Negotiation Skills - What My Children Have Learned During Family Vacations
Most of us are just now completing the first few weeks back from winter break, which is often a time of rest and even reflection, but rarely a time for learning new skills. At my house it is. Over most of summer and winter breaks, and despite the best of their intentions, my daughters have received negotiation training and acquired what I consider to be valuable skills.
I’m not trying to teach during breaks. It all happens by accident. Things just go wrong. The Hotel fails to put the cot in the room, or the beach house is located next to a construction site, maybe we’re on a “stay-cation” and the plumbers hired to fix the drain or clean the sofa only make things worse. No problem ever goes away on its own, and because of my negotiation skills, I’m the designated “fixer”. I’ve been pleasantly surprised to learn that my daughters – now college age - have been paying attention and can tell me the steps I take to reach satisfactory negotiation outcomes.
Step 1 in any successful negotiation process is to start with a clear focus on one’s needs and interests. My first learning about the importance of a focus on needs came from my father, most likely the worst negotiator ever. He always seemed to have a complaint, but those to whom he was directing complaints never understood his problem or what he was trying to accomplish. During one episode, a confused desk clerk desperately looked to me to help him understand the problem. Instinctively, I I shrugged and gave him a look that said “I don’t know what’s going on and I can’t help you with this crazy guy. He’s just my Dad” – and Dad saw me. That was the last time I was ever caught doing that!
My father was a brilliant doctor, but he violated what I now call the First Promise of the Hippocratic Oath of Negotiation – First, do no harm. He routinely made things worse. I recall my high school experience during Mrs. Ungermeyer’s class, when my friend Kelso and I – both A students – were getting poor grades in an easy class for reasons we considered unfair. Both our parents had meetings. Kelso’s meeting was uneventful. He did remedial work and did fine. During my meeting, my father lost sight of the end game and launched into an expletive punctuated tirade, letting Mrs. Ungermeyer know that her intellect, abilities, background, performance, etc. were deplorable, appalling, disgraceful, etc. Dad was probably correct, but the point was to remedy grading issues. An offended Mrs. Ungermeyer never gave me credit for my work and my grade stuck.
The lesson I’ve managed to pass on to my daughters, who have never shrugged in front of me (or at least never let me see them shrug) is to understand the underlying interests at hand. This is true whether the goal is a discount at the hotel, a replacement beach house not next to a construction site, or timely financial close on a billion dollar deal. Negotiation is not about winning, but rather about achieving what you need – those needs have to be understood.
The second step I didn’t fully appreciate until my daughters explained it to me. “You make them feel guilty” they said. Except in dealing with my own daughters, I never set out intending to make others feel guilty, but it turns out that I do, and it does help. I assert the problem, describe how I have been wronged, and explain why the organization has a responsibility to fix it. What I’m really doing is softening my counter-party up to build a platform for negotiation. The “softening” is the guilt. Nobody, not real estate Agent James or even night clerk Mike wants to be the bad guy. Dad’s tirade only made Mrs. Ungermeyer angry, defensive and difficult. Calmly and clearly recounting the facts, however, will produce a decidedly different and desirable effect on any responsible person. My daughters see James’ posture slump as he gets a guilty expression on his face, which is the cue to move on to Step 3.
Before moving on, there is a hidden part of Step 2 that I had to explain to my daughters – Step 2 is not just about guilt, but about asking questions and listening. Asking questions may be irritating but never sours the mood of a negotiation and is almost always informative. Invariably, the dialogue and the answers to questions reveal the available solutions. Night clerk Mike didn’t respond to guilt and give us a cot. He did, however, explain that the reason why no cot was in our room was a matter of policy – not fire safety or law. That meant the decision could be changed by his manager. During the one and only time I’ve asked about one of my daughter’s grades, rather than repeating the Ungermeyer incident, I asked questions. In so doing I learned – and the teacher realized – that the grade reflected information from a prior period that was no longer relevant and that my daughter had done extra work to merit extra credit. Problem solved. On billion-dollar financings, I’ve been able to construct remedies I would never have thought of had I not kept asking questions. You’ll never know what solutions are available until you ask questions, listen carefully to the answers, and follow up attentively.
Step 3 is one I must use a lot, because when I asked my daughters what my next step is, they replied instantly and in unison, “you ask to speak to the manager”. Whether I always do this, following up with other parties is always an option. Chain hotels rarely give night clerk Mike authority to make a change and the manager must intervene. Or, raising the specter of the manager is necessary in case Mike has the authority and just needs the extra push and will fix the problem to avoiding consulting his boss.
A few words about the “manager card”
1. Only use the card if you need to. Despite my girls’ observation, I don’t speak with the manager unless I need to, in part because it harms relationships. Real estate agent James wanted to do the right thing, happened to have a last minute cancellation for a house not next to a construction site, and was able to help us. James kept renting us that house for years. When I was the “manager” at Ex-Im Bank, borrowers would appeal to me, but I discouraged the practice. Better to work things out with the Project Officer, who was the borrower’s primary relationship.
2. Only talk to the manager after a proper dialogue with the principal. As stated above, ask direct questions, listen to answers carefully, follow-up as necessary and clarify all you can. When you do speak with the manager, you’ll seek solutions that are institutionally feasible and practical. On large infrastructure deals where the time and attention of senior managers is limited, you get one shot and a short period to talk to the manager. Do your homework and ask for the right thing.
3. The “manager” is not necessarily the boss, but someone who can help you. When Dwayne the plumber only made things worse, he was effectively the manager and no one at his company would help us. The manager then became our insurance company. Insurance gave us the tools to conduct a proper investigation, pay to solve the problem, and pursue a settlement from Dwayne that covered all our costs. Amazingly, the key to using insurance effectively is the willingness to ask questions and submit to a fact-based process (Step 2 again). On large infrastructure deals involving commercial lenders or export credit agencies, the “manager” might be a major exporter or the sponsor, who can improve contract terms, assume risks, and remind the lending institution of the deal incentives and the risks they are taking.
The fourth step to mention in this process is to write a formal letter, memo, or presentation. I am famous for having drafted the perfect letter of complaint following a disappointing meal at a top flight restaurant I genuinely loved (and still love). The letter was a time-consuming work of art, which recounted the specific details of my history with the restaurant and the courses of the meal, and resulted in a free dinner for four worth several hundred dollars On infrastructure deals, I have used carefully scripted presentations or short and pointed memoranda to crystallize issues to great effect.
A few provisos on the written word – first, written material can be effective, but takes time, and should be used judiciously. You may use the written word as directed by your principal relationship, who may want something in writing to help him with his or her bosses. Otherwise, use written complaints only as necessary, once other measures have failed. Written treatises are the exception.
Second, choose your words carefully. Anything written has to be very carefully scripted and stand on its own. Be mindful of anything that might upset anyone, especially on large infrastructure deals where people tend to get nervous. If you think there is a chance you will offend someone, you probably will. Think again and re-draft.
That’s the process. It is simple, straightforward, specifically designed to “first do no harm”, and almost always successful. So, why isn’t it used more often? Why are forceful, Machiavellian techniques considered more prevalent?
First, this process is used fairly often. Many of the same underlying principles stated here are the same as in the Harvard Negotiation Project and Getting to Yes.
Second, this technique is not exciting or sexy. The process involves thought, effort, listening, and creativity, and generally does not result in big wins that are followed by the slapping of High Fives. Understanding the components of my daughter’s grade and the teacher’s grading process took time and careful listening, and in the end, my daughter only got what she deserved. By submitting to the insurance process to solve the plumbing problem, we chose to give up on a potentially lucrative suit. The replacement beach house, and even the lovely meal for four were all only things one should expect from reputable parties. Many of my accomplishments on infrastructure deals are largely the same. Getting to financial close in a reasonable period, avoiding prepayment penalties that shouldn’t apply, avoiding unnecessary due diligence are all things one should get. Why invest all that effort just for fair treatment?
The reason why is because avoiding unnecessarily bad outcomes is what most negotiations are all about. At home, I am only the “fixer” when there is a problem to be fixed. At work and especially on infrastructure deals that involve long relationships among parties, scoring the big win may be injurious in the long run. If parties can avoid unnecessary requirements and pay a fair level of fees, that’s a win. So, at home and on the job, this technique remains one I will follow and one I recommend.
The stories above are all true. The names have been changed to names of popular fictional characters. Anyone identifying all of them spends too much time on TV, movies, and the internet.