Articles Tagged with Negotiations

As we’ve spoken about in the past, negotiations are an important part of everyday life for businesses, consumers, and lawyers alike. Today we’re going to talk about how respect, trust, and confidence are the keys to successful business negotiations and how you can harness the natural urge to compare, and the common preference for choice, to attain them.

Chances are, you all have felt the urge to comparison shop; how else to tell whether you’re going to get your money’s worth out of the bargain? No matter what you are in the market for, be it clothes, groceries, a new car, or a home, most people want to take a look at multiple options before deciding which one to buy. How many people buy the first house they look at with a realtor, the first car they see in a showroom, or even the first pair of jeans they pick up in a store?

People’s urge to compare is strong, even when they are standing in one store. Think of the last time you bought a new cellphone. Picture yourself standing there, tied to one carrier, in front of a display with many different phones. Do you look at the cost and different features of each, to see which one you like better, before you make up your mind? When you finally make your decision, do you feel more confident that you bought the right phone because you made the effort to educate yourself by evaluating the choices first, or do you regret not buying the first decent looking phone that you saw? What if there is only one phone and the only choice you have is to take it or leave it? How confident are you that it is worth the money?

If having more choices to compare makes you feel more confident in your ultimate selection, then you’re not alone. Even Apple, which perennially has offered one new version of its iPhone at a time, apparently has recognized the power of choice; it reportedly is set to introduce two very different versions of its newest iPhone, one high-end and one low-end, at the same time this September.

A recent episode of the popular National Geographic Channel television show Brain Games points out just how strong the urge to compare is and how much more confident it makes people feel in their ultimate decision. To demonstrate how people make decisions, the show gave a few samples of the same type of clothing to small focus groups and asked each person to decide which one they would buy. Everyone diligently compared the items and every person had a well thought out reason for picking the item he did; the reasons inevitably had to do with the person’s decision that the particular item he chose was better than every other item he could choose from. The reason it was better was based on what the particular person considered to be important; for some it might have been that the clothing was softer, for others it might have been that the item was more durable or its colors were brighter. The reasons weren’t important, because, it turns out, each item was exactly the same as the others. The key was the way the reasons were arrived at; i.e., by comparing options and deciding which one was best, even if there was no real difference between them. If you use that urge to compare in the right way, as part of a win-win strategy, it can help you succeed in business negotiations.

According to Harvard Business School professor Max H. Bazerman, writing in Negotiation, the monthly newsletter of Harvard Law School’s Program on Negotiation, one way to successfully negotiate a deal is to present multiple simultaneous offers. Each offer should benefit you, but, importantly, each should give your negotiating partner something different in return. Let him decide for himself whether it would be better to have faster delivery, a lower unit price, or better payment terms. It’s one way to learn what is important to him; if he immediately knocks one or two of the offers off the table, at least you will know what you have to work with and what you have to work on; you can use it as a framework to better your offer and finalize a deal. When you make those offers, you also demonstrate your flexibility, confidence in your product or service, and commitment to make a deal. If he takes one of the offers, of course, then the deal is done.
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As we have talked about, negotiations are important, to businesses, their employees, and customers. Everyone wants to get the best deal possible. Being able to achieve it, however, is no easy task. How you conduct negotiations, the negotiation strategies that you should follow in order to get what you need out of the negotiations, might sound like academic gobbledygook, but they really are common sense ideas that have real life consequences for real life people. Businesses fail, employees lose their jobs, and products we all know and love go away, when emotion gets in the way of reason; these negotiation strategies are a way to avoid that.

We previously wrote about the need to know what you want before you begin to negotiate and the dangers of playing hardball once you start. This time we’ll talk about determining what your best alternative to a negotiated agreement, or BATNA, is. Put another way, your BATNA is your best fallback position if negotiations fail. It’s a common sense concept that gives you an idea of when you should accept an offer, when you should fight, and when you should walk away. Knowing your realistic bottom line, and that of your opponent, is essential to getting what you want, and preventing you from giving away more than you have to, in negotiations.

In order to determine what your BATNA is, you first need to actually know what all of your alternatives are. The most important, and overlooked, step is to make sure that you compare them as apples to apples because none will be exactly the same. As Harvard Business School and Law School Professor Guhan Subramanian pointed out in an article entitled, “Taking BATNA To The Next Level,” which first appeared in the January 2007 edition of the monthly newsletter Negotiation, your alternatives are not going to be directly comparable to what you can achieve in a negotiated agreement. His example, of a customer deciding whether to renew his current homeowner’s policy, proves the point. You can’t just compare premiums; you have to go through the coverages, to see what losses are covered and what you’ll receive if a loss actually occurs, before you know which policy gives you the best value. Saving a few hundred dollars a year in premiums may not mean much if you lose a few thousand dollars because the cheaper policy does not cover your loss.

How to succeed in negotiations is open to debate. It depends in large part on what you mean by success. Business owners, in New York and elsewhere, often think it means they have to win, and their negotiating partner, who they often view as their opponent, has to lose. Hardball, to them, is the key; power is what counts. Most business owners want to gain the upper-hand, and, once they have it, use it for all it’s worth. Lawyers often act in this same way, especially once litigation begins. The take-no-prisoners approach may be tempting, and it certainly does look good in the movies, but it often doesn’t get you what you bargained for.

The word “tense” always seems to come first whenever negotiations make the news. Normally up against a deadline, each party strongly believes that its cause is just and that the other side is pig-headed, if not downright evil, in opposing it. If the negotiations fail, each side is ready and willing to heap scorn upon the other.

Think of what happened to Hostess Brands. It closed down in November of 2012 because one of its unions went on strike. Hostess made Twinkies, Ho-Ho’s, and even Wonder Bread. Just about everyone has tried some of their foods at one point or another; my favorite was the Coffee Cakes. Well, the familiar story goes, Hostess ran out of money, declared bankruptcy to try to survive, and attempted to negotiate new contracts with its various unions. Some went along; the Teamsters did. Some refused. The Bakery, Confectionery, Tobacco Workers and Grain Millers, which represented 5000 Hostess employees, went on strike because they opposed the give-backs the bankruptcy judge imposed. When they wouldn’t go back to work, at least not enough of them anyway, Hostess decided to close its doors and sell off its assets. All of its major brands eventually were sold and, hopefully all will re-appear on store shelves. Many of its former employees, however, probably won’t be hired by the new owners.