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.
To get more of what you want there are four steps. Assess, prepare, ask, package. To give you an example, my dean recently sent me an email indicating that I would have to be going from five courses a year to six courses a year. Because he had received information from the Provost that we needed to be consistent in the amount of contact hours, and course credit. I was not happy about that email. So, my response was, I think I need to talk to my dean. Let’s negotiate. But, before I started a negotiation, I thought hard about why was he doing this? What was in his interest? His interest was probably, to make sure the provost was happy. What was my interest? Not to move from five classes to six classes. And it turns out I teach two different types of classes. MBA electives, and then some specialty classes. There are lots of folks who teach MBA electives. There are very few folks who teach specialty classes. So, I thought I should focus on the specialty classes.
So, then I went for the ask. I set up a meeting, and part of that meeting was to verify the information that I had gathered in my planning session. And, it did turn out to be true. He was interested in making the provost happy, so then came the proposal that packaged our interests. He said he wanted consistency between contact hours and credit. So, what he did is he changed the credit to match the contact hours. I suggested, why not change the contact hours to match the credit? Because it turns out that in my courses, in my specialty courses, we always went over. So, while they were three hours, it was common that we would go for 3 and a half to 4 hours. So, let’s make them 4 hour courses. And, keep me at 5 rather than move me to 6.
He said to me, I never even thought of that, and why didn’t he? It wasn’t that weird. Because he didn’t have the information that I had, that my classes routinely ran over. And, so when I gave him that information, it created a solution that made him as well off as he was, and made me a whole lot better. By the way, I was the only faculty member to get an exception. And why did I get an exception, because everybody else had the same email? For two reasons. One, I decided to negotiate. And, number two, I provided him with a solution that made us both better off.
So, what are the unique opportunities and challenges that women face when they negotiate? Let’s start off with an example that’s pretty far away from what most of us think about as negotiations. In 2006, the U.S. Tennis Open’s Grand Slam Tournament got some new technology. And, for the first time, they were able to replay the calls. And, so they allowed the players to challenge the calls of the referees. Now it turns out, that over the course of the entire tournament, about one third of the challenged calls were given to the player. But interestingly, if you divided up the number of challenges by gender, it turns out the men challenged 73 calls, while the women challenged 28. Now, we can come up with all sorts of stories about why men’s tennis is different from women’s tennis. Men’s tennis is faster. Maybe the judges make more mistakes. Maybe the judges are paying more attention to the women. Maybe. But three times difference in the number of challenges? Women are simply uncomfortable with asking. Expectations drive behavior. If we expect to do poorly, we will behave in ways that ensure a poor performance. This was demonstrated in a piece of research that I think is very telling.
When women were told that people who are like them negotiate poorly, they did significantly worse in their negotiation performance than their male colleagues. When they were told that people like them negotiate well, they did significantly better than their male colleagues. Expectations drive behavior. If you change your expectations, you will change your outcomes. As women, we need to be very cognizant of three aspects of negotiation. Why am I asking? How am I asking? And, for whom am I asking?
Let’s first talk about why you are asking. It turns out that women are much more effective in negotiations when they pair their competence with a communal orientation. Women need to demonstrate their concern for the other. So, how are my skills help you, the organization, my employer, my team, to do better? So, let me give you an example. A colleague of mine had gotten a wonderful job offer from an East Coast university. So, she came to me and said, can you help me figure out how to leverage this offer? I really don’t want to move. I said, no problem. We can do this. So, I said, make an appointment with the Dean, and take the offer with you. Be very clear. Dean, we have a problem. I love Stanford, but I just received this offer, and it’s an attractive offer. I need some help. Can you help me figure out how to stay here? She wasn’t making a demand. She wasn’t giving an ultimatum. She was saying, can you help me? Communal problem solving. How are you asking?
Male evaluators penalize female negotiators in a single issue distributive negotiation when I ask for more money. In ways that they do not penalize her male counterparts. Female evaluators penalize both males and females for asking for more. Why the women were penalized? Was because they were perceived as being too demanding and not nice. Now note I said a single issue. They were negotiating issue by issue. So, how can I help you with this pool of resources that I need to do my job more effectively to make you better off, and packaging? Communal packaging.
Next, for whom are you asking? It turns out that if we distill the research and negotiation, we have two big findings. Number One. You’re better off negotiating for yourself if you’re a man. Number Two. If you’re negotiating for me, I am much better off if you are a woman. Women outperform men in representational negotiations between 14% and 23%. This is huge. So, I use this all the time. When I negotiate, I don’t negotiate for myself. I negotiate for my husband, my four dogs, my seven horses, and my fourteen chickens. That’s a lot of mouths to feed, and it works.
“A client came to me asking for one of our top consultants who was busy working on another project full time. So, I wanted to staff it with a different consultant. But, the consultant that the client wanted really wanted that project as well. So, she came up with the idea, what if we hired a junior consultant to work underneath her, and give her the opportunity to work on both projects with that leverage. It worked for the client, it made the consultant really happy, and it really solved my problem.”
“Before coming to business school, for me, negotiation was about preparing to beat a price, or aim for a higher number. Now I realize that preparation, for a negotiation, is much more than that. It’s about identifying the issues that are important to me. But also, the issues that are important to the other parties that I’m interacting with. And, I think that allows us to be much more creative and actually solve the problem.”
“One of the most important things you can do in preparing for your compensation negotiation, is to do your research and find out your market value. Sometime people will go to websites and enter in their current field and title in order to find out what their salary range is. But, I find that those websites aren’t all that accurate, and they often compile an average salary. It’s safe to assume that if you perform strongly and you’re asking for a raise, you’re above average. One of the other things that you can do is to survey a membership group or an association, either online or offline, and ask those members what their salary range is. You can do so anonymously if that feels more comfortable to you”.
“I worked for a Fortune 50 company. I got the promotion of my dreams. Best day of my life. Went out to dinner with a mentor that night to celebrate. Learned that I was getting paid substantially less than my six male counterparts. He said, you have got to go back in there and renegotiate. Had a lot of fear that I might lose that job, but I did. Showed up the next morning and I renegotiated. The concern of my boss was, I was younger and had far less experience than all of my counterparts. Yet, I pointed out to him that his expectation of me was that I would make the same goals as my six counterparts for equally as large accounts. We discussed it and he agreed, and at the end of the day, I got the raise that I really deserved”.
When you’re considering negotiating, you need to be very honest with yourself. How much are you willing to pay to avoid the discomfort of negotiating? And, if you decide that you’re going to negotiate, you need to be strategic in how you ask. And, finally, negotiation is an interdependent process. Every bad deal you have gotten, you’ve agreed to. So, you need to have the capacity to say no, and sometimes when you say no, the other side comes back and says, don’t go, let’s talk. How about this? Is it good for you? But, you’ll never know that unless you’re willing to walk away.
“Recently I had a client enter a negotiation where the terms really didn’t work for me, and so I told them, it’s just not economically rational for me to take the deal. And, it kept it objective and not personal which really worked for me, and allowed me to walk away from the deal but keep the door open.”
“When I got my first job, I didn’t even negotiate for salary. I had no idea how to set a goal. I had no idea how to make the ask. Now it’s a little bit different. I understand how to set an aspirational goal, and in that preparation, I get to the point where I understand how it benefits all the different parties that are involved.”
“But, you really do have to understand how you feel in order to understand what it is that you want. Because, if you don’t know what you want, you can’t negotiate for it.”
“Earlier in my career, I realized that the types of projects I was going to get to work on, and the people I was going to get to work with would be invaluable experience for me to gain for later on. So, when I received a promotion, I took that time not to just negotiate my cash compensation, but my total package. In this way, I was able to ensure that I was able to focus on a particular industry and also get to work with team members who I knew would invest in my own development.”
“When I was hiring people it struck me that men negotiated quite frequently. And, women were not negotiating. And when they did negotiate, women would have a number in their mind of what they wanted, but they wouldn’t be able to back into how they got that. They didn’t explain to me that they did a competitive assessment. They didn’t tie it to the results and goals that I was hiring them for and why, based on their experience, they were a perfect fit and they were going to meet those goals for me. And therefore, they wanted a package that would include X. They needed to come in prepared, and just persuade me that they could meet my needs.”
“I’ve been on both sides of the negotiation. First, running compensation for a large organization, and now as I place people in jobs and where I’ve seen women be most successful is, when they frame their ask in terms of how it reaches the business goals. So, go ask. Just always keep in mind how does it help the company as well.”
“What I’ve noticed before is candidates negotiate their compensation package is, that sometimes the negotiation process can get so heated, and both parties can get so focused on what they’re looking to get out of it, that the candidate’s enthusiasm and hunger for the job can get lost. Therefore, remember when you enter this process that you want your future employer and your boss to know that you’re not only excited about the opportunity, but you’re hungry to get in there and start the job.”
Let’s start with baby steps. Don’t start off with a negotiation where there’s a big relationship risk. Rather, start a negotiation where the relationship is possibly not even important. Where there’s less risk to you to experiment, to try.
Now, let me give you an example. Think about going to a department store. And, I don’t know about you, but I am a shoe-aholic. I love shoes. Unfortunately, with my job, I spend a lot of time in boring black pumps. But, sometimes when I go to shoe sales, there are shoes that sing to me. You can’t wear them, you can’t even walk very far in them but when you put them on you’re like, I am good. So, I go to this department store. It’s the sale. They have a sale like once every six months. I’m there when the store opens, and I find the boring pairs of black pumps that I’m going to have to buy. And, then there’s a shoe that, from the rack, was singing to me. And I found them, and they were in my size. It was great. I was so excited. But, then I looked at the price and was like, these were really expensive shoes. And, they hadn’t discounted them very much for the sale. And, I said to the guy, I said I’m going to buy these shoes here. These are beautiful. I want them, but they’re too expensive. Can you help me? And he said, no problem ma’am. Here’s what you do. Buy all four pairs, but don’t wear these shoes. And, then bring them back, in a week, you return them, we discount them 50% and then you can come and buy them back immediately. And I said, it’s an hour and a half each way from my home to the store. It’s not going to happen. Have you got any other options? And, he said, let me go talk to my manager. But, when he came back he said, we’ll take $75 off those shoes for you. And I said, that works. Thank you.
Now, here’s your assignment. Go to your favorite department store. Find something you want, and then negotiate for it. Figure out how to solve the problem. Here’s what I want. It’s too expensive for me, and ask for help. Initiate the negotiation. Not all of you will be successful every time, but you will be surprised at how often you are.
“When I first learned about this research, it helped me understand why women sometimes don’t ask. There is a social risk. Women are judged differently. And, with Maggie’s work, it gives us tools to negotiate successfully in a way that works for everyone.”
Malcolm Gladwell suggests you need 10,000 hours of practice to become expert in anything. Negotiation is the same way. You need to practice, but you need to learn from what you experience. You need to see social situations as an opportunity to create value, so that you and your counterparts can get more of what you want.