Basic Negotiation Skills 2015 -...

© Practising Law Institute

LITIGATION AND ADMINISTRATIVE PRACTICE SERIESLitigation

Course Handbook SeriesNumber H-972

Basic Negotiation Skills

2015

ChairDoug MacKay

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Outlining Negotiation Types and Processes Materials

Doug MacKay

Exec|Comm LLC

© Exec|Comm LLC 2012

If you find this article helpful, you can learn more about the subject by going to www.pli.edu to view the on demand program or segment for which it was written.

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INTRODUCTION

As lawyers, you negotiate. Primarily, you negotiate on behalf of your clients. You negotiate the terms of a deal, a plea bargain, a discovery schedule.

You also negotiate with our clients regarding fees, deadlines, volume of business, retainer agreements, level of service and referrals. Because of the “high-end” nature of legal work, negotiating with a client often feels less like a formal negotiation and more like a simple professional conversation. Nevertheless, it is a negotiation.

Often, you negotiate within your own firms. Partnership meetings are often sophisticated negotiation sessions with layers of political implica-tions. The same is true regarding your partner-associate committees on diversity, hiring and development.

Finally, you negotiate daily with your colleagues, administrative assistants and firm administrators. The truth is, if you want to get some-thing done, you have to negotiate.

WHAT IS NEGOTIATION?

Negotiation is the way we satisfy our needs when someone else controls what we want and we control what he or she wants. When someone has something you want, the natural result is tension. Your challenge is to figure out how to provide something of value to that person to gain what you want. To deal with this tension and avoid unpleasant confrontation and conflict, you need to understand the process of negotiation. Through-out the negotiation process you respect the other negotiator and while meeting your needs, you help him meet his. If everything goes right, at the end of the negotiation, both of you will believe a good agreement was made. Furthermore, you and the other negotiator are willing to negotiate again.

TYPES OF NEGOTIATION

There are three types of negotiation: Competitive Cooperative Collaborative

Negotiations become competitive in win/lose situations. People exercise power to gain their ends. You see the other person as an opponent and

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everything he gains is your loss. Traditionally competitive negotiation is filled with a lack of trust and also a concern for victory. Competitive negotiation can be compared to sports – there is always a winner and a loser. Where negotiations necessarily become competitive is in criminal matters. Plea negotiations in criminal matters are inherently competitive.

Conversely, during a cooperative negotiation there is a win-win attitude. Both negotiators understand that power is balanced; one side can’t win unless the other side does as well. This motivates both nego-tiators to achieve fairness and equity. The parties perceive that their needs are compatible which fosters a sense of mutual trust.

A good example of a cooperative negotiation is a well-run franchise. The parent company and the franchisee both know that the best way to increase profit is to work together. They do not fight about the size of their slice of the profit pie; they increase the whole pie.

Most of the time, when you negotiate on behalf of your client, your client has an ongoing business relationship with the other party. That relationship is usually far more important than the specific item at issue in the negotiation. If the negotiation takes on a competitive atmosphere, it could damage your client’s business interests. It is therefore best to work toward a more cooperative spirit during the negotiation.

The last form of negotiation is collaborative. Once again this is a win-win situation. The negotiators understand that power is shared and that they are trying to achieve a maximum return for both. Trust is explicit and negotiations are characterized by joint problem solving. We can compare collaborative negotiation to people on the same sports team. Each player trusts his teammates and all work together towards a common goal.

When you are negotiating with your client, or are in a co-counsel situation, you are, ideally, working in a collaborative atmosphere.

A good negotiator tries to make each negotiation a win-win situation. A good negotiator moves negotiations from the competitive to the cooperative or collaborative level as much as possible. A good negotiator meets his needs and helps the other negotiator do the same. Certainly any negotiation with colleagues over resources within the firm should be collaborative.

SIX STAGES OF NEGOTIATION

Whenever you negotiate successfully, whether with your client, or on behalf of your client, you go through six stages. You: 1. Strategize

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2. Set The Climate

3. Obtain Information

4. Clarify Positions

5. Bargain

6. Agree

To operate as a successful negotiator you must master each of these stages.

1) Strategize

Before the negotiation you must set your strategy. If you do not set objectives before the meeting, you will come away with very little. You must know: — What you want — What you think you’ll take — How you’ll open the negotiation — How you believe the other negotiator will open — What you can be pressured to take — Your “walkaway” position

If you are negotiating on behalf of your client, they will probably dictate these positions. While strategizing, set your aspirations as high as possible. Research shows that negotiators who set high aspi-rations tend to gain more than those who set lower ones. If you do not set a high goal, you will never achieve one.

Other Currencies

Besides considering the price you want to achieve for your client, you should also consider other options or currencies. Cur-rencies are items you can bargain with to move the price in a favorable direction. In any transaction you can negotiate certain terms. You can bargain about the timing of a transaction, the support and service required, the number of units you’ll take, etc. For example, a dealer wants to sell you a computer for $10,000 and you want to pay $9,000. You can use currencies to bargain down the price. You might tell the dealer that $9,000 is a good price because you’re paying cash. You could buy multiple units,

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install them yourself, service them with your own people, take immediate delivery, take a floor model, etc. When you are strate-gizing you must make your currency list as long as possible. Figure out multiple options you can offer to the other negotiator. This will put you in a strong position when you start bargaining about price.

The Other Negotiator

You must analyze the other negotiator. You must analyze both the negotiator’s individual style and her client’s style. Is the other negotiator direct and forceful or laid back, waiting for your initia-tives? Is the negotiator solidly established with her client or a per-son who needs to develop a reputation? Does the other negotiator have time constraints for this negotiation or project? Practically any information you know about the other negotiator will become useful to you.

2) Set the Climate

When you meet the other negotiator you want to set a positive tone. That does not mean that you should come across as wanting to befriend the other negotiator. Rather, your attitude should suggest that an agreement can be reached. Appearing difficult or antagonistic toward the process will hamper the exchange of information, which is essential to a successful discussion. You want to be conversational, relational and energetic. Remember the negotiation situation may be stressful for the other negotiator too. If you find that the other negotiator starts negatively, you should stay in control and be as positive as possible. Don’t allow the other negotiator to push any emotional buttons.

Make the environment as pleasant as possible. If this is a signifi-cant negotiation for your client, the setting itself may have been negotiated beforehand. In the ideal world, you and the other negoti-ator would be sitting at a round table, or at 90-degree angles from each other. If you have two teams negotiating, try to avoid a long table in which one team lines up on one side and the other team on the second side, much like two football teams at the line of scrimmage. Set an informal environment and take as much time as necessary to allow the other negotiator to feel comfortable.

If your client is present, the nature of his or her relationship with the other party will dictate in large part, the tenor of the meeting. If the business relationship is strained, a more formal approach is

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warranted. If the parties have a comfortable working relationship, the discussions between respective counsels should appear more relaxed. At both extremes however, the tone of the discussion should always be professional. If the parties are warring spouses in a divorce, the attorneys establish the level of decorum needed to establish civility. If the parties are good friends turned business partners, the attorneys establish the need to treat a transaction as a business deal, not a casual handshake deal.

The first real piece of negotiation business is the agenda. If pos-sible, you should bring an agenda that both of you can use. On your agenda put the most important items toward the end. Allow time to build a relationship with the other negotiator. If the other negotiator challenges your agenda, you will have to negotiate the agenda with the other negotiator. This is part of negotiating as well.

3) Obtain Information

During this next stage you play detective. A good model for you is Detective Columbo from the old TV series. You can find several clips on YouTube. Columbo always gives the impression that he is not the smartest person in the world and he keeps asking obvious questions. Different people keep giving him small bits of infor-mation; then he pieces everything together and solves the crime. Your task is basically the same.

Probe the other negotiator by asking open-ended questions. You’ll say, “Why..., How..., Tell me..., Please give me more details about..., Could you clarify...,etc.”. Probe and gain as much infor-mation as possible, but do it in a conversational tone. Ask for clari-fication about many areas and repeat statements as questions so the other negotiator will continue to talk.

When you are gathering information, be as non-judgmental and pleasant as possible. Acknowledge everything the other negotiator says, but agree to little. If the other negotiator presses you to agree on a tough issue you might say, “We’ll get back to that one.”

Prepare your questions in advance so that you will have many questions ready. If the other negotiator is evasive, follow up your general question with a specific one. Remember, it is vitally important that you learn as much as you can about the other party’s organi-zation, personality and needs.

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4) Clarify Positions

After you have obtained enough information, you and the other negotiator must clarify your positions. Both of you must state your ideal positions. Traditionally, this means you and the other negotiator talk price. Always try to get the other person to give the first price. This will put you in a stronger position for a counter offer. Unless both of you know the other’s starting position, the rest of the negoti-ation will be fruitless.

5) Bargain

Bargaining is what most people think of as negotiating; it is the actual give and take stage. We’ll divide bargaining into three areas: currencies (options), tactics and concessions:

Currencies (Options)

Currencies are the other items you talk about besides price. They can be anything. Consider a simple example of buying a car. The currencies can be the method of payment, color, service, white wall tires, tinted windows, leather seats, length of service contract, etc. In a merger of corporations, the currencies would be endless. They would include the timing of the deal, physical assets of each entity, the name of the surviving entity, employment contracts for key employees, non-compete clauses for employees given severance packages, insurance terms, exposure for pending litigation, and so on. The longer your list of currencies, the more you points will have to bargain.

Tactics

Tactics are physical things you can do to better position yourself during the bargaining stage of negotiating.

There are several good tactical rules to follow: Concerning pricing, never say yes to the first offer. Always know your walk-away position. Draw attention to any concession you make. Don’t state the price first. Offer low when buying; high when selling; but be flexible. Never offer to split the difference.

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Never reveal a deadline. Don’t negotiate on the phone. Watch the other negotiator’s body language. Use “what if” statements. If you’re losing, call a caucus.

Ploys

Ploys are unorthodox maneuvers experienced negotiators use to gain temporary advantage by momentarily upsetting the other negotiator. Your reaction to any ploy should be the same – calmly diffuse the ploy by acknowledging it, restating your position and returning to the topic at hand. If necessary, you can defer dealing with it until later. There are endless possible ploys. You can never prepare for every ploy that the other negotiator might bring up. How-ever, you can become aware of ploys and learn to diffuse them. The Nibble - The other negotiator asks for a small extra

at the end of negotiation. Other Negotiator: “Why not throw in the shirt with the suit.”

Your Answer: “I’m sorry I can’t do that.” Higher Authority

Other Negotiator: “I’ll have to ask my boss about the price.” Your Answer: “When can I speak with your boss?”

Good Guy, Bad Guy Other Negotiator: “He really wants the price to be a dollar,

but I’m willing to give it to you for ninety cents.”

Your Answer: (Ignore statement) “I know fifty cents is a fair price.”

The Flinch

Other Negotiator: “What?! You must be crazy with that price.”

Your Answer: (Remain calm) “I believe it’s a fair price.”

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Printed Word Authority

Other Negotiator: “It says right here that....”

Your Answer: “A person wrote that; we can change it.”

Withdraw the offer (at the very end)

Other Negotiator: “Well, that changes everything; I have to take back the white walls.”

Your Answer: “The white walls were part of the package.”

Puppy Dog Closing Technique

Other Negotiator: “Sign the contract for this price and try the car for a week.”

Your Answer: “Let’s get the right price at the right time.”

The Crunch

Other Negotiator: “You’ve got to do better.”

Your Answer: “I believe I’ve stated a fair price.”

Cherry Picking

Other Negotiator: “Your competitor has given me this low figure.”

Your Answer: “I don’t know what anybody else does, but I know my price is fair.”

Fait Accompli

Other Negotiator: “I have a registered check for the amount.”

Your Answer: “I’m sure you can get another check.”

A Walk-Out

Other Negotiator: (As he walks to the door) “This is impossible. I won’t do business

with you.” Your Answer: “I’m happy to talk to you, any time,

anyplace.”

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Legitimacy Other Negotiator: “The authority in this field says....”

Your Answer: “He has a right to his opinion, but these seem to be the facts....”

Remember, ploys are just that. They are devices the other negotiator uses to go “one up” on you. When a ploy has been used against you, calmly diffuse it by acknowledging it, stating your position and returning to the topic at hand.

Concessions

Giving and receiving concessions is part of negotiating. During negotiations, neither you nor the other negotiator will get everything each want. Expect to give as well as get. Some rules to follow about concessions are:

• Make your concessions conditional. “If you do this, we’ll do that.”

• Whenever you give a concession try to get one in return. Do not try to make equal concessions, because you never really know the true value of a concession to the other negotiator.

• If a concession is too difficult to give, do not be afraid to say, “I can’t do that.”

• Accept any concessions the other negotiator gives you for free.

• If the other negotiator makes an unreasonable demand and then asks you for a concession, do not give the concession. Start any discussion from a reasonable point of view. Remember that most concessions are given toward the end of

a negotiation. Retain as many concessions for as long as possible, so you can trade at the very end.

6) Agree

The final stage in the negotiation process is to obtain agreement. That’s why both you and the other negotiator came together. In a successful negotiation both of you recognize a win-win situation. Since you are both relatively satisfied and each person’s position has improved because of the negotiation, you both would be willing to negotiate again.

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You should memorialize the agreement. If the other side reduces the terms to writing, you will have a more difficult time interpreting clauses in your favor if it eventually becomes necessary for you to do so. In addition, if an issue important to you but seemingly irrelevant during the discussions is not included, you will have to raise it with the other side, signaling its importance. The other side will remember that issue the next time the deal has to be negotiated.

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