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The Art of Smart Negotiating

“The Art of Smart Negotiating”

Plan ahead, show patience and think long-term.

Catch them at an unguarded moment, and even the most confident entrepreneurs might admit that they hate to negotiate. Dickering and bluffing rarely excite business builders who see themselves as "straight shooters."

But master negotiators are both brilliant game players and dry-eyed realists. They know that as much as they’d prefer to open with their best offer and cut the haggling, they’re better off engaging in give and take.

One of the cardinal laws of negotiating is to ask for more than you think you could possibly get. Even that simple rule can offend an entrepreneur’s sensibilities, especially when it means wasting precious time and even beating around the bush to justify making such a high opening offer.

By jacking up your opening offer, however, you create a cushion that can be used for compromise later. You also allow the other party to "win" by prodding you to make concessions. And in a few lucky cases, your artificially high offer may get accepted outright.

Your attitude drives the negotiation. If you assume you must yell, threaten or lie to succeed, you may miss chances to reach agreement. But if you seek creative ways to ally yourself with others so that they understand and respect your position, you can guide them to a mutually satisfactory result.

Follow the ground rules

While negotiations vary widely based on the circumstances and participants, you can come out ahead more often by adhering to three rules:

  1. Insist on tit for tat. Think before you say yes. If you habitually accede to what people ask, you may miss opportunities to extract favors in return. Whether you’re negotiating a lease or time off with an employee, avoid yes-no answers in favor of, "That sounds fine, but only on the condition that you will …"

    Some executives assume that imposing conditions whenever they’re asked to do something makes them seem petty or difficult. After all, it’s tempting to surrender to the impulse to "just say yes." But you wield leverage when someone asks you for something. Why throw away that leverage by agreeing blindly? Suggest a fair exchange before you seal the deal.

  2. Forge alliances. You can extract more concessions from someone who likes and trusts you. The easiest way to establish rapport is to reinforce others’ positive perceptions of themselves. How? Closely study the individual with whom you’re about to negotiate. Ask yourself, "How would this person describe himself/herself?" Examples may include: smart, aggressive, stubborn, perceptive, demanding, flexible and fair-minded.

    You can tell others’ self-perceptions by the way they refer to themselves. Listen closely when they say, "You know me, I’m …" or "One thing I pride myself on is …"

    Armed with this information, you can reinforce how they view themselves when you negotiate. Examples:

    • If they pride themselves on their aggressiveness, say with a smile, "You’re really pushing me hard."
    • If they see themselves as careful and methodical, say, "I’m impressed by how much information you’ve gathered before making this decision."
    • If they like to be liked, say, "It’s always a pleasure working with you, and this time is no exception. Now in terms of this deal …"

    These types of comments reassure others that they’re presenting themselves as they expect. That comforts them and makes them view you more favorably.

  3. Know your goals. Prepare for any negotiation by prioritizing what you want. In addition, decide in advance how much you’re willing to give up.

    Busy entrepreneurs may skip this step because they figure it’s obvious. But if you head into a negotiating session without mapping out your priorities, a savvy adversary can outsmart you by offering concessions that appear too good to pass up.

Play offense and defense

Some entrepreneurs pound tables, talk fast and raise their voice to make their point. They negotiate by force, bullying adversaries into submission. They’re pushy and can be profane and occasionally obnoxious.

Others adopt an overly obliging attitude. They give in without putting up much resistance. They’re quiet and soft-spoken. They prize harmony above all, so they avoid any behavior that may seem confrontational.

Neither of these approaches — the hard-charging offender or the genial defender — works all the time. The best strategy is to play offense and defense as circumstances dictate: Attack the other person’s position when necessary, while making concessions to break deadlocks or gain goodwill.

Play offense when you want to divert attention from your demands. Say you lack solid reasons or precedents to justify your stance. Or you fear that you’ve already given away too much. That’s a good time to drill holes in the other person’s position by finding fault and questioning their assumptions. That forces them to struggle to stand their ground.

When you play offense, realize that you risk escalating the hostility. Others may refuse to defend themselves and simply walk out or withdraw the concessions they made earlier. This risk is often mitigated because individuals will warn you that they’re growing angry with your overaggressive style. After a few such warnings, soften your position and shift into defensive mode, making concessions and striving for accommodation.

Keep constant tabs on whether you’re playing offense or defense. Monitor the changing dynamics of the negotiation, and adjust your behavior accordingly. If you’re going to compromise, start with a minor concession, and note to what extent the other side reciprocates. That way, you won’t lock yourself into a defensive posture, where you keep eroding your position without getting anything in return.

Beware of overdosing on concessions. Adopting a defensive position too often can generate so much goodwill that you grow addicted to compromise. Though an overly obliging stance can reduce the agony of a tense negotiation, it can also undermine your best interests.

Fend off evidence

If negotiators flood you with data to uphold their point, don’t buckle under the weight of their information. Maintain your position even when the evidence mounts against you with these three strategies:

  1. Question the source. Ask, "How did you arrive at these figures?" or "Where did you get that data?" Once you find out, deflate the validity of the source or offer an alternative set of facts.
  2. Redirect the focus. Look beyond the evidence to introduce larger or more important priorities. You might say, "Look, we could each trot out plenty of evidence all day. This situation requires that we focus on what’s right for everyone — what’s really fair — not just engage in dueling evidence."
  3. Separate evidence from experience. Some negotiators will try to blur the line between hard evidence and their own experience. Don’t let them get away with it. If someone attempts to prove a point by drawing upon his or her experience, ask, "How many actual cases can you cite?" Demand a precise number, not a vague guess such as "plenty of times." Then invite them to run down their list. Say, "OK, tell me about some of them." Inevitably, they’ll get flustered and either forget the specifics of each case, or they’ll realize that they were overestimating.

Hardball tactics

In high-stakes negotiations, you can build trust and express a win-win desire to come away with a mutually agreeable deal. But hashing out the details can still prove harrowing.

Here are some strategies to maintain your edge as the tension heats up:

  1. Never offer to split the difference. Wait for the person you’re negotiating with to make this suggestion. Say that you’re negotiating with a parts manufacturer. You’re willing to pay $250,000, but they ask for $280,000. Eventually you raise your offer to $258,000, and they lower their price to $270,000. You’re tempted to say, "Let’s split the difference," because you sense they’d agree to a final price of $264,000.

    Try this instead: Say, "It’s too bad we’re only $12,000 apart." Chances are, the other party will offer to split the difference. Then you respond, "So you’ll come down to $264,000? Good. Maybe we can pull this off after all." Call a break. When you return, say, "I can’t budge from $258,000. It’s frustrating, because now we’re only $6,000 apart." At this point, the supplier may lower the price yet again (perhaps splitting the difference one more time at $261,000) or stick to $264,000 as the final offer. Either way, you can agree to a deal and make the supplier feel like a winner.

  2. Give decreasing concessions. Always ensure that your first concession (whether it’s money, time or personal sacrifice) is your largest, and subsequent concessions are less generous. Establishing this downhill pattern signals to others that they cannot pry greater rewards from you by making constant demands.

    Some entrepreneurs make a token concession early on because they assume they can win over others with their flexibility, only to find that they keep giving away more. That’s because a shrewd opponent will think, "If I keep saying ‘no,’ I’ll extract bigger and better concessions."

  3. Back into what counts. The danger of dwelling on your No. 1 concern right off the bat is that you may lower your guard after you resolve that issue. A calculating adversary might give you most of what you want, and then chip away at everything else until you’re left with almost nothing.

    Instead, let the negotiation unfold in stages. Begin by raising a secondary matter, giving in where appropriate to put others in a positive frame of mind. By conceding a few items up front, you gain leverage and exert more influence later over more substantive issues.

  4. Make one last grab. Most negotiations do not end all at once. Typically, exhausted parties who think they’ve finally reached an agreement will shake hands while expressing relief that they resolved such difficult issues. They loosen up and relax. That’s when they are vulnerable to an extra squeeze.

    When you’re congratulating each other on forging an agreement, that’s the time to nibble for an extra concession. Catch the other side in a feel-good moment, and they might toss in your last-minute request without much thought. Had you made the same demand in the thick of negotiation, it might have caused a deadlock.

    Ideally, you should only try to grab one last concession if the other side has an incentive to close the deal right away. You might say, "I’m glad we got this done by your deadline. Oh, I assume you’ll throw in …"

  5. Ignore the time. Even if you’re operating under a tight deadline, don’t continuously check the time or attempt to push the talks ahead faster. The more you respond to delays and stalling tactics with visible angst and desperation, the more delays you’ll face.

    A smart negotiator will take advantage of your eagerness to wrap up by wrestling more concessions from you. What’s worse, your efforts to speed things along can fail if the other side agrees at first to proceed faster, only to introduce additional obstacles that grind the negotiation to a near halt.

    In truth, deadlines are usually illusory. They only matter to the extent that both parties choose to honor them. If it’s in their self-interest to extend the deadlines or simply disregard them, they will do so.

Avoid common mistakes

The No. 1 trap that entrepreneurs face when negotiating is to place too much emphasis on short-term gains over long-term payoffs. When building a fast-growth business, it’s often hard to adopt a long-term perspective when so many pressing issues demand attention.

Nevertheless, strive to balance your impulse to get every last dollar with your larger investment in working with your counterpart in the future.

Another easy mistake is deciding when to walk away. If you spend long days dickering over a complex deal, it’s often hard to pull yourself away when talks threaten to collapse. But if an offer doesn’t come close to meeting your needs, you must show a willingness to cut off negotiations.

Stop worrying about what others think of you. As long as you’re polite and professional by nature, you’re fine. There’s no need to fret over every word or action in a negotiating session. If you’re hyper-sensitive about how you come across, you may go out of your way to sound ingratiating or insincere, which can alienate others.

In high-stakes negotiations, others may pressure you to accept an offer on the spot. But take-it-or-leave-it ultimatums are often fiction. If both parties share a desire to forge a deal, there’s no reason to allow someone else to dictate an unreasonable pace for you to respond. Digest every offer on your own timetable, and reply only when you’re ready.

Finally, never speak first as a negotiation heats up. Show patience and let others initiate claims, requests or observations. This helps you understand what they deem important and what type of offer they’ll accept.

Writer: Morey Stettner is a management writer and trainer in Portsmouth, N.H. He is the author of "Skills for New Managers" (McGraw-Hill, 2000) and "The Art of Winning Conversation" (Prentice-Hall, 1995).