The Intelligent Negotiator (19 page)

Many insurance company agents use best-offer-first bargaining when they negotiate with claimants. They announce the figures they are willing to recommend to their superiors and indicate a complete unwillingness to modify those terms. They are successful with desperate claimants who need money now and cannot wait until they can obtain effective legal assistance. On the other hand, they are wholly unsuccessful with claimants who are willing to wait until higher insurance firm representatives who are willing to discuss more generous terms become involved.

You often lose out with best-offer-first bargaining for two reasons. One, you have skipped the information exchange. Without that, it is difficult for you to determine the value of what is being negotiated. You need to talk with the other side to ascertain the degree to which that side wants the deal. Your counterparts may be willing to
accept less generous terms than you anticipate. The use of best-offer-first bargaining deprives you of any opportunity to do better than your first offer. The second reason you often lose with this technique is that it greatly increases the probability of non-settlements, because of the way in which the recipients of such offers react. These are “parent”-to-“child” interactions. The “parent” gets to determine unilaterally what is good for both sides. They then present their “final” offers to their “child”-like counterparts in a patronizing manner that is likely to be viewed as highly offensive. If the recipients respond in a “child”-like fashion, they may reject even reasonable offers that have been presented in such an insulting way.

Individuals who use the best-offer-first approach normally have a substantial amount of bargaining power. You have to possess a lot of authority if you wish to make offers that your counterparts can’t refuse. The more bargaining power you possess, the more generous you should be with
process
—not
substance.
If you let your counterparts participate in the interaction and feel they influenced the outcome, they will pay you for the privilege by accepting terms that favor your side. We all like to think we had the chance to state our own positions and be heard. To the extent we are granted this privilege, we become more amenable to compromise. On the other hand, when we are presented with
faits accomplis
and are denied the opportunity to alter opponent perceptions, we become frustrated and often refuse to accept opponent terms that may be objectively reasonable.

Managers have to be especially aware of the negative impact of best-offer-first bargaining when they interact with their subordinates. It is difficult for supervisors to interact with subordinates on an “adult”-to-“adult” basis.
They act as “parents” and try to impose on their “child”-like subordinates what they think is good for them. Even when such supervisory offers are rational, the subordinates have a natural tendency to respond in a “child”-like fashion. To demonstrate that they possess options, they must reject the “parental” offer no matter how realistic it may actually be. The “parental” supervisors then react with anger, and the interactions deteriorate.

Whenever you are contemplating best-offer-first bargaining, remember how offensive
you
would find such tactics if your counterparts employed them. Give the other side the opportunity to participate as much as possible in the interaction. Make them transaction partners. It is possible that your counterparts will generate options you never contemplated. Give them the chance to suggest such mutually beneficial alternatives.

If you encounter best-offer-first situations, try not to immediately reject the overtures of your counterparts merely because of the offensive way in which they have announced their initial positions. These are not always devious bargaining counterparts who are trying to hoodwink you. They may be people who are not comfortable with the give-and-take of the bargaining process and who really try to start with reasonable opening offers. Companies like Saturn and Mercedes, which refuse to engage in auction bargaining over the price of cars, are perfect examples. Try to separate the take-it-or-leave-it opening offer from the actual terms being proposed. When you know in your mind that the offer you have just received is what you were hoping to get, accept those terms. Don’t cut off your nose to spite your face, as many children are prone to do when given take-it-or-leave-it offers.

F
LINCHING OR
L
OOKING
D
EJECTED

If your counterpart makes an opening offer (or subsequent concession) you don’t like, you can use the following nonverbal signals to generate unreciprocated position changes. Flinch visibly or exhibit a look of complete dejection, and then remain perfectly silent. The technique is designed to induce uncertain counterparts to think their initial offer is wholly unacceptable. In some instances, you may generate two or three unreciprocated position changes, as your counterparts bid against themselves in an effort to placate you.

When counterparts use this device against you, don’t make the mistake of providing them with additional offers. Ignore their negative facial expressions. Patiently await their response to your position statement. Don’t panic if one or two minutes of silence result. Once your adversaries realize that you won’t bid against yourself, they will enter the discussions and state an opening offer (or another concession) of their own.

W
RITTEN
D
OCUMENTS

Many proficient negotiators recognize the aura of legitimacy associated with written documents. They initiate a bargaining encounter by providing the other side with a highly principled opening offer in written form. Since we have been raised to believe that what is written is generally true, we accord their initial position more respect than it deserves. When counterparts provide you with a written memo containing their opening offer, don’t accord it more respect than it objectively warrants. Remember
that individuals can puff and embellish as quickly on their word processors as they can orally. Examine the proposed terms carefully and decide which items to challenge.

Negotiators can also use written documents to obtain a tactical advantage near the end of bargaining encounters. When you begin to finalize the terms you think have been agreed upon through regular discussions, they present you with written statements—often on pre-printed forms—containing those terms. This approach is often used by landlords through lease forms, and car dealers and real estate agents who use written sales contracts. While they accurately include the terms that have been agreed upon, they usually add language that detracts from what you think you have obtained. For example, the landlord may include language requiring you to clean the carpets and paint the walls when you vacate the premises. Car dealers may include such extras as “transportation costs,” “dealer prep,” and “processing fees” that increase what you have to pay by $500 to $1,000. Why weren’t these items included in the asking price and subsumed within the final figure agreed upon? By leaving these items until the end—after everything else has been agreed to—the landlords and car dealers realize their ability to demand extra concessions once you have become psychologically committed to the transaction.

You may hardly recognize the significance of these extra provisions, and when you do, it is so easy to assume your obligation to accept these items since they are set forth in printed documents. These are all negotiable terms. Don’t hesitate to indicate your dissatisfaction with these types of clauses and ask to have them removed or demand concessions in exchange for your acceptance of these terms. Landlords may cross off clean-up provisions if you object to them and they think you will be a good
tenant. Car dealers may waive “dealer prep” and “processing fee” items if it is near the end of the model year and they are trying to sell you last year’s model, or it is near the end of the month and they hope to receive incentive payments from the manufacturer.

What should you do when you attempt to have preprinted form clauses removed and are told you must accept those terms or go elsewhere? Don’t reject good apartments or good car purchases simply because of such add-on clauses. Try to discover during your preparation the degree to which the industry you will be dealing with uses such provisions. This way you will be prepared for them. Ask at the beginning of your interaction about “extra” costs not included in your present discussions. When these items are raised at the conclusion of interactions, politely ask to negotiate over these terms. When your overtures in this regard are rejected, objectively review the final terms and ask whether you are getting a good price, even with these add-ons. If you are, don’t scuttle the deal because of them.

L
IMITED
A
UTHORITY

How often have you negotiated with salespersons or immediate supervisors and achieved what you thought were “final” terms only to have the salespeople or supervisors indicate a need to have the final provisions reviewed by the “sales manager” or “division director”? This is an especially common bargaining technique among car dealers. Just as you are about to sign the purchase agreement in front of you, the salesperson steps into the back room—ostensibly to get the approval of the sales manager.
When the salesperson reappears, he or she looks distraught. The “sales manager” has rejected the unusually generous terms they have given you, pointing out how far your price is below the “invoice” figure. Dealers who use this device are convinced that most customers are unwilling at this point to walk out and go to other dealerships. The prospective buyers are mentally committed to this transaction, and are not going to allow a few hundred dollars to negate their purchase. If this ploy is used effectively, you even feel sorry for the salesperson and agree to increase what you are paying the dealer to prevent that person from suffering further humiliation. For all you know, you may be presently talking with the sales manager. He or she may have merely gone into the back room to grab a cup of coffee before returning to the sales floor to fleece you!

When you begin to negotiate with salespeople, don’t hesitate to ask whether they have final authority. If they indicate that they do not, you may ask to talk directly with the sales manager. Sometimes the sales manager will actually join the conversation. On other occasions, salespeople will indicate that their recommendations are almost always accepted. This puts their reputations on the line and makes it difficult for them to demand concessions at the end without looking foolish. When the dealer demands several concessions at the end as a prerequisite to a final deal, don’t hesitate to ask what they can give you in return. Could they include the better CD player or the mag wheels? Could they include the extended warranty for the extra costs you are paying? If you demand reciprocity, you will either obtain some concessions in exchange for what they are demanding or they may give up on their efforts to obtain unilateral changes from you. If you are unable to get them to withdraw their new demands, you
can either head for the exit—hoping they will call you back before you get out the door—or accept those new terms as part of the deal.

Never make the mistake of negotiating with individuals who have absolutely no bargaining authority. This occasionally happens when people from the other side contact you—usually by telephone—to find out what you hope to obtain. When you explain your opening offer, they indicate how unacceptable your stated terms are, suggesting that they could not even convey that position to their superiors. They hope that you will become embarrassed and make another offer. If they can induce you to bid against yourself through consecutive opening offers, they will gain a substantial bargaining advantage. Never make consecutive opening offers in response to these people. When they initially criticize your opening terms,
ask them
what
they
are willing to offer you. If they indicate they have no bargaining authority, tell them to get some authority and place their own offer on the table so you can discuss the merits of your respective positions.

N
IBBLING

Some manipulative negotiators seemingly agree to final accords. Their counterparts are pleased with the agreements and consider the deals finished. Several days later, these negotiators contact their counterparts with apparent embarrassment and indicate they must have several “small” changes in the terms agreed upon. Often combined with the “limited authority” ploy, nibblers use their absent superiors as the basis for the last-minute changes being demanded. House buyers often use this approach
after entering into binding sales contracts. As the closing dates approach, they find minor problems with the properties they are purchasing and request price reductions to reflect these unanticipated conditions.

I once met a successful business attorney who told me that at the conclusion of every major negotiation he demands several last-minute changes. He claimed that his demands have always been met by his counterparts. I told him he was a
nibbler
and explained the concept as follows. The attorney agreed that he fit the definition and said that this technique is always successful.

If you are confronted by demands for small changes made by nibbling counterparts, you are in trouble. By this point in the negotiations, you are psychologically committed to a final agreement, and most often do not want these last-minute demands to negate your previous efforts. You are likely to give in to the modest changes being requested. If you find yourself being nibbled, don’t make the mistake of asking the wrong question: “Am I going to allow the whole deal to fall through over these few items?” Instead, focus on your
counterparts.
Ask yourself whether you think your
counterparts
will let the entire deal collapse over these few terms. Use that answer to guide you.