Negotiation is a universal art, but many of us are surprisingly bad at it, especially those raised in cultures in which bargaining is not the norm. (I once participated in a panel on how to run a successful freelance business; at least half the audience confessed to almost never negotiating with their clients over rates.)
Even if you consider yourself an old hand at getting the best of your bargaining partner, I urge you to check out the Dec. 21 podcast of Planet Money. It’s about how to negotiate for things, especially when you’re Barack Obama and the US Congress and you’re trying to avert the fiscal cliff. I’ve distilled the lessons contained in that episode, plus a few from the literature, below.
Across all negotiating strategies—and this is a vast field of academic inquiry—one universal requirement for winning is confidence. The easiest way to be confident in a negotiation is to not have to fake it, and that means knowing your “best alternative to a negotiated agreement,” or BATNA.
In the fiscal cliff negotiation between Obama and conservatives in the US Congress, Obama’s BATNA is arguably better than the House Speaker John Boehner’s. If negotiations break down and the US goes over the fiscal cliff, Obama gets the end to Bush-era tax cuts that he wanted, albeit for the middle class as well as for the rich. (Subsequently, he might be able to lower taxes on the middle class through legislation.) Whereas Boehner, according to polls, mostly just gets the blame.
When negotiating over a salary, your BATNA is whatever wage someone else is ready to pay you to do a similar job. That’s one reason that leveraging a competitor’s attempt to poach you is a tried-and-true method for getting a raise: that competitor’s offer is your BATNA in any renewed salary negotiation.
When negotiating, the human mind is automatically drawn to the point of contention, whether that’s the issue of new taxes or the price of an item. But that keeps both sides from realizing that there are other things that could be on the table, but aren’t. For example, when two companies are negotiating a licensing deal over intellectual property, one sweetener that is sometimes offered is a cross-licensing deal. In other words, instead of Apple simply paying Google for the right to use some of its patents, Apple might also offer the use of some of its own patents as part of the deal.
This negotiating technique is also known as “integrative bargaining,” and it’s the basis of William Ury’s bestselling book Getting to Yes. (Ury co-founded Harvard University’s Program on Negotiation.) The idea is that if both parties lay out their needs in advance, rather than keeping information hidden from the other party, each side can seek to meet the needs of the other in a way that’s mutually beneficial.
In Planet Money’s podcast, one story stands out. Adam Galinsky, a professor at Columbia University who specializes in negotiations, was waiting for a flight home when the airline began offering vouchers to anyone who would take a flight the next day. After waiting for the value of the voucher to reach $1000 (Galinsky had paid $180 for his original ticket), he approached the airline’s ticketing agent.
Galinsky said to the agent that he’d be willing to take a flight the next day. But, he added, could the airline also upgrade him to first class on that subsequent flight? Sure, they said, probably because airlines often have unused first class seats which they offer to frequent flyers as free upgrades. In his shambling, “oh, by the way” style, Galinsky proceeded to ask for—and received—a hotel room for the night, dinner, and a car service pickup at the airport the next day.
This negotiating technique is called “the nibble.” Often, when we’re done settling the main terms of an agreement, we act as if the negotiation is over. But in almost any situation, there are tons of extras to be had if only we ask. As in a salary negotiation, benefits like time off and other perks can often be tacked on once the negotiation would traditionally be considered “over.” As Galinsky noted, “if you don’t ask for something, you can’t get it.”
What happens when a former FBI hostage negotiator buys a car? Would it surprise you to hear that he gets a really good deal? Here’s how Christopher Voss, now a professor of negotiation at Georgetown University, did it:
First, Voss offered a price that was low enough to make the other side peevish, but not so low that they immediately walked away from the table. Then, when they came back with a higher price—instead of going through the usual back and forth of meeting somewhere in the middle—Voss simply said, in the nicest way possible, that theirs was an entirely reasonable price, and he was sorry to be wasting their time, because the truth was that he simply didn’t have enough money to pay what the vehicle was worth.
Suddenly, the seller’s empathy was on Voss’s side, and the rest of the negotiation was, more or less, the seller bargaining with himself, not Voss. Round after round, the car salesman went back to his manager, got a lower price, then offered it to Voss, and round after round, Voss said, apologetically, that he didn’t have the means to pay it.
Eventually, Voss bargained the seller down to his own original, seemingly unreasonable price.
There’s a reason that a venerable high-pressure sales technique is to say that a deal is available “for a limited time only”: It makes us irrational. There is no price so good that it’s not worth sleeping on. Indeed, saying “yes” too quickly can even have the unexpected effect of disappointing a seller, because he or she may think that, if you accept it immediately, their initial offer was too low.
One other lesson for negotiating well is that there’s nothing quite like practice. It may seem impolite, but whether it’s your interpersonal relationships or the workplace, in my experience negotiating leads to the opposite of alienation. In the process of revealing what we really want, it allows for a form of engagement, even intimacy, that’s too often absent from our lives. And short of practice, you really ought to listen to the richly textured narratives rounded up by the team at Planet Money.