On Negotiation

I’m involved in several negotiations, so I thought this was a good moment to remind myself what I believe about negotiation. My fundamental belief is that negotiations are a value-creating process (or at least can be), not just a transaction cost or (worse) a power struggle. Here’s how I try to create value in negotiations.

First a little background. My mother’s side of the family were hustlers. They settled on car sales as the family business. This gave everyone ample opportunity to exercise the skills with negotiation to gain power over other people. In this model, the payoff of negotiations is getting someone else to do something they didn’t want to do.

I spent many hours as a kid sitting in the corner of my grandfather’s office, ostensibly playing but in reality paying attention to him doing deals. This gave me a solid grounding in the mechanics of dealing. Sometimes while negotiating I have a sense of what’s going to happen next that has been valuable to me. That’s the good part of having learned from an expert negotiator. Watching all the short-sighted power games was the bad part.

Negotiation as a power struggle comes at great personal cost. I watched people in my family destroyed by their addiction to power and I experienced the cost of that addiction to the people around them. Even if power negotiation “worked”, it wouldn’t be worth it, but it doesn’t work. In the long haul, you keep running into the same people over and over, even in a profession as large as ours. The potential gains from leaving the last negotiation with everyone satisfied is much greater than the immediate gain of a better deal that leaves regrets in its wake.

When I studied economics I learned that negotiation was a transaction cost. Negotiation was something you did before you exchanged value. Minimizing the cost of negotiation was the way to create the most value.

Once I got into business for myself and started negotiating I discovered a couple of things. First, as a child I had absorbed the lessons of negotiation as power struggle and I had to actively work to change the beliefs underlying those lessons. I had the advantage that I just wasn’t that good a negotiator at first, so the power games just didn’t work for me. Lucky for me I had to find another way. Second is that negotiation isn’t just a cost because nobody knows what they need.

I found this hard to believe. How could it be that business people don’t know what they need? Money now or more money later? Risk or reward? Time or money? What’s the problem to be solved? The initial positions people (including me) staked out at the beginning of a negotiation frequently changed with respect to these fundamental questions. I learned to appreciate the learning that accompanied negotiation. Rather than try to conclude negotiations as quickly as possible, I shifted to trying to learn as much as possible and help my negotiating partner learn as much as possible.

I’ve come to see negotiation as a compassionate act, a gift. By negotiating I am giving the other party a chance to learn about themselves at the same time that I am learning about myself.

Just because I use a word like “compassion” doesn’t imply softness. The toughest negotiators are the ones I learn the most from, if that toughness comes from the right intentions.

Holding to positive intentions is the hardest part of negotiation for me. A part of me would still enjoy “putting one over” on my negotiating partner. When I spot the warning signs of this attitude, I back up and reset my goals.

I have a pathological fear of conflict, so it’s a bit strange that I enjoy negotiation. Sometimes in negotiations I stop communicating. However, at my best I’ve learned to appreciate how much I will learn about myself and how much I’ll be able to help my partner.

Having written this much, I’m struck by how much more there is to write: encouraging creativity, lateral moves, shifting risk, The Only Game, and succession. However, time is short for today so I’ll close by saying that we are all of us surrounded by opportunities. Sometimes we can see them by ourselves, but sometimes we need the help of others. Negotiation is a candle that, when lit together, illuminates the possibilities around us.