Negotiating with agility
Negotiating in the real world
Selecting transcript lines in this section will navigate to timestamp in the video
– Picture the best negotiators you know. They are poised, creative, and most important, they are agile. They don’t lock themselves into simplistic, one-size-fits-all approaches. Instead, they craft robust strategy to avoid obstacles and capitalize on unexpected opportunities. Agility drives their success. How could it be otherwise? Negotiation is a dynamic, fast moving, and often uncertain process. You need to be ready for all kinds of possibilities. The good news is that you can enhance your own strategic and tactical skills through focused study and honest self-reflection. I’m Mike Wheeler. I’ve taught negotiation to MBA and executive students at the Harvard Business School for 25 years. I’m eager to share my ideas with you in this LinkedIn Learning course. Together we’ll analyze cases and real-life examples. Exercises will help you prepare for and learn from your own negotiations, large and small. You’ll also identify strengths you can build on and other areas where improvement will have a big payoff. So, join me on this path to becoming a more agile negotiator.
The dance of negotiation
Selecting transcript lines in this section will navigate to timestamp in the video
– A priority in negotiation from start to finish is negotiating how to negotiate. That’s not trading offers, and counteroffers, or making threats and promises. Instead, I’m talking about how parties implicitly define the who, what, and how of negotiation. It’s a dance that powerfully shapes the whole process from start to finish. Let me explain the who, what, how framework, and show you how to put it to work. The who is about engagement. Will the parties be friends, or are they going to be foes? Is their power equally balanced, or is one person up and the other down? The what is about framing, how they define the task at hand. Is this a zero sum win-lose situation? Or are their opportunities for mutual gain? Finally, the how is about norming, setting the unwritten rules of the game. Will they disclose their interests and seek to create value? Or will they hide their cards and haggle? You can’t decide any of those questions unilaterally. Your counterpart’s views about negotiation may be very different than your own. But you need to influence them positively, both their behavior and their attitudes to the extent you can. Beyond that you’ll have to adapt to their approach and make the best of it. It’s all ongoing action and reaction. And there’s plenty of room for missteps and miscommunication along the way. If you’re lucky you may ease into a graceful waltz. Other times it may feel more like a scorpion’s mating dance. You must be ready for either extreme and everything in-between. Constantly monitoring the interaction, recalibrating where necessary, is the essence of negotiation agility. Here’s a concrete example. Imagine you’re trying to nail down a service contract with Chris, a prospective customer. What’s the first thing you should say after she welcomes you to her office? That depends on how she begins the conversation. Chris might open in different ways, each calling for a different response. Here’s version one. – We’re really looking forward to partnering with you. Let’s figure out a deal that works well for both of us. – Chris’ partnership comment sets a positive tone for your budding relationship. If it sounds sincere, echo it. But what if she said this instead. – Hey, Mike, glad you could come in today. So, my colleagues have put you on the shortlist of possible providers for this contract. – This moves us from the who to the what, framing the task at hand. Here, Chris is casting you as a bidder in an auction. And between the lines she’s telling you she’s in the driver seat. Don’t jostle over power this early in the conversation. But she should know that you have options too. Here’s a third possibility. – I’m going to be honest with you. We like your proposal, but you’re going to have to come way down in price to beat the competition, or you’re going to lose this deal. – That’s a shot across the bow. Should you return fire or ignore it? Perhaps you could deflect it by saying when I explain the quality of our service you’ll see we’re ultra competitive. Agility requires being deeply engaged with your counterpart moment to moment. Just as important, though, you need the detached perspective of an observer watching the back and forth process as it unfolds. Maintaining that macro view of the who, what, and how of a negotiation is the key for getting to where you want to go.
Ask the right questions
Selecting transcript lines in this section will navigate to timestamp in the video
– Most negotiators don’t ask enough questions. And when they do, they often ask the wrong ones in the wrong way. Doing it right is simple, ask questions that will launch a two-way conversation. You might ask about your counterpart’s needs, for example. Doing so could open the door to mutually beneficial trades, Research shows that question asking also enhances the asker’s likeability and effectiveness. A real world study of a half a million sales calls showed that the top sales people asked significantly more questions than average performers. These all-stars asked their questions deftly, their follow-up queries were tied to whatever they’d just heard, signaling that they were paying close attention. They spaced their questions as well so that people wouldn’t feel that they So why doesn’t everybody use this simple tool? First, some people get stuck in their own head, so intent on making their pitch, they don’t confirm that what they’re saying Then there are others who already think they have the answers. So why ask? Still others are reluctant to ask out of fear that listeners will be prompted to respond with their own questions. But if that happens, great, it means they’re engaged and you have a chance to explain where you’re coming from. Just make sure that as part of your preparation, you’ve crafted good answers to challenging questions they may raise. Not all questions are created equal of course. Avoid asking rhetorical questions, asking don’t you agree my offer is fair? Paints your counterpart into a corner. Instead you might say, how do we figure out what would be fair here? Note the plural we, wording the question that way makes defining fairness a shared task. Simple changes in phrasing can make a difference too, asking why is your price so high personalizes the issue, it invites the justification that could be hard Puts the focus on facts that can be analyzed and debated. Open-ended questions can expand everyone’s thinking, your own, as well as the person you’re negotiating with. Asking, is price your major concern takes you down one road, asking, what issues do we need to consider could take you down another. You can even ask questions about questions. In a job interview, it’s often smart to ask, what else should I have asked about? And that’s true whatever side of that table you’re sitting on. One caveat though, the downside of broad questions is that they allow evasion. If you need to nail down a commitment, you might say, I know you hope to deliver on time, will you guarantee it? I recommend you have answers on hand for difficult questions that you may face. Along with that, make a list of questions that you want to pose yourself. Others will arise during the interaction, Others will arise during the interaction, but having a list in advance will spur you but having a list in advance will spur you to ask more often. to ask more often. You’ll learn more about the matter at hand, You’ll learn more about the matter at hand, and connect more effectively with your counterpart. and connect more effectively with your counterpart.
How to use improv in negotiation
Selecting transcript lines in this section will navigate to timestamp in the video
– An MBA student with a glowing resume was in his first round of interviews at a consulting firm. He demonstrated his technical skills and industry knowledge in earlier rounds. The final meeting with the senior partner seemed like a formality, but then the head of the firm asked him, “When was the last time you had to think on your feet?” It caught the candidate off-guard. “Well,” he said, stroking his chin, “let me see.” There was a long and awkward silence. The guy didn’t get the job. Maybe the perfect answer came to you immediately. “Oh? About a half a second ago?” Congratulations if you had a quick comeback too. Of course, it’s easy to be quick-witted when nothing is on the line. The challenge is being nimble when you’re in the spotlight. Yet improv comics deal with the unexpected night after night. Their secret? The “Yes, and” rule. They find something to affirm in whatever their fellow performer says, then they build on it. “Yes, and” is a great rule in negotiation as well. Let’s say your counterpart tosses out three demands, two of which are ridiculous. Your natural reaction may be to focus on what’s not workable and why. The other party may respond in the same spirit and tear your arguments apart. Down you’ll plunge into a pit of negativity. What if instead you picked up on the one thing that he or she said that was positive? Nourish that idea. “Let’s explore that point,” you might say. Maybe we can fold it into what we were talking about earlier. Saying “Yes, and” also can defuse tense moments. Here’s an example. When Donald Dell was just starting out as a sports marketer and agent, he represented tennis star Arthur Ashe. Dell had worked a lucrative endorsement deal with the company that makes Head racquets. Later, the company tried to cut back Ashe’s 5% royalty on all sales. Naturally Dell and Ashe wanted to keep the payments flowing. Dell was meeting with Head’s marketing team when the door flew open and the chairman stormed in and started screaming, “This is outrageous! “He’s making 10 times what I’m making, “and I’m the chairman of this company.” The room went silent. Would Dell cave in or blow up the deal by answering in kind? Everyone turned to see how he’d respond. Now I want you to take a moment and think about what you would do if you were in that situation. What would you advise Dell to say? Well, here’s what happened. After a brief pause, Dell tilted his head, smiled and said, “But Pierre, Arthur has a much better serve than you do.” The tension broke, people laughed, and the group got back to business. They tweaked the royalty schedule and preserved a business relationship that was beneficial for both sides. Dell later said, “I live for such moments.” As an ex-athlete himself, he may have a natural gift for performing under pressure. For the rest of us, it’s a skill we can practice. Try this. Next time you’re in a meeting and two colleagues are arguing about an issue, listen hard for opportunities that they’re missing. Try to pick up on positive words or phrases that could have prompted a “Yes, and” response. Make this a mental habit and you’ll amp up your improvising skills.
Cultivate an agile mindset
Selecting transcript lines in this section will navigate to timestamp in the video
– An agile mindset is the mark of master negotiators. It enables them to shift gears and transform possible deadlocks into successful deals. Here’s an example of what I mean. Early in his career, my friend Jay worked for a private investment firm, HS Capital. They’d made a smart move buying a cable TV company in a small Midwestern city for $8 million. Some of that was their own money. The rest they borrowed. A year later, Jay and his partners decided to expand their business. They figured they could pay 11 and a half, maybe 12 million for the cable system in a neighboring town. Jay negotiated with its owner for three months but got nowhere. “Listen,” the guy finally said, “you’re not offering nearly enough. “If you dumped 15 million on the table in cash, “I might take it and I might not. “Anything less, you’re wasting my time.” Remember, Jay’s maximum was $12 million, $3 million less than that. If you were in his shoes, which of these three options would you choose? Offer to split the difference, explore creative financing, walk away, there’s no room for agreement. Think about how you’d save the deal. If you have a better idea than those three, that’s fine, but be sure it’s specific and practical. Okay, let’s look at those options. Splitting the difference won’t work. Any number between 12 and 15 million will be too much for Jay and not enough for the owner. Likewise for creative financing. A $3 million gap is just too big to paper over. So, is walking away the right answer? After all, some things just aren’t negotiable. That wasn’t the case here, however. Five minutes after the owner demanded $15 million, he and Jay were shaking hands on a deal. So what happened here? As Jay was standing up to leave, he asked one question. “You think your system is worth 15 million. “How much do you think our company is worth?” The fellow leaned back and replied, “Yours is a little smaller so I’d say “14 million or so.” In a heartbeat, Jay flipped the negotiation upside down, becoming the seller instead of the buyer. After a little haggling, the other party agreed to buy Jay’s system for $14 and a half million. Jay went into the negotiation well prepared with a clear objective. But when it became obvious that the owner wouldn’t budge on price, Jay didn’t try to beat him down, nor did he cave on his own assessment of the other company’s value. Most people, including Jay’s counterpart sitting across the table, would have seen the $3 million gap as an insurmountable obstacle. But as an agile negotiator, Jay recognized it as an opportunity to make an even better deal. In a mere 18 months, he more than doubled his firm’s original investment. Having a plan is important when you negotiate, but don’t let the plan have you. Before you walk away from the bargaining table, look hard at what’s blocking agreement. Like Jay, you might find the seeds of an even better deal.
What to do before you negotiate
Selecting transcript lines in this section will navigate to timestamp in the video
– Before starting a negotiation, think hard about these two questions. Is now the right time? Is there a downside? Let’s start by taking a look at timing. For small negotiations, timing may not matter much. But even for common transactions like buying a car, analyze whether your leverage will get better or worse based on when you negotiate. Is your counterpart hungry to close a deal right now? If it’s the beginning of the month and you’re car shopping, you’d often be better off a few weeks later. That’s when dealerships are under pressure to meet their quotas. Other opportunities may be fleeting. Say that you love a house that the owner is about to sell privately. Making a preemptive offer might be smart before other people bid up the price. Always assess whether you might face competition. Waiting and seeing is sometimes wise, but your general tendency in negotiations should be to press ahead. That’s often true even when important facts may still seem hazy. Think about it this way. Hesitating to take action is wise only if one or more of the following things is true. Waiting is costless. That is, all your options will remain open and you won’t lose credibility. You’re confident that time is on your side and your options will improve. Or there are specific reasons why gaining more information will make you more effective. Finally, if sleeping on the decision will make you more comfortable with your choice. But the less true that one or more of those factors is, the more likely it’s time to take a deep breath and move ahead. Now for the other item on your pre-negotiation checklist. Is there a downside risk? No harm in asking is the premise of the classic book, You Can Negotiate Anything. For example, look how much easier it’s gotten for consumers to bargain for discounts shopping in stores or online. But sometimes negotiating can backfire badly, especially when relationships are involved. My friend Arvin learned this lesson the hard way. He was close to an older couple who lived in a spectacular mansion with sweeping ocean views. When they decided to downsize, they offered it to Arvin for 2.5 million. This was well below market price, but Arvin countered with 2.25 million. You probably know where I’m headed. The couple responded angrily. “We treated you like a son and this is how you thank us?” They withdrew their offer, found a broker, and sold the place for $11 million. Woops. Arvin has done fine in other negotiations and can now laugh about this one, but his experience remains exhibit A for the proposition that you can never know how far you can push a negotiation until you’ve pushed it too far. When someone makes you a great offer, instead of haggling, maybe you should just extend your hand, smile, and say, “Thank you.”
How to set your baseline
Selecting transcript lines in this section will navigate to timestamp in the video
– There’s so much uncertainty in negotiation, but the one thing that you can and must know cold are your own priorities and trade-offs. To craft a strategy, start by setting your baseline. Most people do this poorly, if they do it at all. Following these simple steps gives you an important edge. One, identify your provisional walkaway, the minimum that you’d be willing to accept. Two, construct alternative packages of equivalent value. Three, anticipate how your interests might change. The first step, establishing your walkaway, is negotiation 101. That means identifying a deal that overall leaves you no better, no worse than you’d be if there were no agreement. For example, imagine a job offer that might lure you away from your present organization. Then picture a specific package that would put you on the knife edge between accepting or rejecting it. Naturally, you’d want to be offered something much better than that, but here, we’re trying to establish the lowest that you’d go. That’s just a start. Step two prompts you to weigh your trade-offs. Now think of another compensation package with the same total value. How much salary would you give up, for example, in return for more stock options or a better benefit plan, a little bit or a lot? Questions like that aren’t easy. They make most people squirm, but it’s far better to wrestle with them as you’re preparing for negotiation instead of making snap decisions in the heat of the moment. Now push yourself further. Think of a third package, again, of equivalent value to the first one. Would you trim your salary requirements if the company were to give you more flex time? Would you increase your salary demand if the job requires more travel than you prefer? These three hypothetical packages define points on the baseline, the boundary between saying yes or no. It’s built on what you know and feel today. Now, consider as the last step how that line might shift as your interests change. You’ll probably learn some new things in the course of negotiation. It would be odd, in fact, if you don’t. Circumstances might change, as well. What if, for example, you’re dealing with the other company, and your present employer gives you a promotion and raises your pay? Your baseline surely would go up. Then again, other conditions might lower it. Assessing best and worst case scenarios will make you more agile. Doing this homework in advance pays off many times over. It lets you focus on the negotiation process while you’re in the middle of it. It will give you discipline and confidence, and research shows that the exercise will make you more creative when you’re at the table. Think back to your most recent negotiation. What could you have done to open up your thinking and creativity? Look ahead to your next one. How would you use these tips to become more agile?
Determine your negotiation profile
Selecting transcript lines in this section will navigate to timestamp in the video
– Honing your negotiation skills is a lifelong endeavor. Building on your strengths and addressing areas for improvement pays off handsomely. It will ask you to rate yourself honestly, on four essential negotiation skills. You’ll have a total of 16 points to allocate, giving one to seven points to each skill. There are no right or wrong answers and your responses will generate a personalized profile. Maybe you said you were equally good or bad at all four. But of the thousands of people who have completed this exercise, very few people give themselves all fours across the board. Two of the questions dealt with the substantive dimension of what you’re negotiating. Namely, opportunities to create value and getting the maximum possible. The other two are about the relational dimension, asserting your interests and understanding other parties. Both dimensions go to the heart of negotiation and the two are tightly connected. Your responses likely show that. But overall patterns are different for different kinds of negotiators. You can see that simply by plotting the results, which is the next part of the exercise. The vertical line is substantive, problem solving. Value creation is at the top and value capture at the bottom. The horizontal line is the relational dimension, with self-assertion on the left and understanding others, empathy, on the right. People’s self-assessments fall into five different clusters. For example, those who rate themselves strong, in regard to empathy, almost always feel that they are good value creators too. That makes sense. If you understand other people’s interests, you should be able to make constructive trades. So call them empathetic value creators. This is the most common group. If this is your profile, you’re certainly not alone. But most people you’ll deal with, 70% in fact, fall into one of the other four categories. So don’t make the mistake of assuming that everyone else negotiates the way that you do. For example, look at this second profile. These are people who rate themselves as relatively strong at self-advocacy. No surprise, they’re also confident about capturing an ample slice of the pie. But note that they judge themselves as less skilled at empathy and value creation. Perhaps they believe that’s the price they pay for being assertive. They’re the assertive value claimers. The analysis portion of the exercise describes the other three common profiles. No matter which of those most closely fits you, recognizing other different styles is important to negotiation success. Depending on whom you’re dealing with and the situation at hand, tap your agility and tweak your own approach to match it. Your profile also serves as a template for further learning and improvement. Ask a friend or colleague who has seen you negotiate to assess your relative skills. They may tell you that you’re too self-critical in some respects or maybe that you’ve overlooked some areas where you could do better. Enhancing each of the four basic negotiation skills will enhance your overall performance. But give special attention to the ones where there is the greatest room for improvement.
Manage the negotiator’s dilemma
Selecting transcript lines in this section will navigate to timestamp in the video
– Here’s some good news, you can have your cake and eat it too, at least that’s true in negotiation. It may not seem that way, many people feel that negotiation puts them between a rock and a hard place. If they follow the cooperative path, they risk being exploited, and if they play hard ball instead, they may jeopardize relationships. In my field, this is called the Negotiator’s Dilemma. It’s the supposed tension between cooperating and competing. It’s a false dichotomy, I just don’t buy it, and research backs me up. There’s a third avenue that lets you have it both ways. Studies show that you can collaborate with a counterpart to create value while also securing a handsome portion for yourself. Experimenters paired up subjects for a multi-issue negotiation. Most people reached agreement, though some created and captured more value than did others. That’s to be expected, but here’s the twist. In addition to collecting results, the researchers asked subjects to secretly rate how they felt about their counterpart. Responses varied from strongly negative to strongly positive. The goal was seeing whether there’s inevitable trade-off between getting a superior deal and having a collaborative relationship. There was not. The data was plotted with substantive terms, price and terms, on a vertical scale and relational success on the horizontal axis. Negotiations found four distinct buckets. Yes, some people did well on one measure and poorly on the other, these are the people in the boxes in the upper left and lower right. That seems to support the dilemma concept. But look at the box in the upper right. These are negotiators who got great deals, but were also highly rated relationally. They got the lion’s share yet still were liked by people who ended up with a smaller portion. What’s their secret? They recognized that the health of relationships with counterparts is not driven by what you obtain for yourself or how much they end up getting. Instead, it’s primarily shaped by how you negotiate, specifically how you engage and connect with others. I’ve included an exercise to help you build a personalized checklist of dos and don’ts so that you can have the same double barrel success. The exercise files asked you to compare and contrast two experiences, one where the negotiation relationship was positive, the other where it was negative, so you can learn from those experiences. Others who’ve responded to these questions speak positively about counterparts who seem genuine and engaged. The well-liked negotiators asked questions and listened intently. They had credible reasons for what they could and could not do, they’re focused on solving a problem, not trouncing the other person. The negotiators at the negative end of the relational scale are just the opposite. They come across as self-centered, they’re often aggressive and treat negotiation as a game of bluffing and intimidation. Even if you ultimately succeed in getting reasonable terms from such people, resentments can linger long after the process is over. Just look at the fourth box on the lower left, these are negotiators who got mediocre or worse results, but who still managed to alienate the other party. This is not where you want to be. So, I’ve asked you what kind of negotiator you prefer dealing with. Now my question is what kind of negotiator do you want to be? Being a decent person is an end in itself, and there’s strong evidence that there’s a bonus. Being open and engaged can help you both create and capture more value.
Align your tactics and strategy
Selecting transcript lines in this section will navigate to timestamp in the video
– When people ask me about negotiation, it’s often about things like is making the first offer really a mistake? Does negotiating on my own turf give me an edge? What about outnumbering the other side? My typical response is it depends. I’m not ducking such questions, but the right answer depends on your larger objective. Strategy should always drive tactics, not the other way around. It’s here where many people go astray. They focus on what they could do or say moment to moment without judging whether those pieces comprise a coherent approach. Tactics that might be needed in a contentious dispute could actually sabotage an attempt to create a partnership. Sticks judiciously deployed might help in the first case. The second case likely calls for carrots instead. So strategy and tactics must be aligned. Then there’s another problem. People may mean well, but their behavior isn’t always consistent with their ideas. Researchers asked subjects whether they’d cooperate or compete in the classic prisoner’s dilemma game. It’s a two person decision-making exercise. If both parties cooperate, each wins an equal share. But if you cooperate and I compete, then I win everything. After hearing the rules, the vast majority say they’d act cooperatively to create mutual gain, but when they play the game for real, almost half decide to be competitive instead. Two factors are at work. First, it’s costless to be virtuous in theory, but when real money’s on the line, self-interest comes into the equation. But it’s deeper than that. When it’s time to play the game or engage in a negotiation, one’s focus shifts to how the other party will behave. The bigger the fear that the other party will use sticks and try to dominate, the stronger is the impulse to find a stick to defend yourself. That fear also can lead to other scenarios, like concealing your priorities or issuing an ultimatum. These things can go downhill very quickly, as each party reads and reacts to the actions of the other one. It’s a matter of projection. Imagining the worst case makes the worst case happen. The good news is that this is not inevitable, not by a long shot. A friend of mine says, “Tactics speak louder than words.” Tactics can either provoke competition or elicit cooperation. For example, you might have good reason to want to schedule the negotiation in your office, but your counterpart could see that as an attempt to dominate. An offer instead to go to their place to talk could be received as a gesture of goodwill and respect. If you’re curious about what your tactics say about your own negotiation style, you can download the Exercise File and find out more. Remember, always make sure your actions are consistent with your intentions.
Next steps
Selecting transcript lines in this section will navigate to timestamp in the video
– Congratulations on completing this course. Being agile strategically and quick on your feet moment to moment is essential to negotiation success. It can turn deadlocks into deals and good deals into great ones. I hope you’ve already had a chance to employ concepts and techniques we’ve covered here. If not I hope you can do so very soon. I also hope you continue to polish your skills. We’d love to see you in one of our on campus executive courses at the Harvard Business School or if travel is an issue check out my negotiation mastery course on our distance learning platform. I’ve also included an exercise file full of additional resources for you. Most of all I urge you to reflect on and learn from your own negotiation experience. Exercises provided here will help you do that. My negotiation 360 app for iOS and Android devices takes this further with prompts to assess your style, prepare well, conduct after action reviews, and compile a personalized library of your own best practices, good luck and thank you.