Imagine you’re headed down Madison Avenue, NY, when you pull up to a skyscraper on the corner of 77th street. You hop out of the car, tip the driver, and take the elevator up to the 60th floor to meet with the head of advertising at one of the most prominent marketing companies in the world. You are here to negotiate the pricing on a new multi-million dollar advertising contract. Your counterpart has a reputation for being a real hardball negotiator, so your palms start to sweat before you even enter the room.
You walk into the corner office, shake hands for the first time and take a seat across the table. You steady yourself for battle and are preparing to speak when your counterpart says this: “Dear X, thank you for coming in today to discuss the contract. I want to let you know that I am here today to help you reduce your costs, reduce your liabilities, and improve your profits. Is that something that you would be interested in?” You smile and skeptically say, “Of course.” He nods his head, smiles too, and says, “Great! While then, all I ask for in return is that you help me reduce my costs, reduce my liabilities, and improve my profits. Do we have a deal?”
Every day, millions of commercial transactions fail to achieve their full potential value because of low trust and a zero-sum mindset. This is the belief that there can be only one negotiation winner, and it comes at the expense of the other person. The goal is to get the opponent to zero profit, or as close to that as possible. This mindset is a side effect of thinking that the deal’s value is a fixed size (no additional value can be created). Or, thinking that, even if there is potential for added value, the counterpart will not cooperate in the value creation process.
In my previous article, Why Negotiators Still Aren’t Getting To Yes, Karen Walch, Professor of International Business and Negotiation at Thunderbird Global School of Management, supports this idea. Over the course of a 20-year, ongoing study, she has polled students on how cooperative and trusting they believe they are personally, and asked them to evaluate their counterpart on the same criteria. What do you think she discovered?
“What we’ve generally found so far is that 40% of people tend to believe that they are cooperative and trusting,” says Professor Walch. “Yet, when asked about the counterpart, people tend to believe that the other party is just looking to win. It’s this type of mentality that causes negotiators to take a defensive strategy, which often leaves a lot of value left on the table.” People justify a zero-sum approach by convincing themselves that they are the only well-intentioned person at the table – the other party is just in it to win.
I believe that it is not only in your best interest to help your loyal opposition make a profit, it is your duty! From one standpoint, there are only so many organizations you can hardball before you develop a horrific professional reputation and no one wants to partner with you. Secondly, even if you do have moderate success with this tactic, over time you will drive your vendors into the ground until there is only one survivor left standing. At that point, they have a monopoly and can name their price!
A far better idea is to create a relationship with your counterpart based on cooperation and trust. I call this a SMARTnership™, and it’s the key to unlocking the full potential of a deal. Typically, low trust forces negotiations to focus on only one or two variables: price and quantity. But when both parties operate with honesty and transparency, it allows them to open a real discussion about shipping, storage costs, installation, warranties, payment terms, quality control, and additional services. Many people think that reason for cooperation is that both parties share the same values. But it’s actually the differences you should look for and take advantage of!
For instance, if one party has lower shipping overhead, it might make sense that they take ownership of that part of the agreement. And if the other party has lower storage costs, then maybe that should be their responsibility. If the deal is optimized so that everyone is handling the aspects that they do most effectively and efficiently, there is more value available to create a deal that leaves both parties happy. However, this is only possible when there is a spirit of trust and cooperation. It sounds simple, but it makes serious demands on negotiators.
Having studied over 25,000 negotiations, my firm Center for Negotiation A/S, has found that up to 42% of a deal’s value goes unutilized in a typical commercial transaction. This value is just sitting there for the taking! The key is to realize that it’s up to YOU to create the right interpersonal dynamic for the deal to grow. See, in the eyes of your counterpart, you’re not the nervous negotiator sitting across the table – you’re the hardball executive on the 60th floor that they are unsure whether to trust. It’s up to you to make the first move! Show them that you are here to help improve their profits, and watch as they magically do the same for you.
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Author of SMARTnership: The Third Road – Optimizing Negotiation Outcomes
