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Negotiating Masterfully
by Dr. Michael Benoliel,
Director
Center for Negotiation
Cultural dimensions determine how negotiators think
and act. Negotiators from Asian, relationship-oriented societies like
Singapore and China, for example, tend to nurture friendship and trust
with their counterparts. Anglo-Saxon societies like the United Stated,
Australia, and Canada, in contrast, place less value on the communal
ethos and more on the primacy of the individual. Negotiators from these
societies, therefore, tend to focus more on the substance of the deal
and less on the dealmakers.
While cultural differences, indeed, influence the way
Asians, Americans, or Europeans negotiate, there are certain negotiating
principles that transcend both cultural differences and negotiating
fields, like business, diplomacy, labor or law. Based on my personal
interviews with 30 world class Master Negotiators, I highlight here only
three of the best negotiating practices world class Master Negotiators
use.
Know your objectives
In 1987 Robert Campeau, a Canadian businessman,
sought to acquire the American department store, Bloomingdale’s. On
January 25th, 1988 he initiated a hostile takeover bid for
Bloomingdale’s parent company, Federated Department Stores. Immediately
a bidding war began between Campeau and Macy’s, another interested
acquirer. Observing the escalating bidding war for two months, the Wall
Street Journal characterized it as no longer a bidding war over price
but a war of egos.
On March 31, Macy’s appeared to be winning the
contest, but Campeau, refusing to leave the table, topped Macy’s already
high offer by roughly $500 million. He won the battle, but not the war.
In January 1990, he declared bankruptcy.
In contrast to Campeau, the legendary billionaire
Howard Hughes was both, flexible and firm. When he was signing contracts
to purchase new airplanes, he was flexible on non-essential airplane
specification issues, but left no room for bargaining when it came to
two issues: The price had to be right and the delivery dates had to be
written in stone.
Master Negotiators go to the table with a clear set
on objectives. Kenneth Novack, vice chairman of Time Warner, a media
conglomerate, divides his negotiating objectives into two categories:
the “must-haves” (critical objectives) and the “like- to-haves” (desired
objectives). American labor union leader, Richard Trumka calls his
objectives the “needs” – the things that are essential in order to come
to agreement and the “wants” – the things he would like to have.
Negotiation after all is not about getting the deal. It is
about accomplishing your objectives. Master negotiators not only set
clear negotiating objectives; they condition themselves to walk away
from the table if and when it is apparent those goals are not going to
be met. The former CEO of Kellogg, Carlos Gutierrez does that. “Even
though this (Kellogg acquiring Keebler) was a deal that I desperately
wanted,” he says, “I conditioned myself mentally that I might not have
it.” This is also the business attitude of Sol Goldman, the owner of 800
buildings in New York. When he was asked how he had accumulated his
enormous wealth he said: “I never wanted anything so much that I
couldn’t walk away from it.”
Less skilled negotiators make the mistake of going to the
table without clearly set goals. “You ‘d be surprised how many
negotiators don’t know what they want with the kind of precision that a
negotiation demands,” says Charlene Barshefsky, former U. S. Trade
Representative, and winner of Harvard’s Best Negotiator Award.
Consequently, they end up with either no deals or bad deals.
By creating precise “must haves” and like-to-haves,” lists,
you will know your limits before you get to the table and avoid the trap
of escalating bidding wars.
Negotiate from both sides of the table
A U.S.
arm control negotiator was once asked if he could craft a proposal
taking into consideration the interests of both the Soviet Union and the
United States. He was dumfounded. Why in the world would the United
States care about the Soviet Union’s interests? Their interests is their
problem! In a similar vein, a congressman from South Carolina once said
that the Soviet Union will not accept a SALT treaty that is not in their
best interest, and if it is in their best interests, it cannot be in our
best interest.
That kind of a mindset, which I call the
“incompatibility bias,” drives negotiators to behave competitively and
adopt a win-lose negotiating style.
Master Negotiators, in contrast, think and act
differently. In the late 1970s, Robert Johnson, a Washington lobbyist
for the cable industry trade association, realized that
African-Americans had a lot of buying power, but no TV outlet. Examining
the programming offered on the cable system in 1979, Johnson quickly
realized that filling the gap – offering a cable channel devoted to
African-Americans – had tremendous business potential. To become a cable
programmer, Johnson needed money, which he didn’t have. But he knew
people with money. One of them was John Malone, “the King of Cable,”
whom Johnson knew through industry meetings.
Today Johnson says, “The biggest negotiation I did in
business was to convince John Malone to invest in my idea, in creating
Black Entertainment Television (BET).” To convince Malone, Johnson
applied the compatibility principle. He pitched his idea intentionally
appealing to the things that Johnson felt were important to Malone as
well as to himself. “I knew Malone believed in entrepreneurial
initiatives and in individuals helping themselves and not relying on the
government to help them,” Johnson says, “and so everything that I talked
about with him was designed to hit these points. I had to convince him
that I shared his value system in a way that he would come into this
deal."
When Johnson was ready to make the pitch, he flew to
Denver, Colorado to meet with Malone and present his business plan. “How
much money do you need?” Malone asked him. “It would take $500,000 to
get it going,” Johnson replied.
At that time Malone was interested not only in owning
the cable wires (hardware) but also in owning the programming (the
software). “I’ll buy 20 percent of your company.…and I’ll loan you the
rest,” Malone offered.
Johnson said yes and a one-page agreement was drawn
up immediately. A few moments later, Johnson got a check for $500,000.
The deal, which took less than one hour to put together, became a great
financial success. Twenty-two years later, BET was sold to Viacom
International for more than two billion dollars.
The compatibility principle, which conveys the
concept that “we are similar,” was used in a different way and under
different circumstances by Armand Hammer. In the mid-1960s, Hammer, the
founder and former CEO of Occidental Petroleum, applied the principle
when he made his first bid for an oil concession from Libya. To win the
competitive bid, Hammer presented his bid in Arabic, written on a
sheepskin parchment, rolled up, and tied with ribbons bearing the Libyan
national colors, green and black. By using Libya’s cultural symbolism,
Hammer showed the Libyans that he had studied their culture and
respected it. It meant a lot to them, and Hammer won the concession.
“People are not going to do something against their
interests,” sports agent Leigh Steinberg says, so it is essential to
craft an agreement that will have real benefits to the other side. To
figure out how to do that, he says, he works hard to put himself into
the heart and mind of the other negotiator and see the world as he sees
it.
Inexperienced negotiators tend to focus primarily on
incompatibilities and on their own interests. They, unfortunately, let
the differences “take over” and drive the negotiation process, which
often leads to deadlocks and poor results. In contrast, Master
Negotiators, like Johnson, Hammer and Steinberg, are aware of the
differences, but focus primarily on the similarities, the shared
interests, and on how to creatively bridge the differences.
Think strategically
In 2000, IMS Health, a major health care information
provider, agreed to merge with Trizetto Group, an Internet health care
company. Once the merger was announced, the investors panicked and sold
their stocks, wiping out $2 billion of the companies’ combined market
capitalization. The merger was not managed strategically because the
merger’s managers did not take the time to fully explain the benefits of
the merger to the stockholders.
Master Negotiators invest time in understanding the
complex and dynamic negotiating environment. They develop a
“Stakeholders Interests’ Map” (SIM), which identifies all the
stakeholders, the quality of the relationships between them, their
conflicting and compatible interests, and their power. The SIM enables
Master Negotiators to initiate offensive moves - like forming
coalitions, or defensive moves like forming blocking coalitions - in
essence, to better manage the strategic environment.
This
is what Edgar Bronfman, the former CEO of Seagram’s, did effectively
several years ago. When Bronfman approached the Swiss banks on the
issue of compensations for Holocaust survivors whose families’ assets
had been held by the banks since World War II, he was stonewalled.
Bronfman then sought support from other groups who could apply pressure
on the Swiss banks. It didn’t take long before Swiss banks and
Swiss-based companies were facing a massive divestiture of stocks by
huge U.S. pension funds. In addition, the proposed merger between Swiss
Bank Corporation and the global financial services firm UBS was delayed
because of this negative publicity: Swiss Bank Corporation couldn’t pass
a “character fitness” requirement needed to operate in New York. Facing
growing pressure from a formidable coalition, the Swiss banks caved in
and settled for $1.25 billion with the survivors.
Whether you are negotiating with counterparts from the same
or different cultures, the key to negotiating successfully lies in these
three negotiating principles: know your objective; negotiate from both
sides of the table; and think strategically.
Dr.
Michael Benoliel is the Director of the Center for Negotiation (www.centerfornegotiation.com)
and the author of the negotiation book titled,
Done Deal: Insights from
Interviews with the World's Best Negotiators
(Platinum Press, 2005) which was selected by the Chicago Tribune as one
of 2005 best business books. He has provided consulting and training
services in Effective Negotiation, Transformational Leadership, and
Corporate Strategy in the United States, Asia, Europe, and East Africa.
Recently he has delivered negotiation workshops in Singapore, Kuala
Lumpur, Hong Kong, London, New York, and Washington, D.C. |
