In international politics, we see some impressive examples these days of such illusory superiority biases… and it is quite scary to think that we may all suffer the consequences from any of their bad decisions.
In all these examples, the common denominator is this: self-limiting thoughts and attitudes in negotiation will inevitably lead to bad outcomes. Or in other words: you could be leaving money on the table.
The question is – what can you do to optimize the outcomes of your every-day deal-making?
Here are three basic guiding principles to help you in your decision-making:
Rule # 1: Prepare. Prepare. Prepare.
Understand what, exactly, you want from the other side, and also why you want it. And then look at your best and worst alternatives that would remain, were your current deal to fall through. In negotiation language, these are called BATNA (Best Alternative To a Negotiated Agreement) and WATNA (Worst Alternative To a Negotiated Agreement). Also, instead of simply aiming to “get the best outcome you can”, set a quantifiable limit to yourself – this will be your WAP – your walk-away point.
Do the same for the other negotiati
on party: identify where they are coming from, what they (really) want, if they have any good fall-back positions and what their walk-away-point could be.
Rule # 2: Fall in love with three.
…things (not people)! Fall in love with three houses, instead of just one. With three cars, instead of just one. Three is a magic number in many contexts: from Three Little Pigs and Three Musketeers to using the power of three for storytelling and engaging content: “Life, liberty, and the pursuit of happiness”, “Government of the people, by the people, for the people”, “He came, saw and conquered”.
If you fall in love with three houses, instead of one, you will not set yourself up for adversarial bargaining, and you will also not fall prey to your own ambitions with a “got to have it!”- approach, overpaying on price. Max Bazerman explains this in his book “Smart Money Decisions.” Instead, you will strengthen your negotiation position by having not just one, but various BATNA´s, and several good BATNA´s will also enable you to set your walk-away point.
Rule # 3: Negotiate Based on Mutual Needs: Your Needs AND Their Needs.
Your negotiation strategy should be based on achieving the famous “win/win” situation, where both parties collaborate and have an outcome that satisfies their respective real needs. Rather than simply trying to get the biggest piece of an identified pie (distributive, or positional negotiation), we should aim at creating value by integrating the additional wants, needs and interests of both sides into the bargaining (integrative negotiation). This way, we make the pie bigger and both sides have a higher chance of satisfying their respective needs. The famous Harvard example is the one orange we fight over. Instead of dividing the orange 50 / 50 (positional), we identify underlying needs, and as a result one party gets the orange flesh (to eat) and the other gets the peel (for cooking).
Question: Should we take advantage of the other side, if and when we may have the power to do so, especially in transactional deals where a good longer-term relationship does not matter?
The answer to this question will be subjective and depend on an individual´s personal values and beliefs. Here is my personal recommendation: Stick to your own ethical approach.
Even if a short-term money gain can be obtained by applying power or emotional blackmail, resist the temptation and refrain from doing so. First, we may always meet twice in life and the other side will remember what you did. Second, you may undermine your own reputation as a negotiator and subsequent deals may be marked by less credibility. And thirdly – believe it or not: acting against your own value system will cause a stress reaction inside of yourself and will have a negative health impact. The psychologists call it “cognitive dissonance”.
So here is the most valuable rule of all: except for in extreme circumstances – treat other people, when negotiating, the way you would want to be treated. This way, you will be an effective, stress-free negotiator, optimizing outcome for both sides. And as a welcome side effect, you won´t leave any money on the table.