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• Negotiating well is a skill, not an innate talent, but it takes lots of preparation.

• To learn to be a negotiation genius, work systematically on your negotiation skills and learn from your experiences.

• Identify your “best alternative to a negotiated agreement” (BATNA) and “reservation value” (or lowest acceptable result), and those of the other party.

• These will determine your “zone of possible agreement” (ZOPA).

• Rather than just making a deal, claim as much available value as possible.

• Look for ways to create value by building trust and negotiating creatively.

• Every negotiation is distorted by bias. To negotiate well, plan to adjust for these biases. Work systematically to understand and eliminate your biases.

• Most people don’t mean to be dishonest or irrational. What you see instead is egocentrism, social pressure, and hidden constraints or motives.

• Frame your offers to take advantage of the “psychology of infl uence.”

• You can’t negotiate everything and sometimes you should not negotiate.

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Negotiation GeniusHow to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond

by Deepak Malhotra and Max BazermanCopyright © 2007 by Deepak Malhotra and Max BazermanPublished by arrangement with The Bantam Dell Publishing Group, a division of Random House, Inc.336 pages

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This summary is restricted to the personal use of Pierre Elias (elias.pi@pg.com)

Negotiation Genius © Copyright 2008 getAbstract 2 of 5

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What You Will LearnIn this Abstract, you will learn: 1) How to prepare for negotiations; 2) How to negotiate to claim and create value; and 3) How to reduce your biases and make your proposals more appealing.

RecommendationThis strong book on negotiation offers a lot that is new and valuable. Authors Deepak Malhotra and Max Bazerman are realistic. They know how often people run on automatic pilot when negotiating, how they can miss opportunities due to bias and narrow vision, and how many common beliefs about negotiation are wrong. They provide tools and strategies that let readers address these failings. They illustrate their insights and advice with many real world examples, large and small. Many of their suggestions are not easy to follow. It takes humility and rigorous honesty to admit your biases, and lots of effort to correct them. But if you’re willing to do that kind of work this book will fundamentally improve how well you negotiate. getAbstract recommends it to anyone who is serious about negotiation.

Abstract

What Is “Negotiation Genius”? Negotiation geniuses are able to overcome marked obstacles and achieve striking success. You might be tempted to think that they are really talented at negotiation – and that it is a talent someone either has or doesn’t have. The reality is that negotiation genius is a set of skills you can and should learn. Rather than working on intuition and instinct, develop a conceptual framework that lets you understand the negotiation process, establish specifi c goals for each negotiation and prepare methodically. Forget some common misconceptions about negotiation, like the idea that your goal is always to create win-win agreements. Learn to take the psychology of negotiation into account and adjust for the biases that all humans have. Develop a mindful approach so you learn from each negotiation.

Your Tools for NegotiationNegotiation begins long before you sit down. Systematically plan how to claim value in the negotiation, value being anything “useful or desirable.” Identify your goals. Then identify your options so you know your “best alternative to a negotiated agreement” (BATNA). Figure out how much value each option has. Next, determine your “reservation value” or

“walk-away point.” What’s the lowest outcome you’ll accept? This means that if your results fall below that point, you’ll leave the table. Now fi gure out the same two factors for the other party. This research will tell you how much leverage you have. Finally, evaluate your “zone of possible agreement” (ZOPA) – the range of all the deals that could be made that would be acceptable to both parties, the space between your reservation values. You can use this basic framework to prepare for any negotiation, but also to evaluate your negotiations and learn from each one. Start with plain metrics. How much did you beat your reservation value? How much of the available value did you claim?

Evaluate the process. Did you make the fi rst offer? That can be good, since the fi rst price named works as an anchor on the range of the negotiation. If someone else makes an offer,

“You can see genius in the way a person thinks about, prepares for and executes negotiation strategy.”

“Genius in negotiation requires knowledge, understanding and mindful practice.”

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distinguish “information from infl uence” to pull out what they believe about the negotiation, but don’t let it determine your actions. Find ways to moderate that anchor, such as simply allowing time to pass. If you make the fi rst offer, justify it, keeping as much of the ZOPA available as possible. Explain why you set this price in the context of this negotiation and your relationship with the other party.

If you’re trying to fi gure out how far you can push the other party, start with research: Learn all you can before the negotiation. “Identify your assumptions” and challenge them. “Ask indirect questions” to gather information, and plan for contingencies to protect yourself from risk. At the table, pay attention to the other party’s BATNA and “reservation value.” Once you’ve both made offers, both of you should make concessions to reach an agreement in the middle. If the other party doesn’t – don’t. Instead, sit quietly, with the standing offers on the table. When you make concessions, label them as such. If you are reciprocating for an offer, defi ne what that means. When concessions shrink, that is a signal that you’re reaching the ZOPA’s limits – or the other party wants you to think so. When responding to offers, you have two goals: closing the specifi c deal being negotiated and strengthening your relationship with the other party.

To create real value for both parties, work through the issues in balance with each other. Wrap up one issue, and then add another, so you can trade values through “logrolling,” letting each party pick which issues matter to it the most. If you address more than one thing at a time, you can create packages and leverage the parties’ differences. Calculate reservation values for various combinations. This requires knowing what matters to you and to the other party, so prepare by identifying and prioritizing your interests and theirs. A numerical scoring system is useful. Shift goals; you aren’t looking to close the proposed deal, but to create a deal that adds and maximizes value. Both sides should seek ways to make changes that improve the deal for at least one party without anybody losing. Such changes can range from delivery dates to fi nancing plans and contingency contracts. After the negotiation, check the agreement again to see if a “postsettlement settlement” (PSS) can improve it. If it can’t, you already have a signed deal anyway. If it can, everyone benefi ts.

In “investigative negotiation,” you learn all you can about the situation. Look past what people demand; ask why they want it. Seek common ground or allies. When you identify each party’s underlying interests, try to reconcile them creatively, rather than focusing on specifi c items. Each time the other parties make a demand, convert it to an opportunity. For example, if they push you to fi nish a building on time, add a bonus for early completion. If they have a problem, helping them solve it is to your advantage, since you want to do the deal. If they reject your offer, don’t let that end the negotiation. Come back with alternatives. Don’t pitch them like a salesperson, though. You want to create joint agreement, not force a close. Investigative negotiations work better with mutual trust, so work to build it, inside and outside the negotiations. Create trust by asking questions about personal matters and sharing information you don’t have to share.

The “Psychology of Negotiation” As a negotiator, you must face the depressing fact that “people are irrational and make mistakes,” and that includes you. The good news is that most mistakes within negotiations are “systematic and predictable,” and many fall into just a few categories so you can plan for them. The “fi xed-pie bias” mistakenly assumes that there is only a limited amount of value to divide. Address this by creating more value. The “vividness bias” kicks in when one factor is so vivid it blots out consideration of other elements, as happens when a proposed salary outshines all the other factors in a job offer. To compensate, “create a

“Many people believe that you can either get a great deal for yourself, or you can play nice and make the other side happy. As it turns out, this is not the way it works.”

“Adding issues to a negotiation is an important tactic for value creation because of a simple formula: more issues = more currency.”

“Your greatest opportunity to build trust comes when your cooperative, benevolent or ethical behavior cannot be interpreted as self-serving.”

“Egocentrism is not only common, but also robust and resilient. It can also be extremely costly.”

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scoring system” that forces you to evaluate every element methodically to see if you are being unduly infl uenced.

Many people engage in the “nonrational escalation of commitment,” such as when executives hold on to a waning strategy because they don’t want to lose face. This parallels what happens in auctions when people keep bidding past an item’s worth. To avoid this bias, plan your “exit strategy.” Recruit a “devil’s advocate” to challenge your logic. Anticipate the forces that will pressure you to escalate your position, then plan your responses.

“Susceptibility to framing,” another common bias, means that the way information is presented can shape your response to it. To fi x this bias, reframe key points. Use different points of reference to evaluate data.

The heart can steer you astray as easily as the mind. For instance, “motivational biases” can lead you to make poor negotiating decisions. These biases crop up when your motives clash, such as when what you want confl icts with what you know you should do. To cope, give decision-making authority to someone else at particularly troubling points. Anticipate when events might trigger a confl ict and plan safeguards, like preset limits. Egocentrism is another source of bias. Humans tend to interpret things in their favor, so different parties won’t just disagree on what they want; they’ll also disagree on what is fair. To reply, use the “outsider lens” to see things from a third-party perspective. What looks fair? Overconfi dence and optimism are related biases. People tend to estimate that they and their group will always do better than average, and to view other people’s wins as the results of inappropriate or unethical actions. Recognize the risk of overconfi dence. Avoid judging people as being inside or outside of your group; instead, build trust among the parties before the negotiation.

People often run on autopilot, so be aware and confront your biases systematically. When you face a decision, review your thinking processes. Time pressure can nudge you back to an intuitive approach, so try not to negotiate when deadlines loom. Break your negotiation into sessions, and review your decisions between each one. Use analogies to learn from experience beyond your own. Go back to “the outsider lens.” Or literally bring in someone from the outside to check your perspective. Plan for other parties’ biases. For instance, Oakland A’s general manager Billy Beane statistically analyzed which baseball players did well, rather than relying on baseball scouts’ opinions. This eliminated subjectivity and let him assemble winning teams at a lower cost.

Help the other party overcome its negotiating biases – not out of altruism, but because bad negotiators make worse deals than good ones. Confi rm all their data against multiple sources. Include contingency clauses in your contracts to address confl icts arising from bias. For example, if a salesperson makes extreme claims for a product, don’t challenge the person. Instead, include in the contract penalties for nonperformance and rewards for excellence.

Negotiation Strategies and Challenges Use the “psychology of infl uence” to shape the other party’s reaction to your offer. Since people fear loss more than they wish for gain, accent what they’ll lose by rejecting your offer. People would rather get their losses over with, so if they will incur multiple losses, lump them together – but detail each gain independently. Try making an extreme request fi rst. The other party will reject it, but your actual proposal will then seem more moderate. Or fl ip the process: Get them to agree to a small request that lays the foundation for your larger proposal. Increase the likelihood that people will agree by justifying your proposal, offering points of reference that make it seem reasonable and showing that it has social support. Make a small, voluntary concession to your counterparts to trigger their desire to reciprocate.

“Negotiation geniuses do not assume that they are immune from bias. Rather, they accept the fact that their intuition, like that of other smart people, is fundamentally fl awed.”

“Negotiation genius is about human interaction, and the only raw material you need to achieve it is the ability to change your beliefs, assumptions and perspective.”

“Genius, then, is sometimes nothing more than taking the time to see that to which others have turned a blind eye.”

“Many (and perhaps most) of the unethical behaviors in which people engage during negotiations result from ordinary, unintentional psychological processes, not from deliberate – or even conscious – deception.”

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Sometimes blind spots can cause diffi culties. For example, you invite trouble if two other parties have an interest and you open negotiations with only one. If the other party has rules about decision making – such as requiring that all the partners in a fi rm must sign an agreement, you could waste time and energy if you don’t address everyone’s interests. Gaps in data or understanding can create blind spots. If you are blind to your competitors’ strengths, you’ll misread how big a threat they present. Focusing too strongly on a current deal can blind you to future risks and opportunities. You can win now, but will you have to deal with these people again?

Many people think that lying in negotiations is okay. It isn’t. Don’t do it. It also establishes a precedent, indicating that others can lie to you. Be ready when others do lie. Arrive prepared and show that you know how to gather and confi rm information, so that lying to you seems risky. Ask indirect questions to confi rm what you’re told. Responses that dodge the question you asked may be attempts to misdirect you. If you fear a lie, build contingency clauses into the contract. If you think you’ve caught someone in a lie, check to make sure the person didn’t simply make an error. (Don’t assume malice.) If it is a lie, decide if you want to keep negotiating and if you need to confront the problem. To avoid telling a lie, anticipate diffi cult questions and plan which ones you won’t answer, for example, probes that would require revealing too much information. Instead, provide data that meets the questioner’s underlying needs. Discard structural constraints that entice people to lie, such as budgeting processes that push departments to infl ate their annual budgets.

Lying isn’t the only ethical dilemma in negotiations. You’ll also hit confl icts of interest. People, including professional agents, like lawyers or real estate brokers, interpret situations in ways that benefi t them. Recast the situation to avoid this pitfall. For example, insisting on a higher selling price benefi ts the Realtor, but may leave your house on the market longer. Can you reward the Realtor some other way that provides an incentive to act as you wish? Many people also negotiate on the basis of stereotypes and assumptions, thus introducing biases they really don’t intend to include. To become a negotiation genius, work to eradicate such prejudices.

Negotiating from an extremely weak position or in an ugly situation is intensely challenging. In most cases, don’t let people know you’re weak. Instead, reframe the issue to show how the deal serves them. Sometimes, though, you can reach your goal by frankly admitting your weakness and your desire to make a deal, and asking for the other party’s help. This can jog you out of an adversarial position. Move out of such a position when the other party is very angry or seems irrational. People almost always have reasons for their words and actions, so rather than assume they are as irrational as they seem, seek hidden motives, hidden constraints or an information gap you can fi ll. If they’re really angry, acknowledge that and address the underlying interest driving the emotion.

Finally, remember that you can’t negotiate everything and you shouldn’t always try. Do not try to negotiate when it is culturally inappropriate, “when your BATNA stinks – and everyone knows it,” when you’re under serious time pressure, when negotiating would send the wrong signal about your motives and when it would damage an important relationship.

About the Authors

Deepak Malhotra teaches negotiation at the Harvard Business School. Max Bazerman, who also teaches there, has written more than 100 articles, and written or co-written more than a dozen books, including Judgment in Managerial Decision Making.

“If all you have to fall back on are the ‘soft’ strategies of infl uence, you will be seriously outgunned. Not all negotiations go smoothly, and not all negotiators are amicable. Negotiation geniuses anticipate this, and they know what to do when things get tough.”

“Some negotiation ‛experts’ will tell you that ‘you can negotiate anything.’ Perhaps you can – but that does not mean you should. Often there are better things to do than negotiate.”