Full Text – Margaret Neale on Negotiation – Getting What You Want at Stanford
Margaret Neale – Professor of Management, Stanford GSB
You’ve got a job offer and now you have a choice: negotiate or not. If you decide not to, and your buddy who got the same offer negotiates and gets a $7,000 increase. By the end of 30 years, your buddy will be making $100,000 more a year than you. Think about that.
My husband is a trained chef. Do you know that chefs don’t have recipes for all those sauces. They know the structure of the sauce, and so regardless of the ingredients that they have, they can make a great sauce. And that’s what I want for you. I’m not going to give you a recipe for a particular negotiation. Rather, what I want to do is give you the structure of a negotiation, so that you can be successful, regardless of what you face.
I want to propose a new way of thinking about negotiation, and what you’re trying to achieve in that negotiation. And then what I want to do is give you four steps to help you be more effective in getting what you want. Folks typically see negotiation as an adversarial process, and are uncomfortable because they’re concerned that other folks will think of them as too demanding, too greedy, not nice, or socially awkward. What I want to do today is get you to change the frame of how you think about negotiation. Moving it from an adversarial process to one that is problem solving. And, problem solving is collaborative. I want to solve our problem in a way that’s good for you, but also gives me more of what it is I want.
When we negotiate most of us view the goal of a negotiation as to get an agreement. This is wrong. The goal of a negotiation is not to get a deal. The goal of a negotiation is to get a good deal. We need to be able to separate what a good deal is from what a bad deal is. So, that means we need at least 3 pieces of information. The first thing we need to know is, what is our alternative? What happens to us if this negotiation fails? What are we left with? What’s the status quo, or what alternatives exist for us? And, the research is very clear. He or she with a better alternative does better.
Secondly, we need to know what our reservation price is. What’s the point at which we are indifferent between saying yes, and invoking our alternative. And when you negotiate, it’s critical that you understand where that reservation price is, because that’s that point at which you are indifferent, where a no looks as good as a yes.
And the third point, which is really important, and one that people often overlook, is that not only do we have to think about our alternative, and our reservation price, we also need to think about our aspiration. What is an optimistic assessment of what it is we can achieve in this negotiation?
So how do you get more of what you want? Let me suggest that four steps will help you. The first step is to assess the situation. Is this a situation where I can have influence on the outcome? To change that outcome in a way that makes me better off? And, I need to weigh the potential benefits from negotiating with the potential costs for negotiating. And, will the benefits outweigh the costs?
The second step is, I need to prepare. And, they’re really two aspects of this step. Number one, I need to understand what my interests are. What I’m really trying to achieve in this negotiation. And, the second component is I need to understand the interests and preferences of my counterpart. Many of us may understand what our interests are, but few of us actually understand at a deep level what the preferences and interests are of our counterparts.
Third, now comes the ask. Engage with your counterpart. Look at these disputed, social situations as opportunities to negotiate. You have information that your counterparts don’t have. And, this is what you bring to the table. If they knew all your information, if they knew your perspective, they don’t need you. Because you have unique information, and because they have unique information, that’s where the value is created.
Fourth, you need to package. Now what do I mean by that? Most of us when we negotiate, negotiate issue by issue. This is a really bad strategy, because when you negotiate issue by issue, every issue is adversarial. You either win or lose. When you’re packaging issues you now have the opportunity to trade among the issues. So, think about proposing solutions. Alternative solutions to your counterpart, in packages. And to help you out, because your counter part will probably want to negotiate issue by issue, think about using if then language. If I give you this, then I get that. What you’re doing is you’re yoking various issues together into a package.