Hard negotiations: why a softer approach yields better outcomes
knowledge.wharton.upenn.edu
knowledge.wharton.upenn.edu
My basic rules for all negotiations:
1. Be useful to your counterparty. (Simply, this means to be well-informed and listen intently. Present any information they need as they need it. Don't be the type to 'bury' the opposition in paperwork when you know they're looking for a few specific details.)
2. Be empathetic to their needs. (Everyone has a reason to show up to the table. If you can identify, with absolute clarity, what they need - you can help them get there. In return, it's often MUCH easier to get what you need.
3. Don't try to win. (The extra 1-5% you might gain in most cases is outweighed by the negativity of the event. If you're negotiating with a future employer, vendor, or potential client, then the value of having them actually want to talk to you is greater than the difference most of the time.)
And lastly, #4 - If your counterparty plays hardball with you, give them a truly fair offer that addresses their needs. If they don't take a fair deal when offered, be prepared to walk away.
There are exceptions to every rule, but I've negotiated with Russians, Chinese, Americans, British, French, Italians...and just about every other European country and probably a few others I'm forgetting. (Deal sizes have been 1m+, but there's definitely layers above that where I don't have experience.) In all my experience thus far, I can honestly say I've only ever had the displeasure of having to manufacture a 'loss' once. And that was dealing with an American, albeit he was working for a large Chinese company.
I'm always eager to hear about other folk's experiences, so if you can give some more insight into what cultures you've seen this with and how you've managed to handle it I'd love to listen!
edit - I just realized the tone of this might come off as a tad 'superior' and that's truly not my intent. If you have experiences that can potentially make me better at what I do, I'm genuinely eager to learn.
I would note that some people view negations as win/lose. Personally I prefer not to do business with them. Edit: this is really covered by the "be prepared to walk away" rule.
I prefer to think of this as winning the short vs. long game. If a person wins this single deal for +5%, but blows up the relationship, they have likely lost the long game. Now any future deal with the 'loser' will be harder, and there may be ripple effects out to other deals.
The above is not only with business deals, but with but life in general.
Is it really true that you would win nothing? I think that one might be a better person to leave just a little on the table rather than have that random trinket vendor right on the knife-edge between taking the deal and refusing it.
One might even say that one could win one's soul!
I personally can't stand it when rich foreigners try to get a souvenir for a few dollars less than the list price. That infinitesimal fraction of your wealth doesn't matter to you; but it could make a big difference to them. And similarly, I hate when I have to treat business deals as if I'm negotiating with a hostile enemy, when we can both benefit.
That said, the GP comment was about trying to win the long game by sacrificing the short game, and I meant to point out that there is not always a long game and even if there is, not everyone subscribes to the same win/win philosophy and recognizing when your negotiating partner doesn't is a valuable life skill.
Yep, this is an excellent point. The interaction doesn't quite take place in isolation: it's in a societal environment, and your actions can return to you through that network in some form.
If you don't haggle in haggle culture, you're missing out. It's just part of the experience.
Of course you may not enjoy it, in which case missing out is preferable but it serves many purposes.
I think this is easier said than done. A lot of negotiations are invariably started with very incomplete information. Knowing what a fair offer for the other side would be often isn't clear.
"Real" negotiation takes place when there is no such equilibrium. For example, hostage negotiations, car sales, or a negotiation between a landlord and the tenant are of this sort. Maximizing your utility minimizes the other's utility, and vice versa. These types of negotiations proceed only by using psychology to trick the other side into making concessions. Being a tough guy is mostly counter-productive in such cases, too, it's more about exploiting cognitive biases like the anchoring effect. This activity is adversarial.
Good mediators are people who are able to turn such win-lose scenarios into real bargaining with win-win solutions, not by mere "reframing", but by really changing the decision/distribution problem. That's often possible, if you make the goals of the participants and broader setting/presumptions part of the negotiations.
Ummm, hostage negotiations probably don't have a win-win, but I think that it's at least arguable that car sales and landlord-tenant negotiations do.
After all, it's a win-win for the car buyer to have a car and the car dealer to have some dollars (lose-lose would be for the car-wanter to have no car, and the dealer to have no dollars). Likewise with landlord-tenant negotiations: the tenant wins by getting a place to use, and the landlord wins by getting money. Sure, the tenant would like to use the place with no restrictions whatsoever, and the landlord would like all the money of the richest tenant ever, but there's a point where each gets enough of what he wants to make the deal worth making.
This is why it is easiest to negotiate when you don't actually need to.
Back then I didn't know the tricks of how to negotiate in such adversarial situations. Our goals were really just "raise rent vs. keep rent as is". You could say that it was still win-win, though, for example by pointing out that our secondary goals were to maintain good relations and not have any lawsuit.
In those situations, usually the path to getting the best outcome is more about you. If you deeply understand what you need, especially as compared to what you want, you can get relative advantage.
Usually people who are selling things care about this quarter more than next year. If you understand what they need to get, you can usually find a way to make things work.
-- Below is how I mitigate that in my world, but if anyone has good strategies/tactics to handle such scenarios, please share!
Being well-informed means going in with the best possible knowledge. Of course, there's always the chance to step on a land-mine, but more often than not if you put in the work you can learn everything you need to know to frame the negotiation in a constructive manner.
Some really important points that are relevant for what I do (and may help others!)
1. Who are the stakeholders in the negotiation? Is it the person I'm speaking with, their superior, or a party much farther removed (shareholder/board member/internal influencer) that must be identified.
2. Who in their company is responsible for the information I need, if such a person even exists? Can I address the relevant questions directly to this person? (Sometimes this is as easy as sending an email and literally just asking. Sometimes not)
3. What are their high-level goals? If they are a public company you can glean a lot from their public reports and financials. Sometimes you can find out that you're basically swimming upstream, and sometimes you find out that your counterpart is basically mandated to make certain decisions.
4. Is there any visible progress towards their goals? If they're struggling to make headway, and you can identify this, you can re-focus the discussion on making their pain point go away. (This depends heavily on what you do, but for my field, I can almost always find accurate information)
Ultimately, the prep work for a serious negotiation is what we internally call CIA work. It's a lot of intelligence gathering, asking (sometimes indirect) questions to get some insights, and doing the due diligence to ensure that we're as informed as we can be. Even with all that effort negotiations still fail sometimes. But if they fail, it's usually because the type of deal that would be struck wouldn't make sense in the first place.
Of course, this doesn't apply to hostage negotiations or to what I could only describe as 'toxic' scenarios.
The assumption here is that you have access to that knowledge. In many cases, you just don't. You can't address it by emails or talking to anyone. All these scenarios aren't necessarily 'toxic' but common in daily life.
President Lincoln summed it up best:
"If you would win a man to your cause, first convince him that you are his sincere friend.
"Therein is a drop of honey that catches his heart, which, say what he will, is the great high road to his reason, and which, when once gained, you will find but little trouble in convincing his judgment of the justice of your cause, if indeed that cause really be a just one."
I teach some of the principles of rapport to stand-up comics. For example, do your material until they start ignoring you, then talk to the audience. When they start paying attention, return to your prepared material.
In general, because of the information asymmetry and extreme advantage the employer has over the employee, accepting a weak offer can mean leaving over 30% on the table, and that matters to individuals. (It matters to some companies)
You can have healthy conversations explaining that you want to reach an agreement that's good for both of you and still explain that you need to get paid. Companies and recruiters actually value that _more_.
My recommended reading/listening on negotiating as an employee is patio11's posts.
As a company, yeah, don't try to "win" and be fair (as much as is possible given funding constraints)
TL;DR - Don't buy a car or house using the same negotiating strategy you would use to negotiate a professional services contract.
>there are no negative consequences for you. did not prove true.
I have free service for the first year or so, not to mention all the warranty issues (none of those yet knock on wood) and guess which dealership is the only one close enough to my house to have free shuttle service?
That's right, the dealership that I absolutely destroyed in a game of hardball when buying the car.
Talk about a Pyrrhic victory.
Edit: maybe the service department of my dealer is just really bad. I was assuming the poor work they were doing on my car was related to my experience with the sales staff.
Service and Sales are completely different departments. They rarely speak. They rarely interact. They report through different managers, sometimes up to the VP level for large dealer groups. I've known a handful of car salesmen (half dozen or so) and quite frankly can't believe a story like yours would ever happen at any dealership large enough to have both an in-house service center as well as free shuttle service.
Making the customer feel that they took the dealer to the cleaners is a time-honored sales technique. They still made money off of you, and will be happy to treat you just like any other customer.
There may be exceptions, but I haven't seen them.
dealership that I absolutely destroyed
To these places you are a "type". They probably clocked you in moments as "guy who like to think he's playing hardball and winning" and walked you through that set of conversational gambits. At the end they end up with a profit in their acceptable range, you end up feeling you came out ahead. "win-win"
It's certainly possible they made no money on the sale itself for a variety of reasons.
You might have got them down to net zero on this on - I have no idea. But the vast majority of people who think they did, didn’t. Just part of the game.
There are pretty reliable ways to get a good/better deal , but they still make a bit of money. And you’ll usually compromise something too.
I never try to put the other person in the unenviable position of actually having to ask the manager (not the fake ask the manager show they put on). I do however call up friends and find out what the thing costs on the invoice and then go in with that as my offer. (If you are diligent enough to poke around online forums and find the right people you could probably get the same information).
Success rate: The last 2 vehicles I've bought I could have sold the same day for more than I paid.
Story turned out to be that they didn't control the mix of cars that they got, but they could sell every Prius with all options for top dollar. So internally they marked other cars down to sell fast so that they could get more Priuses.
It goes to show how dealer incentives don't always align with the manufacturer's.
(This was in Santa Monica in 2005.)
If you end up with a similar situation in your next vehicle purchase it might be worth writing up a blog. I know I'd read it!
The purpose of this system is partially to obfuscate the real "invoice" price so buyers searching the internet (or services like Edmunds) can't accurately price the car. It also allows the manufacturer to exert more control over dealers.
Presumably, for a job or professional services contract, where there is significant post-agreement interaction, the article's prescription for and reasoning behind not playing hardball still applies, even if the other party plays hardball.
I am not disagreeing with your negotiation strategy, but why would the dealer be unhappy about making a sale?
That doesn't effect the price you ultimately pay, just who gets what.
(E.g. your "true" interest rate is 2.5%, the dealer gets you to take a loan at 3.9%...they pocket the 1.4%)
The salesperson is not your friend. They know this already and the sooner you realize it too, the sooner you can get to a reasonable deal.
As an example, I got to know the leadership at the DGDG dealer group in the Bay Area over the past couple of years, and they've fully embraced the notion that there's not much money to be made on the sale itself -- and the more you try to make, the more your customers dislike you.
Instead, they aim for the price you might be able to negotiate down to somewhere else, and focus on making it an extremely pleasant experience. The goal is for you to return for trade-ins, maintenance, and all other auto related transactions.
This one is useful when the two parties are equals, but it is horribly wrong in negotiating with a future employer.
Once they've identified you as someone they want, and they've made you an initial offer, nothing you can say* will make them walk. And if you negotiate well, you'll be identified as higher value than someone who didn't.
*Within reason - if they offer $120k and you ask $150k, that's fine. If they offer $120k and you ask $500k, you might run into problems.
You don't want to work for these companies.
Some companies will try to feel you out for salary right off the bat in order to "weed out" anyone who would ask for too much money, and you need to always resist this.
The less they need you, the less this is likely to matter. But if they really need you then of course your price is high!
A hiring manager, after having offered $130k, would never do something that stupid.
This is why so many places have a "Salary Expectations" box or something similar on their interest form. Some will even try to brow beat you into saying a number. Never do this until they've named a number first. This puts pressure on them to offer something reasonable right off the bat, instead of having the pressure on you to not ask too high.
Like everything, it depends on the situation. But this seems to be key to me. Most people seem to walk in with expectations of leaving with something. If you're not willing (or able) to walk away, you're at some kind of disadvantage.
Interesting approach which uses Emotion aware technics to get what you want. The main point - let your opponent to negotiate with themselves.
Obviously neither of these needs can be successfully ignored, but thinking of it this way helps me mitigate the guilt that comes with asking for more, without engaging the "winning" rhetoric even subconsciously.
> We don't allow you to work on your own projects while working for us
"Completely unacceptable. Im a free soul and I demand my freedom!"
Compared to
> We don't allow you to work on your own projects while working for us
"I perfectly understand, no need to invite competition or leak ideas, however in my experience you'll actually benefit from XYZ and I'd be happy to ..."
My intuition is, that as long as the talk is progressing in a pleasant manner, you're inching towards your goal.
Sometimes soft negotiations have to turn to hard negotiations. In fact, I would argue that the potential to turn into a hard negotiation - but not yet being such - is a key factor in making soft negotiations work.
There's not many sticks to emolpy unless you're unionised or otherwise have strong networking in the company.
While the company might give you what you ask for this one time, they will feel blackmalied and will see you as a flight risk, ready to leave for greener pastures at any moment anyway, so they'll prepare themselves by restricting your access to promotions, trainings and critical work so you don't pull that stunt again and slowly reduce its dependency on you and you could soon find yourself training your future replacements. It's all 101 in the HR handbook.
Try it, but only as long as you always have an exit planned.
This is a pretty reliable trope. I feel like I hear this every time someone mentions putting the screws to their employer. Yet I have yet to see it borne out by evidence.
It sounds scary. In practice I have never experienced it.
The reality is that institutional memory at most institutions is so fleeting that this above threat has never become an issue in practice.
Mind you in all cases I’ve always been prepared to walk, so that’s something to keep in mind, but I’ve never experienced worse treatment for leveraging what scraps I have. It’s pretty much been the opposite. Once I have that promotion by whatever means, magically I’m treated better. It has never failed.
They can fire you, and they can delay advancement.
(Btw, you have an implicit stick about not working with as much motivation.)
Management is well aware of what might happen. Financial incentives, however, are aligned with keeping costs as low as possible. And you are seen as cost. Even when you bring money in.
That means unless you have an offer on the table, ability to waste time is a secondary consideration.
For the record, I agree about the ability to waste time. I don't agree with assessment that management does not get it. They just act in their own short term interest.
That's the equivalent of hitting myself and my employer, just hitting them a little harder.
If I'm lazing around, I'm bored and not progressing as a developer. I don't know if you've ever had a job where you do nothing or very little, but it's torture. Plus, you run the risk of getting sticked right back for underperforming.
Your biggest stick is actually flipping the table and doing something that seriously damages the company or puts it out of business. Comitting actual crimes like embezzlement, theft, or damaging company equipment for which you are not caught are also great sticks.
Of course, nobody likes to talk about that, they find it too high minded, but all to often that is what goes on behind closed doors. The root cause of it is a mal-formed, unfair compensation policy.
Classic example is Small business Sole Proprietorships where the ownership passes their purchases through the company and plays accounting games to hide profitability from their staff. The staff are always told "work harder to make the profits go up we'll reward you", nobody gets to see the balance sheet so the profit number they are given is fundementally hidden and there's no end of excuses as to why the business can't pay those market wages or big bonuses. Then one day the ownership sells, new ownership cleans house, and we repeat.
They'll negotiate just fine, make verbal promises, but at the end of the day there's a scam going on.
And when people feel scammed, then they do the aboved illegal\immoral crap and make the place a totally messed up place to work.
Not in my experience. Plenty of people able to progress talk in super pleasant manner without moving from their original position. Or to pleasantly promis and then conveniently forget that. Or most often, to make it sound like they agree, make vague pleasant statements that mean nothing.
That's not to say you can't have a dishonest counterpart - they certainly do happen. But in my experience when there's an issue like you described above there is fault to be found on both sides of the table. Leaving your notes visible in some form during a chat is another way to solve this. By having it written and in plain view it suddenly becomes much harder for the other party to come back later and say 'well I didn't actually agree to...'
Dishonest people set up process and culture so that it is easy to be dishonest. They do happen quite often. And it is not fault of people who are being intentionally lied to.
What Proziam mentioned "[if] they don't take a fair deal when offered, be prepared to walk away" doesn't work if walking away means not eating for the next week, for example.
https://www.joelonsoftware.com/2016/12/09/developers-side-pr...
I have met tough negotiators who uphold their end of the deal just fine.
The people who let me down the most are those who do not even attempt to negotiate on my prices: usually they'll think about it way later, but still won't accept discounts, until they run out of budget. Then you're thinking to yourself “why did they undermine this whole thing by paying me more than they could afford, for something I was willing to negotiate on?”. Then they miss 20k in billing, and you break it off.
At the end of the day, it's a piece of paper. Enforcing it in a civil court will take years, if not decades and costs tens of thousands if not hundreds of thousands of dollars in legal fees. Most people don't have the time or the money to do this, so it ends up "settling", often times with arbitrary fairness.
Settlement is more a game of "who can do what to whom".
I considered reading it, but then I read a review that says that although it’s useful, it presents a few quite manipulative tactics:
“A lot of what affects how much you enjoy these books is, again, how self aware you are or how much consideration you've given to how you talk to people and the best way to get what you want from others. If you already easily have any easy time convincing people, or have thought about it and are self aware of how you behave and talk to others then I don't think any of these things are going to be surprising or helpful but if you haven't ever actually considered the way you interact with people then maybe this will be an eye opening book for you. Personally I think I've always been a little manipulative so I wasn't all that impressed. The writing was average also so the books clear and easy to read but I wasn't impressed by the writing either.”
The book actually explains quite well which negotiation tactics don’t work when faced with life and death situations (hostage negotiation) and goes on to explain which ones do and why they actually work better in everyday negotiations as well.
The book has further gems like
- Deadlines cut both ways. Never hide your deadline, as it will increase the chance of an impasse: the opponent will hold out for more while you will be pressured by the unspoken deadline.
- Never bluff. Be prepared to actually walk away from the table at any given time.
- If the other party thinks lowly of you, bring forth their worst fears. This allows them to see them through the glasses of logic instead of emotions. Once you diffuse their feelings in the open, they'll be more receptive to what you have to say.
The book is worth a read.
Eg you can pretend that you have another offer. But if someone calls your bluff, you shouldn't come back begging. If you need to, don't bluff.
There's nothing backing up the bluff, apart from your willingness to walk away.
Norwegian here: I've previously read self-improvement books written by Americans that state advice that gives me the same vibes as this one, specifically a feeling of this being a very bad idea. I'm almost certain that starting a salary negotiation with a demand 80% higher than my actual goal would either get me laughed out of the room, or a polite "you're too expensive for us, goodbye".
I get the impression there's a major cultural aspect to this, with negotiation tactics that are considered acceptable or not in each culture. Does anyone have any experiences confirming or denying this? I don't think I'll stake my reputation in this small-ish city on trying this out.
Not sure if this is a cultural thing, but from my experience most salespeople and lawyers in america employ this tactic (and many others like htem!), so I recommend everyone on HN read these books to know when you're being taken advantage of. Merely identifying the tactic often neurtralizes it in any real world way.
For example, you can phrase it as "At top places like $ExampleOne, $ExampleTwo, people in my position earn between $X+80%, X+100%". You then go from there. You can also lower the start of the range or increase the end of the range, make that gap wider. Every employer will go to the initial range given and try to bring you down on it because of "excuses". you are allowed to go down up to 3 times by 10-15%, with the "say no without saying no" technique. At the end, you give the non-round number (e.g 134,567$ per year) which gives the impression you put some thought into it.
Another thing he mentioned is that money is not everything. Ask for more days or perks. If they can't meet you on those they might instead bump your salary.
It's also about putting in a bit of theatrics. For example, when I gave my final number for my salary I paused and said "give me a moment" and scribbled something on a piece of paper. After that I said my non-round number. It worked.
No technique is fool-proof. All it takes though is for it to work most of the time.
I recommend the audio as Voss narrates... And voice is important.
Good business texts haven't emphasized this approach for a long time. The prevailing negotiation methodology has been "grow the pie" for a long time. In this approach, you're not trying to claim more of the pie directly, but rather make the pie bigger and then claim a larger overall slice.
However, this article is a good reminder that an overly strong negotiating strategy can create friction later in the deal. That's good advice, and it shows the value of good business development.
If you're claiming more of the pie, but the pie isn't really bigger, you're just indirectly attempting to best the other. It's the same outcome, but with a different approach couched in friendlier wording.
Perhaps off topic, but speaking of sofas and CraigsList no one should buy a new sofa without checking a few weeks on CraigsList's free section. At least in New York City, every day sees plenty of new ones for free that will otherwise go to landfills even if like new.
My two sofas came free from people in my building, both like new.
I largely agree with this, although the researchers omit the important tactic of developing an acceptable alternative deal with a counter-party's competitor and then focusing negotiation on comparisons to it. Done well, you can still drive a hard bargain in a soft way, while maintaining the relationship by diverting the counter-party's resulting negative feelings away from you and towards the competitor.
We've had a long relationship since, and still this person can't "read the air" about pricing.
Ironically, by the end of the whole process, I realized this person could probably lower their prices by about 5-10% if they just paid closer attention to their bills and operational efficiency.
In this case, I was working with a general contractor to build a home, and I kept pointing out that "newish" houses (10-20 years old) in the area were significantly cheaper, and that his stock of new homes was sitting unsold for a very long time.
Throughout the process:
1 - He sent me to a plumbing and lighting store where everything affordable was something that would go in a very cheap apartment. Everything else was absurdly expensive. We ordered everything off of Amazon for a reasonable cost.
2 - He tried to pass a very large, and obvious, billing error from the electric company off on me
3 - At times he would hint to me about how much money he was loosing floating interest on his unsold homes. These homes had the high-end fixtures where he could have saved about $10-20,000 just buying "nice" stuff at Amazon.
4 - When the house was done, a family architect looked at my basement and told me just how over-built my structural members are.
When they see me, a white man, they like to charge a very high price. Sometimes I can get very frustrated and want to “win” the negotiation. But then I think about how miserable the next 30 minute ride may be, and I also think about how dangerous it may be. If he feels frustrated or angry with the result of the negotiation, it may affect his driving, and it is already a highly dangerous activity to start.
So, I often negotiate softer with them. It’s one of the reasons I like SafeBoda and Uber, because then the price is set by the app and I don’t have to have the potential argument with the driver. So during the ride I have great relaxed conversation with them and then when I arrive, since I know the price is typically too low, I give them a good tip, and everyone seems happy.
So two thumbs up for softer negotiations with services.
Come on people now, smile on your brother, everybody get together, try and love one another, right now...
A couple of years ago, we purchased a used Tesla (2014 MS P85D+) from someone on Craigslist. The estimated value of the car in a private sale was $48-53K on TrueCar, and the buyer was asking $50K. We paid $50K. We haven't had any problems with the car, and ended up having some roof racks/equipment given to us for free later on by the seller because he didn't need them anymore. We even found out he had prepaid the next 5 years of maintenance with Tesla.
We just went under contract on a new house, and we negotiated the deal without a real estate agent representing us. This was the extent of the negotiation:
- Us: We'll pay 6% below list, but you can save 3% because we don't have an agent.
- Them: We'll accept 5% below list.
- Us: Ok.
Also, the builder built his own house 20 feet away. We're going to be neighbors with the person we were negotiating with, and it would be better to be on good terms with them than to simply extract the maximum amount of value from them in the transaction. If anything in the house needs to be fixed in the future that isn't technically covered in the builder's warranty, they're more likely to work with us to fix it or help us get it fixed at a low cost. Plus they're our only neighbor and we're probably going to invite them over for dinner every now and then.
However, as much as I'm a fan of win/win dealmaking, I find it only works well when the other party is interested in a win/win. The first thing I do when I approach the negotiating table is assess whether the other party is a smarmy Glengarry Glen Ross/Art of The Deal jerk who is trying to rip me off. My solution to negotiating with one of these people is simple - don't. Just walk away. Leave the wolves to bite at each others' throats and find someone else to work with. You can only get ripped off if you put yourself into a situation where the people you are dealing with are trying to rip you off.
As an owner, if I negotiate super hard, the tenants will be resentful, and will damage the space, pay late, and cause no end of trouble.
There is a social element to all relationships, and the Trump-style win or go home strategy only works if you have massive leverage, and even then it will leave a sour taste in the mouth of the other party.
You want the other party to feel satisfied with their part of the deal. Not just because it's good for business (which it is), but because we are human beings and we should not be trying to squeeze every last penny out of each other.
I believe that this will inspire a great many people to this negotiating style for many years to come.