4 Steps to Smart Negotiating
Join us in a city near you at Entrepreneur’s Accelerate Your Business event series kicking off Feb 23. View cities and dates »
Play this game with me: I have $100 that is owed to both of us. We're going to split it between us and I get to decide how. You get to decide whether to accept my offer--but you cannot make any adjustments or comment on it. If you accept, we split the money as I suggested. If you decline, no one gets to keep any of the money.
My first offer is for me to keep $60 and you get $40. If you're like most people--according to research by UCLA neuroscientist Dr. Matthew Lieberman--you might hesitate slightly but you take the $40. It seems mostly fair.
Now, instead of the deal I presented above, I propose to keep $80 and you will get $20. According to Lieberman's study, the vast majority of people will opt out of the deal and no one will get any money.
Why? Our brains are wired for fairness and we would rather no one benefit if both people can't benefit somewhat fairly. As a matter of fact, the instinct for fairness is so strong that many people will pay money and go out of their way to seek vengeance if they feel the scales are tipped out of their favor. In light of this information, negotiations can be based on real science and everyone goes home wealthier and wiser.
Assess deals you're trying to close, whether it's a bank loan or the acquisition of a competitor, a lot of fairness questions are being asked right now. If you don't answer them with some degree of equitability, you'll most likely stall progress and might even see the deal go completely sour.
The business lessons we learn from brain science about fairness and the applications to your livelihood are many, but let me point out the ones that are most important and ironically the touchiest:
- Hierarchy. Most people come to the negotiation table presuming a specific role they'll play. They might believe they're in the driver's seat, for instance. If you unfairly assume that you are the driver because you didn't do your homework about the other person, there is going to be a lot of arguing over who gets the steering wheel instead of focusing on the deal. Be proactive and investigate the role of the other person and play into it.
- Give in and give up. Go into a meeting knowing your idea will rarely be adopted in its entirety. It's interesting to see debates break out over seemingly trivial aspects of a proposal. But, people will go to the mat over little matters just to make sure you've given up something and give in to one of theirs. Prior to the meeting, examine the aspects of the proposal you can live without.
- If it's unfair, it's unsafe. The brain is scanning all day long to maximize reward and minimize danger. When something doesn't feel fair, it feels dangerous. The other party is now scanning for other areas in the proposal to minimize danger and you get puny, negative and narrow thinking in the room. One of your early tasks in a negotiation is to assure safety and create it if it's not there.
- If you expect fairness, you will likely get it. Examine one of the world's best statesmen, Egypt's Anwar Sadat, and you'll see why he accomplished what some dubbed a miracle. He negotiated peacefully with Israel during one of the most turbulent times in the Middle East. He did it by announcing in press conferences, when asked about how he thought negotiations would go, that he fully expected for them to be fair for both sides because he had come to expect nothing less. In essence, he got the other side to play nicely because "we have always played well together during our talks." Brilliant use of fairness.
There are exceptions to the fairness rule. Some people are numb to its effects no matter how fairly you play. They are the exceptions and you may need to play hardball with them, but it's doubtful that you'll feel good about it afterwards. Practice playing by the fairness rules and most of the time you will win--and so will they. Fair enough?
For reprints and licensing questions, click here.