THE ART OF THE DEAL:  Do you really know how to negotiate?  If there is no win-win and no win-lose, how do you get what you want?

Leader's Edge Magazine - September 2005
Author:  Robert J. Lieblein  

Everybody, from Donald Trump to the lowly apprentice, has a need for negotiation strategies in day-to-day business transactions. You want something they have. They need you, but you don’t come free. You’re both drowning and there’s only one life preserver.

In the insurance business, your day might move quickly from discussing a producer’s pay raise to debating a client’s coverage needs to negotiating a merger with another agency. Think you don’t need to brush up on those skills? You always need to be in top form so that every negotiation will result in the best deal for you. I want to share my best tactics gleaned from more than 20 years of gaming at the negotiating tables.

There are many different negotiating styles, and I don’t profess to have the one-and-only “system” that will change your life. If I had that, I’d write a book and hold pricey seminars in suburban hotel ballrooms. This isn’t a get-rich-quick situation because negotiating strategies and tactics are not rocket science. Some of the best tips may sound obvious or simplistic. However, unless you’re a professional negotiator, they probably aren’t second nature to you. It’s my goal to give you a refresher and maybe throw in a few things new to your concept of a successful negotiation.

The Opening

Let’s start with my least favorite opening: “Hey, there, I’m sure we can make this a win-win!” Does that sound like a snake oil sale? It does to me. I know that I want to make my business better through a good negotiation, but I’m not naïve enough to think that benefits will come to me without occasionally having to give something up. So I never say that we’re all going to win.

Now here’s my favorite opening: “My goal is to make a deal that results in a fair and reasonable solution for all parties.”

Perhaps that’s another definition of a “win,” but the way you present the idea shows your awareness of potential compromise. You’re not using terms like “winner,” which could imply that there will be a loser. It becomes less competition and more collaboration, with balanced risks and rewards. You’ll get more satisfaction from negotiations if you begin with this approach because you’ll have a better record of successful deals.

A mentor of mine started off all negotiations this way: “Listen, there will be no win-win coming out of this negotiation, nor will there be a winner or loser. If all parties are fair and reasonable as to expectations and resolutions, then we will all walk away feeling very good about the negotiations and feel like we all won, when in reality the balance of rewards and risks were appropriate for all parties.”

In my many years of working with this person, I never saw a deal fall apart because the parties could not negotiate a reasonable solution. It is a lesson I learned early in my career, and I continue to view it as the basis for all my negotiations.

Four Key Tenets

Remember these four doctrines behind negotiating strategies, which can help you function in nearly all situations:

1. TIMING: Knowing when to use a particular strategy or tactic is very important.

2. CHOICES: Be conversant with every possible strategy for a given situation because you never know when you will need any of them. Deploy as necessary.

3. RESPONSE: If you are a student of negotiating strategies, you will recognize when a certain strategy is being used against you, and you’ll know how to respond.

4. BE CAREFUL: Some strategies can damage relationships you’ve built with the other side or torpedo negotiations. If you want to try something extreme, proceed carefully.

In the Beginning

When you begin negotiations with phrases like “fair and reasonable” and “solutions that work for everyone,” you are implying that you will act fairly. Cement that image of yourself by choosing words like flexibility, discussion points and middle ground.

Go into every negotiation with confidence. Gain that confidence by being prepared. Your homework includes knowing ahead of time what issues could arise during the course of the negotiations. Know your own position, but understand the other party’s positions and desires. Also consider competitors and other external factors that could affect your actions.

Be respectful and make it personal. Get to know the other parties in the negotiation and let them get to know you, revealing more about yourself than just your negotiating side. Break down barriers by using humor, if it’s appropriate to the situation and it comes naturally to you.

These steps will result in better communication, and if the negotiations turn ugly, they’re less likely to turn personal. Using such tactics—and they are tactics, even if they’re sincere—you establish the human element in the proceedings, which will again build on your reputation as being honest, fair and reasonable.

Time Kills

It’s commonly understood that each side might ask for more than they expect, or propose less than they’re willing to give up. If it didn’t happen this way, it really wouldn’t be called negotiations, would it? But be careful about “high-balling” or “low-balling” because making unrealistic statements will kill a deal before true negotiations get underway. You’re trying to establish a perceived value, so your pricing range must be supportable. If done properly, prices will eventually come in line and make each side feel as if they’ve gained something in the end.

Have patience. Agree upon time frames then let the deal materialize within those limits, without rushing your actions. Left to linger too long, however, time will kill all deals, so make sure everyone sticks to deadlines to keep the deal moving.

Finally, understand that you’ll see a wide variety of personality types across the negotiating table. Some will be more palatable to you than others. Hold firm to your principles of fairness and maintain flexibility in how you communicate with, deal with or react to each unique person involved.

How to Negotiate

Once you’ve built rapport, set a schedule and laid the groundwork, negotiations can begin. Here are a few tips that have helped me through the process:

• Be careful not to overstate. This involves knowing the facts and not stating something that might come back to haunt you. Always react honestly, and if you need time to consider a new twist, don’t be afraid to take a break.

• Take calculated risks. In the negotiation process, risks will crop up in the time between proposal and response or acceptance. See this as an opportunity, but be sure that the chances you take do not kill the deal.

• Don’t sweat the small stuff. Know what is truly important to you and be willing to compromise on other items. If you establish this pattern, when you draw a line in the sand, the other party will know you won’t cross it.

• Know your options. This requires that you do your homework. A negotiator who knows all the options and is not afraid to express them as matters of fact will have a powerful tool. Frank discussions of another competitor’s offer can often cause the other side to quickly respond by laying their full capabilities and needs on the table.

• Keep your own counsel. Silence is also a very powerful tool. Expert journalists know that a prolonged pause will cause their subject to fill it by speaking, and often will reveal points the person was not previously willing to disclose.

• Take no action. Biding your time when the other party expects action can have an effect similar to silence. This, too, requires patience.

• Stick to “standard practice.” When backing up a position, simply stating, “this is standard practice in all our agreements,” will make the other party believe you’re acting with the only acceptable terms or policy. If you use this, be prepared to back it up, not back away from it.

• Wield the hammer. All negotiations will hinge on a few key points, and when you come to the keys of your case, use them to get a negotiation over an impasse. This will often be a fact or circumstance that the other party is not expecting—perhaps a price point or a key contingency plan that you will enact if negotiations fail.

• Beware the nibbler. Negotiations can be steaming ahead and you’re satisfied on many key points, but the process can be sidetracked by “the nibbling effect,” where numerous additional small points are added to the deal as it gets toward the end. Each of these may not seem like much, but taken together you may find you’re giving up significant ground and the deal is out of balance. Be ready to put a stop to it as soon as the nibbler raises its head.

Vaulting an Impasse

When you’ve tried all possible means to compromise and still are faced with an issue you just can’t allow, what do you do? You may need time to consider whether there are options not yet proposed or ways to make the other side back away from the unacceptable point. Walk away, take a pass, call delay of game, go for a walk in the park.

This will make a strong statement, and it will be a true message. It’s a very powerful step, reserved for only the most necessary situations. You never know when the other side will stop you at the door or come back with a compromise a few days later. But as you head for that exit, don’t hesitate.

Support your position with statements that clearly lay out the situation: “The price is just too high and we cannot justify any additional amounts,” or “You seem unwilling to compromise any further and we are still beyond any amount that is reasonable to us.” Or you can recall your opening statements, using them as a lever: “It appears that you are truly not serious about getting a fair and reasonable solution, so let’s just part ways at this point before it gets serious.” You’ll make waves, and maybe they’ll carry the tide back in your direction.

Most Common Mistakes

One of the most frequent errors that I see negotiators make is using the word “no” without any reasonable explanation. Standing firm with your arms crossed does not help any negotiation if not used properly, and it can significantly damage relationships. This strongest of statements must be backed up with good reasons.

Alternatively, just like when you’re talking to your toddler, you say no but you really mean not right now, not exactly, this is not to my liking, or maybe, not just yet. Either side may invoke the parental no, and if you can recognize it, you will have something to work with.

Another common mistake is to send in a negotiator—or work with a negotiator from the other party—who has limited authority. Often this is rightly seen as simply a strategy from the other side. If possible, never negotiate with someone who does not have the same level of authority as you. If you play along, all you have done is laid out your positions and allowed the other side to deliberate, then send in the real decision-maker, who will ask for more.

If you discover this during the proceedings, point out that the rules of the game have not been observed and you expect the other side to change their negotiator. When I am put in this position, I just defer any further conversations and indicate that when the decision-maker is ready to rejoin the discussions, we will continue. Not hostile, just stating the fact.

Don’t Get Emotional

Finally, too many negotiators let their emotions get in the way of doing a deal. Emotions can kill deals and destroy relationships. They often result in overpaying, which means the tenets of fairness and reasonableness have not been followed. Perhaps most importantly, letting a negotiation be ruled by emotions exposes a weakness in the negotiator.

Tripping on these pitfalls, or slamming up against an impasse, are the challenges that a student of the negotiations process will need to go through, perhaps many times to learn and apply those lessons.

Among all the steps outlined in this article, the most important ones are also the most basic, and when we make mistakes it is often because one or more of those simple tenets have been violated.

When you prepare for your next negotiation, jot down these notes in the margins of your legal pad:

• Is the timing right?

• What are my choices?

• Make tactical responses.

• Be careful with extremes.

Now, as a student of the negotiating process (no CE credits for reading your trade publications yet, but maybe there should be), you will be able to recognize the common tactics used by another good negotiator. Knowing the rules of the game is the first step toward playing it well. When they thrust, you parry. Recognize when you’re playing defense, and when you’re being played. Show respect when the game is proceeding by the rules, and always play fair.

Just like building a rapport with your toddler, or relearning how to communicate with your teenager, completing a successful negotiation can be a rewarding success. And while you might have to remind the other company’s negotiator to pick up his toys when he leaves the room, you almost never have to lend him your car.

Lieblein is a contributing writer and managing principal of WFG Capital Advisors.  rlieblein@wfgca.com