All parties to a negotiation must agree to the final result; otherwise, no agreement is ever reached. But this does not mean that everyone “wins” to the same degree. For a corporation seeking to acquire a company, a goal of win/win may result in overpayment of tens or hundreds of millions of dollars, cheating the company’s shareholders.
For a lawyer, win/win may mean a breach of his ethical duty to “zealously” advocate for his client’s interests. This happens a lot in the legal field. Lawyers rationalize that they will have to work with the opposing lawyers again in the future and they want to avoid hard feelings.[1]
Your main goal is to maximize your or your principal’s interests. The Others have their own advocates. Win/win sometimes occurs as a by-product of effective negotiation by all parties, but it should not be your main guiding idea.
From thousands of negotiations as a corporate negotiator and trial lawyer, here are some of my guiding ideas in negotiations.
- Never forget that negotiation is a very high-value activity.
In the grand scheme of things, relatively few things matter.[2] Negotiation is one of them. Negotiation is “crunch time” when months or years of effort or interactions crystallize into concrete results. Lives, careers, reputations, and fortunes can be at stake. So take negotiation seriously and prepare for it. This is a big advantage because some people are too lazy or busy to prepare, preferring to “wing it.”
- Dictate the rules, stack the deck, set the pace, and win in advance.
A negotiation is won or lost before it is held.[3] Like the negotiation process itself, “Beginnings are special” because if foundational elements are broken at the start, they cannot be fixed later.[4] Your job is to “shape” the very contours of the negotiation and thus control it to your advantage. The rules, time, place, participants, and circumstances surrounding a negotiation are “further removed” from the actual negotiation, like the long end of a lever, and thus have outsized effect on its results. Shape and influence those factors to the extent possible. One traditional tactic is to hold the negotiation on your home turf.
- Have a goal in mind and a flexible plan to reach that goal.
Before negotiations I take a piece of paper and write out how I think the negotiations may proceed, with arrows connecting demands, offers, counter-offers, and final results. It is uncanny how accurate these “game plans” often turn out to be.
- Identify and exploit the crucial factors.
Look for the “crux of the issue.” There will be one or very few at most. Usually one or more will be what I call “non-merits.”
- Identify and exploit the “non-merits” of the situation.
Seemingly peripheral or insignificant matters often substantially outweigh a situation’s objective “merits” or obvious factors. Look for and exploit these situation-specific factors. In a lawsuit, for example, the “merits” include the liability facts, law, and damages. The “non-merits” might include:
- One side’s lawyer is less experienced or competent than the other’s;
- One side has a good or bad relationship with the judge;
- The suing party needs money now;
- The suing party is tired of spending money on attorney fees and experts;
- One party is simply tired of the litigation;
- One party is on the verge of bankruptcy, which could delay the resolution of the case;
- Appeals could tie up the case for years;
- Any number of a party’s “hot buttons”–wants, needs, fears, beliefs, prejudices, misconceptions, etc. that can be discovered and exploited.
- Exploit the “anchoring effect.”
Conventional wisdom recommends letting the other party name the first figure. That’s bad advice (as conventional wisdom usually is). The first figure acts as a subconscious “anchor” on all parties which colors the rest of the negotiations. So you name the first figure, whether you are buying or selling. And be very certain that it will not be accepted (in which case you know you offered too much or demanded too little).
- Buy low, sell high.
Everyone knows that the first offer or demand is negotiable. So the most basic principle of negotiating is to price high if you are selling and offer low when you are buying. The demands/offers should be “unrealistic” but not absurd. For example, if you are negotiating to buy a $50,000 car, you should not be afraid to make an “unrealistic offer of, say, $32,500. An absurd and counterproductive offer would be $20,000. But always leave yourself room to move.
- Emphasize your strong points and the Other’s weak points. Minimize your weak points and the Other’s strong points
This goes without saying, but it is just the start of good negotiating strategy.
- Look for asymmetric values.
Through pre-negotiation investigation and during the negotiation itself, learn what is of high value to the Other and of little value to you, and vice-versa. Thus you can offer what is of little value to you but of high value to the Other in order to gain what is of high value to you and of little value to the Other.
- Understand and use the power of words, which is “the power of life and death.”[5]
Use the most powerful words, phrases, and characterizations. Simplify and overstate your case and keep repeating it.
- Use specified breaks as a tactic.
Imagine ways to overcome obstacles or seemingly impossible gaps and even to turn them to your advantage. Then you plan for, work toward, expect, and look for situation-specific events or breaks to clear the logjam. Help the other side to “break.” See my previous article, “Mastering Luck with Specified Breaks” at https://www.linkedin.com/pulse/mastering-luck-specified-breaks-lyndon-laird?trk=prof-post.
- Stay in control.
In mediations the mediator’s goal is to settle the case. Your best interest is not his concern. So don’t let the mediator control you; you control the mediator. Listen to his advice, but make your own decisions.
- Move slowly and incrementally.
Move off your initial offer/demand slowly and in small increments. If you offered $4 million to purchase a small business in distress priced at $10 million, your next offer might be $4.2 million. What have you got to lose? The seller may walk away. If so, you can increase your offer to say, $5 million to get him back to the table.
- Act like a patient, persistent, and slow-moving broken record.
Like water dripping on a stone, patient persistence can wear down stubborn opposition.
- Change the Other’s expectations
Everyone has a “bottom line” to start out, but that number can be changed during the course of the negotiation by using these tactics. This is a very high-leverage activity.
- Let the Other save face.
Allowing the Other to save face is important. People will deliberately blow up a negotiation, hurting both parties, in order to save face or to redress a perceived insult. Be tactful, courteous, polite, and gracious in victory. You can zealously advance your agenda while letting the Other save face.
- Get it in writing.
Don’t leave until your agreement is documented in writing and signed by all parties. And you do the writing. An agreement not in writing and signed is not worth the paper it’s not written on. And if someone else writes the agreement, you should go over it with a fine-toothed comb because they will slip in little terms that were not agreed to and which help them and hurt you. (Again, don’t be lazy).
- The last-minute “afterthought” may be the MAIN THING
In a large class action lawsuit I handled for the Plaintiffs some years ago, the Defendant company hired a top Big Firm as its lead counsel and the judge’s ex-law partner as its local counsel. That prior relationship between the judge and his former partner was not disclosed to us and explains why the judge was inexplicably hostile to our side throughout the litigation. (After the case settled I filed an ethics complaint against the judge, which the State Bar took more than a year to investigate). As I expected, as settlement negotiations approached, the Defendant filed several dozen Motions to Dismiss (one for each Plaintiff). Under the circumstances we had to settle. At mediation, the opposing attorney made a low-key threat, in my clients’ presence, to countersue my clients for several million dollars in attorney fees. This last-minute bombshell was a shock and had a tremendous effect on our thinking and expectations. The threat and its timing were extremely powerful.
[1] I had a large multi-party case where the lawyer for a co-Defendant, a so-called “Super Lawyer” and partner with a major law firm, could have completely shut out the opposing side on legal grounds and ended the lawsuit. But, against my strenuous objections, the “Super Lawyer” wanted to give the opposing side a second bite at the apple, presumably (1) to keep his legal fees coming and (2) to avoid ill will among the close-knit construction litigation community in Texas. In effect, he deliberately committed gross legal malpractice, breached his ethical duties, and was rewarded for doing so. [2] Greg McKeown, Essentialism (2014) [3] Sun Tzu, The Art of War [4] Peter Thiel, Zero to One (2014) [5] Pr. 18:21