This Strategy Will Make Negotiations Less Painful
From making job offers to closing deals, building a business can feel like a never-ending sequence of negotiations. But for most of us, the thought of being in "negotiating mode" all the time, like some pinstriped character from an ‘80s business movie, isn’t very appealing. Even the word causes stress. How can we negotiate like a pro without it feeling so adversarial?
In my executive coaching practice, I often help entrepreneurs and executives navigate challenging business negotiations. In the course of doing this, I frequently refer them to the work of Victoria Medvec, a professor at Northwestern's Kellogg School of Management. Her approach to negotiation is not only backed up by academic research, it tends to feel a lot less stressful in high-stakes negotiations.
Medvec is a proponent of a negotiation technique called MESOs, or Multiple Equivalent Simultaneous Offers. The idea behind MESOs is to give the other party multiple options to choose from that are equivalent from your standpoint.
For instance, say you’re the CEO of a growing startup and you’re making a job offer to a VP of sales candidate. You could do it the standard way with a single offer, or you could try giving the candidate multiple options, or MESOs.
Here's how you would create the MESOs:
1. Create a list.
Make a list of all the issues that matter to both parties. For the job offer, let’s say the variables that matter to both sides are salary, commission, equity and vacation time. (There may be other variables, like the size of the sales team budget, but let’s keep this simple for the sake of this example.)
2. Weigh each option.
Estimate how important these issues are for each party. From your interviews, you gather that the VP of sales candidate really values “upside” from equity and commission but also supports a family and needs a healthy salary. You're guessing they're less concerned with vacation time. On your end, let's say you care about managing cash (i.e. needs to keep a lid on salary), maintaining a "work hard" culture (i.e. has a bias against too much vacation) and achieving valuation milestones for investors (i.e. is open to being generous with commission and equity if it’s tied to results).
3. Think about alternatives.
Identify realistic possible alternatives for each issue. Given these preferences, let’s imagine the realistic alternatives for equity are 1 percent, 2 percent or 3 percent of company shares (with four-year vesting of course) depending on the rest of the package. For vacation time, the alternatives are the standard two weeks vacation, with the possibility for three or four weeks if that were important to the candidate, which it isn’t in this case. Let’s say there are a two or three alternative salaries and commission structures, too.
4. Narrow down the choices.
Finally, create three alternative offers that would be compelling to the other party and are mutually equivalent from your standpoint. For example, one compensation package might include 3 percent equity but with a lower salary, standard vacation time, and moderated commission structure. Another might include 2 percent equity with a medium salary, standard vacation time and a generous commission structure. The third might include 1 percent equity with standard vacation time, as rich a salary as you can afford, and a generous commission plan.
Voila, you've created your MESOs!
This might seem belabored, but there are a number of benefits to this approach. According to Medvec’s research, the MESO technique makes you appear more flexible, increases the overall odds of reaching an agreement and makes it easier to collect information about the other side’s preferences. By offering three alternatives instead of one, you powerfully frame where there are trade-offs. Plus, the process of creating MESOs forces you to do your homework in evaluating and prioritizing all the issues.
For me personally, I like the multiple-offer approach, because it gets me out of an adversarial mindset and focuses me on optimizing outcomes for both parties. There’s also something powerfully disarming about giving someone a selection of choices.
While I don’t recommend using MESOs in every negotiation you encounter, it’s a useful strategy to keep in mind when you face a high-stakes negotiation with many component parts.
Related: 7 Ways to Be a Better Negotiator