Life is full of times when we have to negotiate: for a raise or promotion, on the price of a car or house, on how much of the housework you are going to do. Yet most people have at least some amount of anxiety about their negotiating skills.
To get started, it is important to think about your ideal outcome in a negotiation. The typical situation that comes to mind when we negotiate is a one-off negotiation between two parties. In this case, each one wants to get the best deal. Almost by definition, the better the deal that one party gets, the worse that the other party has done.
For example, most people only buy or lease a car every five years or so. Chances are, the person who sells you a car today is not going to be involved in your next transaction. So, there is a real incentive for you to try to pay as little as possible for the best car you can get, and for the dealer to try to get as much money from you as possible.
Yet, very few negotiations in your life are likely to fit this scenario. In fact, you probably negotiate most often with people with whom you have an ongoing relationship. In this case, you want to preserve the relationship in addition to getting a fair deal. While you do want to maximize the value of a deal in some cases, in others, you may choose not to press for a better deal in order to make sure that your negotiation partner can also make a living.
With that in mind, here are three things you can learn from studies of negotiation.
When you negotiate, the value of the goods and services under discussion is ambiguous. For one thing, the monetary value of something (including how much you should be paid) is simply what someone else is willing to pay for it. And in many cases, that amount varies depending on the circumstances. A lawyer might get paid $150 an hour or $1,000 an hour depending on that lawyer’s experience and the number of other lawyers in that region who provide the same service.
Because there is no fixed scale for value, the actual monetary value that gets placed on an object can be influenced by arbitrary numbers that are out there in the environment. When people make judgments about value, they will often fixate (or anchor) on numbers that they encounter. After anchoring on a number, people will adjust that number based on their beliefs, but they rarely adjust enough.
In one recent study, participants were asked to negotiate about the price of an item. The seller was told that they had another offer for the object already. So, if they couldn’t reach an agreement with this buyer, they could always sell it to the third party. This external offer is called a BATNA (or the Best Alternative to a Negotiated Agreement). In this study, some participants were given a really great second offer, while others were given a weak offer.
When the seller approached the buyer to negotiate, the seller used the BATNA as an anchor and then adjusted upward to try to get more for the object than they had been offered. The people who had the weak offer ended up asking for less than those who had the strong offer, and they ended up getting less after negotiating. That means that the weak anchor actually hurt them in negotiation.
Studies like this suggest that it is important to really do your homework when you are negotiating. Before you start, make sure that you have a clear idea of what the resources you are trying to obtain are really worth. If possible, find out about other transactions that have happened recently and use those as an anchor rather than relying on numbers that happen to be present when you start negotiating.
Whenever you negotiate for something, you can choose to focus on what you have or you can focus on what you hope to get. Research suggest that when you focus on your own resources, you value them more. That makes you less likely to want to give up your resources. When you focus on the resources you hope to get, that makes you want those resources more. As a result, you are actually more willing to give up your own resources.
Go back to buying a car. One reason that car dealers want you to test-drive a car is that once you sit down in it, feel the smooth steering, and smell that new-car smell, you are focused on that car. The more you focus on the car you want to buy, the more you are willing to part with your money to get it. In this situation (as with any negotiation) make sure you shift your focus back to what you are giving up in order to make sure that you do not overspend for what you desire.
In negotiation it’s important to recognize the difference between the thinking and doing mind-sets. In the thinking mind-set, you are focused on contemplating a situation. You are willing to hold off making a decision in order to gather more information. In the doing mind-set, you are focused on action. You have little tolerance for additional thinking and discussion.
There are times in a negotiation where you may get that nagging suspicion that the deal is really not going your way. At times in those situations, you may feel as though your negotiation partner starts pressing for action. They may place deadlines on the offer they have made. Deadlines are a way of shifting people from a thinking mind-set to a doing mind-set.
Remember that if you are truly in a negotiation in which you have a resource that someone else wants, then a deal can’t be made until you both agree to it. If you feel like a negotiation is rushing to a conclusion, shift the conversation back into a thinking mind-set. A great way to do that is to literally walk away from the table for a while. By creating physical distance, you are giving yourself and the other party a chance to think again.
Pay attention to the shifts between thinking and doing mind-sets during a negotiation. Use these mind-sets to control the pace of a discussion in ways that make you comfortable with the outcome.
When you really want something, that puts you strongly in a doing mind-set. When you are unwilling to walk away from a negotiation (at least for a little while), the other party is likely to get what they want. That’s why it is helpful to bring an advisor to the negotiation whose payment is not contingent on the deal you are making. A disinterested party can pull you away from the table and help you to reset the discussion.