The Best Bargaining Chips

It’s now two weeks since Theresa May formally triggered Brexit, beginning two years of long and complex negotiations with the remaining 27 members of the EU. Whichever way you voted last June there’ll be days when you’re elated and days when you despair. Right now, only one thing is certain – the word ‘negotiation’ is never going to be far from the headlines…

Negotiate-Settlement-Agreement1

It’s certainly played a central part in my life of late, with the lengthy negotiations to buy TAB UK – and what I suspect may be even lengthier negotiations as my sons go through their teenage years. So you’ll be in for ten? I was thinking more like midnight, Dad…

While I await the grey hair and the whispered ‘was that the front door?’ conversation with my wife, let’s take a look at some of the basic principles of negotiation – and then next week I’ll build on those principles by discussing the rather more thorny question of negotiating with a friend – exactly what I was doing when I bought TAB UK.

First things first: unless you’re in a Moroccan bazaar, negotiation is very rarely about the short term. It’s an area where you really need to think ‘win/win’ because nine times out ten you’re going to have an ongoing relationship with the person across the table. So don’t set out to ‘screw’ someone: in the long run that attitude is unlikely to be profitable.

I’ve always tried to go into any negotiations with three positions: my optimum (sell the car for £20,000); desirable (happy with £19,000) and my essential, bottom line price (I can’t accept less than £17,500).

Your ‘opposition’ – I don’t like to use the word but you know what I mean – will have those three in the reverse order. They’d be very happy to buy your car for £16,500, prepared to pay £18,000 and the maximum they’d pay before walking away would be £19,000.

In the scenario above it’s likely that the car would be sold for around £18,000 – assuming both negotiators are equally skilled.

So what do I mean by a ‘skilled negotiator?’ Looking back over my time in business there are probably four principles I’ve seen that work effectively and consistently: in my view, anyone applying these principles is a skilled negotiator.

  • The first thing is to keep the big picture in mind – and leave your ego at the door. I’ve seen too many negotiations fail because people got bogged down in petty details or tried to score points. It’s not just about demanding, “What’s your bottom line?” It’s also about discovering the other person’s ODE – optimum, desirable, essential. If you can operate within those parameters then you have scope to build – or strengthen – a long term relationship.
  • Sooner or later we all have to negotiate with someone we don’t like: someone who changes his mind, can’t make a decision, can’t remember what decision he did make – or all three. The answer is simple: concentrate on the issues, not the personalities. Stick to what you want, and be patient. It may well happen – as happened to me two or three times – that you sigh, mentally prepare yourself for another frustrating day, sit down at the table – and find a new face opposite you. All the problems vanish and the negotiations are wrapped up in a couple of hours. ‘Keep the main thing the main thing’ applies just as much in negotiation as it does in building your business: and the ‘main thing’ is what you want, not the failings of the person opposite you.
  • And don’t get emotional. At least, not for real. Any emotion is fine as long as you are in control of it. But don’t let yourself get angry, frustrated or sarcastic. And don’t get bored: we’re not talking about smoke-filled committee rooms where the old style politicos turned up with flask and sandwiches and simply bored their opponents into submission – but sometimes you do need to settle in for the long haul.
  • Finally, if you’re talking money, think in real money. We all know the traditional approach of breaking it down into ‘silly money:’ Look, you’re going to have this car for three years. £1,000 is 91p a day: two trips to Starbucks a week. Are you going to let that stand between you and a four year old Fiat Punto in Canary Yellow? A £1,000 is £1,000 however you break it down – which brings me back to my original point about optimum/desirable/essential price points. There has to be a point at which you walk away. If you cannot accept less than £17,500 for your car then you cannot sell it for £17,499 – if nothing else determines that, your self-respect should.

My apologies to anyone who does own a four year old Fiat Punto in Canary Yellow…

 

Across the Great Divide

Yet more wall-to-wall Brexit ‘n’ Trump stuff in the meejah this week (and we’ve got years more of it to look forward to) — but surprisingly (you may think) the first of these provides the background to this week’s Business Bit.

You may have noticed that Mrs May signed the letter triggering Article 50 (of the Lisbon Treaty) this week, thus starting a two (+) year period of negotiation.  It’s clear from the cacophony of bilge considered comment in the press that yer average journo has absolutely no idea how a business negotiation is carried out — most of them seem to think that the way forward is to state one’s position (with as much aggression as possible) and then stick to it through thick and thin.  Those of us who have carried out complex negotiations, though, know that it’s not at all like that, and Daniel Finkelstein’s article in Wednesday’s Times offered a masterclass in how to go about it.

Lord F started with recounting a story from 1912, when Teddy Roosevelt was campaigning to return to the White House.  His campaign manager realised that he had had three million (!) copies of a campaign leaflet (incorporating a portrait of the candidate) printed before getting the permission of the photographer, and that under copyright law this might let him in for a bill of $3million (a sizeable sum even now, but a gigantic one in 1912).

What to do?  After careful thought, he sent the photographer a telegram (if you don’t know what one of these is, ask your granny — Ed), saying “planning to distribute three million copies of campaign speech with photographs.  Excellent publicity opportunity for photographers.  How much are you willing to pay to use your photographs?  Respond immediately” — and received a reply by return — “Appreciate opportunity but can only afford $250”.

The article goes on to refer to research work undertaken over the last forty years by the Harvard Negotiation Project, which has spawned a number of books (such as Getting To Yes), all incorporating similar ideas —

  1. establish your own negotiating objectives
  2. be clear about what will happen if it all breaks down (this is called identifying your BATNA — Best Alternative To a Negotiated Agreement)
  3. understand the objectives of the other party
  4. …..  (fairly obvious so far, but…..)
  5. mentally walk round the table and see things from their point of view
  6. seek to achieve their objectives as well as your own
  7. find ways round a “no” from the other side

Steps 3 through 6 involve what the researchers call “listening from the inside” — not simply hearing what the other side say they want, but truly comprehending their needs.

Step 7 includes showing that you respect their authority, conceding arguments about the past (as opposed to your future position), and reframing your objectives in a way that meets their interests as well as your own.

Lord F gives the example of Senator Joe Biden visiting Moscow (in 1979!) during arms negotiations, seeking concessions from the USSR that President Carter hadn’t managed to secure.  Having received a firm “nyet” from Andrei Gromyko, Senator B had a brainwave — he asked Gromyko whether he could advise him (young and inexperienced) what he should say when he got back to Washington.  Gromyko couldn’t resist giving advice, and in the process talked himself round to a new position.

As one of the project researchers says, “breakthrough negotiation is the art of letting the other person have your way”.  Let’s just hope Mr Davis has read the study…..