Covering The Bases
Ron Shapiro is a legendary negotiator, but his style can be surprising. That's because the Baltimore attorney holds to a guiding philosophy that makes him very different from most negotiators: "Never beat up on the other side."
Sound crazy? Not judging by the rich deals Shapiro has made for clients ranging from businesses to pro athletes including $32 million over five years for Orioles star Cal Ripken Jr. and about the same for former Minnesota Twin Kirby Puckett. What's more, despite winning those lucrative contracts, Shapiro is so highly regarded by Major League Baseball's owners that he frequently gets mentioned as a strong candidate for baseball commissioner.
"Both sides can leave a negotiation happy," says Shapiro. "Get all you can, but try to accommodate the other side's needs, too. Use the negotiation to build relationships for the future."
Nowadays the co-founder of the Shapiro Negotiations Institute regularly conducts "Making the Deal" seminars for executives and entrepreneurs. Can we, in fact, learn to negotiate and build relationships? "Absolutely--I've taught thousands of people through the years, and there's no doubt this skill can be taught," promises Shapiro, who here shares some of his negotiating secrets.
Entrepreneur:Why shouldn't we try to beat up the other side in a negotiation?
Ron Shapiro: That's how most people think of negotiating, but it is exactly how not to do it. The battle mentality is a real negative--in the end, this win-lose approach turns into lose-lose, and nobody comes out ahead.
Entrepreneur:Another case of that kind of negotiation is the baseball strike of a few years ago.
Shapiro: And today, too. Remember, the strike was ended by court order; the talks continue. They are the ultimate example of how not to negotiate. Management clearly came to the table to beat the union once and for all, while the union clearly did not want to relinquish its string of wins in recent years. The two sides started out fighting over a whole pie, then a slice of the pie, and soon they may be fighting over crumbs unless they find a way to accommodate the needs of both sides. This shows what's wrong with the battle mentality in a negotiation.
Entrepreneur:But should we just surrender to the other side?
Shapiro: [In our seminars,] right after we show how negotiation isn't win-lose, we show how it isn't "wimp-wimp," either. Negotiation isn't appeasement; it's persuasion. When you negotiate a $30 million deal for a baseball player, that's not appeasement. But the deal can still take into account the needs of the other side. I've been doing negotiations for 25 years, and my view has always been that the key is to do business not just for today but for tomorrow as well. That's how you achieve lasting success.
Entrepreneur:Do we really need to learn how to negotiate?
Shapiro: You are in negotiations probably the greater part of every day. I'm in negotiations with my youngest son every night about bedtime. You check into a hotel, and you're in a negotiation for a better room, a better price. Wherever you go, you are in negotiations, and if you are comfortable doing it, you're more effective not only in your business but throughout your life.
Entrepreneur:When does the negotiation start?
Shapiro: In my mind, I'm in a negotiation days and weeks before sitting at the table. I'm preparing, gathering information that relates to the other side--its financial resources and competitive factors. The next step is probing, where I sit at the table and try to find out what the other side's interests are. What's their bottom line? Then, finally, we propose an offer and enter what some describe as the haggling stage. That's the "Three-P" negotiating strategy we teach--prepare, probe, propose--and it works.
Entrepreneur:Which "P" gives entrepreneurs the most trouble?
Shapiro: Two of them--preparation and probing. The Greek philosopher Epictetus said we have two ears and one mouth. Most entrepreneurs act as though they have one ear and four mouths. They want to get down to haggling. But once you get the mind-set that preparation and probing are important, you become much more effective. The actual negotiation at the table is only the tip of the iceberg. In an effective negotiation, a lot of the iceberg is under the water.
Entrepreneur:How, specifically, do you prepare?
Shapiro: If it's a public company, I go to the [Securities and Exchange Commission] or the computer and pull up information. If it's a private company, I go to trade association publications, newspaper clips, the Internet. I want to know all the key facts.
Entrepreneur:How do you probe if the other side doesn't want to open up?
Shapiro: Ideally, you probe just by sitting down with the other side and asking questions. If they are resistant, probing gets tougher--but not impossible.
For instance, if you can, go over to their office. Look at the pictures on their walls. Look at their diplomas. Search for ways in which you can connect and bond with them--ways to get a relationship started. And keep looking for creative solutions that satisfy their needs as well as yours.
Entrepreneur:Is it just a bluff when the other side says "This is non-negotiable?"
Shapiro: Usually. When you've been negotiating for a while, you don't even listen to it. Even when price isn't negotiable, there are other issues that can be addressed--there's delivery, service and so forth. That's why I spend a fair amount of time trying to find out what the other side is thinking. Often I find things in this probing process that let us shape a deal that works for both parties but doesn't change the price.
Entrepreneur:Is it possible to make a deal where you win and the other party loses?
Shapiro: Sometimes you could--in cases where you have a lot of leverage. But what I admonish people is, get everything you can, but don't make this a search-and-destroy mission. Why? You may well have to deal with that party at another point in time. What goes around comes around.
Entrepreneur:Is part of the negotiator's job to help the other side see how they can give you what you're asking for?
Shapiro: I always say, to get what you want, help the other side see what they want. Then convince them they can have that while you still get what you want. That's the way to achieve a true win-win result.
Entrepreneur:In the proposing stage, you warn that the first offer and counteroffer are crucial. Why?
Shapiro: The first offer creates a boundary. If you can, get the first offer from the other side. There are times that the other side comes up with a first offer that's far bigger than you hoped to end up with.
If you cannot get the other side to make the first offer and you must go first, put out an offer that creates a high enough boundary so you are left with room to negotiate. If you're the buyer, offer less than what you're willing to pay. At the same time, since you've done preparation, build in at least some of the other side's needs in your first offer. But don't put in all their needs--there's still a negotiation ahead of you.
Entrepreneur:What are some tactics the other side may try, and how do you disarm them?
Shapiro: Good Cop-Bad Cop. The Higher Authority. Manipulating physical surroundings--for instance, putting you in a hot room and seating you in a chair where the sun shines in your eyes. Know these "getting the upper hand" tactics, and you know to do what the witch doctors do. The witch doctor calls up the evil spirits, and the evil spirits go away. You can do the same. Look across the table and say, "Hey, that's good cop-bad cop." Or "Why don't you bring your higher authority into the room so we can talk this out?" Or "Can I change my seat?" These are easy techniques that let you disarm these tactics if you recognize them.
Entrepreneur:What's the worst mistake a negotiator can make?
Shapiro: Getting personal. Don't insult the other person. By the same token, don't take things personally and get angry. If somebody is angry at you and you get angry at them, where do you end up? Losing control of your emotions is about the worst thing you can do.
Entrepreneur:A big worry is that, somehow, in becoming effective negotiators, we'll lose our integrity. Is that a real concern?
Shapiro: A lot of people ask that. The answer is, you go into the negotiation with goals, but if you give up your integrity in winning your goals--if you lie or don't keep your word--you may be giving up being an effective negotiator.
When you have integrity and you say something, people know you mean it. You cannot give away integrity because once you do, you cannot buy it back.
Shapiro Negotiations Institute, 36 S. Charles St. 20th Fl., Baltimore, MD 21201, (410) 539-2697.