Art of Negotiation

My wife thinks I am good at haggling.I have to admit that I am a better haggler than my wife. It has nothing to do with any skill, but the fact that I am not embarrassed to ask for the lowest price. But the haggling most of us do is called as position based bargaining. When I haggle with the road-side or footpath vendors, my formula is to buy things at half the quoted price. So my low-ball number will be much lower than half-price so that when we finally settle at the half-price, I make it look like a fair deal for both sides. The truth is that even the vendor is aware of this and his objective is to slow down the rate at which he concedes. He starts reducing the price in smaller steps, extending the time taken to come to a conclusion, and thereby testing your patience. He will also use psychological tactics to make you feel embarrassed. The moment you walk away, he would drop the price steeper. He will be observing the pace at which you are moving away from him. The moment he realizes you are slowing down, he will stop dropping the price. Haggling is a psychological contest. Now you know why you should leave your shame at home before you go for shopping. You should be even more shameless to haggle in China. My h-constant (not the Plank’s constant, but the haggling factor) for shopping in China is 10 : to settle a price that is 1/10 the quoted price. You need to be extremely unemotional and fully shameless. I realized while shopping in China that the calculator is more than a number crunching machine. It acts as a translator. The vendor punches his price and you shake your head sadly, take the calculator and punch in your quote. The calculator changes hands back and forth till a final price is arrived at. The Chinese vendor uses another psycho trick, of raising the voice and keeps uttering the word “No Joking”. You should be impervious to all of this if you want the best deal.

But doing negotiation based on positions is not a recommended option in business. Any negotiation may be judged by three criteria: It should produce a wise agreement; It should be efficient; It should improve the relationship between the parties. Any negotiation based on positions does not meet these criteria. As the person’s ego is associated with the position he takes, it is highly unlikely that a wise agreement can be arrived at. The more extreme the opening positions and the smaller the concessions, the more time and effort it will take to discover whether or not agreement is possible. Positional bargaining becomes contest of will and thus strains, and sometimes shatters the relationship between the parties.

In the book “Getting to Yes”, the authors suggest that for a better result, one needs to focus on interests and not positions. The book quotes the example of Egyptian-Israeli peace treaty. Israel insisted on keeping part of the Sinai peninsula. Egypt, on the other hand, insisted that every inch of Sinai be returned to Egypt’s sovereignty. Negotiating on position did not lead to any amicable agreement. Looking at their interests, instead of their position made it possible to develop a solution. Israel’s interest lay in security and did not want Egyptian tanks poised on their border ready to roll across any time. Egypt’s interest lay in the sovereignty. Knowing these interests behind the positions, the two countries agreed to a plan that would return the Sinai to complete Egyptian sovereignty and, by demilitarizing large areas, would still leave Israeli secure.

Reconciling interests, rather than positions works for two reasons. First, for every interest there usually exists several possible positions, that could satisfy it. Secondly, behind opposed positions lie many more similar interests than conflicting ones. So how do we identify interests? Ask “Why?”. Put yourself in their shoes. Examine each position they take, and ask yourself “Why?”. You can also ask the other party, why they take a particular position. Make it clear that you are asking, not for justification of the position he made, but for an understanding of the needs, hopes, fears or desires that it serves.

Ask “Why not?”. Think about their choice. One of the most useful ways to uncover interests is first to identify the basic decision that those on the other side probably see you asking them for, and then ask yourself why they have not made that decision. Which of their interests stand in the way? If you are trying to change their mind, the starting point is to figure out where their minds are now.

Realise that each side has multiple interests. To understand that negotiator’s interests means, to understand the variety of somewhat differing interests, that should be taken into account. The most powerful interests are basic human needs like security, economic well-being, a sense of belonging, recognition and control over one’s life. These are easy to overlook. To sort out the various interests of each side, it helps to make a list. It will help in the quality of your assessment, as you acquire new information, and to place interests in their estimated order of importance.

If you want the other side to take your interests into account, explain it to them. Part of the task of impressing the other side, with your interests lies in establishing the legitimacy of those interests. You need to convince them that they might well feel the same way if they were in your shoes. Acknowledge their interests as part of the problem. If you want the other side to appreciate your interests, then demonstrate it\.

If you want someone to listen and understand your reasoning, give your interests and reasoning first and your conclusions or proposals later. Put the problem before your answer. Beware of arguing with the other side about the past, instead, talk about what you want to have happen in the future. Instead of asking them to justify what they did yesterday, ask, “Who should do what tomorrow?”

To summarise- focus on interests and not on position to result in a win-win solution. I wish I could use this learning to get an iPad with 3G and 32GB for $499 :-)

Happy Negotiating,
Ram