Executing a Competitive Negotiation
Framing the Opening Conversation
The opening conversation sets a tone for the negotiations that follow. It is possible to recover if the opening message falls short, but it's better to establish a position of authority and strength at the onset.
In competitive negotiation, some negotiators begin with a moderate and reasonable opening. This is a valid option, though it is more common in collaborative negotiations, in which being reasonable establishes a congenial tone and makes it clear that you are invested in coming to a prompt conclusion without a lot of haggling.
A more common strategy in competitive negotiation is to take an extreme opening position to establish a position of strength, and to start negotiations at a position that is disadvantageous to the other party.
The advantages of doing so are:
- It establishes a sense that you are a tough negotiator and the opponent must make a lot of concessions to achieve their goals.
- It provides a lot of room between your opening offer and what you will really accept, so you can make concessions.
- It tests the opponent's resolve to make a deal to keep you at the table
The disadvantages to doing so are:
- An extreme position may cause the other side to walk away immediately, and it may harm your reputation with others
- An extreme position may cause the opponent to also take an extreme position and dig in their heels even harder than they might have
- An extreme position makes it very difficult to establish a working relationship, and causes others to expect this tactic of you in future negotiations
It's often a balancing act: your goal is to make your opponent feel that they will have to give up ground to reach an agreement, not to make them want to leave the field altogether (or bring in their heavy artillery).
There is some debate over whether one gains a position of strength by making the move or waiting for one's opponent. The preference seems to be toward the latter, and many negotiations seem to waste time with introductions and pleasantries, avoiding starting the actual negotiation, as each party is waiting for the other to make an opening move.
The first to move immediately discloses information to the other side and gives the opponent an opportunity to size you up: how tough will you negotiate, how does your initial offer compare to theirs, how likely are you to walk away. The other party can then adjust their opening accordingly.
There are some instances in which your preference should be to make the opponent take the first move:
- You are not familiar with the territory (have not negotiated a deal like this before)
- You do not know much about the opponent, and what they are likely to accept
- You are not sure whether your opening offer will seem reasonable or extreme
In these instances, you're better off reacting to their first move than risking making a bad move. It may be necessary for you to ask questions of your opponent in order to gather information if they are not volunteering it, or deflect their questions of you if they are probing.
Of course, when the situation is opposite: you are experienced in the area, have a clear idea what a good settlement will be, have a good sense of your opponent, and want to make your strength known to your opponent, then it makes sense to be more aggressive in making the first move.
Ultimately, your goal is to communicate "strength with civility" - it's largely a matter of brinksmanship: making your position as strong as possible without crossing the line where the opponent will be discouraged from entering negotiations.
Also, we aware that the opening move will set the tone of the conversation and establish behavioral norms. Typically, each move you make will be mirrored by the other party: if you are extreme, they will be extreme; if you seem hostile, they will get hostile; if you threaten to break off, they will use the same tactic; etc. While you can take steps to mitigate this in collaborative negotiations, it's much harder to turn the volume back down in competitive ones ... though it's generally easier to crank it up, even unintentionally.
Also, your opening move should allow you to transition smoothly to your next position. It sends mixed signals if you have a "warm and fuzzy" opening and then dig in your heels, or if you make a powerful opening move and immediately retreat afterward. This confusion is not always good: the opponent may think you are not trustworthy, and they may wonder what you're really up to. In the author's opinion, it is better to be consistent than tough, as this supports your credibility. A flexible but credible opponent will generally fare better in negotiations than one who is both difficult and inconsistent.
Concessions
After the opening statement, negotiation proceeds to a series of concessions: each side revises its demands to be a bit closer to the other side's demands, until they meet somewhere in-between.
The agreement that results is not always a mathematical average (I offer $4, you demand $3, and we settle on $3.50) - this depends on how close the initial offers are to how much the parties are willing to give or accept (I offer $4, you demand $100, we don't necessarily settle at $52).
One tip the authors provide is that the intervals become smaller when the person approaches their absolute limit: a dealer might offer a car for $30K, then cut to $25K, then to $22K, then to $21K - the shrinking interval is a sign that they have less and less room to compromise before arriving at their absolute limit.
However, experienced negotiators are familiar with this approach, and may begin decreasing their interval a lot sooner in order to make the opposing party assume their limit is higher/lower than it actually is.
For the same reason, you must be careful about your own concessions: if you move a small amount a t first, then a larger interval, it sends a signal that you are more flexible than you actually are. If your intention is to send a clear message, then use a decreasing interval: cut your offer by 40%, then 20%, then 10%, then 5% of the distance between the current bid and your target.
If you are dealing with a party who makes irregular concessions, you may want to try to sleuth out the reason why their intervals are irregular to gain insight on what it will take to close the deal. Failing that, you can point it out - state that their inconsistency confuses you and ask why - in some cases, especially when the negotiator is inexperienced, there may not be a reason, and pointing out that they seem to be arbitrary gives your own concessions more weight.
Sometimes, creating confusion is exactly the point - they may be attempting to conceal their walk-away point, or stalling for time.
Another tip is to leave room for a final concession - even when you put your foot down and insist that "this is my final offer," they may try to push you again, and making an extra small concession may be useful in closing the deal.
Rules of Thumb
The authors provide some random bullet points on competitive negotiation:
- Stick to your planned target and walk-away points. Don't agree to "split the difference" if it's a bad deal for you. Also, be wary if the opposition wants to split the difference - which means it's a good deal for them.
- Do not reveal your target price until you are close. Your actual target is a very important piece of information, and the earlier you surrender it, the less flexible to opposition will feel the need to be.
- Never reveal your walk-away point. This will become the target for your opponent, as it represents the best possible deal for them and the worst acceptable deal for you. The opposition will ask about it, as it's a very valuable piece of information.
- Try to elicit large concessions from the opposition. The opposition would like to baby-step, minimizing the amount they must move from their current position - you want them to make larger strides to meet you.
- Make concessions few, slow, and small - The alternative, making them big, fast, and often, suggests that you have a lot of flexibility, and the opposition will expect you to move further in their direction than you may be willing to move
- Pay attention to the other party's level of concern for the outcome - the more they want to strike a deal, the more they will be willing to give concessions to appease you.
- Keep them talking - Information is power, and the party that does the least talking learns the most about their opponent.
Commitment
A party is generally committed when achieving the outcome is urgent and they don't have many options. The more committed a party is to making a deal, the more it will be willing to concede in negotiations. In the worst of cases, where a party is utterly disinterested, there may be no point in attempting to negotiate at all.
Generally, the frequency of contact is a sign of commitment. If a party is slow to respond, this suggests they really don't care, and you may need to make large concessions to get their interest. In competitive negotiations, the time interval may be used tactically - pausing to see if the other party will get jumpy and make a larger concession is a way to test their commitment. But again, this is brinksmanship - if you cross the line, the party may decide you're not interested at all and break off negotiations.
Threats and promises can be effective in communicating commitment. The threat (if you don't do this, I will take this action in response) puts the other party on the defensive while clearly drawing the line; whereas the promise (if you do this, I will do this in return) puts the other party at ease and suggests a spirit of cooperation. In both cases, you must make good, or your credibility will be lost - hence future threats and promises will have no weight - so you must be careful not to do so idly.
In tense negotiations, there may be an escalation of threats to the point where both parties are painted into a corner - negotiations will probably fail - so if you don't have alternatives, be careful of making threats, and be prepared to walk away if a counter-threat is made.
It's worth noting that a "final offer" is a kind of threat - accept it, or I will break off negotiations. In some circumstances, it may be acceptable to give a little bit (not more than 5%) after making a final offer - provided the negotiation involves a unitary amount.
There may be instances in which you will have to get out of a commitment, and there are graceful ways of doing so. The authors provide a couple of examples:
- State that the situation has changed or new information has come to your attention that changes your position.
- If the opposition does not press the matter, do not mention it again and let the commitment die
- Attempt to modify the commitment by stating conditions that were "implied" but unstated
These are not necessarily good things to do - and are more in the line of doing a bad thing in the last bad way possible. A better approach is to consider your commitments in advance - don't make them lightly, and when you are uncertain, build in an escape clause.
When another party wants to back out on a commitment, you have two choices: allow them to save face, or walk away. If you suspect they are making false commitments, walk away: they are untrustworthy. If you wish to continue negotiations at all, and think that their reason for breaking a commitment is fair, then you have to allow them to save face.
Playing Hardball
The authors have played down the value of being a "tough" negotiator in the traditional sense ... but sometimes, you have to fight fire with fire, or possibly make a decisive strike against an clumsy opponent. It is generally acceptable to do so, and should not be considered foul play so long as the tactic in question is not deceptive.
A tactic that us generally acceptable is "helping the opponent" - this means giving the opposition the information they need to make their case. In many instances, this can be effective if the opposition is inexperienced and doesn't know what offer to make. You can jigger the information so that it is favorable to you (e.g., the opposition will make an offer you will accept), so long as it is factual.
Another acceptable tactic is simply to be silent - generally speaking, the one who talks the most in a negotiation loses the most ground. Silence can make the opposition nervous, and cause them to crack out of turn - increasing their concession because they think your silence means disappointment, or simply disclosing information they might not have otherwise shared.
Asking questions is another acceptable tactic: rather than reacting to a concession, ask a question about it, letting the other party disclose information to you without having to volunteer any of your own.
A "good cop/bad cop" approach is sometimes used where there are multiple parties involved in a negotiation: one party is excessively aggressive and belligerent; another seems to be more flexible and amiable. The thought is that the contrast provided by the "bad cop" will make you more eager to deal with the "good cop" - going further than you would, and disclosing more than you should. This is generally considered to be a dirty trick, and is a best a bit of a melodrama - but it is often used by some negotiators, especially when the person you're negotiating with is an agent to the individual who makes a decision (a "good cop" salesman offers a deal, but the "bad cop" sales manager must approve it).
A "highball-lowball tactic" is used in making a ridiculously high or low opening offer. If your hope is that the opponent is uninformed and may accept because they don't know better, then this is not considered an ethical tactic - they will eventually discover the real worth and will feel slighted.
A "bogey issue" is placing a lot of importance on one factor in order to trade it off to get what you really want later. The example is making outrageous demands about delivery in order to get concessions on price. This is generally considered deceptive - and it can really muddle issues if the other party uses the same tactic - or worse, is willing to accommodate the wrong demands.
A "nibble" is attempting to get something new near the end of negotiations: to slip something into the agreement without having discussed it. In general, the hope is that the other party will conceded to the nibble without negotiation in the interest of keeping the deal alive. It can be effective, unless the other party suspects that they are being nibbled and wants to take back concessions in exchange.
The tactic of buffaloing (or "playing chicken") describes the tactic of making a false charge at an opponent (outrageous demands backed by threats, usually with a lot of drama) in order to make them flinch, then backing off at the last second if it is unsuccessful. Your hope is that the other party will believe the feint and give up a lot of ground, at which point you can begin negotiations in earnest. This is a high-risk strategy that will cause an instant loss of credibility when your bluff is called.
Intimidation and Coercion
Intimidation and coercion are tactics that some find questionable, but they are often used in competitive negotiation in order to attach on the emotional, rather than logical level, and force an agreement that the opponent might have been reluctant to make.
A common tactic is to demonstrate anger (whether genuine or feigned) to intimidate the opponent, to attempt to pressure someone by appealing to their sense of guilt, or to launch ad-hominem attacks.
These tactics can be offensive - to be used only in cases where preserving the relationship or laying ground for future interaction is not a consideration at all. There is also the danger that the opposing party will react by taking offense - either breaking off negotiations or fighting back in the same manner.
A fairly safe coercive tactic is passive-aggressiveness: act upset with the other party, then be reluctant to continue the conversation. If you have reasonable grounds to be upset, it's especially effective, because it's entirely on the other party to make amends, and can solicit a concession and/or an apology. Opponents who are interested in building a working relationship will be very motivated to appease you; but even those who are purely competitive want to achieve the objective, and will be fearful of your withdrawal.
Tactical Use of Time
Time can be used to put pressure on a negotiation - particularly when there is a deadline involved. The party whose need to make a deadline is greater will be in a disadvantaged position when compared to a party who has no time constraints and can delay negotiation. A party who has a sense of urgency generally becomes desperate and loses a lot of ground.
Taking time to respond to an overture, or even pushing back a date for negotiation, can make the opponent feel pressured - it is a gentle way to suggest disinterest in the negotiation. If the opposing side is under time constraints, this makes the constraints more acute, and gives them less time to make a deal.
Scheduling the negotiation can also be a way of gaining a tactical advantage. In some situations, one party may be more motivated at a particular period (at the end of a year/quarter/month, businesses may be under greater pressure to unload inventories or make quotas); a specific day of the week (a negotiation scheduled on Friday afternoon is likely to be settled quickly); or a certain hour of the day (ditto any negotiation at 4 pm). There can be some struggle in advance over controlling the scheduling of an interview when it is a tactical advantage. The authors suggest that you should always attempt to gain control over the schedule.
Travel schedules are likewise an issue in business negotiation - if a party has to make a flight, they will be more likely to make concessions as their departure time approaches. The authors suggest that you never let this be an impediment.
To defend against time tactics, the authors suggest negotiating deadlines with your own side in advance - allowing some flexibility if an arbitrary deadline is not met.
Managing Impressions
In sizing up their opponent, most negotiators attempt to indentify their areas of concern and focus their attention on those items of most concern, as those are the areas in which the opponent will fight the hardest.
Strategically, it would be best to manage those impressions. If you can misdirect the opponent to focus on areas of little concern to you, you can more easily trade off concessions in those areas in order to make gains on those aspects that are more important to you. In fact, the opponent may offer them unsolicited.
Tips for doing so are:
- Using body language or emotions to conceal your attitude about key issues and exaggerate your interest in minor ones
- In team interviews, bring a second person who will seem to be devoted entirely to a minor issue
- If you can set the agenda, make less important issues seem more important by scheduling them early in the discussion and devoting more time to them.
- Bring multiple factors into the interview, creating a "fog" of items that obscure which are the more important.
- In presenting information, provide a great deal of information about a minor issue and relatively less about a key issue.
- Openly dismiss the importance of key concerns - but be careful not to dismiss them altogether. "Getting a good price is important, but not as important as X"
- Concealing information that is pertinent to key issues can effectively blindside your opponent. You may keep it concealed indefinitely, or bring it in as a non-agenda item to catch them off guard.
- Pushing the emotional buttons on a minor issue can be effective. Pretending to be upset about a minor issue can get you concessions on a key issue to appease you. If you can get you opponent to dig in their heels on a minor issue, you can ask for concessions on your key issue.
EN: The authors become increasingly vague on these tips - fundamentally, they are suggesting ways that you can misdirect an opponent. It's also worth noting that looking for these things in a less experienced opponent can help you to identify their key issues, or detect which issues an experienced negotiator wants to misdirect you from certain issues.
Counteracting Tough Tactics
With all the attention that is paid to negotiation skills, you can expect that your opponent knows a trick or two, and that they will utilize tough negotiation tactics. Especially when you're dealing with an experienced negotiator (e.g., a car salesman), they may have prepared a very detailed strategy that covers various contingencies. You should be prepare to defend against their tactics as well as acting on your own.
One option is to ignore tough tactics: do not react to them, but instead change the topic (call a break if needed, then take tempo when negotiations resume). This is very often quite effective.
Especially when dealing with experienced negotiations, confront the issue directly: state that you don't like the tactic the opponent is using, calling it by name. The opponent will realize that you know that trick and that it won't be effective, and they'll generally knock it off. The limitation is, once you take a weapon out of their arsenal, it's out of yours as well.
You can also retaliate: when an opponent nibbles (asks for a late concession), nibble them right back (ask for something in return). This sends a clear message that you recognize the tactic and can use it against them as well.
In some instances, you can negotiate about negotiating at the start and set the rules to exclude certain tactics. For example, you can state that you intend to provide complete information and not blindside them with anything that's not on the agenda, and expect the same of them. They might still try it, but it is a basis for you to react sternly.
Negotiate Slow, Close Fast
The authors advise moving slowly and cautiously through the middle part of the negotiation - time is on your side if you can be more patient than your opponent - but once you've worked out the agreement to your liking (you've gotten what you want, or close enough to it that the deal is acceptable), that's the time to bring it swiftly to its conclusion and "lock in" the deal.
An inexperienced negotiator, or even an overly aggressive one, will continue to work on a deal even after it's to their liking, in hopes of getting "more" out of it. More often, they end up conceding more to their opponent - and it can turn south on them, such that they feel the need to regain some of the ground they have lost. If you continue to go back-and-forth, the other party may get the sense that you cannot be appeased, and walk away.
Remember that the "deal" is not an end in itself - there are other reasons that you want or need to work out a deal with another party - and when those interests are satisfied, then the goal has been achieved.
Also, be aware that there is a formal closing to a deal - generally, a signed document. There may be instances where the parties shake on a deal, and then others review the document before it is signed (typically, the lawyers review a contract) - and if they have any objections, negotiations must resume.
This might be seen as a time to try a nibbling tactic, but should not be, as any revision will cause offense at this time, and could queer the entire deal. If you need to make any changes to the deal, be very straightforward about the necessity, and expect the same from another party. IF things smell funny, you should either walk away from the deal or be prepared to go back to the table to negotiate these changes.
LOOSE NOTES
The author refers to the tactic of "nibbling" - following up a negotiation in which a price was set with arguments to reduce it. The example was a narrative of a real-estate transaction, where an offer is reduced after an inspector finds problems (even though the seller's inspector disagreed).
The author talks about the value of observation - having others present merely to observe the opponents and fill you in on things you may have missed in the conversation. Having more eyes means seeing more.