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Negotiations in the real world (or "Never Split the Difference" mini-summary)

Business Jan 16, 2022

Most books I read are great. But few books offer as practical advice on a subject as "Never split the difference".

The subject of negotiations is wider than first thought. If you think a bit about it, we are negotiating our entire life: from an argument with our partner and kids at home, to the potential business deals at work. So having some practical guidance and tips on negotiating better, might be the differentiation point that could tip the balance in our favor.

Without further ado, let's deep dive into a short summary of the main points of this book. Don't forget that the author has provided a super useful cheat sheet for refreshing your memory when needed.

It's emotional

Traditional negotiation tactics in the past approach the subject as a logical and rational arguments exchange that will hopefully lead to a win-win situation.

But in reality, human beings are far from rational. We are making mostly emotional decisions and then try to justify these decisions logically.

Negotiation should be built on the assumption that humans want to be accepted and understood.  So be an active listener to show empathy.

Information gathering

Negotiations are more about gathering/uncovering as much information about the other party as possible, rather than arguments exchange. A newly discovered critical bit of information can change the entire outcome.

So aim to build rapport with the other party by listening, validating their concerns, build trust and a safe environment for sharing. Do that slowly. Rushing things will make the other party think that you only care about your benefit. How you can do this?

Use appropriately the voices of negotiation

  • Late-night FM DJ voice: Calm and slow. Selectively used for authority and trust.
  • Playful/positive voice: Default voice. Easygoing, good-natured person.
  • Direct/assertive voice: Rarely used. Creates pushback so use with caution.

Mirroring

Use the three most critical words to frame a leading question. This technique encourages the other party to reveal more information. This newly discovered information might be useful/key in your future decisions.

Summary

  1. Use the late-night FM DJ voice
  2. Use phrases like "I am sorry, ..." to display openness
  3. Mirror the other participants to get them to explain/uncover information
  4. Use silence effectively
  5. Repeat

Tactical empathy and labeling

Tactical empathy is listening and understanding the feelings of the other party. Labeling is validating their emotion by acknowledging them after you understand the other party's emotions.

Start your labels of emotions with:

  • ‘It seems like…’
  • ‘It looks like…’
  • ‘It sounds like…’

Don't forget that labeling negative emotions can diffuse them, while labeling positives can reinforce them.

Aim for "No"

Counterintuitively, aiming for "No" can be the start of the real negotiations, not the end.

Pushing people for "Yes" (e.g. salesmen) makes people feel defensive. They might even say it just to get away from the annoying person they are talking to. But saying "No" make people feel safe, secure, and in control. Ask "no-oriented" questions, like "is now a bad time to talk?" or "have you given up on this project" (the always-working question to get a reply in an email).

Aim for "that's right"

Not for "you are right" but "that's right". Summarize, reaffirm, and paraphrase how the other party feels to get to a magical "that's right" moment. It is a more robust affirmation of the other party’s concerns than just getting a "Yes".

Bend their reality

  • Create an extreme anchor. A very low or high offer can change the entire negotiation.
  • Use offers that incorporate odd numbers that show that are a result of careful thought. Round/even numbers show that they are approximations.
  • Acknowledge the other party's fear to anchor their emotions. Don't forget the loss aversion: people are less willing to lose something than gain something.
  • Let the other party name the first price. It might be higher than your closing figure. If not, they might be doing a hard bargain, so avoid being anchored on it and stand firm.  
  • Use a range with credible references (e.g. "people in similar roles earn between $120,000 and $140,000"). The other party will be less defensive since it sounds less like you are telling them what to do.
  • Offer non-material things that might not be important to you, but important to the other party (e.g. press).
  • Research suggests that numbers ending in 0 feel like placeholder numbers that can be bargained down. In contrast, less rounded specific numbers (e.g. 10,512) look like the result of a thoughtful calculation.
  • Use surprise gifts. After a rejection, offer a completely unrelated and unexpected surprise gift.

Illusion of control

The other party needs to feel that they are in control. In reality, the one asking the questions is in control.

Use less aggressive but calibrated questions starting with "what" and "how" to make the other party speak and reveal information rather than causing conflict by telling them what the problem is and how to solve it.

  • What about this is important to you?
  • How can I help make this better for us?
  • How would you like me to proceed?
  • What is it that brought us into this situation?
  • How can we solve this problem?
  • What are we trying to accomplish here?
  • How am I supposed to do that?

Bargain hard

Negotiators can be analytical, accommodating, or even assertive. Figure out the other party's negotiation style to increase your chances.

Avoid confrontation and aim for collaboration. Use first-person pronouns to direct the attention to you, instead of blaming and focusing on the other party. Do not beg or be apologetic.

The Ackerman Model

A 6-step process to maximize your returns from counteroffers.

  1. Set target price
  2. Set the first offer at 65% of the target price
  3. Calculate three raises in prices: 85%, 95%, 100%
  4. Use empathy and the ways of saying no without saying no (e.g. "How am I supposed to accept this ...") to encourage negotiations for the other party to provide a counteroffer. Consider the counteroffer before increasing your offer.
  5. For the final amount, use precise numbers rather than rounded ones.
  6. Offer a non-monetary item that you don't want in your final offer, to suggest that you are at your limit.

Black swans

Most of the time there are "unknown unknowns" that can change the balance of negotiations. Understand the other party's worldview and position to find common ground with them.  

This was a super-short summary of the book and only the surface was scratched (actually I left a lot of content that I didn't cover). If you were intrigued, go read the book; highly recommended!

 

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