Conducting Effective Negotiations by Joel Peterson at Stanford (Full Transcript)

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Joel Peterson – Founder, Peterson Partners

Be a little bit more of a class than kind of a lecture presentation. I learned something about marketing. Because I was told that the title of this initially was, How to Negotiate When You Absolutely Have To Have The Deal. Well that is a great, I mean, that’s a title that you’d come for. I mean, everybody would have come to hear how do you negotiate when you have to have the deal? You know, everybody wants to know how to do that. They asked me, you know, well, what will you teach them, and I would say, don’t get in that position. Where you absolutely have to have the deal. So it would be a very short session. So I changed the session to the one that you signed up for, which is conducting effective negotiation. So a little more pedestrian title. A little less exciting, but I think we’ll go over some things here that may influence the way you think about negotiations.

So, who in here likes to negotiate? Raise of hands. So that’s maybe 20% of the class. Who just dreads negotiation? That’s even a smaller percent. So the rest of you are kind of indifferent. You’ll do it. You know, you’ll eat your broccoli, if you have to, but you’re not looking forward to it. Negotiation is the vegetables of your business life. You’ll do it. You know it’s good for you. You know you have to do it, but you don’t absolutely love it.

So, who and, let’s just take a second on, those of you who like it, why do you like it? What is it you like about it? Now the hands disappear. Yeah?

Audience: Well, compared to my engineering field, when I knew everything was right or wrong, black or white, in negotiations everything’s grey, and nobody can say I’m wrong.

Joel Peterson: So you feel better about yourself. You don’t get any bad, and you don’t get any –

Audience: I get credit, you know? Nobody can say they could have done it better.

Joel Peterson: Yeah, all right.

Audience: Yeah the reason I want to go negotiate is that typically I have heights to take him. When I negotiate I’m going to win. I’m going to get better on the other side.

Joel Peterson: So you are going to improve your situation. Okay, so you negotiate to improve whatever situation you are involved in.

Audience: Conflict situation is just rarely the case you can make a deal without some level of negotiation. So I look at it as just as a means to the end, and getting to the end is kind of the goal. On the flip side, doing win-win deals is really a lot of fun.

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Joel Peterson: Okay. So you see it largely as eating your broccoli, but sometimes you do get to turn it into dessert. I keep thinking of the first George Bush who made the comment about how he hated eating broccoli. So I actually like broccoli too.

Audience: Yeah I think the win-win thing is fun, and it’s also like a pizza, it’s like putting in the puzzle — if you’re the person, why why why, how you do you get it all together, and make it work. And you look for win-win, and that’s fun if you make it work.

Joel Peterson: So, win-win agreements are fun, and you can negotiate. The higher the percentage of deals you can get that are win-win, the more you like it. Other?

Audience: I think it’s a unique opportunity for creativity in business. It’s one of the most creative aspects of business.

Joel Peterson: It does allow you to fashion solutions according to, usually different kinds of facts, different fact situations, so you get to be, you get to express some creativity. Other things, yeah.

Audience: We are building relationship, as well as the other person.

Joel Peterson: Yeah, building.

Audience: You understand better what they want, where they want to go and you can disclose what you want.

Joel Peterson: Yeah, and I’ll bet you, those of you who said you didn’t like negotiation, saw it as a way of destroying relationships, of stressing out relationships. So, a lot of it depends on, what are you doing to relationships as you negotiate with other parties? How about those of you who didn’t, let’s get some more of things that you don’t like about negotiation. For those who just say, I can do without this. What do you not like?

Audience: This makes me very uncomfortable thing to think that, I do not have enough information to get the most out of this negotiation. And more often than not, I just regret the results, thinking I could have done better.

Joel Peterson: Okay, so you look back on it, and you say, shoot, I got taken. I didn’t get as good a deal as I might have gotten. I lost. Other things you don’t like about, yeah?

Audience: Most of the time, hopefully, the person on the other side is or are, is an intelligent team you’re dealing with. But you do get the what I call amateur, like if I pound on the table – if I can get just intellectually and emotionally tiresome to deal with.

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Joel Peterson: You can get abused, in negotiations. And there’s a whole lot of, there are a lot of issues around power and information. If there’s a disparity in power, leverage, information, and you’re dealing with a party who’s going to use that and take advantage of that. You can go out of the room feeling abused. I actually met with Donald Trump in his office in New York, about 20 years ago, before he was a huge cheese, but he was with — well no, he still had the same hair. And actually he tried to sell me an interest in the Washington Generals. Any of you know the Washington Generals? This was a USFL football team that had drafted Herschel Walker. And so he was very proud of that, and he was trying to sell me an interest in that, and I didn’t fall for it. So, that’s my qualification for teaching a class on negotiation.

Actually my qualifications is, I have negotiated billions of dollars of transactions over the years, literally, hundreds if not a thousand different kinds of transactions. I was in the real estate business for 20 years and I was actually the chief financial officer of a big real estate company for about ten years, so I was negotiating debt deals and equity deals, and then partner departures and solving litigation. And, so my life was a diet of — just solid diet of negotiations. And then when I got done with that, I started buying companies and it became a different diet of negotiations. So, I’ve seen a lot of different kinds of negotiations. I’ve experienced the feeling of looking forward to a day when I’m negotiating and with great anticipation, and really loving it, because I like the people on the other side. I like trying to problem solve. I like being creative. I like all those elements. And I also have looked at certain days of negotiating where I dread it. I cannot wait to get the day behind me. So there’s nothing intrinsic about negotiations that say you should like it or not like it. I remember teaching a real estate class here at Stanford about 10 or 12 years ago, and asking the class roughly the same question, but I did it in the form of, who of you likes to buy a new car? And that was the most highly correlated question with who likes to negotiate, and who doesn’t. There are some people who absolutely hate the process of buying a new car, because it feels like you come out a little dirty. You know? You don’t have the — it’s uneven information, uneven power. And whatever, so it can, it can be a bad experience.