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Nov. 4, 2003
FROM THE AIRWAVES
A Nose for Negotiating
From the Airwaves is a transcript of “The GW Washington Forum,”
the weekly public affairs radio program produced by GW, hosted by Richard
Sheehe, and broadcast on WWRC-AM 1260 in Washington. This conversation
with Charles Craver, professor of law and author of “The Intelligent
Negotiator,” comes from a recent program.
Richard Sheehe: When you talk about a whole
process of negotiation, it sounds like it’s possible to apply this
process not just to legal situations, but to business situations, maybe
even to marriage, hostage negotiations, all sorts of applications. What
are some of the basics about negotiation?
Charles Craver: The biggest thing that people
need to understand is how structured it is. Most people, when they start
preparing for negotiations, sort of have an idea of where they are going
to start, where they hope to end up and what their bottom line is. That’s
all they know. In between where they start and end up, they wing it. They
think of it as totally unstructured. This is true for lawyers, for people
negotiating over employment, the purchase of a car, anything. What I hope
people start realizing is how very, very structured and predictable negotiations
are. You can’t always predict the actual results, but you know how
you’re getting there. So I try to break it into six distinct stages.
We talk about the different techniques, best offer first, limited authority.
RS: Let’s talk about these six stages.
What’s the skeletal outline of how to negotiate in pretty much any
situation?
CC: The first stage to me is the most important
and you’re not even negotiating with your counterpart — preparation.
How do you get great negotiating results? Prepare, prepare, prepare. There’s
no substitute for thorough preparation because knowledge is power. If
you really know what you have to know about this negotiation, you want
to know the facts. So go do your homework. You may go to a library to
do your research. You may go online if you’re going to buy a car
— kbb.com for Kelly Blue Book (for example), where you get a pretty
good estimate of the dealer costs and their rebates, incentives and things
that are relevant to the price of a car. Why do car dealers usually win?
Because they have one piece of information that the consumer normally
doesn’t have — we normally don’t know really what they
paid for the car. It isn’t the invoice because that may be thousands
of dollars or hundreds of dollars above what they actually paid when you
add up the incentives and the rebates. So the first stage: try to figure
out what it is that you’re negotiating. What is the housing market?
What is the car market? What is the employment market? What’s the
market for what you’re going to negotiate.
The more you know, the more you exude an inner confidence that will unnerve
a less-prepared opponent. I see it time after time with my students. The
students who get best results are normally the most thoroughly prepared
and they really do believe in their position. So this is critical. Once
you have that information, then ask what’s the likely thing that
will happen to you if you didn’t reach an agreement with your adversary?
What’s the best thing or the worst thing, depending on your perspective,
that would happen because this is your bottom line? Are there other people
with whom I can do business? If we’re negotiating a dispute, what
happens if we don’t resolve our dispute? You never want to enter
into a deal that’s worse than what you had. Most people ask that
question, but they fail to ask the second part of that question: what
happens to your opponent if they don’t reach a deal?
The biggest mistake people make is they never bother to look across the
table and ask what happens to your opponent. You always want to try to
put yourself in the shoes of the other side and ask what’s their
perspective? Because the answer to those two questions will define the
relative bargaining power.
RS: Why do you think it’s so difficult
for people to look across the table and have this empathy for the other
side?
CC: Because we really focus on our own side.
I get involved in negotiating consulting work with lawyers and they always
do a wonderful job of detailing all of their problems. When they’re
done, I say let me tell you what I’m concerned about if I’m
your opponent. They’re always stunned.
What’s your goal going to be? There’s a direct correlation between
aspiration level and outcome. The students who get the best results on
negotiating exercises are the people who wanted the best deals. And the
people, interestingly enough, who are the happiest of negotiators, are
usually the people who always get what they want when they negotiate because
they don’t want anything. There are people who say “I’m
a great negotiator, I always get what I want.” They’re the least
effective negotiators because the only way you can always get what you
want when you negotiate is if you don’t want anything. You’ll
always get what you want and be happy. In reality, the people who are
the most frustrated are the most successful negotiators. They have very
high goals, they come up a little short and they are frustrated by their
inability to get everything they want. But the fact of the matter is they’re
getting the best results. If you always get what you want when you are
negotiating, raise your goal.
RS: Anyone’s who has bought a house
in the last three or four years knows that it’s very easy for bidding
wars to break out. How do you handle yourself in a situation like that
if you’re buying a house?
CC: You really have to know the market. This
is where the preparation is critical. How valuable are the houses in this
particular area? If you don’t know the market, you’re an easy
pickings for the seller and the real estate agent. Secondly, you have
to decide how much time you’re going to give them on your offer.
If you make an offer, you might decide to give them a short time of one
day or until 10 pm or the offer is withdrawn. And you want to know how
long the house has been on the market, if at all possible, because the
longer it’s on the market, it probably means it’s a little overpriced,
otherwise people would have been running in a long time ago. If you do
get involved in a bidding war, what you have to decide is how high are
you willing to go because there can be euphoria here where people at the
end want the house even if they pay too much for it. That’s where
you have to know your bottom line.
One last thing about preparation: where are you going to start with your
opening offer? You have your bottom line, you have your aspiration level,
where are you going to start with your opening offer? This is very critical.
You don’t want to start with an offer that’s absurd — you
lose your credibility and turn off your opponent — but you don’t
want to start too generously.
Send feedback to: bygeorge@gwu.edu
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