Negotiation Simplified: An Excerpt

negotiation simplified

As someone who has been negotiating deals my entire professional life, I’ve observed great negotiators and those who are less skilled. From these observations I’ve realized that the great negotiators employ a common analytical framework and thought process, and that improving your negotiation results requires honing just four skills that you’re already using to some degree. My book, “Negotiation Simplified,” relates the process and skills of great negotiators. It then relates eight real life negotiation stories told by ambassadors, CEOs, and other great negotiators to bring the lessons to life.

In the excerpt I’ve selected, we’ll delve into the skill of goal-setting and the differences between needs and wants. Developing and understanding with precision your goals, needs, and wants is the most important step in improving your negotiating results.

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Why Goals Matter

Why is goal-setting so important? Former US Secretary of State Henry Kissinger said it best:

If you don’t know where you are going, every road will get you nowhere.

Goals are the end result your negotiation is intended to achieve. Dr. Kissinger’s simple quip says it all. If you don’t have a firm understanding of your goal, you’ll likely not achieve your desired result. Or, as Yogi Berra allegedly phrased it, “If you don’t know where you are going, you might wind up someplace else.”

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There is a more complex answer, however. Results are measured against goals. The greater the clarity and precision of one’s understanding of one’s goals, the greater the likelihood that the negotiator will remain focused on them, hence the greater probability that they will be achieved.

Very simply, goals drive everything. They determine the strategy and tactics that may be employed. They determine when to say yes and when to move on. They are the very reason that the negotiation is occurring. Having a goal, however, is not enough! It must be clear and precise.

To illustrate the level of granularity required when identifying goals, consider the famous story of the orange:

A mother and two daughters are all in the kitchen preparing a celebratory feast. Julie is making a cake with an orange frosting. Lisa is cooking duck with an orange sauce. There is one orange on the kitchen table, and both daughters reach for the single orange, which results in an argument.

Cutting the orange in half will not meet the needs of either daughter. Both daughters explain that their recipe requires one orange, not one-half.

The mother, a wise woman, steps into the fray and asks each daughter why she wants the orange. Julie says, “I need the orange’s peel for its zest for my cake frosting.” Lisa says, “I need the orange’s juice for my sauce.”

The solution is easy: one daughter gets the peel, and one, the fruit. All are happy.

This story teaches the importance of every negotiator’s favorite question, “Why?” It is also used to teach the concept of “expanding the pie,” enlarging the universe of options that may be traded in order to craft a great result. While both topics will be addressed in later chapters, I present the story here to illustrate and underscore the concept of clear and precise goal-setting.

What was each daughter’s goal in her negotiation? Those who have not thought deeply about what they want to achieve from the negotiation will say, “My goal is to get the orange.” While it is true that the entire orange will fulfill the needs of each daughter, neither daughter needs the entire orange. Julie requires all of the orange’s peel, and Lisa requires all of the orange’s juice. Indeed, neither daughter even wants the entire orange. Thus, neither should have set her goal as securing it.

This is the level of precision a skilled negotiator will strive to achieve. When they ask, “What is my goal?” the answer is the entire peel (or juice) of an entire orange, not one orange. The whole orange may be a want, but it is not necessary and is not the goal.

Effective goal-setting requires not just precision with respect to the identification of the goal. It also requires clarity with respect to needs and wants.

Goals, Needs, and Wants

The previous chapter spoke of needs and wants, the former being elements of a deal that must be achieved for a deal to be struck and the latter being matters that are desired but not critical for a deal to ensue. Goals and needs, while similar, are different. Like needs and wants, successful negotiators understand and always distinguish between the two.

Goals are the ultimate result desired. Needs are the elements that must exist in order for the goal to be achieved. Achieving your goals requires that all of your needs be secured, whether you say yes to a proposed deal or move on. Wants are just that—those elements that are desired but not essential to the deal.

Think of goals, needs, and wants as a hierarchy:

Wants are desirable, “nice-to-have” elements, like a dessert after a nutritious meal. They are not essential to satisfy the Needs or the ultimate Goal. Needs are foundational; they support the Goal, as I’ve tried to show here.

Here’s a simple example:

You wish to buy a car that you can take delivery of today that will hold a driver and three passengers and cost no more than $25,000. You like white, but any color will do.

Your goal is to buy a car. Your needs are first, that the price does not exceed $25,000; second, that you can drive the car off the dealer’s lot today; and third, that the car be big enough to hold a driver and three passengers. Your want is that the car’s color be white, but if all of your needs are met, then you’ll buy a black or a red car.

Returning to the example of the orange, the goal was the peel or the juice. The need was the quantity—that each daughter secured the peel or juice of the entire orange.

Goal-setting requires identifying and understanding your goals, needs, and wants. The difference between a successful and failed negotiation is whether all of your needs are obtained. The degree of success is determined by your wants, namely which and how many of the wants secured make the deal acceptable, good, or great.

The skilled negotiator always identifies and keeps the difference between goals, needs, and wants in the forefront of their mind. They also know, with precision and clarity, which wants are more or less important and the value or weight ascribed to each. As discussed in Chapter Four, the skilled negotiator trades wants of low value for those of greater value.

Here’s another example—this one a true story.

My wife and I were fortunate to spend our honeymoon in Hong Kong, a place we had always wanted to explore. Toward the end of our trip, a client who knew I was visiting Hong Kong reached out and asked if I would be willing to extend my trip for three days to meet with a Hong Kong manufacturer and negotiate a contract. I asked Beth (who is both a very understanding and tolerant wife and a confident and curious soul) whether she’d like to stay and explore the city alone. Her choice was easy. She would stay and explore and do some shopping—an activity for which I’m not a good companion.

Beth set a task for herself. She wanted a particular kind of pearl earrings as a memento of our trip. She also didn’t want anything fancy or extravagant, just something she liked that would be a fond reminder of our trip. So she set herself a price target of $100.

Hong Kong has literally thousands of jewelry shops and vendors offering countless variations of the kind of earrings my wife sought. One could easily spend a week visiting them all to find the earrings she had in mind. Beth intended to do just that, not because she’s such a serious shopper but as a means to explore the city.

As it turned out, on day one, the second shop she visited had a pair of earrings she loved. Moreover, the price was $85, comfortably below her $100 target!

Think of this in terms of a negotiation. What was Beth’s goal? Yes, it was to buy a pair of earrings. But it was to buy a special pair and to explore and entertain herself while I was working. What were her needs and wants? Beth’s needs were first, a pair of earrings that had special meaning; second, filling her time while I worked; and third, using the earring shopping as a means to explore Hong Kong. Her goal would not be achieved if she failed to accomplish all three.

In this simple example, she had only one want, a price of $100 or less. Note that I described the $100 price as a “target.” The price was important but within a desirable range. Thus, it is a want and not a need.

Should Beth have bought the earrings? Consider: This was day one and just the second store she visited. Did she know that these were the earrings she wanted? She hadn’t yet fully investigated the market or seen the multiple offerings available. Moreover, she didn’t know whether the price offered by the vendor was a good price. Was the price a deal? Was it fair or too high?

Set aside for the moment her lack of knowledge of the market and her inability to know whether these were indeed the earrings she wanted or whether the price was right. Instead, focus on just the question: What was Beth’s goal? Remember, it consisted of three needs:

  1. To buy a special pair of earrings
  2. To entertain herself
  3. To use the shopping as a means to explore Hong Kong

Beth recognized that achieving her goal required fulfilling all three needs. She knew that if she bought the earrings, she would not have achieved her two remaining needs and thus would not have achieved her goal. So she decided not to purchase the earrings. In the context of a negotiation, she rejected the offer and terminated the negotiation because her goal could not be achieved.

The story continues:

Three days later, having worn out her shoes and visited nearly every jewelry mall and shop in the city, Beth came to realize that those earrings she had seen on day one were indeed the perfect earrings and that the price was very reasonable.

Hoping the earrings had not been sold, she returned to the second shop and greeted the proprietor warmly. He remembered her well. After relating her investigation of the market, she said she was ready to buy the earrings she had seen previously, which were still in the proprietor’s showcase. He smiled, brought them out, and related that the price was now $110, which elicited an understandable, “What?” The price had been $85 when she had first seen them three days ago. To her question, “Why $110 now?” the shop owner explained with an “apologetic” smile, “Storage and interest costs.”

Question: Should Beth have walked out or just bought the earrings? Personally, I would have stormed out, slamming the door behind me. (I was younger then.) Thinking about this story in the context of a negotiation, Beth asked herself, “What did I need to achieve my goal?” The answer was the three needs listed above. She had just spent over two days investigating the market and exploring Hong Kong. She had entertained herself, and she had found a special, memorable pair of earrings—even more so now given this turn of events. So she reasoned that if she bought the earrings, she would have achieved her goal, since all of her needs had been met.

Moreover, she now knew that the price was fair. While $10 over her price target, the extra money was immaterial. So she bought them. From a purely negotiating perspective, why did Beth make the correct decision? Why would my storming out of the shop have been the wrong one? The short answer is that Beth acted on reason and understood that she had achieved her goal. I would have let emotion cloud my thinking and would have ignored or lost sight of my goal. Had the price jumped to an unreasonable amount, then it would have changed our thinking, but that was not the case. The price was still fair.

This story illustrates several important, basic aspects of negotiation:

  • Identifying one’s goals, and always keeping them in mind, helps get you where you want to (By storming out, I would have lost sight of my goal and permitted emotion to cloud my judgment.)
  • The importance of identifying needs and goals, and how they relate to wants. (Had Beth not thought deeply about her goal and what was necessary to fulfill it, she would have likely identified her goal solely as acquiring a pair of earrings for $100 or less.)
  • The difference between needs and (Price, within a reasonable range, was a want, not a need.)

Goals Dictate Strategy and Tactics

I stated earlier that “goals drive all.” They determine not just when the skilled negotiator will say yes but also the strategy and tactics that the negotiator employs to achieve their goal and the analysis and research to be conducted in preparation for the negotiation. Here’s another anecdote, also a real-life story, with only the company names abstracted. It relates a negotiation between a technology start-up (“NewCo”) and one of the world’s fifty largest companies (“BigCo”).

NewCo had invented a new and potentially revolutionary technology that it had licensed to BigCo. The latter had agreed to integrate the NewCo tech into certain products and pay NewCo a license fee for each product sold. The products involved were large, complex, multimillion-dollar machines. The integration of the NewCo tech into BigCo’s products proved more complex and challenging than anticipated, resulting in delays and large cost overruns.

NewCo, a start-up with limited cash, faced a financial crisis and would not be able to meet payroll without securing additional funds promptly. BigCo also faced a massive budget deficit. While it was financially able to weather the cost overruns, the internal reputation of the BigCo project team was at stake. Both companies believed the other responsible for their financial difficulties, and both believed the other should compensate them for their company’s losses.

BigCo submitted a three-million-dollar cost-overrun bill to NewCo, one that would bankrupt NewCo and effectively force it out of business. (This fact was known to the BigCo managers who submitted the invoice.) Similarly, NewCo presented BigCo with a five-million-dollar claim for damages resulting from delays and expenses it had incurred working to assist BigCo with the integration. (If paid, such a sum would have eliminated the near-term profit of BigCo’s project department, which would have had a devastating impact on the career of BigCo’s project leaders.) Frustration and emotions at both NewCo and BigCo were running high.

NewCo’s CEO and BigCo’s project leader determined to meet and discuss the issues and their respective claims.

Preparing for this meeting, each party’s negotiator asks, “What is the goal of this negotiation?” The inexperienced negotiator would likely say that the goal is to get the best financial result possible. They might then set as needs a minimum amount to be paid and a time limit for payment. Thus, the strategy employed would be to justify the legitimacy of each company’s expenses so as to “prove” their right to the sums claimed and the time demanded for payment.

The sophisticated negotiator would identify the goal differently. Remember the definition of goals: the ultimate result desired. Thus, sophisticated negotiators would look at the dispute to be negotiated in the context of the larger license/joint venture agreement between NewCo and BigCo. They would take note of the troubled relationship, not just the monetary dispute, and the fact that both parties are unhappy—as evidenced by the bills submitted, notwithstanding both parties’ knowledge that the bills, if paid, would cause significant harm.

Therefore, sophisticated negotiators would determine whether their own company wanted to continue or terminate the relationship. If the goal is to terminate the relationship, then the goal of the negotiation will be money: maximize the amount to be paid, and get it paid as quickly as possible (the same goal set by the inexperienced negotiator). If the goal is to preserve the relationship, then the goal of the negotiation will be preservation. A set of needs will be created to crystalize those matters that must be satisfactorily resolved for the relationship to continue. One need will likely be money, but there will be additional non-monetary needs as well. Thus, the goal determines the needs. As discussed in Chapters Three and Four, for each need and want, a strategy and set of tactics is created. As a result, the goal determines the needs and wants, which in turn determines the strategies and tactics employed. In short, the goal determines all.

Consider this simple example: Assume that BigCo’s goal in the negotiation is the preservation of the joint venture and that BigCo’s principal concern is that it doesn’t trust NewCo’s project manager. BigCo believes this person is young and inexperienced. It will therefore set one of its needs to be NewCo’s replacement of that person. The strategy and tactics to secure that result will surely be different than the strategy and tactics to secure a purely monetary result.

When setting goals, there is no better formula than the general truism: stop, think, and think again. View the situation globally. Think about the matter to be negotiated in the context of the global perspective. As the metaphor has it, “View the forest, not the trees (or weeds)” when identifying goals.

Expand your vision. Start with the immediate issue. Consider the probable outcomes of likely scenarios. Then consider the “knock-on” effects or consequences of those probable outcomes. Take a break, and then repeat the process. When a set of needs crystalizes, scrutinize each and confirm that each is indeed a need and not a want. Collectively, the needs will yield the goal. If, as in the NewCo/BigCo example, multiple goals exist, be sure to prioritize them. After that, prioritize and weigh the multiple wants that you’ve identified.

If the matter is time sensitive, remember that a matter is rarely so urgent that one cannot take a reasonable period of time to reflect on it. Moreover, measured, thoughtful responses almost always enhance one’s negotiating position once the negotiations begin. Take the time to set aside emotion, and work to remove emotion from the positions advocated by your counterpart and your colleagues.

Takeaways

Henry Kissinger: “If you don’t know where you are going, every road will get you nowhere.” So start by figuring out where you want to finish and what you want when you get there, not what road you’ll take.

Be granular when identifying goals and needs and weighing wants. Think juice and peel, not orange.

Differentiate needs and wants. All needs must be secured to achieve an agreement; how many and which wants are secured determine whether the deal is acceptable, good, or great.

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