competitive instincts but weak when it comes to relationships.
Or they may be strong in cooperative skills and weak if the situation calls for
hardball tactics.

Many negotiation experts try to teach people a single, all-purpose style, which is
often not helpful or realistic. Your job is to find out who you are as a negotiator
and then work to be more effective with the skills you have – not try to become
someone you are not.

What predispositions do you bring to the bargaining table? Are you a cooperative
sort of person, striving to meet everyone’s goals so people leave the negotiation
table feeling good? Or are you a more competitive type who is less concerned
with how the other party feels and more interested in how well you do?

Regardless of your answer, your job as a negotiator is to understand your style


preferences, see how they match up with the situation, plan your path through
the four steps that negotiations follow, and try your best to be effective by
preparing, forming high expectations, listening to the other party, and acting with
integrity in the process.

Information-based bargaining proceeds from the assumption that you will get
better results for yourself and achieve more for others who depend on you by

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tirelessly searching for key information about the parties and the situation. Your
success then turns on using this information skillfully as bargaining goes forward.

Your Bargaining Style: A Checklist


• Determine your basic style preferences
• Acquire a willingness to prepare
• Set high expectations
• Have the patience to listen
• Make a commitment to personal integrity

CHAPTER TWO: THE SECOND FOUNDATION: YOUR GOALS


AND EXPECTATIONS

Morita and Sony


In 1955, a small Japanese company called Sony Corporation had a new product:
a $29.95 miniature transistor radio. The radio was selling well in Japan, but
Sony’s energetic leader, Akio Morita, was not satisfied. He wanted to introduce
Sony’s radio to the world’s biggest consumer market: the United States. Morita
went to New York City to see if he could interest American retailers in selling
Sony’s new radio. He ran into a problem: The tiny radio was unlike anything
Americans had ever seen. Morita was persistent, however, and he soon attracted
the interest of Bulova, one of the most respected names in electronics of its day.
But Bulova offered to buy the radios for distribution in order to sell them under its
own brand name. Morita cabled his executive board in Japan for instructions.
The board enthusiastically cabled back its response: Forget about the problem
with the brand name and take the order. Morita thought it over carefully for a
week and returned to Bulova to continue the negotiations. He told Bulova he
would like to make a deal, but he could not accept the condition that they sell it
under their brand name. The deal didn’t push through and Morita received,
eventually, a more modest order from another American distributor. This one let
Morita keep the Sony name on the radio. The miniature radio caught the
American public’s eye – along with the name Sony. Of his negotiations with
Bulova, Morita later wrote, “I said then and I have said it often since: It was the
best decision I have ever made.”

Goals: You’ll Never Hit the Target if you don’t Aim


In Lewis Caroll’s “Alice’s Adventures in Wonderland,” Alice finds herself at a
crossroads where a Cheshire Cat materializes. Alice asks the Cat, “Would you
tell me please, which way I ought to go from here?” The Cat replies, “That
depends a good deal on where you want to get to.” “I don’t much care where,”
says Alice. “Then it doesn’t matter which way you go,” the Cat replies. To
become an effective negotiator, you must find out where you want to go – and
why. That means committing yourself to specific, justifiable goals. It also means
taking the time to transform your goals from simple targets into genuine – and
appropriately high – expectations. What is the difference between a simple goal

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and something that has matured into a genuine expectation? Basically one thing:
your attitude. Goals are things we strive toward that are usually beyond the range
of our past achievements. Such things as investment goals, weight loss goals,
and athletic goals are typical. We set goals to give ourselves direction but we are
not greatly surprised or disappointed if we fall short.

What you really want


Since setting goals is so vital to effective preparation, how should you do it? Use
the following simple steps:
1. Think carefully about what you really want – and remember that money is
often a means, not and end.
2. Set an optimistic – but justifiable – target.
3. Be specific.
4. Get committed. Write down your goal and if possible discuss the goal with
someone else.
5. Carry your goal with you into the negotiation.

Goals and Expectations


The first important step in preparation is to commit to specific, justifiable goals.
Why are clarity of purpose and optimism so helpful in negotiations? First, once
you set your sights on a concrete, challenging goal, you will become more
motivated. The intuitive part of your mind – the part that works and learns “below
the surface” while you are getting ordinary things done during the day – will
become a powerful ally and problem solver. You will become more focused,
persistent and achievement-oriented, and you will be more likely to come up with
good arguments and new ideas about how to get what you want. You will also
avoid the common trap of becoming focused on your bottom line too early. This
“goal focus” gains you a significant advantage over the average person, who is
inclined to pay more attention to his or her bottom line than to any other single
bargaining point.

Second, your clarity will communicate confidence and resolve to the other party.
You will convey the message that you have high expectations for both yourself
and the deal. And perhaps no other personal variable makes such a difference in
negotiation as the quiet feeling of confidence, self-esteem, and commitment that
emanates from people who know what they want and why they should get it.

CHAPTER THREE: THE THIRD FOUNDATION:


AUTHORITATIVE STANDARDS AND NORMS
The Third Foundation
In addition to the power of clear goals, negotiations harness one of human
nature’s most basic psychological drives: our need to maintain (at least in our
own eyes) an appearance of consistency and fairness in our words and deeds.

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Standards and Norms


Arguments about standards, norms, positioning themes, and authority are the
bread and butter of negotiation. But there is another important truth about the
criteria of fairness and consistency: Unless the issue is relatively trivial or the
social roles especially strong, authoritative standards and crisp positioning
themes alone seldom carry the day against negotiators with high aspirations.
When stakes are high, people do not make a concession just because they are
caught making an inconsistent statement or realize that the other side has a
good argument. They make it because they decide after careful consideration
that it is within their reach and helps them advance toward their goal. A quote
from J.P. Morgan succinctly summarizes this point: “There are usually two
reasons people do things – a good one and the real one.”

Put another way: A reasoned argument supporting your position is an admission


ticket that establishes your request as legitimate and gets the other side’s
attention. But argument alone is seldom sufficient to achieve bargaining success.
Your request must also be within the zone of the other party’s capability and
interests, and your manner of communicating the standard you wish to apply
must be persuasive. In the end, only two things determine the right price of
something: what a buyer is willing to pay and what a seller is willing to accept.

Gaining Normal Leverage: A Checklist


• Survey the applicable standards and norms. Identify the ones the other party
views as legitimate.
• Prepare supporting data and arguments.
• Anticipate the arguments the other side will make.
• Prepare a positioning theme and anticipate the other side’s.
• If necessary, consider making your arguments before a sympathetic
audience.

CHAPTER FOUR: THE FOURTH FOUNDATION: RELATIONSHIPS


The Fourth Foundation
Negotiation is about people – their goals, needs, and interests. Your ability to
form and manage personal associations at the bargaining table is therefore the
Fourth Foundation of Effective Negotiation. Personal relationships create a level
of trust and confidence between people that eases anxiety and facilitates
communication. The relationship factor is a critical variable in your ability to
succeed as a negotiator. Here are some tips that will help you get the most from
relationships every time you negotiate.

The Relationship Factor: A Checklist


• Gain access and credibility through relationship networks.

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• Build working relationships across the table with small steps such as gifts,
favors, disclosures or concessions.
• Avoid reciprocity and relationship traps like trusting too quickly, letting others
make you feel guilty and mixing big business with personal friendships.
• Always follow the “Rule of Reciprocity”:
• Be reliable and trustworthy
• Be fair to those who are fair to you
• When other parties treat you unfairly, let them know about it

CHAPTER FIVE: THE FIFTH FOUNDATION: THE OTHER PARTY’S


INTERESTS

The Other Party


Finding out what the other party is worried about sounds simple, but our basic
attitudes about negotiation make this surprisingly difficult to do. Most people tend
to assume that other people’s needs conflict with their own. They also restrict
their field of vision to the issues that they themselves are troubled by, forgetting
that the other side often has its own problem based on its own worldview.

The best negotiators overcome these assumptions with a relentless curiosity


about what is really motivating the other side. Indeed, a research suggests that
they spend up to four times more time thinking in a strategic way about what the
world looks like to the other party than average negotiators.

The lesson here is simple: Find the shared interests that will motivate negotiators
on the other side to agree with your proposal and explore why they might say
“no.” These inquiries will give you a checklist for proceeding with the negotiation.
Lead with the areas you have in common, then probe for and try to meet the
other side’s objections one by one with the lowest cost concessions you can
make. As you move into the areas in which you have genuine and significant
conflicts, you will have gained the momentum you need to keep talks going.

Exploring the Other Party’s Interests: A Checklist


• Locate the decision maker
• How might it serve the other party’s interests to help you achieve your
goals?
• Why might the other party say “no”?
• What low-cost options might remove the other party’s objections?

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CHAPTER SIX: THE SIXTH FOUNDATION: LEVERAGE


Leverage
Leverage is a critical factor in negotiation. The party with the least to lose from no
deal generally is the party that can afford to insist that critical deal terms break its
way. You can improve your leverage using many different moves, including
finding good alternatives to achieve your goals away from the table, gaining
control over assets the other side needs, forming coalitions, arranging the
situation so the other party will lose face if there is no deal, showing the other
negotiator you have the power to make him worse off materially, and so on.

Watch out for the common misconceptions about leverage. Even less powerful
people can have leverage in any given situation. And leverage is a dynamic
factor based as much on perception as fact. Finally, you can gain power within
an organization by showing passionate commitment rather than cool indifference.
That is just the opposite of the way leverage works in most market transactions.

Ask yourself, which side has the most to lose from no deal? For whom is time a
factor? Can I improve my alternatives or make the other party’s worse? Can I
gain control over something the other party needs? Can I commit the other party
to norms that favor my result? Can I form a coalition to improve my position?

PART II: THE NEGOTIATION PROCESS

CHAPTER SEVEN: STEP 1: PREPARING YOUR STRATEGY

Preparation
Good preparation, like in most endeavors, is a crucial part in the negotiation
process. First, using the Situational Matrix, you should determine the basic
situation you face. What strategies are best suited to deal with the situation?

Next, you need to combine your situational analysis with the knowledge you have
about your own stylistic preferences to determine how well suited you are to
negotiate the problem. If you are basically non-confrontational, you will have a
hard time doing well in a Transaction unless you are negotiating against
someone just like yourself. If you are aggressively competitive, you will lack
some of the tact needed to handle a Relationship situation that calls for delicate
diplomacy.

Third, try to imagine how the other party views the situation. Do they see the
relationship as important? Do the stakes matter as much to them as they do to
you? The situational analysis prepares you to anticipate the range of strategies
the other side can be expected to use.
Finally, combine the information you have gathered on the situation with your
insights into the Six Foundations to develop a specific bargaining plan. Use this

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plan to formulate a list of questions to ask the other side early in the discussion
phase to test your assumptions.

If all this sounds like too much work for the time you have available, remember
that even a few minutes spent reviewing the Six Foundations and the Situational
Matrix before you start will yield significant benefits. In fact, research indicates
that the single most important step in becoming an effective negotiator is
acquiring a habit of preparation. John Wooden, the legendary basketball coach,
once summed up the truth about preparation with a phrase: Failing to prepare is
preparing to fail.

CHAPTER EIGHT: STEP 2: EXCHANGING INFORMATION

Information Exchange Process


The information exchange process is the crucial first stage of the interactive
phase of negotiations. In general, it accomplishes three purposes. First, the
parties establish open communication by setting, if the situation favors this, a
friendly and personal tone. Second, they determine the interest and issues to be
negotiated and share information about their perceptions on these matters.
Finally, they send signals regarding their respective leverage positions.

Information exchange should be handled differently in different situations. The


more the stakes matter relative to the relationship, the more strategic the parties
are likely to be. Hard-nosed opening statements and bluffing regarding the issues
can be expected in a Transaction situation, whereas the rapport-building effort
may be the most important aspect of a Relationship situation. In many cultures of
the world, extensive rapport building is a precondition to any negotiation
regardless of context.

The preliminary information exchange stage has ended and the bargaining stage
has begun when one side or the other makes a concrete plausible opening offer
that requires a reciprocal response.

Information Exchange: A Checklist


• Establish rapport
• Obtain information on interests, issues, and perceptions
• Signal regarding your leverage

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CHAPTER NINE: STEP 3: OPENING AND MAKING


CONCESSIONS

Making Concessions
As you move through the opening and concession-making stage, remember that
your strategy and tactics should be determined by three main elements: the
situation, your leverage, and your own and your counterpart’s style.

Each of the four quadrants in the Situational Matrix carries its own presumed
best concession strategy: competitive for Transactions, accommodating for
Relationships, and interest-based problem solving for Balanced Concerns.
Compromise is a useful tool – though not a preferred strategy – in all three
situations.

As your leverage goes down, your need to soften your approach rises. And as
your leverage rises, your need to accommodate goes down – regardless of the
situation you are in.

A word of advice for accommodating people: When two accommodating


negotiators get together, they have no need to concession-making tactics. They
will simply cooperate as best they can to solve each other’s problems. Both
would probably do better to work harder at their goals. But their simple,
straightforward approach to bargaining will usually work well enough to get them
through.

And a word of advice for competitive people: When you lock horns with another
competitive negotiator, the risk of impasse is high. You should remember that
you are there to deal, not win a war. Look for face-saving, neutral methods to
defuse any bargaining crises you help create.

CHAPTER TEN: STEP 4: CLOSING AND GAINING MOMENTUM


The final stage of negotiation, closing and gaining commitment, poses some
significant challenges. In competitive situations a number of strong psychological
levers, including the scarcity effect and overcommitment to the process, can
cause one side to panic when it would be better off making calmer, more rational
decision.

Yet holding out poses risks, too. The other side may have genuine leverage and
take its business elsewhere. Firmness can also lead to impasse. Although
disagreement often prompts parties to become more creative in their search for
solutions, it can also put deals and relationships in jeopardy. How you close

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therefore requires a measure of judgment, not just passionate commitment to


your goals.

Finally, negotiations are not over until the parties have secured commitments to
performance. Agreements alone are not enough unless the relationships and
trust between the parties are deep and stable. The secret of making
commitments is simple: Set the situation up so the other party has something to
lose if it fails to perform. And be willing to take a similar step yourself.

CHAPTER ELEVEN: BARGAINING WITH THE DEVIL WITHOUT


LOSING YOUR SOUL: ETHICS IN NEGOTIATION
Ethical dilemmas are at the center of many bargaining encounters. There is no
escaping the fact that deception is part of negotiation. And there is no escaping
the importance people place on personal integrity in their dealings with others at
the bargaining table. One ethical slip and your credibility is lost not just for one
but for many deals. Effective negotiators take the issue of personal integrity very
seriously. Ineffective negotiators do not.

How do you balance these two contradictory factors? There are three
frameworks for thinking about ethical issues: the Poker School, the Idealist
School, and the Pragmatist School. Nonetheless, you are better off sticking to
your own tried and tested rules as much as possible. Where you come out on
bargaining ethics, of course, is a matter for you to decide. But remember:
Negotiators who value personal integrity can be counted on to behave
consistently, using a thoughtful set of personal values that they could, if
necessary, explain and defend others.

CHAPTER TWELVE: CONCLUSION: ON BECOMING AN


EFFECTIVE NEGOTIATOR

Personality and style are crucial variables in negotiations. The more you know
about your own style, the better you will be able to take advantage of your
strengths and compensate for your weaknesses. Moreover, your understanding
of your own style will greatly help you in interpreting the style and personality of
the people you face.

Do not rely too much on stereotypes, however, whether of the gender or cultural
sort. Your judgments about other people at the bargaining table are vital to your
success. The best way to make those judgments is to ask questions, listen, and
gather solid information about who they really are as individuals. Then be willing
to admit you were wrong when they do something that surprises you.

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