The Real Art of Negotiating Part II: Finding Your Strategy
This is part two of a three-part series. For Part I, click here
Once you know what you want from a deal, and when you’re prepared to walk away, you can decide on how to negotiate. There are basically five major strategies to conducting a negotiation, and which one you select will be dictated by circumstance and personal preference.
Strategy 1: Nail them to the wall
One technique we don’t advocate is screwing the other person. It just never works. While I explain more about why in my book, Lessons from the Len Master, the main reason is glaringly apparent – most deals occur at the start of an association. Ripping someone off is a bad way to establish a relationship.
How to get everything you want and still lose
Picture two orangutans. The smaller one has a banana and the bigger one wants some or all of it. There is famine in the rainforest, and calories are scarce. The larger one could negotiate, but instead he beats up the smaller one and takes the banana. Negotiation complete, opponent vanquished. Except…
Well, one might wonder why the smaller orangutan had the banana in the first place. Does it have access to a food supply that would be useful to the larger primate? He will never know. The smaller orangutan won’t want to deal with its larger opponent next time and might come prepared with a bigger friend. Either way, it was a one-shot deal, and chances are the larger orangutan needs an ongoing source of bananas. Plus, eventually the larger orangutan has to go to sleep, and may find the smaller one and a few of his friends waiting in the darkness.
Editor’s note: I have never met an orangutan — except at the San Diego Zoo — but they seem peaceful and friendly, so I am not saying don’t do a deal with an orangutan. Maybe the real lesson here is don’t do a deal with orange people who enjoy being bullies?
Bad negotiations also increase your costs. Businesses like payday lenders that rely on predatory deals spend a lot of money on advertising. Coincidence? Probably not, since they may not be able to rely on referrals and word-of-mouth and instead have to constantly get new victims prospects to grow business.
Strategy 2: State what you want and don’t take no for an answer
Here you state your major points upfront and stick to your guns. For example, you’re selling your car. You list the price and add “firm” in the ad. Someone offers less money, you say “No, thank you.” Upfront negotiations involve outlining the major terms and saving everyone time and aggravation.
While selling one of my businesses, I took that approach. I knew what the business was worth, had the information to back it up and made it clear to the interested buyers that my number was non-negotiable. This tactic works well when you are not in a hurry, and value your asset or time more than the value you would receive if you were more flexible. It also assumes you know the true value of what you have. Otherwise, a truism of deals applies and works against you: whoever goes first is at a disadvantage. But if you know what is fair, and you don’t want to waste time, this is an effective approach.
Fair is another word for consistent
There is psychology behind this strategy. The trick is to make it seem that the price is fair and unchanging. Humans are more likely to accept a fixed price if they assume no one else negotiates or is likely to get a better deal. It’s why we don’t generally negotiate at supermarkets or department stores, unless you’re my father and trying to embarrass your children.
An important note: just because the price is fixed doesn’t mean everything else is not negotiable. You may wish to be flexible on payment terms or delivery, but in general, if you state everything upfront and make it clear that it is a take it or leave it situation, it makes things go faster.
Strategy 3: Be reasonable
This is my favorite approach and works best for people who are not confrontational by nature — which is 95% of the population. It works especially well when you don’t feel like you have a lot of leverage or for people who find it hard to negotiate for a larger salary. The general idea is that you hear an offer and you frame your rebuttal in a reasonable manner that highlights a win-win scenario.
Just give me the money
Recently a friend applied for a position with a government agency. The agency spelled out the salary range for the position — in the form of pay grades or steps from one to ten — and made an offer at the lower end of the range. My friend countered at the higher end, but also elucidated why she felt she was worth more.
Her experience and her education would place her at the middle of the scale, she argued. Her familiarity with the program — she had worked for an agency just like this, and had manned the difficult shift they needed filled — meant she could hit the ground running right away. That advatage placed her closer to the top of the scale. It was a convincing argument and not only convinced the hiring manager that there was value in getting her for the position at the higher cost, but also gave her the words to sell it to her boss. A classic win-win. My friend didn’t go in with I want more money, but rather, this is why it’s fair to both of us and makes sense. She got the offer at the rate she wanted. No additional haggling was necessary.
Incidentally, women and minorities are statistically less likely to bargain on pay according to many studies (https://www.glassdoor.com/blog/do-race-gender-play-a-role-in-salary-negotiations/). One reason may be because of culture, or a sense of diminished power, or because we’d rather bargain with people who look like us, and women and minorities are often negotiating with white males. Whatever the reason, women in general avoid negotiating and pay the price for it. Taking the reasonable approach to negotiation builds confidence and is effective in communicating why someone deserves a raise, rather than just wanting one.
A reasonable approach also works when you have the time to develop a relationship. The more you know about the other party — and they of you — the better your chances of coming to agreement.
People are nicer to people they know
Being reasonable also means keeping your options open. If you are an employee applying for a job and you must provide a salary requirement, give a range. Make it realistic, but then use the interview process to communicate your value and work your way to the higher end. How will you benefit the company, and what do you bring to the table? The longer you can negotiate, the better you are positioned to increase your worth. It’s like the difference between dating someone on Match.com versus someone you know from work. You have a lot more options to show value if you meet more than once.
Strategy 4: Play the angles
If a magician tells you to look right, you can bet the real action is to your left. This is the basis for the misdirection strategy and has been an art that has won wars and entertained audiences. It can work in negotiations, but it is important to understand the difference between misdirection and deception.
Why settle for more money when you can have fancier business cards?
One way that misdirection works in a deal is to have the other person focus in on things that are less tangible. As an employer, you can easily augment a title in lieu of more pay, and use wording to have the person focus on that, rather than the fact that you are not meeting their pay demands:
Employer: “I can’t bring you in at that pay level, but I may be able to make you a director of marketing instead of a marketing manager. As a director, you will be in on planning meetings and be part of our annual retreat.”
You haven’t offered more money, but in the other person’s mind you have created value. Who wants to be in the gold club when there is a platinum level?
Misdirection is also about making something appear as if it is very important to you, when in reality it is not. The classic example of this is a divorce. If my soon-to-be-ex thinks that my classic car is the most valuable thing to me, depriving me of it — or letting me have it — can earn negotiation points elsewhere. (I am not getting divorced and my wife loves me too much to ever take away my beloved roadster).
A poker face helps
In a negotiation, never reveal how badly you want or don’t want something, unless you are using it to your advantage. And if something is going to be included anyway (think vacation, health benefits, car allowance) don’t assign it a lot of value, unless you want it used against you: “Yes, I understand you have great health benefits, but I am already covered by my spouse’s plan.” Does this break the rule of honest bargaining? Not if you do it with the overall intent of getting to a good deal. And again, that’s the key: a balanced deal will survive and spur future deals.
Strategy 5: Allies won the war
Our last major strategy is to bring in allies. This works well in practically any deal.
First, the more people on your side, the better your chance for success. There is safety in numbers, and more negotiable resources as well. The obvious example is collective bargaining. Regardless of your stance on unions, it is unlikely that we would have the employee protections we have today without them, because there is strength in unity. People are also influenced by groups and react better when they think others agree. So, whenever you can recruit people to support your case, you are likely to improve your negotiating hand.
Second — and less commonly used — is involving a third party in the deal. Bob needs a kidney, but his sister Stacy— a willing donor — is not a good match. But she is a good match for Maria, who has a brother who is willing to donate and is a good match for Bob. Maria’s brother donates to Bob, and Stacy donates to Maria. A simple two-party negotiation would have never worked here.
A more practical example came up the other day. While looking for new office space, we negotiated with a landlord using the usual tactics. We hit an impasse and were about to walk away from the deal. Enter an ally; the landlord let it slip that the space had been vacated by a tenant who had a lease for another 12 months. The landlord’s point was that they had no incentive to negotiate, since they were being paid to keep the space empty.
Sensing an opportunity, we reached out to the tenant and negotiated a three-way offer: the tenant would pay for some of our tenant improvements in exchange for getting out of his lease by our taking over the space now. The landlord had reduced costs and was more amenable to lowering the term of the lease for us, since he had fewer costs to recoup. We got the space and deal we needed. To add urgency, we also mentioned we were willing to sublease directly from the tenant, saving him money and cutting the landlord out from earning higher rent from us for a year. The deal happened quickly after that.
The key to allies is finding anyone that can benefit directly or indirectly from you getting what you want. It makes a deal a bit more difficult to close but can bring dead-end negotiations to fruition.
All’s well that ends well
Whichever approach you use, just remember that the end goal is to reach a long-lasting agreement that makes sense. Winning today and making an enemy of a partner, boss, vendor or client is short-sighted. Good deals give both sides bragging rights and incentives to work with the other party again.
Our next article will focus on the most common mistakes negotiators make and strategies to avoid them.
Want to know more? My latest book, Lessons from the Len Master, will be published soon by PostHill Publishing. It covers lessons I learned from my father on business, negotiations and leadership. Drop me an email or message and I’ll send you a free copy when it’s available. Or pre-order it now on Amazon by clicking here.