Discover more from Course Notes: Continuous Business Learning
Value Negotiation: How to Finally Get the Win-Win Right 7/x
Negotiating independently of trust (i.e., even if there’s no trust, this shouldn’t stop us) is important when initiating the interaction. Trust is useful to increase the expectation of a positive outcome for both parties, leading to better information exchange and increased value creation potential. Trust is also persuasive, making requests more likely to be accepted.
Too much trust is not without its risks: there’s less motivation for parties to verify information and there’s a temptation to trade relationship arguments for substance gains. Trust also is not a replacement for a good communication process.
Trust means different (not contradictory) things to different people, and it comes in layers. People may not tick all the boxes immediately, and most of the time all boxes are not needed anyway.
Ability – can a person deliver on a promise? (Skills, knowledge, credentials)
Honesty – does a person intend to deliver on a promise?
Reliability – will the person be available to and consistent in delivering?
Caring – does the person have our best interests in mind? [MK: this sounds like fiduciary duty] This is a tricky layer because employees who only working for the money are considered less caring, while they might honestly care about their professional service delivery, for instance.
Intimacy – does the person share similar emotions or perspectives on issues important to us? This is the hardest layer, as there’s no rule for developing intimacy, and it’s not known what issues define both of the parties at once.
Relationship negotiation goals can be defined based on these five components above. We look at two interactive variables: the depth of personal relationship and the breadth of business issues. Major transactions may need a targeted investment in relationship, but not more than needed. There are four categories of relationships addressing the interactions we desire (at least some level of care is present everywhere):
Transactions – we only care about the other party’s ability to make us coffee or drive from point A to point B safely. We use positions, not interests here (do we really care about the taxi driver’s interests for the trip to be safe?).
Needs – the majority of our negotiations. We rely on the other party’s honesty to help us make a choice in the lack of critical information (i.e., we are offered options). (Asking a waiter to suggest a bottle of wine.)
Partnership – on top of the needs there may be joint opportunities. The situation adds complexity leading to greater variability and information asymmetry; hence reliability is required here. The options are shared.
Trust – that’s when we control less and respect more. Such relationship stimulates an intimate appreciation for and a deep understanding of one another. Most relationships don’t need trust, as the time and effort spent building a trust relationship is usually not worth it. Maintaining partnership-based relationships is cheaper, faster, and usually as productive as trust relationships.
The opposite is true as well: underinvesting in relationships (transactional-based when needs-based or partnership-based are required) leads to our favourite “win-lose” tactics with an unpredictable result.
Should people be trusted 100%? No one is perfect, and humans do make mistakes. Even the people with the best intentions sometimes fail to live up to such high expectations.
Trust gives a subjective sense of safety and understanding about each other’s interests. It creates a usually improbable assumption of knowing more about the other party’s interests than we actually do, making negotiations run on the assumptions, not facts.
Starting with distrust is dysfunctional because in the almost inevitable case of misunderstanding it doesn’t guarantee deeper probing. The distrusting negotiator simply assumes the worst-case scenario and moves on.
Starting with zero-trust allows holding off judgement to come up with alternative interpretations why someone would say or do something. It’s a fertile ground for asking for more information to understand another party better, without building assumptions too quickly. More information leads to increased trust building.
This is all good, but usually zero-trust doesn’t exist, because people are making the trust/distrust decisions intuitively; zero-trust is a discipline of suppressing these intuitive decisions not based on information (made by the irrational part of the brain, no less) and focusing on information exchange, rational trust efforts and value-creation decisions based on legitimacy.
A nice mental practice is asking oneself: “If trust were not an issue in this negotiation, what would I focus on to build value?”.
Unconditionally Constructive Behaviour (UCB)
It’s a behaviour that’s simultaneously good for:
The relationship between the parties.
The other party.
Our party, even if the other party doesn’t reciprocate.
Soft bargainers fail at this step when then either try to reciprocate unproductive behaviours with similar actions (a vicious circle) or open themselves to be manipulated when being unconditionally nice instead of constructive.
A very frequent mistake negotiators make is making unilateral substance concessions to the other side hoping for reciprocation. If the other party hasn’t made clear that it would definitely reciprocate, this is a wasted move at best and the lack of response in kind from the other party may feel like a betrayal.
Thus, a proper UCB move is the one with high reward (building a relationship) with low risk (not unilaterally giving anything of value and trading between negotiations). Even if the other party doesn’t reciprocate, this still makes the negotiation better off.
Be rational when talking about relationship
Controlled and balanced management of emotions, rather than total inclusion or exclusion of them. It’s OK to tell another party about the emotions their words or actions trigger, just not give in to these emotions. Acknowledging other party’s emotions and bringing rationality by trying to understand the source of frustration is a working approach.
Fewer emotional outbursts improve the tone of the conversation. Acknowledging others’ emotions usually defuses potential conflicts. This all leads to a higher chance of being heard and focusing on the substance negotiation faster.
Rationality allows consciously balancing value over time. Move from being greedy (more for us at their expense) to ambitious (more for both sides, not at each other’s expense).
Understand the interests of all parties
Just listening is not enough; we aim to understand how they see and feel things – and show it to the other party.
As the bare minimum, understanding helps deal with the real issues, and active listening sends a consistent message of the willingness to focus on them. If the other party doesn’t reciprocate on understanding – it’s OK, we still know more and can make better decisions.
Understanding the other party (and even empathising with them) doesn’t mean agreeing with the request as it may just be a delusion.
Communicate our options before committing
Whenever possible, consult with the other party (and whoever else this may affect) before deciding. There’s no risk in sharing information if the sharing party keeps the decision-making authority and communicates it accordingly.
Many misunderstandings and surprises can be avoided, new risks and opportunities can be identified. Better understanding of the impact of the decision will reduce the uncertainty of the other party and increase trust levels. If the other party doesn’t reciprocate, communication still increases potential buy-in and learning.
Be Trustworthy on our commitments as agreed
It’s important to follow through on the promises and only promise what we can deliver. This includes the refusal to share confidential information or admitting gaps in information.
A trustworthy environment offers less surprises and lower transaction costs. It’s much easier to deal with someone who’s consistent in promises and delivery without betraying anyone. Even if the other party is untrustworthy, they are more likely to believe our promises without demanding guarantees.
Only trust another party based on the risk analysis: promote trust, but only trust based on evidence. If the value at stake is high, either more time should be spent building trust or there needs to be a deal independent on trust.
Trust is built through slow, small and verifiable steps based on risk analysis. Look for consistent reciprocation of each step. Large, quick and unilateral steps create power distance and win-lose temptations.
Persuade based on legitimacy
People want respect and make decisions their own (even if they need to be persuaded, but never – coerced). Persuasion helps attack the problem, not the people.
Authority is replaced by a rational discussion of what’s the best thing to do. Participation in decision making creates the necessary buy-in. And countering coercion with persuasion has a higher chance of success.
It’s important to be open to persuasion (and definitely look the kind), otherwise our persuasion arguments can be perceived as disguised unilateral coercion moves. A helpful technique is explaining to another party what sort of verifiable arguments (legitimacy) may help change our mind.
Accept their communications will be different
We need to accept the other negotiator’s right to think, feel and be different. It is a matter of respect, not commitment, and is very different from accepting the substance, which should only happen if there are very good reasons for it (legitimacy).
Feeling accepted makes people less threatened, allowing them to focus on the real issues, open up with ideas or at least reduce or eliminate resistance.
Dealing with risks requires more than acceptance, but it may be helpful to work on the incentives or penalties together (since they affect both parties and need to be fair). This applies to personal or institutional guarantees, too.