Article Summary: Six Habits of Merely Effective Negotiators
In a landmark HBR publication titled Six Habits of Merely Effective Negotiators, James K. Sebenius makes the case that following simple rules for negotiations may end in mediocre results. In this post, I will provide a quick summary of his ideas, with some additional commentary.
The article is organized as a collection of “six habits” (with echoes of prior professional advice-givers). In this structure, the guiding premise of the article is to help readers avoid common mistakes that can be made by following the simple, generic rules of negotiation. In doing so, it becomes a guide for those with some negotiating experience, but not yet with mastery.
For those who want to read the full article, you can access it here.
Here are the 6 mistakes that negotiators make which prevent them from mastery:
Mistake #1: Neglecting the other side's problem
If you don’t understand the deal from the other side’s perspective, you can’t solve his problem or yours.
A technology company that created a cheap, accurate way of detecting gas-tank leaks couldn't sell its product. Why? EPA regulations permitted leaks of up to 1,500 gallons, while this new technology detected 8-ounce leaks. Fearing the device would spawn regulatory trouble, potential customers said, "No deal!" By failing to take the customer's position into account, the product failed even though the technology was superior.
Sebenius spells out a number of missed opportunities and overt blunders that come from failing to research, understand, and appreciate the problem(s) that the other side of a negotiation is solving. As negotiators, if we can get clear on their problem, it will allow us to create a solution to their problem that serves ourselves beautifully. If we fail to understand their problem, we close the door on creative solutions that will serve both them and us.
Mistake #2: Letting price bulldoze other interests
Most deals involve interests besides price:
a positive working relationship, crucial in longer-term deals
the social contract, or “spirit of the deal,” including goodwill and shared expectations
the deal-making process—personal, respectful, and fair to both sides
Price-centric tactics leave these potential joint gains unrealized.
Price is only one of several common interests at play in a negotiation. Sebenius tells us to also consider several other interests, and shows how diverse they can be: relationships, the social contract, the process itself, reputation, time, hassle and peace of mind. The author illustrates, quite rightly, that these interests can be as great or greater than price for either side of the bargain. An obsession on price is a risky mistake that is easily made.
Mistake #3: Letting positions drive out interests
Incompatible positions may mask compatible interests. Your gain isn’t necessarily your “opponent’s” loss.
Environmentalists and farmers opposed a power company's proposed dam. yet compatible interests underlay these seemingly irreconcilable positions: Farmers wanted water flow; environmentalists, wildlife protection; the power company, a greener image. By agreeing to a smaller dam, water-flow guarantees, and habitat conservation, everyone won.
Interests lie behind positions. For example, while a position may be stated “I won’t pay a penny more than $13” there are deeper interests that exist behind that statement, and it is valuable to be able to let the interests create the agreement, not the positions. More likely than not, the positions are blocking the view of the real underlying interests. The mistake here lies in failing to look “behind” positions and discover what the interests are.
Mistake #4: Searching too hard for common ground
While common ground helps negotiations, different interests can give each party what it values most, at minimum cost to the other.
An acquirer and entrepreneur disagree on the entrepreneurial company's likely future. To satisfy their differing interests, the buyer agrees to pay a fixed amount now and contingent amount later, based on future performance. Both find the deal more attractive than walking away.
Sebenius argues that “while common ground helps, differences actually drive deals.” It may seem counter-intuitive, but it is productive to make differences clear, bring them out and contrast them so that creative, inventive solutions can be devised. Conversely, it can create problems and ensnare the bargaining process to eliminate the uncommon ground that exists between parties.
Mistake #5: Neglecting BATNAs
BATNAs ("best alternative to a negotiated agreement") represent your actions if the proposed deal weren’t possible; e.g., walk away, approach another buyer. Assessing your own and your partner’s BATNA reveals surprising possibilities.
A company hoping to sell a struggling division for somewhat more than its $7 million value had two fiercely competitive bidders. Speculating each might pay an inflated price to trump the other, the seller ensured each knew its rival was looking. The division's selling price? $45 million.
Based on the writings of Fisher and Ury (see “Getting To Yes”) the concept of BATNA is elaborated as a scissor blade that works with its twin – the deal – to create authentic bargaining power. For those who are not yet familiar with BATNA, this point requires some prior reading on that topic. Once the principle of BATNA is nailed down, the insight here is beautifully stated in this quote: “The real negotiation is deal vs BATNA; not one or the other in isolation”
Mistake #6: Failing to correct for skewed vision
Two forms of bias can prompt errors:
Role bias—overcommitting to your own point of view and interpreting information in self-serving ways. A plaintiff believes he has a 70% chance of winning his case, while the defense puts the odds at 50%. Result? Unlikelihood of out-of-court settlement.
Partisan perceptions—painting your side with positive qualities, while vilifying your “opponent.” Self-fulfilling prophecies may result.
Counteract these biases with role-plays of the opposition’s interests.
The author makes the observation that negotiations suffer where extreme opinions or impressions are allowed to form. Seeing and treating the other side of a negotiation as irrational or entrenched has the perverse effect of making them take on those traits in reality.
"Negotiation Masters possess the supreme art of making every man offer him, as a gift, that which it was his chief design to secure." -Francois De Callieres
In my opinion, this article forms a nice evolution of the ideas developed by prior thinkers in negotiations, with particular value coming from the requirement to look for differences as much as similarities, and to get interested in the problem on the other side of the table.
There is also a useful description of the recent history of negotiation fads, wherein he says the 50’s and 60’s were a period of hard bargaining tactics, and showing how to divide the pie. The 79’s and 80’s were a period of celebrating the concept of win-win, and techniques to expand the pie; and the 90’s and since a period of time where we explore both how to expand and divide the pie. With special acknowledgment to gains in the fields of game theory and behavioral study.