Negotiating Your Investments Page 7

  Chapter Summary

  Think about the type and scope of relationship you want to have with your negotiation partner during and after this negotiation.

  A positive relationship can create good feelings. An adversarial relationship risks tension. As you build an appropriate relationship, consider its effect on reaching good agreements.

  Communication is the most important tool you have to build the kind of relationship you want. Choose the communication method most advantageous for your discussions, with an eye toward the kind of relationship you are seeking to fashion.

  Use active listening techniques to reduce misunderstanding. Miscommunication is a common reason negotiations break down. Improving communication provides an opportunity to strengthen negotiation outcomes.

  Pay attention to power dynamics. Question whether the current understandings and processes are likely to lead to best possible outcomes. If not, try to change the situation.

  Consult before deciding by letting your negotiation partner know about your plans and alternatives.

  Don’t trust them imprudently, but act in such a way that they will never be disappointed by having trusted you.

  Notes

  1. G. Richard Shell, Bargaining for Advantage: Negotiation Strategies for Reasonable People, 2nd ed. (New York: Penguin Books, 2006), 3.

  2. Adam Grant, Give and Take: A Revolutionary Approach to Success (New York: Viking, 2013), 4.

  3. William Taubman, “Did He Bang It?: Nikita Krushchev and the Shoe,” New York Times, July 26, 2013.

  4. Roger Fisher, William Ury, and Bruce Patton, Getting to Yes: Negotiating Agreement Without Giving In, 3rd ed. (New York: Penguin Group, 2011), 9.

  5. Ibid., 62.

  6. Shell, Bargaining for Advantage, 67.

  7. Roger Fisher and Scott Brown, Getting Together: Building Relationships as We Negotiate (New York: Penguin Books, 1988), 3.

  8. Ibid., 84.

  9. Ibid., 107.

  Chapter 5

  Thinking about Commitments

  Good negotiators are at all times keenly aware of what they are being locked into, how tight or loose the constraints are, and when such bindings are occurring.

  In one of our oldest stories, Odysseus seeks the best of all possible worlds; he wants to hear the sirens’ song yet live to tell of it and return home with his ship. He instructs his crew to tie him fast to the ship’s mast while they stuff wax in their ears. The clever Greek has figured out a way to pre-bind himself to staying aboard ship. His commitment rests not on promises or contracts, but on strong rope. Make no mistake, once he heard the sirens calling to him, he begged, cursed, and demanded that his men untie him. It is no wonder that we consider Odysseus among the great negotiators in Western literature.

  How Tight Are the Bindings?

  Consider this question. Do you wish to be more tightly bound or more loosely bound? A strange query, indeed, particularly since the answer must be that it depends on the subject at hand. In some things you want to be bound up as tightly as possible—for example, the snugness of your seat belt on a roller coaster. In others, such as the dinner menu for the coming year, you probably want to be as loosely obligated as possible.

  Think of commitment in negotiation as a series of questions about how snug or loose are the bindings of promises, obligations, requirements, guarantees, and assurances. Are we locked in? Can we change our mind? How bad are the consequences if we renege? What if a better opportunity comes along?

  As with all things in negotiation, these questions apply both to us and to those with whom we are negotiating. How tightly are we tied in? How binding is their promise? What if we break our word? Will they follow through on all they said they would do? Can I skip out on my girlfriend? Can she walk away from me? How we experience levels of commitment as they apply to ourselves may differ wildly from our feelings about how they apply to those we negotiate with.

  While it is not always true, a general rule is that negotiators seek to bind their partners as tightly as possible while leaving themselves as much wiggle room as the situation will allow. For example, after a long and grueling national search, a top Ivy League university has decided to offer its presidency to a leading politician. She is the former governor, and her name has come up as a leading candidate to run for the Senate next year. A member of the search committee approaches her privately and asks if she will accept the position if it is offered. The university does not want to make a binding offer to her unless she is willing to be tightly bound, in turn, by accepting it publicly. On the other hand, the candidate is quite interested in the possible Senate seat. She knows her chances of winning it will be much clearer after the close of the legislative session several weeks from now. She tells the university that she would like to be able to hold off acceptance for a month. She is hoping to have the offer be fully binding on the university while she draws out the time she has to choose.

  Many students, upon learning this concept of commitment in negotiation, relate it to the problem of roommate division of chores. One woman wrote this:

  You and your college roommates have crafted the mother of all agreements. It took about three hours in someone’s bedroom for it to come to fruition, but all of you stayed engaged, actively offering and exchanging interests. Together, you’ve drafted up calendars for bathroom cleaning and kitchen cleaning. You’ve started a rotation for toilet paper purchase. You’ve established standard practice for dishwashing and food labeling. Every aspect of this agreement has been labored over, and the result is pretty comprehensive.

  All of you agree to it. All of you scan the calendars, nod your heads. “Looks good to me.” Two weeks into the semester, there are flies buzzing over an overrun sink.

  What happened? Brilliant and meticulous as your agreement was, it was anchored to nothing. So it drifted away. That is to say, you reached agreement, but there was nothing to create real commitment. Without strong commitment, agreement is little more than an empty formality.

  I usually teach commitment by insisting that students never use that word when writing about it. To prepare for this communication challenge, we compile a long list of synonyms that can be used to describe what we are talking about. The class often comes up with several hundred different words and phrases. After all, a great deal of the language of contracts, agreements, and promises is a series of descriptions of how bound the parties are, how much leeway they may have, and when the various obligations come into effect.

  When Should We Be Bound?

  The second part of analyzing commitment, after considering the level to which each party is bound, involves thinking about when the binding takes place. The potential college president knows she will have to make a binding choice eventually, but she hopes to put it off until she has more information about her alternative. The university is aware that, once they make a formal public offer, they cannot take it back. As a result, they search for a way to secretly know their candidate’s decision, preserving their own wiggle room, before they announce the offer.

  In what situations is the flexibility of being not yet bound advantageous? On the other hand, when does a total lack of discretion work to your benefit? Consider the example of a U.S. president who wishes to deter the use of chemical weapons in a faraway Middle Eastern nation. While he may threaten a bombing campaign if those weapons are not removed, it seems wise to retain an ability to call off such hostilities if a peaceful accord can be reached. The American leader will be best served by not locking in a course of action until all avenues have been exhausted. In contrast to this, think about the Cold War procedure of having nuclear bombers turn off their radios after receiving an order to strike. So great was the fear of an enemy subterfuge designed to turn the jets around that an absolute lock-in was considered prudent. The plot of the 1964 movie Fail-Safe turns on this protocol. In retrospect, though, we may decide that the flexibility to turn back from a single course of action is often most sensible. In many cases, the least binding options are desir
able until very late in the negotiating process.

  Eventually, though, there comes a time when binding yourself tightly to a course of action is the key to forward movement. Sometimes this is necessary to discourage counterparties from dragging things out in the hope of further concessions. This is often referred to as creating a closing window of opportunity. For example, while I am usually generous in granting extensions of due dates for students’ work, there is often a straggler who needs to have a firm deadline imposed. In that case, I eventually tell her that work later than a set date will be marked down a grade—and that there will be no flexibility in this regard.

  A process of brainstorming ideas with your counterparts can be extremely fruitful in a negotiation. This is essentially the concept of “separating inventing from deciding,” so important to Fisher and his colleagues for creating mutual gains.1 Its success, however, necessarily depends on finding a way to get partners’ agreement that ideas will not bind until the proper time. It turns out to be quite difficult because as soon as someone mentions a possible option favorable to one player, she tries to tie everyone to it. Often called anchoring, this tendency to affix the discussion to one desirable outcome must be circumvented for the brainstorming process to work. In a teasing irony, the Harvard professors challenge us to find a way to forcibly prevent ourselves from latching onto the ideas prematurely—a kind of commitment not to commit.

  Degrees of Commitment

  When considering this element of any negotiation, it is important to realize that commitment is not an all-or-nothing proposition. It is easy to mistakenly think of a negotiator as either bound or not bound. The concept is more subtle than that. Rather, think of there being many degrees of bindingness and join me in wishing for an instrument, like a gauge, to measure them.

  A former student came to my office hours to share joy over her recent marriage. She told me the entire chronological tale of the courtship. She and her boyfriend met on a blind date. She knew right away that he was going to be very special to her. The boyfriend, on the other hand, was not as sure. When he didn’t call for several days, she worked up her nerve and asked him for a second date. A third date followed, which ended with kissing and holding hands. A month later they were going steady. About a half year later, he got down on one knee and asked her to marry him. She was not too sure and actually replied, “maybe.” Almost a month passed before she whispered in his ear, “I do.” To which, of course, he replied, “You do what?,” since he was not clear what she was talking about. Their engagement lasted a year. In the middle of it, she got cold feet and had a long discussion with her sister about whether she could get out of it. Her sister insisted that she did not have to marry him if her heart wasn’t 100 percent. Her fears eventually passed, though, and she became very excited and full of love for her betrothed. On their wedding day, they exchanged rings, said “I do,” and the clergyman declared them husband and wife. So did the State of New York. Sitting in my office, a strange Mona Lisa smile crossed her face. “There’s no going back now,” she said, placing her hand on her slightly rounded belly and giving me a wink of her eye.

  Thinking back on this happy story, I thought it perfect for teaching the many degrees of commitment. Consider the level to which each member of the couple was bound after the first date, after the third date, and during the period of going steady. There is some tie at each of those points, but the level is different. Compare the level after the marriage proposal with after the ceremony and when the legal documents were signed. Or when her sister pointed out that, notwithstanding her acceptance, she did not have to marry him. Sitting there in my office, I saw that her commitment to her husband had just recently risen to a new and more powerful level.

  It is my intention to install on my desk a commitment meter that will measure the level to which a party is bound at any given time. It will use colors to indicate those different levels and will be highly sensitive to subtle changes. After all, if another student comes to tell me a story of true love, I don’t want to miss the chance to teach about this critical element of negotiation.

  Commitment Is Not Just about the Ending—Consider It throughout the Process

  This concept of commitment, of tight or loose bindings and when they begin to fasten, applies not only to final agreement but also throughout every step in a negotiation process. It is relevant when we agree to start discussing a deal and when we concur to keep trying, when we decide to sit down together and when we mutually agree to seek help. Every step is a mini commitment that can be examined in this light.

  Two titans of industry, hugely powerful men with egos to match, had been negotiating all day over whether a takeover was going to be hostile or friendly. As the dinner hour neared, voices were raised, and tempers began to flare. One of the moguls put up his hand. “Tell you what,” he said. “Let’s just stop for today. Even though we were scheduled to keep talking after dinner, let us just agree to put this whole matter to rest until Monday morning at 8 A.M. Will you agree to that?” The other man agreed, and they shook hands.

  The two men have made an agreement. They have bound themselves. At first glance, they seem to have settled nothing. They have simply postponed their heated attempt to find an acceptable deal. But they have agreed to postpone and to resume at a date certain: a tiny little mini agreement. We expect much good to come from this small joint decision; heads can cool and sleep can soothe. When they meet again at the agreed upon time, they will be better able to work toward a resolution that all parties desire.

  Many Little Agreement Steps

  The negotiation process is made up of a series of little steps. At each juncture, there are decisions to be made. At every step, a negotiator encounters questions as to how much to be bound and to what. Furthermore, the question of when to be bound comes up continuously. Instead of agreeing to meet on Monday morning, the businessman might have responded that he would call tomorrow to set up a time. That response would have been less binding and might allow him more time to decide what level of obligation should come next in the ongoing process.

  A series of smaller commitments is very often the way that leads to a big agreement. In international relations, these are often referred to as confidence-building measures. The concept applies to small negotiations as well as big ones. Who hasn’t laid out a chain of such agreements when bargaining with a child? If you will eat your spinach, we will go to the ice cream stand. If you are good on the trip, you can get sprinkles. After the ice cream, we are going to brush our teeth and get ready for bed. . . .

  As you negotiate, pay attention to these commitment issues. Attend to them not only as they affect you but also with an eye toward their impact on your negotiating partners. At every stage, there are forks in the road that require decisions about whether and how much to be bound. Help pave the way for those across the table to easily agree to the next step. Before you know it, you will find yourselves marching confidently, arm in arm, toward agreements that ensure good outcomes for everyone.

  Chapter Summary

  Negotiators usually prefer to bind their partners as tightly as possible while leaving themselves maximum freedom and flexibility.

  From the beginning, you should consider how tightly each party is bound to the agreement and when that binding takes place.

  In seeking to brainstorm possible solutions, be careful to avoid the tendency to anchor the discussion on ideas favorable to one side or the other.

  Issues of commitment are measured in degrees; they are not “all or nothing.”

  These commitment issues should be considered throughout the entire process, not just at the conclusion of the negotiation.

  A series of small commitments or a planned chain of agreements can build confidence and help lead to a larger agreement.

  Note

  1. Roger Fisher, William Ury, and Bruce Patton, Getting to Yes: Negotiating Agreement Without Giving In, 3rd ed. (New York: Penguin Group, 2011), 62.

  Chapter 6

  B
est Alternative: Where Your Power Comes From

  In negotiation, power comes from alternatives. One of the first things a skilled practitioner explores is what course she will take if the deal being worked on completely falls apart. If I can’t make this arrangement with this person work out at all, what will I do instead? Answering this question lays the foundation for increasing negotiating strength. And greater strength presents the potential for increased control, influence, and authority.

  In studying negotiation, we refer to “alternatives” as all the things you might do completely outside of the negotiation you are currently working on. Think of being in a restaurant and discussing the menu with your waiter. You ask for a salad instead of the side of fries. When he says, “No substitutions,” you can continue to negotiate with him, or you can walk out and go to the café around the corner. The latter choice is an alternative—no further negotiation; I will go deal with someone else.

  “People think of negotiating power as being determined by resources like wealth, political connections, physical strength, friends, and military might,” say Fisher, Ury, and Patton. “In fact, the relative negotiating power of two parties depends primarily upon how attractive to each is the option of not reaching agreement.”1 The less you mind walking away from an agreement, the more power you have relative to your negotiating partner.

  Once an attractive backup plan has been put securely into place, you needn’t settle for a negotiated agreement that’s less appealing to you than your alternative. On the other hand, if you realize that the consequences of not settling are dramatically worse than the agreement you are seeking, acknowledging that your alternative is weak may prompt you to consider terms of agreement that you hadn’t previously entertained.