Close the deal! Win the day! Beat the competition! Bargain down the price! Maximize concessions!
Almost all leaders would agree that “Negotiations” is a major part of their leadership role. Business leaders must negotiate contracts. Political leaders negotiate for legislation they favor. Individuals negotiate price and details when purchasing a car or a house. Even family members will often negotiate with one another regarding where to vacation or how to decorate the house!
Sadly, however, many of our efforts to negotiate advantage go awry…
- Many negotiations result in an unsustainable outcome – a merger that fails, legislation that is ineffective, a substandard automobile purchased, and so on;
- Likewise, negotiations often damage relationships beyond repair – a salesperson no longer trusted, political colleagues now viewed as enemies, family members angry with one another, and more;
- And almost all negotiations, even when viewed as “successful”, actually deliver outcomes that are far less than – business opportunities left unexplored, public policy that addresses only a portion of society’s needs, or simply accepting an outcome that is good which could have been great!
There are many, many reasons that leaders struggle with negotiations. Everything from a lack of skills to incomplete information to obnoxious negotiation partners, and more. Future Uncommon Wisdom essays will explore some of these issues. But, before this specific discussion goes any further, a few definitions are in order. For the purpose of this essay, the following terminology will be used…
- Negotiations Counterpart – The person or the entity who is “across the table”…from whom you are hoping to obtain some favor, some action, or some transaction.
- Negotiations – Any effort to determine how two or more people or entities will either work together or exchange goods, services, or favors.
- Enemy – A person, a force, or a personal attribute that threatens a person’s ability to prosper or achieve a highly favorable outcome.
- Self-Discovery – Understanding one’s own best interests, current status, personal concerns, temporal needs, etc.
- Negotiations Table – A figure of speech to mean the “act of negotiating” whether it be a formal or informal proceeding.
As said, there are many reasons that a leader falls short in their negotiations. But, for this discussion we want to focus on the single most critical reason that leaders fail as negotiators – most leaders view negotiations as a battle in the arena to be won, rather than a journey of self-discovery and opportunities to be pursued! In other words, we often pursue the wrong purpose and strategy in our attempts to negotiate…
- Most leaders view their Negotiations Counterparts as an enemies to be vanquished; and,
- Most leaders view negotiations as transaction to be completed rather than relationships to be nurtured.
To be successful in negotiations, therefore, two leadership perspectives must shift…
- First, a leader must reject the common belief that Negotiations Counterparts are an enemy to be conquered. Instead, leaders should must view their Negotiations Counterparts as neutral observers at worst, and potential allies at best; and,
- Second, a leader must resist the temptation to view negotiations as merely a transaction in the moment. Instead, leaders should view negotiations as part of a larger journey and the pursuit of opportunity…
Let’s explore each of these shifts in perspective…
Perspective Shift #1
From Conquering Opponents to Creating Benefit
The common viewpoint of negotiations as a battlefield is deeply embedded within our lifetime experiences and our culture…
- Unions and corporations “negotiate” contracts often with contentious labor strikes, accusations, and conflict preceding any agreement;
- Countries that are at war “negotiate” peace while often threatening hostilities to twist the outcome in their favor;
- Families threaten to walk away from the house of their dreams as they try to force the seller to lower price or to increase amenities;
- When a negotiated agreement is reached, the negotiators will most frequently boast about what they “won” and what their Counterparts “lost” or conceded during the negotiations;
- And, so on…
As a result, our definition of a successful negotiation is based on whether we won more than we lost; whether we did better than our Negotiations Counterparts; and even whether we were able to inflict some sort of “pain”, “humiliation”, or “damage” to our Counterparts during the process.
For many years, Negotiations Experts have been running a series of experiments to demonstrate this behavior. The experiments differ in construct, but the intent and the outcome have been the same…
- One such experiment involves two managers trying to determine how to assign five new staff members to their respective departments. Each manager needs four or more new staff to achieve all of their objectives. The rules of the experiment forbid any “division” of labor – sharing a staff member, making promises for the future, negotiations with upper management to change the rules, and so on. As you can imagine, this experiment is designed so that one manager would be assigned three new employees and one manager would be assigned two. But, in practice, the negotiators can almost never come to a decision and – according to the experiment – no manager gets any new employees. The reason? Each negotiator is desperate not to be beaten – to avoid the so-called embarrassment of getting two, rather than three, employees. So, in 90% of the cases, both managers lose and walk away with no new employees.
- In another experiment, two negotiators – who are often friends in real life — are offered a $10 bill. But only one negotiator can get the money and there can be no promises, future sharing of the money, under-the-table agreement, etc. One will get the money, and one will not. Within this experiment, if neither of the negotiators gets the $10 bill, the money is forfeited. In almost all cases, the negotiators cannot reach an agreement because of the need to “not lose” or the need “to win”.
Leaders who are effective negotiators shift these perspectives – first, away from their Negotiations Counterpart and towards the opportunity for Benefit, and second, away from a concern for Individual Benefit and towards the promise of Community Benefit. Consider a few hypothetical, yet true-to-life examples…
- Union / Corporation Negotiations: During labor contract negotiations, unions and corporations are often at odds, viewing each other as an enemy to be confronted. The Labor Union wants to extract maximum compensation from the corporation that is seen as too profitable; the corporation wants to deflate labor costs that are viewed to be too high. This often becomes a zero sum game of give vs. take – one side loses when the other side wins. But, imagine if both parties simply searched for multiple possibilities to increase prosperity of either one or both workers and the corporation – with no concern as to who might gain more or less than the other. With such a mindset, workers might make a change in the production line that would require no effort on their part, but which would decrease costs for the corporation — even if it did not translate into higher wages. At the same time the corporation might find a way to improve vacation and time off benefits for workers — even if it did not add to the bottom line. Each party searching for Benefit, regardless of to whom those benefits might accrue. The negotiations would shift from a battlefield to a platform for discovery and innovation.
- Legislative Negotiations: Governmental deliberations are often viewed as a battle between special interests where one group will win and the other will pay. Consumer protection legislation is often seen as a burden for businesses; tax regulations are often seen as shifting the burden of payment from one group to the next; and, social policy legislation often tries to impose the ethics and values of one group upon another. As a result, when legislation is proposed or regulations are written, negotiators for both sides of a debate tend to dig in and oppose the other side with little room for agreement. In fact, many lobbyists and legislators adhere to the notion of the “slippery slope” – that if the opposition is given anything, it will simply lead to more “losses” in the future. This is why gridlock is so common in government. But, imagine if leaders dropped their automatic opposition to the “other side” and simply looked for bigger opportunities to benefit the whole. Environmental regulations could be written to encourage new and profitable business opportunities; tax regulations could be designed to both raise money, but also to guarantee favorable outcomes; and, social policy could be designed to focus on shared problems rather than on preferred solutions or approaches to those problems.
In many ways, this is the age-old concept of making the pie larger, rather than trying to divide an existing pie more equitably. Rather than a zero-sum game of give and take, creating new and increased opportunities for benefit that surpass today’s status quo. Rather than devoting time and energy towards conflict, innovating and imagining bold new ways to make progress and to prosper. This is not about leaders being selfless or even modest in their expectations. It is about leaders who care not about victory or besting their Counterparts, but care deeply about improvement and benefit for any (including themselves) and for all (including their Counterparts).
Perspective Shift #2
From Completing Transactions to Discovering Possibilities
For most leaders, the definition of “negotiations” is heavily influenced by two very different, yet easily observable, examples and experiences – Purchase Negotiations and Peace Negotiations!
- PURCHASE Negotiations vary greatly in magnitude…from bargaining with a street vendor while on vacation for a souvenir we do not need… to finalizing an offer to buy a house that we desperately want. Regardless of the magnitude, however, these negotiations are mostly about price to be paid and/or benefits to be purchased in the moment. The purchase is normally seen as a single opportunity in the marketplace and there may be no ongoing relationship between the vendor and the buyer. When a leader views an opportunity to negotiate through this lens, he/she will approach the opportunity as a “once and done” transaction potentially never to be repeated again.
- PEACE negotiations on the other hand are often long and arduous endeavors between current or former enemies. These negotiations are mostly about confronting past wrongs and trying to build an environment that will avoid future hostilities. These negotiations are often dominated by emotional interactions in the moment and the objective of the negotiators is to close the chapter of the past. These negotiations are often gridlocked when the parties have relatively equal standing; or, conversely, these negotiations are sometimes dominated by a victor over a vanquished party who has little to say in the final agreement. When a leader views an opportunity to negotiate through this lens of making peace, the negotiations will often be viewed as a “moment in time” in which the signing of an agreement is the end of a fitful past.
Neither of these two lenses is 100% incorrect. Negotiations are indeed about transactions between multiple parties, and most negotiations are time limited and focused on immediate needs and urgent factors. But, using only these lenses incorrectly shift a leader’s focus…
- away from the long term and towards immediate and short term results;
- away from the human component of our leadership and towards the regulations, the contracts, and the mechanics of an agreement; and,
- away from other opportunities that could be discovered and explored, and towards the specific issues of discussion already on the Negotiations Table.
And unfortunately, when a leader’s focus is shifted towards the immediate and the mechanical, the common result will be for the leader to…
- Undervalue alternatives and options that might deliver better outcomes;
- Underinvest in relationships and partnerships that could be vital to a prosperous future; and
- Undermine the effectiveness of any agreement they might be negotiating in the moment.
Three tangible considerations that a leader should make – both before and during negotiations – to help shift their perspective away from the lenses of short term transaction and towards ever greater possibilities for the future…
Consideration #1: Negotiate Against Your Best Fallback Alternative
As a leader tries to negotiate for value and search for benefits, new offers and suggestions should NOT be compared against previous offers or hoped for concessions that a Negotiations Counterpart might make. Instead, new offers or potential agreements should be compared against alternatives that the leader has identified BEFORE they sit down at the negotiations table. In other words, a leader should always have a “Plan B” that is as acceptable and worthy if the negotiations fail. In short, an effective “Plan B” will keep a leader from desperately accepting a negotiated agreement that is detrimental or insufficient. However, it DOES mean that a leader needs to do their homework…
- Before interviewing for a job with a new company, try to understand how your current job might be improved without resigning (new hours, new responsibilities, new department, etc.);
- Have a fallback plan for public transportation or ridesharing before negotiating for a new car that is needed for community to work or school;
- Identify alternate and reputable vendors and suppliers before signing a contract with a specific vendor;
- Identify legislative alternatives that would be acceptable and workable before agreeing to any specific legislation that has been proposed; and so on!
Professional negotiators often call this concept the BATNA (Best Alternative To Negotiated Agreement). The professionals will also explain that the better a person’s BATNA, the more likely it is that a new negotiated agreement will deliver true value and advantages for the leader and the leader’s organization.
By keeping an “Alternative Plan” in mind, the leader will avoid the temptation of incestuous comparisons… How does Vendor A’s Offer #1 compare to Vendor A’s Offer #2? An effective leader will compare both of Vendor A’s offers (Offer #1 and Offer #2) against Vendor B’s Offer #3 and maybe even Vendor C’s Offer #4. It is the game of options –more options means less desperation, and less desperation to negotiate will result in a better and more valuable outcome.
Consideration #2: Negotiate Towards Your Ideal Future
A leader should also avoid negotiating solely on the basis of offers, facts, statistics, and details that are visibly on the Negotiations Table. Many leaders would argue that to focus on the “specifics” being discussed is, in fact, the right answer – guaranteeing that a negotiator is practical, reasonable, and measured in their negotiations. But, to be 100% grounded in tangible details is to ignore the long term picture for which a leader is responsible. Effective leaders must be visionaries, and visionaries must always be focused on the long term and the yet-to-be-seen. Only if he/she is focused on a bold horizon, can a visionary leader negotiate current agreements that will guarantee progress towards the long term objective.
Effective visioning is a skill unto itself that a leader must master; and other Uncommon Wisdom essays will focus on that skillset. But, effective visioning can be likened to sailing a boat across a sea or across a lake. Before the days of GPS and autopilot, mariners sailed their boats by keeping their eyes focused on a distant star in the sky or on a fixed object located on a faraway shore. To reach their destinations every decision – how to trim the sail, how to steer the helm, how to shift weight, etc. – would be made while keeping an eye fixed on the horizon. Even when waves or storms threaten, an effective captain of a ship would respond to the crisis in such a way as to advance their journey towards the final destination.
Effective leaders must do the same. All negotiations should be made with the long term view in mind. Will this agreement position the company for the launch of a future product? Will this agreement help to build resources necessary for the future? Will this agreement minimize the chance of threats and obstacles across the long term? A failure to negotiate today’s agreements with tomorrow’s objectives in mind will result in short term success and long term trouble…
- Businesses that quickly negotiate mergers and acquisitions in order to gain immediate market share often fail in the long term when they are unable to reconcile cultural, operational, or strategic differences with their newly merged organizations;
- Governments that deficit spend today to satisfy an immediate concern and to keep the government running, must often deal with structural deficits and draconian budget cuts in the future;
- Students who negotiate with a professor to skip a term paper or ignore a test result often fail to learn the very subject which they are studying; and so on.
Without a doubt, leaders must be able to negotiate short term agreements and immediate actions with other entities. And, at times, these negotiated agreements will have short time horizons embedded within. But, successful leaders always enter these agreements with the knowledge of if, how, and when these short term actions will help – or at least not hinder – their long term purposes.
Consideration #3: Negotiate with the People Behind the Issues
The final consideration that a leader must make in order to maximize their effectiveness as both a negotiator and as a leader is to focus first on the people AT the Negotiations Table, not just on the details and the specifics of the agreement that are ON the table. Two parties can sign a rock solid contract at the Negotiations Table, but it will be people who make that agreement work or who work to make it fail. Great leaders never forget that it is people above all else that matter most. If a leader alienates, frustrates, or intimidates their Negotiations Counterparts they run great risks for future failure, even if an agreement is ultimately reached. Frustrated Counterparts will often yield…
- An unwillingness to respect or abide by the parameters of an agreement. Every good contract must be enforced, but an unhappy partner will minimize their enforcement efforts resulting in a lowest common denominator outcome for the agreement.
- An unwillingness to negotiate in the future. The old saying of “Fool Me Once, Shame on You; Fool Me Twice, Shame on Me” explains this phenomenon perfectly. A leader might reach an initial agreement through bullying and aggressiveness. But, in the future, the very people upon whom you might depend will be slow or even unwilling to negotiate a second time.
- An unwillingness to go the distance. Many leaders complain that when times are tough or challenges arise, that too many stakeholders abandon ship and cannot be relied upon. But, this absence of support is often the fruit of bullheaded negotiations at the beginning of a partnership. If a Negotiations Counterpart feels that they have been exploited or embarrassed during a negotiations, they will be on the lookout for any excuse to question, criticize, or even abandon the agreement that has been made. This unwillingness to make the extra effort required for success is often the single greatest factor that determines failure for a leader and his/her negotiated agreements.
Although this consideration – that people matter most — might seem somewhat obvious, too many leaders become self-absorbed and driven by hubris once they begin to negotiate an agreement…
- Many leaders will try to play hardball with their Negotiations Counterparts – embracing a “take it or leave it” approach to negotiations;
- Others will keep details secret or hidden from their Counterparts – embracing a “buyer beware” mentality; and,
- Some leaders will dramatically abort discussions and stomp away from the Negotiations Table if they are not getting everything they want during a negotiations.
To be truthful, this type of aggressive negotiating behavior works – once and for the short term! But, in the long term, this type of negotiations will always erode and undermine success.
The correct approach is akin to Human Relations 101 – take care of your Negotiations Counterparts and they will take care of you! Again, a leader does NOT need to sacrifice their self-interest. A leader can even drive a hard bargain, as long as it is also fair and reasonable. But, a leader who builds strong relationships – built on a reputation for fairness, honesty, flexibility, respect, and rationality – will build a strong platform upon which they can then build long term prosperity and good results. Beyond negotiations, this is the science of building a “Social Influence Network” – who do you know and how likely are they to help you! Leaders with a broader, deeper, and more resilient network are much more successful; leaders with a thin, weak network will more often fail. Leaders who negotiate with their Counterparts rather than against them are far more likely to boast strong influence networks.
Leaders who are mindful of all three considerations…
- To always consider fallback alternatives before they negotiate, in order to avoid agreements that are narrowly limited only to the specific options offered by Negotiations Counterparts;
- To always consider how current agreements will support long term objectives in order to avoid agreements that run contrary to visionary leadership; and,
- To always consider the needs and concerns of the people behind the agreements that are negotiated in order to maximize the opportunity for success after negotiations are completed…
…will escape the trap of viewing negotiations only as isolated transactions to be completed.
Leaders who negotiate for the long term, with full knowledge of alternatives, and with a concern for building strong personal relationships…will discover that good negotiations can become a powerful leadership tool for long term success.
Most leaders struggle to become effective negotiators. But, contrary to common wisdom, the problem is rarely about difficult Negotiation Counterparts who are sitting on the opposite side of the table. Nor is the problem simply due to the complexities of the issues and situations to be negotiated. Leaders struggle because they approach negotiations with the wrong mindset. Too many leaders view the Negotiations Table as an Arena in which they are trying to conquer their opponents. And, the weapons with which they choose to fight are often short term, blunt, and aggressive. Good leaders embrace two simple perspectives that enable them to forsake the arena – first recognizing that the goal of negotiations is not to win, but to prosper; and second recognizing that most negotiations are simply one link in a long chain of leadership actions. If a leader can quit fighting and can focus on the long term, they will be much better negotiators. And, better negotiators, who have forsaken the arena, will be better leaders as well