Summary of "The Art of Negotiation"

The Art of Negotiation

by Michael Wheeler

From THE ART OF NEGOTIATION by Michael Wheeler. Copyright @ 2013 by Michael Wheeler. Reprinted by permission of Simon & Schuster, Inc. r

from getAbstract © 2013

Rating (10 is best)

Overall: 8
Applicability: 9
Innovation: 8
Style: 8

Take-Aways

• During a negotiation, every factor evolves constantly, often in unexpected ways.
• An effective negotiator must be flexible and creative, have strong presence of mind, and remain aware of the other party’s emotional needs and mood.
• Every negotiation involves calculated learning, nimble adaptation and the ability to have a positive influence on the other party.
• Always operate as if you don’t know everything – because you don’t.
• A sound negotiation strategy can change on the fly and always has a definitive, if provisional, goal.
• Conceptualize your desired end game. Consider what steps and pathways will help you get there.
• “You may not know your real goals until in the midst of the negotiation.”
• Quickly drop any expectations that prove to be inaccurate.
• All your words and actions should lead to your negotiation goal.
• Negotiations turn on luck as much as skill.

Relevance

What You Will Learn

In this summary, you will learn: 1) Why improvisation and learning are crucial in negotiations, 2) How you can strategize negotiations, 3) How to use a “deal triangle,” and 4) How to determine why a negotiation succeeded or failed.

Recommendation

Sports great Arthur Ashe enjoyed a lucrative endorsement contract with Head, the firm that supplied his tennis rackets, but the company wanted to stop paying his 5% sales royalty. During discussions, the chairman of Head barged into the room. “Outrageous!” the chairman yelled. “He’s making 10 times what I’m making!” “But Pierre,” Ashe’s agent said, “Arthur has a much better serve than you do.” His comment broke the tension, and Ashe and Head worked out a mutually beneficial deal. Harvard Business School negotiations expert Michael Wheeler uses colorful and instructive anecdotes to illustrate his hundreds of suggestions on what does and doesn’t work during negotiations. getAbstract recommends this fun and highly useful manual to anyone who must negotiate.

Summary

Unexpected Reversals

Investment firm manager Jay Sheldon and his partners paid $8 million for a Midwest cable TV company. After a year of profitable operations, they decided to broaden their business. They approached a cable company in a nearby city, planning to offer $11 to $12 million for the firm. The Sheldon group and the cable company’s owner could not agree on a price. “I didn’t post a For Sale sign,” said the owner. “You came to me. You’d have to dump $15 million in cash right on my desk to tempt me. And I’d probably kick myself if I took it.”

For most negotiators, this would be a dead end. Sheldon replied, “If you think your system is worth $15 million, how about ours?” The man replied: “About $14 million.” Sheldon reversed the negotiation dynamic. He became the seller, not the buyer. Thanks to his quick thinking, Sheldon and his partners sold their firm for far more than they paid for it. Sheldon’s adaptability and creative thinking distinguish a master negotiator.

Improvisation

No one can predict how any negotiation will unfold. You can’t dictate the other party’s attitudes, ideas or agenda. Unforeseen objections and special opportunities will pop up. Your goals may completely change, as did Sheldon’s. During a negotiation, everything is in constant flux, including “preferences, options and relationships.”

Being ready to improvise anytime requires acknowledging and accepting the real-life context of a negotiation. At the same time, maintain a cautiously optimistic belief that, regardless of what you face during the negotiation, you will somehow come out all right in the end. For that to be true, you must have definite objectives and a solid strategy.

Decide beforehand whether to negotiate or accept a reasonable offer, whether to hedge your position or “go all in.” Whatever your strategy, remain flexible so you can take advantage of any sudden openings. To become a more effective negotiator, study, read and learn how master negotiators perform. File away their creative solutions. Borrow techniques from other fields wherein people collaborate or contend with one another, such as sports, improvisational theater and improvisational comedy.

Jazz musicians don’t merely cope with uncertainty. They thrive on it, and everything melds when a quartet gets in the groove. Trumpeter Wynton Marsalis explains: “The four of us can now have a conversation. We can speak to each other in the language of music.” This same conversation occurs in negotiations. Everything is improvisational. As musicians do, you must be ready to “reflect, affirm, rebut, reshape and respond to whatever your counterparts put forth.”

Strategy

Design a strategy that tests your prenegotiation suppositions. Drop those suppositions the instant you see they no longer apply. During the opening phases, engage in comprehensive reconnaissance to determine the best directions to pursue. Optimize any paths that might lead to your goals. Make sure your tactics compliment your strategy. Remember that aggression never promotes constructive cooperation. Even if aggressive moves are tactical and deliberate, they put the other party on the defensive.

When planning your strategy, game out “best-case and worst-case scenarios.” You can always walk away from the negotiation. As you design your plan, you need to understand that any rigid or predetermined strategies will prove useless once amid the constant turbulence of negotiation.

“Deal Triangle”

Construct a deal triangle. One baseline represents the outcomes you prefer. Another represents the other side’s acceptable outcomes. The third represents “real-world constraints,” such as “deadlines or company policies.” This triangle of baselines defines the boundaries of “workable outcomes” – what both parties can accept. Everything outside the triangle is a deal-breaker.

Elements of Strategy

Include these nine elements in your negotiation strategizing:

1. “Set a provisional goal” – Know what you want, but don’t restrict your thinking.
2. “Have a Plan B” – Be ready with an alternative if your initial strategy falters.
3. “Envision the end game” – Consider your goals and work backward to determine the best paths for getting there.
4. “Make learning a priority” – Always learn from unfolding events.
5. “Adapt when you have to” – The other party will make moves you don’t anticipate. Stay flexible.
6. “Think like a competitor” – Think about how the other party might exploit the openings you provide
7. “Be multilingual” – Deal in both “carrots and sticks.”
8. “Guard your exit option” – Know how to react to negative developments; know when to walk away from the deal.
9. “Always be closing” – Everything you say and do should move you closer to a deal.

“Win-Win”

When it comes to strategic planning, what about the win-win negotiation model? This tactic includes two well-known guiding principles: “Focus on interests, not positions” and “Develop your best alternative to a negotiated agreement” (BATNA). While win-win is a respected conceptual system, it cannot cope with the complexity that is characteristic of most negotiations.

A BATNA is not always an appropriate fallback position. People seldom know what their best interests are, and during negotiations, interests rapidly change with the circumstances. BATNA presumes an either-or alternative, “deal or no deal.” Hardball negotiations are the opposite of win-win; playing hardball during a negotiation restricts your creativity.

Whatever strategy you adopt, the opening moments of any negotiation involve the following three elements:

1. “Engaging” – The “who of negotiation”: determining whether it’s going to be easy or hard to work with the other party.
2. “Framing” – The “what of negotiation”: whether you want to set up a partnership, straighten out a conflict or simply haggle.
3. “Norming” – The “how of negotiation”: how you and the other party set the negotiation’s “tone and pace.”

“Learning, Adapting and Influencing”

Negotiations are dynamic; stay in a proactive learning mode. Constantly update what you expect to take place in three areas: the overall scope of the negotiation, the resolution of outstanding issues and your relationships with your counterparties.

Military strategist John Boyd developed the concept of ongoing learning as a constant process of “observing, orienting, deciding and acting” (OODA). To prevail in aerial fights, pilots have to excel at each step of this “loop.” Without situational awareness, pilots can get killed. Negotiations call for situational awareness too; be ready to deploy the OODA loop repeatedly.

Adaptive learning also involves nimbly selecting the best way to engage the other party by changing your behavior and tone of voice, as well as the pace of your replies. Be conscious of what you know and what you don’t know. Don’t put your faith in bullheaded plans or unrealistic assumptions.

Interactivity, Unpredictability, Agility and Emotional Balance

Negotiating is an interactive phenomenon and seldom clear-cut. What you say and how you act affects what the other party says and does, often in ways you can’t predict. How your counterparties act and speak affects you. Everything evolves during a negotiation, including what you seek and care about. As things change, so do potential negotiated solutions. Don’t focus on shifting targets. Instead, understand and learn from the negotiation’s interactions.

No one has negotiation omniscience; surprises are inevitable. Don’t expect to control a negotiation. Count on uncertainty; make it part of your planning and strategy, and try to manage it as well as you can. The more agility you can muster in the face of unexpected events, the more effective you will be as a negotiator.

Maintain your emotional balance and stay mentally alert. Consider your psychological hot buttons in advance; be aware of your emotional tendencies and patterns. Visualize doing well under duress. Listen to the other party and pay close attention to his or her emotional state. Try to get in touch with that person’s emotional requirements. To carry off the high-wire act of emotional balance, you must remain “calm and alert, patient and proactive and creative and grounded.”

Have some basic rules in mind for handling critical moments. Understand what you can and cannot accomplish. Be able to say no without shutting down the negotiation. Plan and create the grounds for your desired end game. Keep things on an even emotional plane – negotiations that end smoothly usually start out that way. Stay willing to trade with the other party to create value. Be creative about the negotiation process and its substance. Free your imagination by thinking how you would suggest that someone else in your shoes might handle the negotiation. Conceptualize a sticky negotiating situation by comparing it with other difficulties you’ve resolved well in the past.

To bring a negotiation to a conclusion, don’t push too hard or go too far. If the other party says no, ask why. Figure out the best way to say yes. Have a plan ready to handle any blowups that may occur at the last minute.

No One Knows

Negotiating successfully depends on skill, most notably your ability to analyze what you are up against and to mold events in positive ways. It also depends on luck – the shape of the situation during a negotiation and the nature of the people across the table. Usually, the other parties will be just as keen, competitive and capable of error as you are. Encourage them to be as flexible and visionary as possible. Just try to stay a few steps ahead of them.

It’s almost impossible to tell who succeeded in a negotiation. Normally, you won’t know what the other party might have agreed to under different circumstances. Your own prenegotiation goals aren’t benchmarks; they’re strategies. They might have been too high, too low or unrealistic.

If your job includes negotiation as a commonplace, recurring activity, building better deal-making capabilities can help you attain previously unexpected outcomes. Good negotiations can establish value that didn’t previously exist. They can settle small disagreements before they become dramatic disputes, increase your value to your employer and improve your firm’s good fortune.

Always negotiate ethically. Don’t take moral short cuts.

Negotiation is a poor environment for learning after the fact. Never infer causality from any negotiated agreement, or you may learn faulty lessons. Instead, carefully review how you handled the negotiation. Rather than weighing results, assess whether you kept your strategy and tactics creative, flexible, nimble and opportunistic.

About the Author

Harvard Business School professor Michael Wheeler is a member of the school’s Negotiation, Markets & Organizations unit, editor of the Negotiation Journal and co-chair of the board of the nonprofit Consensus Building Institute.

Quotes

• “Negotiation is like jazz. It is improvisation on a theme. You know where you want to go, but you don’t know how to get there.”
• “Absent strong evidence to the contrary, you should start with the premise that the pie can be expanded through wise trades.”
• “Research...shows that positive and negative expectations about negotiation can be self-fulfilling.”
• “It’s easy to misread other people, especially at the bargaining where they’re likely to be cautious about revealing too much.”
• “The term ‘bottom line’ rankles sophisticated negotiators, and with good reason if that’s taken to mean a rigid position.”
• “Dread of negotiation may be fear of being disrespected, exploited or proven incompetent.”
• “Deciding and acting give you the edge in framing choices for your counterparts, rather than their framing the choices for you.”
• “Prolonging a negotiation makes sense only if there’s solid reason to believe that you will be in a better position tomorrow than you are today.”
• “The time to stop negotiating is when the risk of pressing further outweighs possible gains.”
• “When someone hands you a tasty piece of cake, with rich frosting to boot, think twice about asking for sprinkles on top.”
• “In coming to agreement, you have to balance risk and reward.”
• “All negotiations, large and small, are chaotic.”
• “Negotiation is a two-way street. We can’t script the process. Whoever sits across the table from us may be just as smart, determined and fallible as we are.”
• “Plans are worthless. Planning is everything.” (General Dwight David Eisenhower, US Army, architect of the D-Day invasion)