July 17, 2012

Let’s Make a Deal

People can become better negotiators by learning specific deal-making skills, says Professor Daniel Ames.

“All of life is a negotiation,” says Daniel Ames, a professor of management. But not everyone is prepared when they come to the table. Drawing on his research on social judgment and behavior, Ames helps students and seasoned professionals “read minds” to make inferences about what others think, feel, and want — insights that are invaluable to negotiation.

In his Managerial Negotiations course, Ames teaches MBA students how to approach a business negotiation by first showing them how they are perceived; students watch videotapes of themselves making a fictional deal with a classmate. Through better understanding of their own priorities and those of their counterparts, Ames says, students learn how to steer any negotiation toward success.

How do people typically approach business negotiations? Where do we learn our negotiation skills?

The culture we’re born into shapes all our interactions, including negotiations. When people are reaching across cultures at the table, it can introduce tension and frustration. Some cultures are more direct than others. For instance, in Israel, it might be more common for people to say directly, ’I want this’ or ’I don’t want that.’ But Japanese professionals might be less inclined to directly deny someone’s request or even to say explicitly, ’this is what I need.’ Negotiation is still possible, but it may unfold in a less straightforward fashion.

Another important cultural value is how we define success. Some people will define success in terms of relationships, and others will focus on economics. Cultural values can shape whether we need our returns to appear sooner rather than later. In short, our cultural values give us a compass at the table.

Firsthand experience is another source of our negotiation skills. We’ve all had lots of experience negotiating for jobs, finding apartments, and arranging vacations with loved ones. All of life is a negotiation — but experience is not always the most effective teacher. It’s easy for us to convince ourselves that we’ve succeeded when we’ve actually left a lot of value on the table. So one thing we do in my negotiation class, after a fictional deal is made, is pull back the curtain and have everyone reveal all their information. Our students encounter feedback that the world does not typically give them, and that propels their development.

What are the major mistakes people make when negotiating?

Three mistakes are reasonably common. First, people are often not aware of how they come across. They may think that they’re engaged and reasonable, but their counterparts see them as disinterested, pushy, or weak. This is one reason we videotape our students: they have to confront how they come across.

A second mistake is that we often misunderstand our counterparts. Many people tend to come into negotiations assuming a counterpart is an adversary — an enemy with whom you must do battle. To the extent that your enemy is happy, you must have lost something, and the only way for you to be happy is for your enemy to be wounded. But your success doesn’t require your counterpart’s failure, and their success does not require your failure. When we understand what they care about, we can often create opportunities to give them some or most of what they want in a way that helps us succeed as well.

A third common — and important — mistake is that we are often not ready to make tradeoffs. Many people come to the table without clearly organizing in their minds what their limits are. If you have to sacrifice somewhere, what would you be ready to give, and what do you want to hold on to? If you are not clear about your priorities and limits in advance of coming to the table, you can end up making bad choices.

What key tactics should people keep in mind when entering into a negotiation?

First, check in with yourself. You need to understand what is most important to you. What is your real definition of success? Do you care most about the relationship, your reputation, or the economic value? You have to start by defining your success and understanding your priorities.

Second, step into your counterpart’s shoes. What problem is your counterpart probably trying to solve? What are their priorities? Many times when we’re getting ready to negotiate, we’re consumed with our own goals for the negotiation. People don’t necessarily have the instinct to take a moment and approach it from their counterpart’s point of view, which can be extremely valuable.

Third, think about information sharing. Think about the three most likely questions your counterpart will ask you. If you were them, what would you ask? Now think about how will you respond. I’m not suggesting you script out your entire negotiation, because you can’t. But if you can think about what kinds of questions might be thrown at you, you can be more prepared to respond to them in the moment.

The fourth specific thing is discovery: what do you want to discover or learn about your counterpart, and how can you do that? You may have assumptions about them that you want to test. There may be some things about them, like their time constraints, or their preferences for price versus quality, that you just don’t know. To negotiate effectively, you need to prepare a strategy in advance for what you need to learn and how you can learn it in the negotiation.

Finally, effective deal-makers often have an instinct to step back and re-think — to change the game: Who should be involved in the negotiation? What issues should be on the table? When should we have this conversation? They tend to shape conditions before they ever walk into the room so that they are set up to succeed.

How can professionals keep their negotiation skills fresh?

Over the last few years, we’ve asked some of our students in the negotiations course to go outside of the classroom and coach others. This comes later in the course after they’ve already developed and refined many of their own negotiation skills. Some reach out to former work colleagues, others negotiate with their spouses.

They often have mixed feelings when they receive this assignment, but they come back from this experience energized with a new appreciation for how much they’ve learned and a real satisfaction for having been able to share some of this with others. I would urge alums and advanced professionals who want to continue to refine their own negotiation skills to look for opportunities to coach people around them in negotiation. It’s a way of sharing their knowledge and experience, and I’m certain that their own skills will improve as well.

Watch Professor Daniel Ames talk about teaching negotiation skills at www.gsb.columbia.edu/faculty-profiles.

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