Negotiating Can Change Your Life:
Techniques to Help You Negotiate ANYTHING
Life is nothing but a series of negotiations. If you aren’t thinking about it that
way, says Steven G. Blum, it’s likely that you’re missing out on opportunities to make
big improvements. He provides tips on how to develop your negotiating skills.
Hoboken, NJ (June 2014)—Almost everyone has met a natural-born negotiator. You know the type: the person who can drive onto a car lot and drive off with a bargain well under the sticker price…or go to a flea market or antique shop and get an 18th century armoire for a quarter of its tag price…or walk into their boss’s office and walk out with a raise, even during a recession. These people just seem to have an inborn gift. Too bad about the rest of us! We’re doomed to forever pay sticker price on cars and antiques and shy away from tough money talks at work…right?
Wrong, says Steven G. Blum. We all negotiate things all the time without even realizing it. Take steps to improve those abilities and you can change your life.
“Let’s say your boss comes to you with a problem,” says Blum, author of Negotiating Your Investments: Use Proven Negotiation Methods to Enrich Your Financial Life (Wiley, 2014, ISBN: 978-1-118-58307-4, $40.00, www.negotiatingtruth.com). “A colleague, who was a key member on a big project you’re working on, has unexpectedly left the company. Because there isn’t time to add a new project member and bring them up to speed, the boss asks you to pick up the slack—which means a lot of late nights for you until the project is complete.
“If you aren’t comfortable with negotiation, you’ll probably say yes without asking for anything in return,” he continues. “But if you’re a strong negotiator, you’ll see an opportunity. You might tell your boss that you’ll be happy to put in the extra hours to make the project a success. In return you’d like the company to pay for you to get certified as a project manager, making you a more valuable—and marketable—employee in the long run.”
In doing so, notes Blum, who has been teaching in the Department of Legal Studies and Business Ethics at the Wharton School of Business at the University of Pennsylvania for more than 20 years, you’ve negotiated a better outcome for yourself than you would have received had you not spoken up. And you’ve made your boss happy because he gains a successful project and gets a more highly skilled employee whose knowledge will be useful in the future.
That’s negotiation. It’s not just about getting a better price for a product or service. It’s about dramatically improving the quality of your life, creating better outcomes for everyone, and even building more harmonious relationships (for example, when you negotiate with a spouse or child). Yet many people fear negotiation—mostly, because they just aren’t comfortable with the process and don’t feel they possess the necessary skills.
Negotiating Your Investments is an in-depth guide to applying proven principles of negotiation to your personal finances. With expert insight into the before, during, and after of a successful negotiation, you’ll learn how to prepare for and conduct important financial discussions with an eye toward getting the best possible outcome.
“Once you’re aware of the underlying negotiation skills, you can start negotiating lots of things in your life—a cheaper price on daycare or lawn care services, better assignments at work, and so on,” says Blum. “Becoming a better negotiator can help you get a larger share of what you want, attain more of your goals, and better develop the ways you spend your days on this earth.”
Read on for a few tips for developing your negotiation skills:
Know what you don’t want, what you do want, and what’s even better. One of the most important things a negotiator can do is figure out what she is trying to gain or achieve. As simple as it sounds, many people don’t truly know their own motivations. Once you remedy this problem, you can be purposeful in keeping the process moving toward your goals and avoiding measures that might throw you off course. So, what does a really good outcome look like? It tends to leave you with most of the things you want, both substantively and with regard to the people you are negotiating with.
When you don’t know what a good outcome looks like for you, you can end up agreeing to terms that aren’t good for you or the other party. Just consider this example about Brian and Marge, co-owners of a business. They’ve been working together for more than a decade, and for the most part, they’ve always worked well together.
Brian is very outgoing and is great with clients. Marge is a bit more of an introvert. She isn’t great at talking with clients but she is a whiz at keeping the books, running the back office, and dealing with technology issues.
As you can see, their partnership was wonderfully “win-win” in the past. Recently, though, Brian and Marge had an argument. Brian felt he was pulling more of the weight than Marge. In the end, they came to a compromise. They would split all tasks evenly. So now Brian would take on some of the bookkeeping and IT tasks, and Marge would work more with clients.
“This arrangement makes it clear to me that neither of them had their company’s ‘best outcome’ in mind,” says Blum. “First, they’re both left worse off. Now instead of doing work that each is good at, they are spending half their time doing things that make them miserable. And the joint misery is not helping company output at all. What if, instead, Brian had asked for a higher percentage of the business in return for his work with the clients? Or, if Marge was concerned that Brian’s handling of all client work was unfair, they could handpick the clients with whom she was most likely to have success.
“It’s also important to keep in mind that what you view as being a ‘good’ outcome might not be that good if it leaves the other negotiating party feeling worse off or victimized,” he adds. “Chances are you’ll need to negotiate with certain people on more than one occasion and you don’t want to burn those bridges by leaving them feeling you’ll take advantage of them the first chance you get.”
Harness the power of BATNA. In negotiation, power comes from alternatives. One of the first things a skilled negotiator explores is what course she will take if the deal being worked on completely falls apart. If I can’t make this arrangement with this person work out at all, what will I do instead? Answering this question leads you to your Best Alternative To a Negotiated Agreement (BATNA) and lays the foundation for increasing negotiating strength. And greater strength presents the potential for increased control, influence, and authority. The beauty of your BATNA is that it provides you a powerful floor to support your negotiation effort. You will neveraccept a deal unless it is better than your BATNA. It forms a minimum acceptable level for you.
What does BATNA look like in practice? Let’s take a look at a tale of two negotiations—one where the participant had a strong BATNA and one where the participant didn’t. Sam and Sara decide that they’re going to go to their boss in a week and demand a 10 percent raise. Sam uses the week to get his nerve up. But Sara, on the other hand, spends the seven days trying to get an offer from a competing employer. Sara succeeds in getting a job offer at a salary 4 percent above her current pay level. The following week, each of them goes in and requests the raise.
The boss tells them both that it is simply not possible. Not having strengthened his BATNA, Sam hasn’t given himself any room for negotiation. He simply thanks his boss for his consideration and goes back to his cubicle. But Sara tells her boss that she has a problem and wants the boss’s help. She tells him that she’s received an offer from a competitor and she must decide whether to stay in her current job or leave for this new one. Not wanting to lose Sara, her boss asks how much salary she has been offered. She replies, “While they demanded confidentiality, I can tell you it is more than I am currently making.”
In the Sam and boss situation, Sam has a problem he doesn’t know how to solve. In the Sara and boss situation, the boss has a problem. Sara gets a raise.
Don’t settle for win-win. As you begin to hone your negotiating skills, you might be tempted to seek out “win-win” solutions. Doing so might seem like a great way to keep your relationship with your negotiating partner positive, but the approach can actually backfire, causing you both to settle for the first plausible solution that improves everyone’s position.
For example, Randy the Realtor was trying to get her client (the buyer) and the other side (seller) to agree on a price. The buyer was moving from a “low tax” town to a more heavily taxed one whose wealthy school district could better serve a child with special needs. The two sides were only $600 apart. Eventually, Randy teamed with the other side’s agent and said, “In exchange for signing this deal right now, we’ve agreed to cut our commissions by $150 each. We want each of you to compromise your price demand by $150 each. That will total the entire $600 in dispute and everyone will share the burden of compromise equally.” The deal closed, and later the two agents toasted each other for coming up with a very “win-win” solution.
But Randy had failed to notice the value that was being left on the table. The client was going to need a real estate agent to sell their old property. Randy might have worked that into the bargain by aiming higher than “win-win.”
“Many negotiators breathe a sigh of relief when they get what they expected,” notes Blum. “Great negotiators know, however, that expectations are the lowest acceptable result and that you should raise the bar by pushing to achieve a well-thought-out goal.”
Make sure your interests come first, but make sure others’ interests are served, too.Good negotiators pay a great deal of attention to underlying interests. They seek a deal that meets their own interests very well, satisfies the interests of other parties sufficiently, and adequately addresses those of all important players who are not part of the actual negotiation. To do otherwise is a mistake.
For example, let’s say two business partners own a retail store together. Bob is 62 and beginning to think about retirement. Jane is 36 and hopes to expand the store to increase profits over the long run. Bob wants to increase the store’s current valuation by cutting costs and minimizing investment. Jane wants to take out a loan and invest in an expansion that she estimates will take five to seven years to become profitable.
If Bob just gives in to Jane, he fears that when he’s ready to “cash out” he won’t be able to leave with enough to fund a long and comfortable retirement. If Jane lets Bob make the decision, she is worried that the business will never meet its potential. There is a lot on the line—danger of building resentment, damage to the working relationship, and even the possibility of the successful partnership breaking up entirely.
Each of the partners needs to pursue his or her own goals with the interests of the other partner in mind. Working together, they can find ways to structure a deal that meets the interests of both. Some examples might be Jane’s arranging to buy Bob out in three years at a price that reflects the changes Bob wanted to make (without actually making them), creating a contract that gives Bob and his heirs a percentage of the gains Jane anticipates over the long term, or giving Bob more of the current profits in exchange for Jane’s receiving a bigger share of the business later.
“If the agreement does not meet the needs of the other negotiation parties, they will not agree to enter into the deal,” explains Blum. “If they are somehow tricked into signing a contract that does not really work for them, they will seek ways to sabotage, escape, or otherwise not comply. That is not good for anyone.”
Don’t get distracted from your real goal. Getting distracted by small battles and side issues is a mistake that can be remedied through practice and careful planning. One of the biggest distractions for many people is the idea of winning. Many people pride themselves on a competitive tenacity that leaves nothing on the table. If possible, they take the table as well. But research has consistently shown that many of these winners end up regretting their victories. Indeed, it happens so often that economists have termed the phenomenon “winner’s curse.”
“Competition is a natural and necessary motivator, yet it does not always bring a happy ending,” says Blum. “The desire to win represents a dangerous shift in focus: Besting the competition becomes the primary goal, and the outcome itself becomes secondary. Paradoxically, the strategies and behaviors that follow are usually self-damaging. Avoid hurting your own efforts by keeping your eyes firmly fixed on where you really are trying to go.”
Insist on both a fair process and a fair outcome. Good negotiators refuse to be part of a process, or outcome, that is anything less than fair. You should do the same. Just as a skilled negotiator will never agree to a deal that does not do a good job of meeting her interests or that is not better than her best alternative, so, too, she should decline one that is observably unfair.
“The question becomes, ‘How do you define “fairness”?’” notes Blum. “Leading negotiation professors urge us to look to authoritative standards and norms to help delineate fairness. What Roger Fisher, William Ury, and Bruce Patton, coauthors of Getting to Yes: Negotiating Agreement without Giving In, call ‘objective criteria’ can be thought of as outside measures of fairness that can be used to anchor a negotiation in principles rather than as a test of will. Examples include moral standards, market value, precedent, and scientific judgment.”
Pay attention to power dynamics. Consider the extremely important matter of personal power dynamics. In most human interactions, one person is given or takes more of the authority and control over the interaction. Sometimes this is a natural consequence of people’s roles, such as a parent’s superiority to a child. In some cases, this is the result of social structures: When you are introduced to the president or the queen, you automatically act deferentially. There are many situations, though, where the question of power gets resolved by one party simply being aggressive and seizing control.
“Where accepted power dynamics lead to best outcomes, it’s okay to observe and follow them,” explains Blum. “On the other hand, the world is also full of power dynamics put in place to serve less admirable goals or simply to advance one person’s or organization’s agenda. In such circumstances, passive acceptance is a mistake. Good negotiators are well advised to ask whether the power structures and processes in current use are the best ones to advance their goal of reaching a best possible outcome.
“Where the process in place is neither a necessary consequence of larger roles and relationships, such as deferring to a government official, nor a good one for advancing a negotiator’s interests, you should not accept it,” he adds. “In plain English, as a good negotiator, you should try to change it to your own advantage. Don’t be rude or inappropriate, of course, but also don’t be afraid to question anything that seems unfair or disadvantageous. Always own your power and politely decline any part of the negotiation process that makes you feel uncomfortable, disadvantaged, or manipulated.”
Don’t trust imprudently. The mere fact that you have insisted on forthrightness, and unwaveringly offered it, does not mean you should entirely trust the other parties. After all, how many times have you observed someone you deal with often lying to another person? How often have you seen a colleague act in a shady manner toward another party? Blum points out that if that is how they deal with others, they may well treat you in the same manner. So don’t just accept that this is how the game is played.
“Some negotiators believe that a certain amount of puffery, bluffing, and misleading is acceptable as long as all bargainers are aware of and playing by the same rules,” he says. “Although such a process is common and can work, it’s probably better to establish right up front the expectation of reliability and honest communication.
“In their recommendation that a negotiator be ‘wholly trustworthy but not wholly trusting,’ Roger Fisher and Scott Brown, coauthors of Getting Together: Building Relationships as We Negotiate, are coming down strongly on the side of creating a process that is honest and forthright,” notes Blum. “But be cautious. Don’t let yourself be taken advantage of if the other negotiating party fails to act honestly and forthrightly. Neither, though, do you want them to find you less than completely reliable. The bottom line? Don’t trust imprudently, but act in such a way that the other party will never be disappointed by having trusted you.”
Be mindful of each “little agreement” step. A series of smaller commitments is very often the way that leads to a big agreement. In international relations, these are often referred to as confidence-building measures. The concept applies to small negotiations as well as big ones. Who hasn’t laid out a chain of such agreements when bargaining with a child? If you will eat your spinach, we will go to the ice cream stand. If you are good on the trip, you can get sprinkles. After the ice cream, we are going to brush our teeth and get ready for bed…and so on.
“The negotiation process is made up of a series of little agreements,” says Blum. “Pay attention to them not only as they affect you, but also with an eye toward their impact on your negotiating partners. At every stage, there are forks in the road that require decisions about whether and how much to be bound. A series of small commitments or a planned chain of agreements can build confidence and help lead to a larger agreement.
“The idea is to use the small commitments to pave the way for the other party to easily agree to the next step,” he adds. “Before you know it, you will find yourselves marching confidently, arm in arm, toward agreements that ensure good outcomes for everyone.”
Ask lots of questions. A much-cited study found that skilled negotiators spend almost 40 percent of their time acquiring information (asking questions) and clarifying information (restating and reframing what they’ve heard to verify that they’ve understood correctly). Average negotiators spend about 18 percent of their time on the same behaviors. In other words, average negotiators ask half as many questions as skilled negotiators.
“The key is to ask previously prepared questions and, just as important, listen well enough to pose precise follow-up questions,” notes Blum. “Probing and clarifying the other party’s position requires that you listen carefully and formulate good questions on the spot. Strong listening skills, along with good preparation habits and the ability to express thoughts clearly, consistently show up in the research as among the top traits of the most effective negotiators.
“It’s critical to listen and absorb with discernment,” he adds. “The information you receive will not all be accurate. There is usually an incentive for the other parties to misrepresent certain needs or interests. You can preempt bluffing with hard factual questions; it is psychologically much harder to falsify numbers than it is to mislead about the severity of a situation or the importance of an issue. Plus, there is usually a way to check up on factual information.”
Create scarcity. Just as a shortage of something drives up its price in economic terms, so, too, it increases how badly most people want it. Simply put, humans place a higher value on a thing that is scarce and a lower value on something plentiful. Among the situations that create such an effect are time, popularity, and the risk of loss. Thus, negotiators respond to what is referred to as a closing window of opportunity, i.e., making an offer that is good for only a limited amount of time. When a proposal or offer is structured to end at a certain time, the scarcity effect adds pressure.
Another factor that causes scarcity is competition. When everyone else wants something, there is a tendency for us to want it more, too. We see this all over the commercial sectors of our world, particularly in marketing campaigns. Making it clear that everyone wants the item for sale can make even those with little use for it determined to buy it. Nobody wants to be left out.
“People seem to be hardwired to greatly fear loss, and that’s why creating scarcity can be an effective negotiating technique,” says Blum. “A take-it-or-leave-it tactic or an ultimatum in a negotiation can raise the scarcity effect to sky-high levels. Of course, such approaches pose great risks for the negotiator employing them. As is often the case, scarcity can work its pressure on all sides.”
Prepare and practice. If I were somehow allowed to offer you only one thing to improve your negotiating, it would be this: If you prepare fully for each negotiation, you will do better. It is that simple. As a general rule, the more prepared you are, the better your outcomes will be. In any important negotiation, you should prepare as if it matters. Prepare as would an actor before a big performance, an athlete before an Olympic match, or a lawyer before a major trial. Preparation is something within your reach that can directly improve results. It is there for the taking. Take it. Do your homework.
“And as with many things, when it comes to becoming a better negotiator, practice makes perfect,” notes Blum. “Use every opportunity to test out your skills and think through situations as if they were negotiations. Pay close attention to the everyday negotiations you make with friends and family. As you practice, you’ll become a more agile negotiator, able to work around tough situations and in the end create much better outcomes for yourself.”
Be patient. One of the best things you can do in the closing and commitment stage of a negotiation is to be patient. Try hard not to be in a hurry. The negotiator who is not rushed has a favorable position and is free to work for the best possible deal. She is much less vulnerable to the pressures that necessarily grind down someone who needs the agreement to happen right now. Some methods to help make this attitude possible include starting early, not procrastinating, and avoiding negotiating when you are in a needy state of mind.
“Just as you should avoid the grocery store when you are very hungry, you should not negotiate important deals when you are in a got-to-have-it state of mind,” advises Blum. “The best attitude in the world, where possible, is to be able to say, ‘I have all the time in the world to find the very best possible solution.’ Time is going to work to someone’s advantage in most negotiation situations; work hard to make sure that the person is you.”
“Negotiating is a part of life,” says Blum. “When you pay close attention to this fact, you can make yourself much better off. You can come to better financial decisions. You can get more bang for your buck. You can make relationship-improving decisions. You can protect yourself against unfair business practices. Improving your negotiating skills is an effort worth making.”