Essential Negotiation
by Gavin Kennedy
Profile Books © 2004
240 pages
Focus
Leadership & Mgt.
Strategy
Sales & Marketing
Take-Aways
• Negotiation, which involves intellect, emotion, speech and behavior, is a basic
human activity.
• The value the parties place on a position or item is what motivates them to negotiate.
Finance
Human Resources
IT, Production & Logistics
Career Development
Small Business
Economics & Politics
Industries
Intercultural Mgt.
Concepts & Trends
• Poor listeners are poor negotiators.
• Inexperienced negotiators risk failing to get what they want. Negotiating partners
may also take advantage of unskilled negotiators.
• The "principal-agent problem" arises when the interests of the agent are not
aligned with the interests of the principal, giving the agent no incentive to realize
the client's interests.
• When people have to choose between two bad alternatives, most will avoid
choosing.
• Guanxi is the Chinese practice of valuing personal relationships and alliances.
• Successful negotiation requires mutual consent and a give-and-take attitude.
• The three types of negotiating behavior are aggressive, naïve and balanced.
• "If you agree to buy now, I will include the new software" is one example of a
"conditional offer."
Rating
(10 is best)
Overall
Applicability
Innovation
Style
7
7
5
6
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Relevance
What You Will Learn
In this Abstract, you will learn: 1) What key negotiating terms mean; and 2) How to use
negotiating tactics to get what you want.
Recommendation
In the case of this often amusing, alphabetically organized (well, mostly), cross-referenced
guide, a dictionary is as instructive as a textbook – although, because of their brevity,
some of the definitions are confusing. Gavin Kennedy provides a basic introduction to
the topic, then lets his definitions do most of the heavy lifting. He adds a dimension
by providing examples from years of real-world experience. The book also stands
out because of its European perspective: An appendix lists Europe-based negotiating
consultants and trainers. Because of its unusual structure, getAbstract recommends this
text to both novices, who should probably read it from beginning to end, and experienced
negotiators, who can dip into it when they need a reference book to remind them of key
terms, strategies and ploys.
Abstract
“Negotiation is
the alternative to
the use of force
and it is also a
self-sustaining,
growth-generating
human behavior.”
“Negotiation is a
process in which
both parties
gain from their
transactions.”
Major and Minor Differences
Negotiation is a defining human trait and an essential element of human social interaction.
People are interdependent. To keep the wheels of commerce and social interaction
turning, they must maintain good relations with one another. When they face conflicts,
negotiating enables them to arrive at a mutually beneficial outcome. Thus, people
negotiate constantly, over large and small issues alike, from where to go on vacation to
the delineation of international boundaries.
Negotiation plays an important role in history, since it can replace violent behavior. Talking
over a conflict usually has better results than combat. In war, the victor confiscates the
assets. In negotiation, however, both parties gain access to valuable resources. Everyone
walks away with something positive. And unlike war, which often exacerbates the
hostility between the parties, negotiating produces a new basis for social relationships.
As Winston Churchill said, “Jaw jaw is better than war war.”
Some people criticize negotiating because they believe both sides must give up something
to achieve progress and stability. However, while such negotiations do occur, more often,
both parties win. They begin talking because they want different things. They value
them differently and will pay different prices for them. The differences bring the parties
to the table.
In the following example, each party places a different value on the item, each has
different motivations for buying it, and each is delighted with the outcome: The owner
of a swamped boat agrees to sell it for £6,000. He is pleased, since the boat had become
worthless to him and he actually expected to have to pay to dispose it. The buyer, a
prop manager for a film company, is also pleased. Her budget for obtaining a boat was
£10,000 and she saved her company £4,000. At a climactic moment in a film, the prop
manager’s producer would set the boat on fire.
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The outcomes of a negotiating session are not always this positive. Inexperienced
negotiators may not get what they want, or their negotiating partner may take
advantage of them. They may be coerced into giving something for nothing. In the
best negotiations, however, both parties begin in a spirit of give and take, and both
freely consent to the outcome.
“Negotiation
involves an
exchange of
something
for something
(tangible
or intangible).”
“Rules: In
negotiations
there are none.”
The following are some of the core principles and terms involved in negotiating:
Add-on: An additional charge. Negotiators use add-ons to increase the original bid.
Adjournment: A pause in the discussions. Adjournments can raise the level of
expectations, so when the parties return they will make more progress; they can also
give the parties time to analyze the situation. If you call an adjournment, everyone should
understand what its purpose is and when the group will reconvene.
Agent: Represents the principals in a negotiation and acts in their best interests. Agents
often facilitate buying and selling of goods and services, and are common in real estate.
In some countries, noncitizens must use a local agent to conduct business. If you enter
into an agency agreement, make sure your agreement clearly spells out the following
four areas: limits on liability and authority, limits on territory, how you’ll terminate
the relationship and when the termination clause will take effect. The “principal-agent
problem” arises if the agent fails to do what the client requires.
Aim high: Asking for more than you expect – “because you will never get more
than you ask for.” Weak negotiators with low expectations are usually the first to
compromise. Those with higher goals tend to make small concessions and to be slow
to give in to demands.
Auction: A type of sale in which buyers compete. The following are the three types
of auctions:
“Other people’s
behavior
influences your
perceptions and
what you perceive
confirms,
or amends,
your aspirations.”
1. Regular – All parties bid on an item and the highest bidder wins.
2. Dutch – The auctioneer starts with a high price and comes down until a buyer emerges.
3. “Vickrey sealed-bid” – The highest bidder wins, but pays the price offered by the
second-highest bidder.
Authority: The power to reach binding deals. Deal with the “organ grinder,” not the
“monkey.” If a negotiator does not have authority, he or she should say so and call for
an adjournment when the discussions reach a critical point. Then, the negotiator should
meet with superiors to obtain permission to proceed.
Avoidance-Avoidance Model: Faced with a choice between two bad alternatives, most
people choose neither. Instead, they avoid choosing. When this happens in a negotiation,
one party is usually more inclined to compromise than the other.
“There is no
correct solution
to a dilemma:
That is why it
is a dilemma.”
Bagatelle: An expensive item repackaged in tiny units so a party can present it as cheap
– for example, phone service sold in three-minute intervals or a ream of paper by the
sheet. A bagatelle is a ruse to overcome objections about price.
Behavioral styles: Colors represent the three types of negotiating behavior:
1. Red – Aggressive: bluffing, intimidating and even using dirty tricks.
2. Blue – Naïve: succumbing to ploys and often giving something for nothing.
3. Purple – Balanced: using conditional language to trade and reach a fair solution.
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Best alternative to negotiated agreement (BATNA): This is the alternative you have
in case you don’t reach an agreement. Know it in advance. The better your BATNA
compared to the proposals during the negotiation, the more power you have.
“Important advice
to all negotiators:
ask questions
and listen to
the answers.”
Brooklyn optician: A seller who keeps adding surcharges (supposedly named for a
New York businessman who was an expert at this add-on ploy). For example, the normal
charge for an item is $250, but it’s $10 more on weekends; delivery is $25, but more
outside of a two-block radius.
Cash before performance: Requiring payment before you provide a service. Service
providers who do not accept credit or whose customers might demand a refund may
impose this requirement. Buyers may agree to it in exchange for a lower price.
Claiming value: Taking a larger percentage of the prize than you deserve – a technique
red-style negotiators use in a “distributive bargain,” in which one party’s loss is the
other’s gain. Claiming value precludes “creating value,” in which both parties benefit.
“Do not sell the
steak, sell the
sizzle…Find
the sizzle in a
proposition and
put it to them.”
Closes: The culmination of a bargaining session. The following are three common closes:
1. Summary – A statement of what has transpired and what each side has agreed to do.
2. Adjournment – If a summary close fails to produce a call to close negotiations, the
parties can adjourn.
3. Traded movement – An agreement to settle smaller, unresolved issues before
reaching a final agreement. A traded movement is an incremental step toward closing
negotiations and reaching an “accepted bargain.”
Commitment ploy: Techniques you can use to convince the other party you are
serious about a threat. For example, if you threaten to close a plant by reminding the
other party that you have closed plants before, you’ve demonstrated your commitment
to your threat.
“Soft negotiators
are characterized
by their willingness
to move in
large steps
from any position
they adopt.”
Conditional language: To be used in explaining your terms for reaching a settlement.
Don’t give things away, and don’t ask others to do so; instead, bargain: “If you will do
such and such, then I will agree to do so and so.”
Decision analysis: A method of assessing your options by estimating their value and
multiplying it by their probability.
Devalued concessions: Rewards that lose their value simply because they are given.
Negotiators who become too greedy spurn the concessions the other parties make.
First offer: Always reject it.
“If you concede
in the face of
pressure, you
teach other
negotiators to pile
on the pressure.”
Game theory: A quantitative approach to conflict resolution. It relies on several
assumptions:
•
•
•
•
“The identity of the players and their number are known to everyone.”
“All players are rational.”
“The payoffs to each player are known.”
“Each player’s strategies are known and fixed.”
Guanxi (pronounced “gwanshee”): The Chinese practice of valuing personal
relationships over market realities. You receive licenses and permissions depending on
whom you know.
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Level up the work, level down the price: The buyer tells the seller which features he or
she wants (“level up the work”) and then asks for a lower price (“level down the price.”)
Lifeboat clause: Contingency language inserted into a contract that enables a party to
back out of the agreement.
Listening: “The least successful skill of the below-average negotiator.”
Mother Hubbard: Insisting on a lower price by claiming that you can’t afford the
seller’s price.
“Negotiators
learn to say no if
they find they get
concessions when
they do so, hence
do not stimulate
their resistance
by rewarding it.”
Noah’s Ark: A technique (so-called because it is as ancient as Noah’s Ark) in which
the buyer argues that the seller should reduce the price because other sellers are cheaper.
Counter by asking if the competing proposal includes the same advantages as yours or
by asking why, in that case, the buyer is bothering to meet with you.
Offers: Always conditional. When you make an offer, specify the duties of the other
party, but keep yours vague. When the other party accepts your offer, you’ve reached
an agreement.
Perry Mason ploy: Asking pointed questions to try to get the other party to admit to
something that will disqualify him or her from the negotiation. If you encounter a Perry
Mason, either don’t answer the questions or insist on knowing their purpose.
Quivering quill: A buyer’s pressure tactic for getting last-minute concessions from the
seller. The buyer prepares to sign the agreement, raises the pen (“the quivering quill”)
and hesitates. The anxious seller panics and offers a 1% price reduction if the buyer signs
right away.
Sell cheap, get famous: Offering a low price because of the seller’s lack of a track record.
In return, the buyer claims, the seller will gain valuable experience and a good reputation.
“Nothing is agreed
until everything
is agreed.”
Teaching wolves to chase sleds: Making small concessions to gain an advantage or
relieve pressure. This is like throwing food to the wolves that are chasing your sled. It
doesn’t deter the wolves but rather encourages them to chase you to get more food.
Yesable proposition: Asking the buyer a series of easy questions to which the answer is
obviously yes, then posing a final, more difficult question in the hope that the buyer will
say yes to that one as well, out of habit.
Zeuthen’s conflict avoidance model: A two-stage process to determine how much
conflict you will accept. First, compare the value of sticking to your current position
with that of accepting the other party’s offer. Next, evaluate the potential for a conflict
or a breakdown in negotiations if you stick to your offer, and decide whether the conflict
is worthwhile.
About The Author
Gavin Kennedy is a professorial fellow at Edinburgh Business School and the author of
several books, including Everything is Negotiable and The Perfect Negotiation.
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