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Why Hard Ball Negotiators Get Poor Outcomes

By Joe Hernandez, CEO Lionshare Negotiations

I was in a very contentious negotiation with the Senior Vice-President of one of the top networking companies in the U.S. She was pushing me hard to reduce my price. She told me that my products and services addressed a market that contributed little growth to their company, but they needed to maintain the market to avoid lost revenues. The company was negotiating for was a midsize company that generated about $300M in revenues annually. Initially, it appeared that she had all the leverage. Afterall, they were a multibillion-dollar company who had resources and likely had many alternatives. This was an important deal for both of us, but it felt like it was more important for me than for her.

Many in this situation would seriously consider reducing their price to win business and hopefully make it up in other opportunities that could materialize with them over time. Others might push back and remind her of the value that they provide and how they reduce costs with their solution. But I took a different approach. I shifted the focus on her price position to understanding her underlying interests for this part of her business. I asked her what she was truly trying to accomplish. I asked, “what would make this a great agreement for her and her organization beyond getting a great price?” After asking many questions like this, it turns out that, ultimately, she wanted to show some growth for this business unit. Revenue growth didn’t seem like a possibility to her, so she focused on margin growth which is why she was trying to reduce cost. Her other business units were not meeting their growth goals either and she needed a win. So, that’s why she was pushing so hard for a reduction in price.

After learning this important information, I began to get some perspective about her position. I was also charged with growing my business unit and started to understand her motivation. I asked her if she would be open to a different approach that might possibly impact growth. She said she would listen. I requested a little time to think about the situation and come back with some alternative ideas that could better contribute to her goal of improving growth.

When I returned a few days later, I let her know that we had just developed a next generation solution that was getting great traction with our current users. I informed her that we had it deployed in several accounts and were getting great responses from the users. This next generation solution was helping our company grow revenues and it would surely help with revenue growth for her business unit as well. Our discussion went beyond the price to the possibility of new revenue growth which was much more important to the SVP.

We cam to an agreement that made us both very happy. The deal was more than double the revenue I had originally thought possible. For her, it meant she could show a big win by driving new revenue into this stagnant business unit. Lowering the price was the easy way to achieve growth. But with a little more thought about her true interest and getting a better understanding of her perspective, it was no longer the best approach. Revenue growth was the interest and the driver for this deal. And a focus on growth helped us both find a better way to get more for our respective companies.

In my research I discovered that negotiators spend most of their time thinking about themselves and their own needs and requirements. They spend little time thinking about what the other side is trying to accomplish and why. It is critically important to put yourself in the other party’s shoes to get a sense of what they are trying to achieve with the deal. Often there is not enough time problem-solving which involves more complex thinking. As a result, great value generating opportunities are simply overlooked, and that’s when bad deals happen. And bad deals happen all the time.

How Collaborative Negotiators Drive Better Deals

William Ury, cofounder of Harvard’s Program on Negotiation (PON), refers to this level of complex thinking and problem solving as “looking for the third side.” He suggests that while most people feel there are only two sides to an argument, there are actually three sides to every argument. He has found that to discover the third side, it takes a deeper level of thought about the dispute that is stalling the deal making process. Ury describes the third side wonderfully through a story about a man who leaves a herd of 17 camels to his three sons as their inheritance.

“To the first son, he leaves half the camels; to the middle son, he leaves a third of the camels; and to the youngest son, he leaves a ninth of the camels. The three sons get into an intense negotiation over who should get how many, because 17 doesn’t dive by two, or by three, or by nine. Tempers become strained, so in desperation they consult a wise, old woman. She listens to their problem and says, “Well, I don’t know if I can help you, but if you want, at least you can have my camel.” Now they have 18 camels, so the first son takes half of them, or nine camels; the middle son takes his third, or six camels; and the youngest son takes his ninth, or two camels. Nine plus six plus two adds up to a total of 17 camels. There is one camel left over, so the brothers give it back to the woman.[1]

Sometimes the best solution is not obvious. This is especially true when it comes to negotiating. So often deals get to a point where there is an impasse and the obstacle is too big to overcome. But, when we change our perspective and we consider a collaborative approach instead of holding or fighting for our position, we can improve the possibility of finding a better outcome for both parties. To achieve this kind of thinking and new level of problem solving, we need to think beyond ourselves and our needs. In other words, put yourself in the other party’s shoes and show up with a plan to work together with the other party. Build a strategy that allows you to give more. Work harder to identify the big win for both. Then determine how it will be shared…together.

How to Drive Collaborative Negotiations

Since I discovered how well collaboration works for achieving exceptional deal outcomes that far surpass either party’s expectations, I will never go to the table without planning on working closely with the other party. In fact, I let the other party know that intention in advance. By signaling that we are coming prepared to work together to find the best outcome, we have set an expectation that our discussions will be collaborative. But what if the other party doesn’t want to collaborate? What if they insist that is their way or the highway? What if they demand unfair terms to win at your expense?

The simple answer is you need tools to help drive cooperation between the parties. Not just any tools, but tools that have been tested and proven to work. We cannot leave this to chance; we need a sure-fire way to create a collaborative environment. I’m not talking about collaboration software platforms like Microsoft Teams or Trello. I’m suggesting there are psychological tools that are so powerful, we can count on them to deliver results. I have found that who you are negotiating with, the timing of your negotiation, how you open a negotiation, your concession strategy, how you structure or architect your offers, and how you present them can have an incredible impact on collaboration. There are tools to drive perspective taking assessments and it starts with determining the other party’s interests as well as your own. It also involves forecasting the other party’s positions and looking past those by trying to understand their motivations. I have studied, tested, and proven this strategy with some of the most powerful collaboration tools available. I was introduced to many of these by academics, but I often found it difficult to take the academic findings and translate them to real world application. So, I had to trial each one in live negotiations. I found that some worked immediately, someone only worked under certain circumstances, and some didn’t work at all. It’s been a career’s worth of work finding the path that gets to great deal outcomes consistently. It took an incredible amount of practice.

Lastly, very few know how to create and use the collaborative strategies and tools that are deployed by those who seem to magically bring home extraordinary win-win deals time and time again. It turns out that represents only about 4% of all negotiators.[2] Imagine being part of the 4% Club and the tremendous competitive advantage you will have in every negotiation to come.

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[1] Ideas from ted.com; We Humans; There Are Three Sides to Every Argument, William Ury, April 7, 2017

[2] Nadler, Thompson, & van Boven, 2003