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| What Is Negotiation? | |
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| "Let us never negotiate out of fear, but never fear to negotiate." -John F. Kennedy | |
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| What do you think of when you hear the word "negotiation"? Supporters of Al Gore and George W. Bush arguing about the proper way to count the Florida ballots in the 2000 presidential election? Microsoft and the United States government struggling to define the difference between fair competition and a monopoly? America Online and Time Warner working with the federal government to create a successful merger that will encourage free trade? A nervous investor in technology stocks asking a broker to wait twenty-four hours before executing a margin call? Most of us do tend to think of negotiations in terms of these win-lose scenarios. | |
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| In a research study of university students, the following question was posed to participants: How often do you negotiate--often, seldom, or never? Over 36 percent of the respondents answered "seldom" or "never." Actually, this was a trick question, since the correct answer should have been "always." Everything in life is negotiated, under all conditions, at all times. From asking your significant other to take out the garbage to merging onto the freeway in rush-hour traffic, from determining what time to schedule an appointment with a client to deciding which television program to watch with your family--every aspect of your life is spent in some form of negotiation. | |
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| Gerard I. Nierenberg, author of the first book on the formalized process of negotiation, The Art of Negotiating, and the man the Wall Street Journal calls "The Father of Negotiation," stated, "Whenever people exchange ideas with the intention of changing relationships, whenever they confer for agreement, then they are negotiating." The late Israel Unterman, a former professor of management at San Diego State University, expanded Nierenberg's definition slightly to note, "Negotiation is conducted neither to widen nor to breach the relationship, but to form a new or different configuration." | |
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| In short, most of us are involved in negotiations to one degree or another for a good part of any given day. Negotiation should be considered a positive way of structuring the communication process. | |
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| Typical Negotiated Transactions | |
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| Here is a list of some typical transactions in which you can improve your position by negotiating. | |
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| Price, terms, and accessory items on an automobile purchase. | |
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| Price, terms, and length of escrow on a home purchase. | |
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| Turnaround time and cost for car repairs. | |
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| Which evening television program your family will watch. | |
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| Which "free" features you will get with your cellphone service. | |
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| Your salary, vacation time, and job "perks." | |
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| Scope of work projects and time frame for completion. | |
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| Hourly rate to charge a new client. | |
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| Date for an event. | |
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| Which parties you will or will not attend during the holiday season. | |
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| A work schedule that is flexible enough to meet your family's needs. | |
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| Merger and acquisition terms. | |
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| Vacation schedules for employees. | |
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| The time of year you will take your vacation (business) and where you will go (family). | |
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| What price you will pay for, and what services you will expect from, an Internet service provider. | |
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| The shipping price and delivery date for a product. | |
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| Negotiation Situations | |
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| In what other areas in your daily routine could you improve your position by negotiating? List them here: | |
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| 2. 3. 4. 5. 6. 7. 8. 9. 10. | |
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| How Good a Negotiator Are You? | |
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| Like any skill, negotiation can be learned, practiced, and mastered. Personal and professional growth in any area of life usually involves a combination of awareness and risk-taking. Fill out this questionnaire on the personal characteristics necessary to be a great negotiator. Your answers will help you determine where you have strengths as a negotiator and where you may need improvement. Circle the number that best reflects where you fall on the scale. The higher the number, the more the characteristic describes you. When you have finished, add up your numbers and put the total in the space provided. | |
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| I enjoy dealing with other people, and I am committed to building relationships and creating win-win outcomes. | |
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| 1 2 3 4 5 | |
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| I have good self-esteem and tend to have a high level of aspiration and expectation. | |
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| 1 2 3 4 5 | |
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| I work to create a comfortable, professional atmosphere. | |
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| 1 2 3 4 5 | |
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| I enjoy coming up with creative solutions to problems. | |
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| 1 2 3 4 5 | |
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| I am able to think clearly under pressure. | |
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| 1 2 3 4 5 | |
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| I am well prepared prior to entering a negotiation. | |
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| 1 2 3 4 5 | |
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| I am able to clearly identify my bottom line in every negotiation. (If I go below or above a certain point, I will walk out.) | |
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| 1 2 3 4 5 | |
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| I am willing to ask as many questions as it takes to get the information needed to make the best decision. | |
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| 1 2 3 4 5 | |
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| I communicate clearly and concisely. | |
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| 1 2 3 4 5 | |
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| I work to see each issue from my counterpart's point of view. | |
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| 1 2 3 4 5 | |
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| I confront the issues, not the person. | |
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| 1 2 3 4 5 | |
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| I focus on shared interests, not differences. | |
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| 1 2 3 4 5 | |
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| I look for ways to "grow the pie"--rather than simply dividing up the existing pieces--thereby expanding the relationship with my counterpart. | |
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| 1 2 3 4 5 | |
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| I do not take my counterpart's strategies, tactics, and comments personally. | |
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| 1 2 3 4 5 | |
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| I like to uncover the needs, wants, and motivations of counterparts so I can help them achieve their goals. | |
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| 1 2 3 4 5 | |
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| I recognize the power of strategies and tactics and use them frequently. | |
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| 1 2 3 4 5 | |
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| I know how to effectively counter a counterpart's strategies and tactics. | |
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| 1 2 3 4 5 | |
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| I am willing to compromise when necessary to solve problems. | |
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| 1 2 3 4 5 | |
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| When a counterpart and I come to an agreement on an issue, I ensure that the issue is measurable and time-bound. | |
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| 1 2 3 4 5 | |
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| I am a great listener. | |
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| 1 2 3 4 5 | |
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| Grand Total: | |
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| Scoring | |
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| 90+: You have the characteristics of a great negotiator. You recognize what negotiation requires, and you are willing to apply yourself accordingly. Adding new strategies and tactics to your repertoire will enable you to be even more successful. | |
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| 80-89: You have the potential to be a skillful negotiator. Reviewing the components of a successful negotiation and learning more about skills, strategies, and tactics will get you well on your way to being even more successful as a negotiator. | |
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| 65-79: You have a basic understanding of successful negotiation skills. Studying the dynamics of building a relationship and learning the importance of understanding your counterpart's needs will help you make great strides in your negotiations. | |
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| 0-64: You have taken the all-important first step to becoming a great negotiator by expressing a willingness to learn. Enjoy reading this book. Take your time, and you will begin to understand the principles outlined. Applying these principles will provide you with the tools and skills you need to negotiate with anyone. | |
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| Negotiation's Four Possible Outcomes | |
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| "The real winners in life are the people who look at every situation with an expectation that they can make it work or make it better." -Barbara Pletcher | |
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| A negotiation will end in one of four possible outcomes: lose-lose, win-lose, win-win, or no outcome (no consequences, negative or positive). In most situations, the ideal outcome is win-win. | |
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| Lose-Lose | |
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| Lose-lose outcomes result when neither party achieves their needs or wants. For example, a company requested that our consulting firm provide a proposal for conducting an employee opinion survey. After supplying an estimate, we thought we had the contract, but at the last minute, the client informed us that his company had chosen another consulting firm that had come in with a lower bid. At first, it seemed the client had won and we had lost. The client had found a better price for what his company thought would be quality service, and we had lost the opportunity for some new business. Two months later, however, we received a call from the client informing us that our competitor had provided poor service and done an awful job on the project. As a result, the client no longer trusted our competitor. In addition, since the competitor's delays caused the client to miss the opportunity to present the survey results at his all-company meeting, the client also lost. | |
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| A second example of a common lose-lose negotiation is a labor strike in which management and labor unions cannot come to a satisfactory agreement. The employee loses; the company loses; and, most tragically, the customer loses. The Employment Policy Foundation, a think tank, analyzed the United Parcel Service strike of 1997 and concluded it would take five years for full-time employees to recover the pay they had lost during the strike, and part-timers would never be able to make up the loss.1 In fact, a study of eighteen labor strikes lasting from five to seventy-five days between 1985 and 1996 determined that most strikers would never fully recover the losses suffered in pay, in real terms.2 Almost always in a labor strike, everyone loses. And, as frequently happens in lose-lose negotiations, neither counterpart, if given a choice, would come back to the negotiating table with the same counterpart in the future. | |
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| Win-Lose or Lose-Win | |
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| The second possible outcome of a negotiation is win-lose or lose-win, when one counterpart wins and the other loses. If you have ever lost a negotiation, you know that the feeling is not pleasant, which leads to the problem with a win-lose outcome: One party walks away without having met their needs or wants, and as a result, will be unwilling to negotiate with the winner in the future. | |
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| A participant in one of our seminars shared a story about how he had obtained a home mortgage loan from a nationwide bank. Almost immediately, the bank had prequalified the borrower, and the terms of the loan had been settled. About thirty-eight days into the loan process, however, the bank informed the borrower that the interest rate was going to change and, in addition, the loan was going to incur additional costs that had not been part of the initial discussion. The borrower's gut feeling was that he should walk out the door and find another lender. But the escrow on the home sale was just forty-five days, and there was not enough time. If the borrower wanted the sale to close on time, he had no choice but to accept the new terms. In this case, the borrower felt he had received less than favorable terms--and lost the negotiation. | |
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| You might think that a win-lose outcome is just fine as long as you are the one who comes out the winner, but keep in mind that when you create a win-lose situation, the loser, if given the choice, will most likely refuse to negotiate with you again. (Sometimes a loser who has no choice may have to negotiate with the same counterpart again, in which case the loser goes into the negotiation with the attitude, "Do it to me one more time.") | |
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| At a negotiation course at San Diego State University, one of our students continually created win-lose outcomes, with himself in the winner's circle. By the final week of the course, not one person in the class would negotiate with him! Creating win-lose outcomes is simply not good business! | |
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| It is important to note that almost all win-lose relationships end up lose-lose over time. You can probably remember a time when someone provided you with an unsatisfactory product or service and refused to correct the problem. When you were unable to get your problem resolved, you most likely decided you would never do business with that person or company again. In the first round of the negotiation, you lost. But every time you have the opportunity to buy the same product or service again and choose to take your business somewhere else, your counterpart loses. As you can see, as a counterpart in a negotiation, you would be wise to create a win-win outcome. | |
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| Win-Win | |
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| The ideal outcome for almost all negotiations is win-win. The needs and goals of both parties are met, so they both walk away with a positive feeling--and a willingness to negotiate with each other again. As Gerard Nierenberg explains, "Negotiation is a cooperative enterprise... not a game; in a good negotiation, everybody wins something." In the negotiation workshops we present, it is rewarding to see the excitement on participants' faces when they realize they have created a win-win outcome. | |
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| A historic negotiation that took place in the 1970s provides a great example of creating a win-win outcome. At the time, the Chrysler Corporation was fighting for its financial survival, and its only hope was to obtain a guaranteed, subsidized loan from the United States government. Unfortunately for Chrysler, it seemed that the majority of Americans were dead set against the government bailing the company out. Chrysler's chairman, Lee Iacocca, realized that to create a win-win outcome, he needed to meet the needs and goals of the members of Congress as well as those of Chrysler. With this in mind, he went before Congress and explained to the politicians that he represented not only himself and Chrysler's 147,000 employees, but also Chrysler's 4,700 dealers and their 150,000 employees, plus Chrysler's 19,000 suppliers and their 250,000 employees. Then Iacocca divided Congress up district by district and explained exactly how many people would be adversely affected in each senator's and each representative's district if the loan was not granted. Iacocca had figured out that the number-one need of career politicians was to keep their constituents happy, and, with superior planning and research, he was able to show how the loan would meet the politicians' goals as well as Chrysler's. Not surprisingly, when the vote was taken, the loan passed by a margin of 2 to 1 in the House and 53 to 44 in the Senate. With this approval, Chrysler borrowed $1.2 billion for 10 years. | |
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| On April 15, 1983, just three years after the loan's origination date, Iacocca presented the U.S. government with a check that paid Chrysler's obligation in full. Thus, everyone won--Chrysler, Chrysler's suppliers, the U.S. government, and all the banks that contributed to the loan. Even the politicians who voted for the loan package felt they benefited by being associated with Chrysler's success. | |
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| No Outcome | |
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| The fourth possible result of a negotiation is "no outcome": Neither party wins or loses. Consider the example of a woman who owns a large piece of commercial real estate and hears that the city government is considering rezoning the area where the property is located. Fearing that the rezoning will lower the value of her property, the owner decides to sell, and calls a real estate agent. Once the two people meet, the real estate agent, who is a member of the zoning commission, tells the property owner that her information is erroneous and there is no plan to rezone the area. The property owner changes her mind about selling. This particular negotiation has neither a positive nor a negative outcome. | |