6 Habits of Merely Effective Negotiators

Article Summary

The article highlights the broad classes of error that happens while negotiating and
compares good negotiating practice with bad. The article starts off by taking a closer
look at the right negotiation problem that one’s approach must solve.

In any negotiation one must always choose between two options: accepting a deal or
taking its best no deal option. As a negotiator once must persuade the other side to
say yes to a proposal that meets the interests better than a no-deal option does.
However, the other side will only say yes if the proposal is better than its no deal
option. So, while protecting one’s own choice negotiation problem is also to
understand the counterpart’s perceived decision so that the other side chooses in its
own interest what you want. Hence, understanding the counterpart’s interests is very
important in jointly creating and claiming sustainable value from a negotiation.

Once the negotiation problem is clear, the author proceeds to explain the six common
mistakes in negotiation.

Mistake 1 – Neglecting the Other Side’s Problem

The first mistake is to focus exclusively on your problem. One must solve the other
side’s problem as the means to solving its own problem. For that one must understand
the problem from the other side’s perspectives. This can be done by putting yourself
in the shoes of the other person and try and understand what exactly does the other
side want out of the deal. For negotiations to be successful it is important to overcome
the self-centred tendency. Outward confidence without understanding the other side’s
problem is usually seen as arrogance.

Mistake 2 – Letting Price Bulldoze Other Interests

Only paying attention to price can turn a cooperative deal into an adversarial one. The
author quotes a banker “Most deals are 50% emotion and 50% economics”.
Successful negotiators understand that economics aren’t everything and focus on four
important nonprice factors.

i. The Relationship
The working relationship between the parties plays a huge role in
negotiations and shouldn’t be ignored. This factor comes in play in various
cross-border deals where people from different cultures interact.

ii. The Social Contract

Many times negotiators tend to focus on the economic contract – equity
splits, cost sharing, governance etc. at the expense of the social contract or
the “spirit of the deal”. It deals with the expectations about the nature, extent,
duration of venture and how unforeseen events will be handled. It is
extremely important in new ventures and strategic alliances where goodwill
and strong shared expectations are very important.
 iii. The Process
Many times the deal making process can be as important as the content of
the deal. The article goes on to say that the results are more sustainable
when all parties perceive the process as personal

iv. The Interests of the Full Set of Players

It’s very important to not forget about the interests of the players who are in
the position to cause issues in the deal. The author gives an example from
the GSK merger to tell us that though favourable overall economics are
necessary, they are often not sufficient and that one should keep all
potentially influential players on the radar screen because what’s rational
for the whole may not be for the parts.

Hence, while negotiating should look to the vital issue of price in perspective and not
focus solely on that. One should also focus on the process, the relationship, the social
contract or the spirit of the deal and work with the interests of the parts as well as the
whole.

Mistake 3 – Letting Positions Drive Out Interests

There are three issues at play in a negotiation. Issues, positions and interests. When
dealing with positions a deal is only struck when incompatible positions converge. By
contrast, interest driven bargainers see the process as reconciliation of underlying
interests. People usually have a built-in bias to focus on their positions only. This leads
to the zero-sum pie where one has to lose for the other to gain. Reverse Midas
negotiators automatically fixate on price and bargaining positions to claim value.
Instead, there should be an effort made to understand and meet the underlying
interests of both the parties. The pie must be both expanded and divided.

Mistake 4 – Searching Too Hard for Common Ground

The author debunks the conventional wisdom that win-win agreements can only be
found by searching common grounds. The article gives various examples where
uncovering a vital point of difference led to a satisfactory deal for both sides. Many
times value in negotiation arises from differences among parties. It can lead to
unbundling different elements and giving each party what it values the most at the
least cost to the other. Conducting a “differences inventory” is at least as important as
identifying areas of common ground because while common ground helps, differences
drives deals.

Mistake 5 – Neglecting BATNA’s

BATNA is the action a party would take if the proposed deal were not possible. It
defines the zone of possible agreement. Both parties doing better than their BATNA
is a necessary condition for the agreement. A strong BATNA makes the threat of
walking away much more credible and can serve as a leverage to improve the deal.
One should also carefully think about the other side’s BATNA. The real negotiation
problem is “deal versus BATNA”.
The author gives an example from Teddy Roosevelt’s election campaign where the
campaign manager looks beyond price, position and common ground and used
Moffet’s differing interests to frame the photographer’s choice as “the value of publicity
and recognition”. He avoided the standard hardball price deal by offering a small
amount to start and shaped Moffet’s BATNA perceptions favourably.

Mistake 6 – Failing to Correct for Skewed Vision

The articles talks about a couple of inherent biases that lead negotiators to major
errors.

i. Self-Serving Role Bias

People tend unconsciously to interpret information pertaining to their own
side in a strongly self-serving way. Getting too carried away and “believing
your own line” is an extremely common mistake.

ii. Partisan Perceptions

While we systematically err in assessing information pertaining to own side,
we are even worse at assessing the other side. One usually tends to portray
self as honest, talented and morally upright, while simultaneously vilifying
the opposition. The problem with partisan perceptions is that they can easily
become self-fulfilling prophecies.

There is no solution to this but just knowing that these biases exist can go a long way.
Seeking help from uninvolved parties usually helps.

The article concludes by telling the readers that the very best negotiators take a
broader approach to setting up and solving the right problem. They use their interests
and potential value to create as their guiding beacons during negotiations. To advance
the full set of interests, they understand and shape the other side’s choice between
deal or no deal.