I’ve been on a bit of an
Adam Grant kick this year. The Wharton professor’s book, Give and Take, has had
those of us in the leadership field thinking and talking. It’s made numerous
lists of the year’s best business books, as it offers significant,
research-based, evidence that disputes many of the influencing practices that
we take to be correct.
Grant’s work is immensely practical and timely. It cuts to
the core of the influencing skills so many professionals are trying to
strengthen in our current virtual, distributed workforces.
One of my favorite elements of Grant’s work involves
negotiation. Being able to negotiate well impacts so many key factors in our
careers. We negotiate for our jobs and salaries, for promotions and resources,
with clients, and in sales. And if you’re in a field like law or investment banking,
you negotiate non-stop.
Grant, and his colleague Northwestern University professor
Adam Galinsky, are well worth the read if you’re trying to bone up on your own
negotiation skills. And let’s face it, aren’t we all? Even the best negotiators
fall prey to some of the traps that the research indicates simply do not get
the best deal.
1. Share information.
We often approach negotiation being very guarded and wary of
showing our cards. Yet, while we believe this is a smart approach, it has a
negative impact on our outcomes and inhibits trust. As Grant points out, people
tend to be matchers and “follow the norm of reciprocity, responding in kind to
how we treat them.” If we want to be trusted, we must first offer it.
Studies have shown that revealing some information, even
when it’s unrelated to the negotiation, increases the outcome. You don’t have
to put all of your cards on the table at the outset. Simply putting something
of yourself out there – your hobbies, personal concerns, or hopes – can set a
positive tone that’s conducive to gaining agreement.
2. Rank order your priorities.
Typically when we negotiate, we know what our key issues
are, and we sequence them. For example, if we’re trying to close a new client,
we might say that the price is most important, and if we don’t agree, there’s
no use to continue.
Grant recommends another approach called rank ordering. His
research shows that you are able to achieve better outcomes by ranking and
leaving all the issues on the table and being transparent about it. That way
both parties can compare their rankings and determine what the full set of
options really are.
In the above example, perhaps you could make trade-offs in
scope or travel requirements if the client can’t get to your price.
3. Go in knowing your target price and your walkaway terms.
Galinsky calls your walkaway price (or terms) your
reservation price. Your target price is what you’re hoping for. Often we go
into negotiations with one or the other – or let our partner start the bidding.
This puts us at a huge disadvantage.
It’s critical to do the research ahead of time here. You
need your research to be based on firm data, as not only will it provide more
confidence and power to you, but it also reduces the chance that you’ll throw
something crazy out there. By knowing your own range, it will help you make
better decisions in the moment, and be clear about your limits.
4. Make the first offer.
This is one piece of advice that clearly defies conventional
wisdom. In negotiations, information is often equated with power. We believe
it’s best to extract as much as possible from the other person before tipping
our own hand.
Grant and Galinsky both agree that the research is clear on
this point: people who make first offers get better terms that are closer to
their target price. The reason is the psychological principle of anchoring.
Whatever the first number is on the table, both parties begin to work around
it. It sets the stage.
Often we are reluctant to go first because we may be way
off, and disengage the other party. But Galinksy notes that this does not play
out in the research. He said that most people make first offers that aren’t
aggressive enough.
There’s a reason we have the adage, “you get what you pay
for.” Higher prices make the buyer focus on the positives, while lower ones
invite focus on the downsides. In other words, we find data that supports this
anchor. (Consider real estate: a high-priced home makes us look at all the
desirable qualities, while a below-market offering brings up a bad location or
needed repairs.)
Galinsky says that ideally the best first offer is one
that’s just outside your partner’s reservation price, but not so far that they
have sticker shock.
5. Don’t counter too low.
If you aren’t able to make the first offer, then you need to
also protect yourself against the anchoring effect. Caution: most people go too
low, too quickly. Your counter should be based on the same information you
would have used if you’d made the first offer, Galinsky says.
You may also want to consider re-anchoring, as Grant puts
it. Let the other person know that their offer is way off, and go back in with
a new reset. It also may be helpful to call out what you’re observing to
redirect the conversation, i.e. you may be trying to test my thinking with that
first offer, but here’s more of what I had in mind.
6. Counter offers make both parties more satisfied.
Every buyer wants to feel that they got a good deal; every
seller wants to feel as if they drove a hard bargain. Parties are most
satisfied on both fronts if there was some back and forth. This may come as a
surprise if you’re someone who abhors negotiation.
Galinsky even advises that you shouldn’t take the first
offer, even if it meets your needs. By going back and asking for concessions
you can ensure that you got the best deal, and increase your partner’s
satisfaction as well. More satisfied partners are more likely to work harder
and be more committed to the end result, which is the ideal outcome from the
start.
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