Deal or no deal a guide to negotiation by AUA

Deal or No Deal: A Guide to Negotiation

Good Practice Series number 39

This is one of a series of Good Practice Guides published by the AUA. Front cover image by Flickr user Nogwater, licensed under a Creative Commons Attribution-NoDerivs 2.0 Generic (CC BY-ND 2.0) licence. ÂŠ AUA 2015 www.aua.ac.uk AUA National Office The University of Manchester, Sackville Street Building, Sackville Street, Manchester M60 1QD Tel: 0161 275 2063 Email: aua@aua.ac.uk

Written by Gerry Webber

Contents

Introduction

I’m sure you’ve seen The Apprentice haven’t you? A couple of

What’s in a Word?

the retail price, probably to get them and their television crew out of the store.

Negotiating 101

One Recipe, Many Flavours

Begging the Question

So What Have We Learned?

Select Bibliography

attention-seekers pester a shopkeeper into selling them something for half

Or maybe you’ve bought a car from a second-hand dealer? “I can drop the price to £10,000 if you buy it today, and I can let you have the floor mats at no extra cost this week.” That’s negotiation, right? Well, yes and no. In reality, it’s something we all do, every day, not just at work, and not only when we are buying and selling things. “If I pick the kids up, will you do the shopping?” “Is it ok if I take lunch at twelve and cover for you at one?” “You can keep the house, but you’re not getting half of my pension as well.” This booklet is not a “how to” guide, it is more of a “how might I think about this?” primer. It does offer a few hints and tips, but it’s mainly intended to build confidence in understanding the topic. If you want a stepby-step tutorial on negotiating agreements, I suggest you browse the shelves of any airport bookstore.

What’s in a Word?

Negotiation 101

Negotiation can be a slippery concept, as any thesaurus will quickly demonstrate. Bargaining, compromise, cooperation, diplomacy, haggling, splitting the difference: what exactly is it?

So, you need to negotiate? In that case there must be something you want, and someone else that is in a position to help you get it, or

The Oxford English Dictionary defines negotiation as a “discussion aimed

Two things follow from this: first, that negotiation is always a social

at reaching an agreement”, which is a good starting point, but a lifeless

process, which is therefore going to require some time to complete,

description. This booklet explores negotiation by

however short, and secondly, that you need to be clear about what exactly you do want – although unlike the Spice Girls, you might not wish to tell everyone what you “really, really want”.

considering it from several different perspectives. First, we look at a few of the

Let’s explore each of these a bit further.

prevent you from getting it.

common components and typical stages of The social dimension is easy to take for granted, but absolutely critical, not because you need to like or trust the people you are dealing with, nor they you, although these things help, but precisely because you need to think about how you might reach an agreement with someone

any negotiation, about which there is general agreement. Then we look at some competing views of negotiation – as an “adversarial” practice, as a “principled”

you may both dislike and distrust - such as a second-hand car salesman, for instance.

process, and as a “dynamic” relationship. Of course, these perspectives are not entirely at odds with each other, but presenting them in this way helps to illustrate the range of thinking that there is about the subject.

This is why it is important to think of negotiation as a process and not merely as an interaction. It helps to separate the emotional content of any discussion from the logical path that needs to be navigated.

Finally, the booklet offers a few reflections, and suggests a small number of books for further reading if you want to find out more.

It is easy to find outlines of the process on the internet; they range from “four stages” to “eight steps”. I have included my own checklist below;

Explore the issues before proposing anything. Well, of course, it’s 

Prepare

obvious, which is probably why it is so easy to forget in the heat of the

 

Engage Explore Propose

moment. You know what you want. You assume you know what they want. You just need to find a sweet spot near the middle - no? Sometimes, yes.



Bargain

Simple market transactions can be a bit like that, especially if the only



Conclude



www.flazingo.com

thing you can haggle over is the price, but few negotiations are really that simple. Most have a multitude of dimensions, some of which you

Prepare by gathering information and thinking hard about what you want

may not have considered before you begin talking.

to get out of the negotiation, what you are prepared to give, and how you are going to manage the process. If you’re buying or selling something,

Even if you are entirely clear about what you want before negotiations start, you may not understand fully what the other party (really, really)

check the market. Consider your ideal outcome of course, but remember

wants, nor how much - or how little - they actually want it, especially

also that you may need to compromise, and make sure you have thought about the minimum that you are willing to accept and the most that you are prepared to give. Think through a few scenarios too. What are you

not compared to other things that they might also want. Remember too that it is easy to drift into taking a position, which is likely to be a problem because it is impossible to negotiate beliefs and

going to do if they say this, or do that? Imagine yourself in the other person’s shoes. What are they likely to be able to accept or give? What else

opinions. Be prepared to think in concrete terms about each element of your desired outcome, and look at the issues from lots of different

might they be able to offer? It is difficult to secure a good deal by accident.

angles. You never know what you might discover.

Be prepared!

Engage appropriately. Negotiation is a contact sport. It is always

Propose. Seven letters that strike fear into the heart. “Will you…?” Fortunately, few discussions are quite that momentous. Nevertheless,

essentially interactive. So think about the dynamics of the process.

managing the transition from exploration to proposition is fraught with

Where and when are you going to meet? What impression do you or, more often at work your team, want to make? If you are part of a team, make sure you know your role: Good-cop? Bad–cop? Inquisitor? Provocateur?

potential difficulty. Someone has to make the first move, but whom, how, when and where? Asking for things can be risky because you may not get the

Peace-maker? Deal-closer? Think also about how you are going to start the negotiation, and how and when you plan to make or provoke them to

answer that you want. Then again, if you don’t ask, you won’t get. Sometimes there is a “first mover” advantage, for example by making a

make, an offer. In negotiations, as in many things, it is difficult to wrest a

proposal that is sufficiently credible to provoke a counter-offer, but

successful outcome from a bad beginning. Finally, pay attention! Be attentive to exactly what they are and are not

sufficiently favourable to you that it moderates the expectations of the other party, and maybe sets the parameters of a discussion.

saying, think carefully about what you are communicating, and watch the body language – their own and yours.

For example, if I say “I’ll give you £500 in cash if I can take two away with me right now” I am implicitly establishing five parameters for

negotiation: price, payment terms, volume, delivery method and time. I am

that… if you could just… and subject to contract”.

also signalling an assessment of value: hundreds, not thousands, for instance. On the other hand, there can be merit in allowing, or forcing, the other party to make the first move, especially if they value the transaction in a way that you regard as favourable: “So, he thinks two of those are

Then there is the problem of brinkmanship. “Yes, we did agree a price for the house, but now that we have the survey results…” or “I know we agreed, and I realise you need to sort

worth £500, the chump!”

this out before the end of the financial

Bargain. This is the stage of the process that most people confuse with the negotiation of which it is a part. It is hard to bargain successfully if you

year, but the Chairman of the Board is simply refusing to approve the deal unless…”.

jump-start negotiations at this stage of the process with little or no preparation, which is one of the reasons that “pushy” salespeople will try to

Finally, there are the detailed terms,

get you there quickly. It is usually the most important step in the process,

which inevitably you didn’t discuss.

and often the most stressful, especially for the novice. At one level, of course, we all know how to bargain, and we all start young. “I won’t be your friend any more if you don’t share your sweets”

“About this warranty clause… the termination arrangements… the schedule of payments… oh no, we always quote exclusive of VAT…” and so forth.

“Alright - but you can only have two, and you can’t take the red ones” At another level, though, it is a dark and subtle art. This is the realm of

The devil is often in the detail, and negotiations rarely finish before the

tactics more than strategy, the hand-to-hand combat that follows the

ink is dry on the contract - sometimes, not even then. So, to conclude:

massing of forces, the day-to-day shaping of the marriage that follows the wedding. It is where preparation, communication, calculation and psychology meet. It is also where the dissimilarities between different approaches to negotiation, which are discussed below, are at their

conclude!

sharpest.

One Recipe, Many Flavours

Concluding a deal might seem like a mere formality. Surely, it’s all over when the bargaining results in an agreement? Maybe. If the issues are simple, if mutual trust is high, if the costs in cash or kind are low, and if the

This section considers the core process from several different perspectives, each exemplified by a well-known book. In reality, these

deal is straightforward and easy to enforce, then there’s nothing much to

approaches are not as simple or as different as this form of presentation

conclude. You take two orange sweets, and we can remain friends. In business, however, these conditions are rarely met.

might suggest. The authors might not even agree with the labels that I

First, there’s the question of how exactly one says “Yes”. It is not as simple as it sounds. “Yes that would be great… assuming of course… providing 8

have applied to their work. Still, it is often helpful to sketch with bold lines. If you want to understand these authors properly, go and buy their 9

books!

Don’t just air a grievance. Propose a remedy to begin a negotiation. If you are not getting served in a restaurant, tell the head waiter you

Remember too that much depends upon the context. There is no one “best” way to negotiate everything, even if, as some believe, everything is negotiable.

would like a complimentary bottle of wine while you wait. You might not get it, but at least you are now discussing the merits of a remedy, and not simply complaining about the service.

Adversarial negotiation “Everything is Negotiable” by Gavin Kennedy was first published in 1982.

“Shock ‘em with your opening offer” Providing it is credible and not so ridiculous that it will immediately close

It is quintessentially American, and loosely structured around stories and

the discussion, open with a shockingly low offer. It sets the range of

examples from which the author draws a series of lessons about how to negotiate effectively. It is more a book of

expected outcomes in your favour from the beginning, and it starts a dialogue.

tactics than one of strategy, but none the worse for that. To be fair, Kennedy doesn’t directly advocate

“The negotiator’s most useful two-letter word” The word is “if” (not “no”). Negotiation is a process of exchange. Don’t end the conversation before you have to. Look for angles and options.

an “adversarial” approach, because he argues correctly that the aim of negotiation is not to

“If we do this… then you do that”. Above all, give nothing away for free!

win, but to succeed. Once an agreement is

“If you haven’t got a principal – invent one”

reached, both parties can and should regard the outcome as a “success” since the reason we negotiate in the first place is because we value things differently. The “rock-bottom

It is often helpful for negotiators to have someone else who is ultimately responsible for making the final decision. It provides a line of retreat and a basis for re-negotiating tricky issues, even after reaching a preliminary agreement.

guide” to negotiation with which he concludes also enjoins the reader to treat others with respect and to honour the terms of each agreement. His approach is hard-nosed, but ethical.

“Don’t change the price, change the package!” Negotiating on price alone is generally a bad strategy. Remember that

Nevertheless, this book is the closest of our three exemplars to the

most deals have many attributes, each of which may be valued differently by different people. For this package there is one price. For

Dickensian spirit of Mr Jonas in Martin Chuzzlewit: “Here’s the rule for

another price there is a different package. Even supermarkets do it: buy

bargains ‘Do other men, for they would do you’. That’s the business precept. All others are counterfeits.”

two, get one free.

Here are my top five tips from Kennedy’s book; “Complaining ain’t negotiating”

Principled negotiation

interests allows negotiators to be specific, flexible and forward-looking.

“Getting to YES” by Roger Fisher and William Ury was first published in

In short, it enables them to be “hard on the problem, soft on the

1981 and is one of the best books on the subject written for nonspecialists. It is a short, clear guide to “collaborative negotiation” which centres

people”.

on a few simple principles that can be

It is easy to believe that you know what the best outcome should be,

summarised as follows:

and to take the view that it is for the other side to solve their own problems. That is the essence of adversarial bargaining. Fisher and Ury

Disentangle the people from the problem

argue instead that a “collaborative” approach produces better results.

Focus on interests, not positions Invent options for mutual growth

Avoid rushing to premature judgements. Don’t assume that there is a single answer or a “fixed pie” to be divided. Instead, find ways of

Insist on using objective criteria

making the pie bigger. Broaden the options that might be considered

The book begins by pointing out that bargaining over “positions”, as one does when haggling for instance,

and separate the process of inventing possibilities from that of choosing between them. Look for mutual gain and make it easy for the other side to decide in favour of something that suits you too.

produces results that are often unwise, generally inefficient, and potentially damaging to ongoing relationships.

Finally, insist on using objective criteria when making decisions.

Third, spend time generating options and looking for mutual gain.

Making negotiation a battle of wills or a test of strength is generally The alternative is “principled negotiation”.

Every negotiator, they argue, has two kinds of interests - in the

wasteful and unwise. Aim instead to agree on some fair and objective criteria against which to judge the merits of any negotiated outcome. Naturally, they must be independent of each side’s will. Typically, they might include market valuation, precedent, scientific judgement,

relationship with the other party, which may not be transitory, and in the substance of whatever is at stake. Understand the other side’s perception of the problem. Recognise the emotions involved. Build a working

professional standards or efficiency for instance. This approach is unlikely to end all arguments, but it can shift the discussion away from what either side is willing to do, and towards the question of how

relationship. Then focus on the substance.

substantive matters ought, both in principle and in practice, to be decided.

First, separate the people from the problem.

Second, concentrate on the interests at stake. It isn’t easy to reconcile entrenched positions. It is however usually possible to find common ground amongst a range of interests, which help

That’s all well and good. But of course, power relations are often unequal. What then?

to define such positions, especially because each side will have multiple interests to which they attach more or less value. Concentrating on

In those circumstances, it is especially important to think about your BATNA – the best alternative to a negotiated agreement. This is not an

arbitrary walk-away “position” but a reasoned standard against

which to measure any proposal. It should protect you from accepting

with 10,000 miles on the clock, but I don’t know how well I may do in

terms that are disproportionately unfavourable, but prevent you from

negotiating a better deal at the garage next door for the one-year old

rejecting terms that might at first seem unattractive but would nevertheless be in your best interests to accept. Moreover, the authors

blue Vauxhall that has done 15,000 miles.

argue, by exploring what you will do if you fail to reach an agreement,

Simply stated, most things are complicated.

you can often strengthen your hand in negotiating one.

Dynamic negotiation

In particular, your actions and statements will influence the behaviour of the other party, and vice versa, sometimes in ways that you will not

“The Art of Negotiation” which is sub-titled “How to improvise agreement

have intended or anticipated. As a consequence, negotiations evolve

in a chaotic world” exemplifies the third approach. It was written by Michael Wheeler and first published in 2013.

constantly, and negotiators have to remain flexible and creative. At the same time, and for the same reason, effective negotiation

The essential message of this book is that negotiation is a dynamic, interactive process which requires agility and a willingness to “embrace chaos” - something at which those of us who work in Universities are

requires a robust strategy. You must have a strong sense of direction, but you have to be prepared also to improvise and adapt your thinking in order to reach your destination.

good at! Your goals in negotiation should always be clear but provisional, The author gives “two cheers” for Ury and Fisher’s “win-win” approach,

because you may not properly understand even your own goals until

which he regards as far superior to “old-fashioned hardball tactics”. However, the problem with focusing on interests, he thinks, is that they can be fluid,

you are in the midst of negotiation. As Gary Klein (see bibliography) another proponent of “adaptive decision making” puts it: negotiators should have “strong ideas, weakly held”.

and we sometimes don’t really know where our

Likewise, BATNA is fine in principle, but messy

Wheeler points out that conventional negotiation theory tends to assume a static relationship between two parties. Thinking about negotiation as a dynamic interaction reveals it to be a “learning” process

in practice because it only works well when negotiations boil down to a simple, binary

with an emotional component. Agreements, even in business, are seldom just about money. They are also about relationships, many of

decision: “Deal or No Deal”? Most negotiations

which continue.

interests lie until we are negotiating them.

are more complicated. For example, I might not like the offer that one second-hand car salesman makes on the two-year old red Ford 14

The adaptive method also reminds us that effective negotiation is rarely one-dimensional. Traditional approaches often depict negotiation as a rather convoluted means of finding the most advantageous point along 15

a single axis where what I want overlaps with what you are prepared to give or take. This is sometimes called the ZOPA or “zone of potential agreement”.

Begging the Questions

Wheeler argues instead that negotiators should always be “prospecting” for additional dimensions. The old model of a single-line “bargaining range” is

Let me offer a few more reflections, taking the titles of my chosen

replaced in his approach with a “deal triangle” that opens up a broader area for discussion within which it may be possible to find an imaginative agreement.

books as starting points.

Is everything negotiable? No.

The three axes define the “territory of workable outcomes”. There are quite a lot of things that simply aren’t available for sale or The first is defined by your own “baseline” set of potentially acceptable deals. The second represents the other party’s baseline. Together these would traditionally define the ZOPA. The third boundary represents those

negotiation in the first place. Try making an offer for 10 Downing Street. Likewise, there are plenty of situations where negotiation might be an option in theory, but where it would be impractical, or at least illogical

external constraints that limit the ability of the two parties to negotiate a creative solution. These might include things like resource limitations,

to spend time bargaining. It would of course be possible to negotiate your weekly shopping bill at

assumed deadlines, or institutional policies, for example.

the supermarket checkout, but unless you have deliberately sought out

Such triangles, he argues, are not rigid. They can flex, and potentially

goods that are sub-standard, packaging that is damaged, or products that are past their “best before” date, you are unlikely to make much headway.

grow, as negotiations proceed. For example: the company next door is interested in a building owned by our University, but the site is currently zoned only for educational use. We don’t like their offer price. They don’t like the Council’s planning restrictions. Together, however, we could explore ways in which this external constraint might be addressed,

Why so? The main reason is probably cultural. Unlike purchasing goods in a middle-eastern market, where haggling is part of the etiquette,

sufficient at least to unlock a deal.

consumer transactions in the UK are designed on the whole to be simple and efficient. This makes sense in our culture. It is generally logical to

Paradoxically, three-dimensional problems can be easier to resolve than

accept the retail price for the goods you choose to purchase, since time

two-dimensional arguments. This is precisely why the “explore” phase of negotiation described earlier is so important, and potentially valuable.

is an intangible resource which also has a value. If you don’t like the price or the quality offered by one supermarket, your “BATNA” (best alternative) is probably to go to another one rather than to start negotiating a discount.

A second reason is power. This is distributed unevenly between the supermarket and the individual purchaser, as it often is between buyers and sellers of all kinds. Fight it if you wish, but consider the full cost, including the opportunity cost, of doing so. Wherever there is a concentration of purchasing power, scarcity of supply, an imbalance of knowledge, or differential access to markets and resources, for instance, the scope for negotiation will always be constrained. Sometimes, it will be negligible. In practice, it might be zero. Away from commerce, another question arises. Even if we might in theory negotiate (almost) everything, are there some things that we ought not to negotiate? Should we negotiate with terrorists? Was Chamberlain right in trying to appease Hitler? Should civil rights be sacrificed for greater security or better living standards? Is it ever justifiable to trade academic freedoms or institutional independence for commercial gain? You decide.

with settling for an unsatisfactory compromise. A “positive no” that is mindful of relationships can be a powerful thing.

Is it an art? Maybe. Clearly, some people are better at negotiating things than others, and there are some techniques and tactics that anyone might learn, but not everyone will be able to deploy with equal skill. Negotiation is something that takes place in real-time, with no absolutely fixed rules and at least one other party whose fundamental interests might be obscure, and whose behaviour may be unpredictable. In that sense, it could indeed be described as an “art” rather than a classical “science”. Alternatively, one might think of it as a sport. It is never a solitary exercise. Many negotiations are team efforts. Strategy is important. A modicum of natural talent helps. A good knowledge of tactics can be useful. But in the end, you have to practice if you are going to excel. Something else that often plays a part both in sport and negotiation is luck.

Is the process of negotiation about getting to yes? Yes and no. As we discovered earlier, “getting to yes” is only a part of the process. How one “gets to yes” is important. How one says yes is crucial. How one captures the detail is critical. Nor does it stop there. Beyond simple transactions and “spot purchases”, the process of negotiation is likely to be part of a wider and continuing set of relationships which themselves have a value, both in their own right (for example within families), and as a currency of trade over time. Trust and likeability are rarely worthless attributes, even though you need more than that with which to bargain. An equally important component of reaching sustainable settlements, as William Ury reminds us (see bibliography), is not confusing “getting to yes” 18

The circumstances in which negotiations take place, or the assets and problems you inherit, may have just as much influence on the outcome of any negotiation as the expertise that you bring to bear in managing the process. Successful negotiators rarely like to admit it, but persistence and luck will sometimes trump strategy and skill. This is also one of the reasons why it can be hard to measure the success of any negotiation, although there are at least three further dimensions to this problem. First, one can never be entirely sure that the deal you secure might not have been better. Secondly, if the agreement is unique or multi-faceted, you may never be able to benchmark it properly. Finally, the true value of any agreement may vary over time, and be judged against different criteria at different points. An unprincipled bargain in the short-term might poison 19

a beneficial relationship in the long-term, or a good deal today might turn out to be a bad deal tomorrow. The purchase of ABN Amro by the Royal Bank of Scotland in 2007 was a case in point: a triumph one day;

Select Bibliography

a disaster the next.

So What Have We Learned?

All of these books are now available in paperback. Roger Fisher, William L. Ury and Bruce Patton “Getting to Yes:

Negotiation is deceptively simple, but only in the abstract.

Negotiating Agreement Without Giving In” First published 1981

It is a social process that is easy to understand, but difficult to master.

Gavin Kennedy “Everything Is Negotiable: How to Get the Best Deal Every Time” First published 1982

On the one hand, it is helpful to think about negotiation as a series of sequential steps: prepare, engage, explore, propose, bargain and

Gary Klein “Streetlights and Shadows: Searching for the Keys to

conclude.

Adaptive Decision Making” First published 2009

On the other hand, there are several very different ways of approaching

Robert Mnookin “Bargaining with the Devil: When to Negotiate, When to

negotiation: as an adversarial, principled or dynamic process.

Fight” First published 2010

These different perspectives don’t just modify the tactics one might adopt. They can alter one’s understanding of the process itself.

G. Richard Shell “Bargaining for Advantage: Negotiation Strategies for Reasonable People” First published 1999

Even if everything could in theory be negotiable, it isn’t. Negotiation

William Ury “The Power of a Positive No: Save the Relationship and Still Say No” First published 2007

does not take place in a vacuum. Factors such as culture, power and ethics are always likely to influence behaviour.

Michael Wheeler “The Art of Negotiation: How to Improvise Agreement It is difficult to measure success in negotiation, and luck often plays a

in a Chaotic World” First published 2013

part in the outcome. The only way to become a really good negotiator is to practice.

Michael Wheeler “Negotiation (Harvard Business Essentials Series)” First published 2003

So… what are you waiting for? 20