Bargaining for Advantage

Introduction

In today's world, negotiation is an essential skill that everyone needs, whether in their professional or personal life. From discussing a salary raise with your boss to haggling over prices in a bustling market, the ability to bargain effectively can make a significant difference in the outcomes we achieve. G. Richard Shell's book, "Bargaining for Advantage," offers valuable insights and practical strategies to help readers become more proficient negotiators.

This summary provides an in-depth look at the key ideas presented in Shell's book, exploring various aspects of negotiation, from understanding your own strengths to leveraging ethical standards. Whether you're a seasoned business professional or someone looking to improve their everyday negotiation skills, this summary will equip you with the knowledge and tools to bargain more effectively.

Embracing Your Authentic Strengths

One of the fundamental principles of effective negotiation is understanding and embracing your authentic strengths. Shell emphasizes that there's no one-size-fits-all approach to negotiation, as everyone has different levels of competitiveness and natural tendencies.

To illustrate this point, the author presents two contrasting examples:

1. Steve Ross, the founder of Warner Communications and later CEO of Time Warner, was known for his intense competitiveness. In one instance, while playing a card game on a corporate jet, Ross ordered the pilot to keep circling the airfield until he won a hand, refusing to concede defeat.

2. On the other hand, Larry King, the popular American talk show host, demonstrated a more easygoing approach to negotiation. When his agent tried to leverage offers from other networks to secure a large raise from CNN, King simply told Ted Turner, CNN's owner, that he'd stay with the network for a modest raise.

These examples highlight the vast differences in negotiation styles that can exist between individuals. The key takeaway is that trying to adopt a negotiation style that doesn't align with your personality is likely to result in an incoherent and ineffective approach.

Instead of attempting to mimic someone else's style, Shell advises readers to identify and leverage their own strengths. For instance, if you're not naturally assertive, you might excel at carefully listening to the other party and finding mutually beneficial solutions. If you're more competitive by nature, you can develop strategies that capitalize on that trait.

Ultimately, authenticity is crucial in negotiations. People tend to recognize and respect genuine behavior, which can help build trust and rapport during the bargaining process.

Setting Optimistic Yet Justifiable Expectations

Another key aspect of successful negotiation is entering the process with optimistic but justifiable expectations. Shell illustrates this concept with the story of Akio Morita, the founder of Sony.

In 1955, Sony developed a small transistor radio priced at $29.95, which had become popular in Japan. Morita, driven by high expectations for his product, decided to introduce it to the American market. Despite facing initial skepticism from potential retailers who believed Americans preferred larger radios, Morita persisted.

Eventually, Bulova, a respected name in electronics at the time, offered to buy 100,000 Sony transistor radios on the condition that they would be sold under the Bulova brand. Although this offer promised significant profits, Morita refused, stating that in 50 years, Sony would be just as famous as Bulova.

This anecdote demonstrates the power of entering negotiations with optimistic expectations rather than abstract goals. An expectation is something you believe you can reasonably accomplish, based on facts and research. This conviction lends strength to your statements during negotiations and increases your likelihood of success.

Morita's expectation that Sony would grow into a world-famous brand was based on the transistor radio's success in Japan and his understanding of its potential in a large consumer market like the United States. His conviction in this expectation allowed him to turn down a lucrative offer in favor of building Sony's brand recognition.

To apply this principle in your own negotiations:

1. Do thorough research and preparation before entering negotiations.
2. Based on your research, form realistic but optimistic expectations about what you can achieve.
3. Enter negotiations with the conviction that your expectations are reasonable and justifiable.

By following this approach, you'll be more likely to negotiate with confidence and achieve favorable outcomes.

Appealing to Norms

One effective strategy in negotiations is appealing to norms that the other party respects. Norms can be broadly categorized into two types:

1. External norms: These include laws and societal standards that govern behavior in general.
2. Internal norms: These are specific to an organization or context, such as a company's philosophy or code of conduct.

To illustrate how appealing to norms can be powerful in negotiations, Shell provides two examples:

1. In a hospital budget negotiation scenario, a nursing executive seeking funding for more nurses could appeal to the hospital's internal norm of prioritizing high-quality patient care. By gathering data that shows how additional nurses would improve patient care, the executive aligns their request with the hospital's established priorities, making it harder for decision-makers to refuse.

2. Mahatma Gandhi's experience in South Africa demonstrates how external norms can be leveraged. When Gandhi was thrown out of a first-class train carriage due to his ethnicity, he decided to challenge the racist law by appealing to the social norm that well-dressed and well-behaved people should be allowed to travel first class. By dressing impeccably and behaving courteously, Gandhi was able to purchase a first-class ticket and complete his journey, despite the discriminatory laws in place.

To effectively use this strategy in your own negotiations:

1. Identify the relevant norms that the other party respects or adheres to.
2. Frame your requests or arguments in a way that aligns with these norms.
3. Gather evidence or data that supports your position in relation to these norms.

By appealing to established norms, you create a situation where the other party is more likely to agree with your position, as doing otherwise would contradict their own standards or principles.

Building Fair and Reciprocal Relationships

Developing fair and reciprocal relationships is crucial for successful long-term negotiations. Shell emphasizes that treating others with honor and generosity often leads to mutually beneficial outcomes.

The author illustrates this principle with the story of J.P. Morgan and Andrew Carnegie. During the financial panic of 1873, Carnegie found himself in need of cash. Morgan offered to buy Carnegie's share in a partnership with the Morgan family. Carnegie agreed to sell for what he thought was a fair price of $60,000. However, when Carnegie came to collect the money, Morgan handed him $70,000, explaining that Carnegie had underestimated the value of his share.

This gesture of fairness and generosity made a lasting impression on Carnegie. It led to a friendship and business relationship between the two men that would prove far more valuable than the initial $10,000 difference.

Key points to remember about building fair and reciprocal relationships:

1. Generosity often begets generosity, creating a positive cycle in business relationships.
2. Treating others fairly can lead to long-term benefits that far outweigh short-term gains from taking advantage of someone.
3. True reciprocity is balanced – be wary of manipulators who may try to exploit your generosity.

To apply this principle in your negotiations:

1. Look for opportunities to be fair and generous, even when you have the upper hand.
2. Practice reciprocity by making a move and then waiting for the other party to reciprocate before making another move.
3. Be cautious of imbalanced reciprocity, where small gestures from the other side might pressure you into making larger concessions.

By fostering fair and reciprocal relationships, you create an environment conducive to successful negotiations and long-term business partnerships.

Understanding the Other Side's Motivations

A crucial aspect of successful negotiation is understanding what motivates the other party. As Henry Ford said, "If there's any secret to success, it lies in the ability to get the other person's point of view and see things from that person's angle."

Shell provides an excellent example of this principle in action through the story of Kelly Sarber, a young saleswoman trying to win a waste-management contract in Oceanside, California. Sarber, a surfer herself, understood the importance of beaches to Oceanside's economy and the threat of coastal erosion. She cleverly offered to bring clean sand from her company's desert dump site with each garbage run to replenish the beaches. By addressing a key concern of the Oceanside administrators, Sarber was able to secure the contract.

To effectively apply this strategy:

1. Research the other party's needs, concerns, and priorities before entering negotiations.
2. Try to identify where your interests might align with theirs.
3. Prepare offers or proposals that address their specific motivations.

It's also important to remember that while companies and institutions have policies and goals, it's individuals who actually negotiate. Therefore, understanding the personal motivations of the people you're negotiating with can be just as important as understanding the organization's goals.

For example, if you're interviewing for a job and discover that your potential boss is about to open a new office and wants to keep the initial payroll down, you could offer to start the job a little later. This shows that you're attentive to their needs and willing to be flexible, which could give you an edge in negotiations.

By taking the time to understand and address the other side's motivations, you increase the likelihood of reaching a mutually beneficial agreement.

The Power of Leverage in Negotiations

Leverage is perhaps the most critical factor in negotiations. It gives you the power not just to reach an agreement, but to obtain one on your own terms. Shell compares negotiating to a game of poker, where perception plays a crucial role. Even negotiators with no real leverage can create the impression that they have it in abundance.

Leverage can come in many forms and can be applied in several ways:

1. Arranging for the other side to lose face if no deal is reached.
2. Finding a good alternative option.

The author illustrates the power of leverage through the story of Janie Mitcham, head of purchasing for Houston Lighting & Power Company (HL&P). HL&P was paying an exorbitant rate of $195 million a year to Burlington Northern Santa Fe Railway for coal transportation. Despite attempts to negotiate lower rates, Burlington Northern, which had a monopoly on rail access to the HL&P plant, refused to budge.

Mitcham's solution was to create leverage by building her own railway connecting her plant to tracks owned by Burlington's competitor, Union Pacific Railroad. This move pressured both railway companies to lower their rates. The result was a 25% discount off Burlington Northern's rates from Union Pacific, saving HL&P over $10 million a year.

To effectively use leverage in your negotiations:

1. Identify your sources of leverage before entering negotiations.
2. If you lack leverage, look for ways to create it, such as finding alternative options or partners.
3. Use your leverage strategically to influence the other party's perception and decision-making.

Remember that leverage is dynamic and can shift during negotiations. Stay alert to changes in the negotiation landscape that might affect your leverage position.

Overcoming Impasses in Negotiations

Even the most skilled negotiators can find themselves at an impasse. When negotiations grind to a halt, it's crucial to maintain objectivity and take small steps to move forward.

Shell advises a two-step approach to overcoming impasses:

1. Find objectivity:

   • Pause and step outside yourself.
   • Check your emotions and ensure they're appropriate for a professional context.
   • Examine your perceptions of the other side, remembering that their behavior is contingent on the negotiation, not their innermost character.

2. Take one small step:

   • Make a small, unambiguous move in the other side's direction.
   • This could be a minor concession or an acknowledgment of past mistakes.
   • If the other side responds positively, take another small step.
   • Repeat this cycle until tensions ease and negotiations can resume.

The author illustrates this approach with the historic visit of Egyptian President Anwar el-Sadat to Israel in 1977. After decades of war between the two countries, Sadat's visit was a dramatic gesture. His "small step" of simply getting off the plane in Israel demonstrated his willingness to recognize Israel's existence. This gesture eventually led to the Camp David peace accords and the return of the Sinai peninsula to Egypt.

While most negotiations may not be as high-stakes as international peace talks, the principle remains the same. Whether dealing with a personal misunderstanding or a professional negotiation, the one-small-step strategy can be incredibly effective in breaking deadlocks and moving negotiations forward.

To apply this strategy in your negotiations:

1. When you reach an impasse, take a moment to regain objectivity.
2. Identify a small, meaningful gesture you can make towards the other party.
3. Make this gesture and observe the response.
4. If positive, continue with small steps until the negotiation is back on track.

Remember, overcoming an impasse often requires patience and a willingness to make the first move towards reconciliation.

The Three Schools of Bargaining Ethics

Ethical considerations play a significant role in negotiations, and how one approaches these considerations can greatly impact the negotiation process and outcomes. Shell identifies three main schools of thought when it comes to bargaining ethics:

1. The Poker School:

   • Views negotiation as a game with well-defined rules set by law.
   • Anything goes within these rules, including deception.
   • Adherents see no problem with lying to extract the best deal, as long as it's effective.

2. The Pragmatist School:

   • Allows for some deception but prefers alternatives when available.
   • Concerned about potential damage to reputation if caught in a lie.
   • Aims to preserve credibility and good working relationships.

3. The Idealist School:

   • Follows philosopher Immanuel Kant's belief that lying is never acceptable.
   • Believes negotiations are serious, consequential acts not to be treated as games.
   • Commits to truth in all dealings.

To illustrate these schools of thought, consider a scenario where you're buying an antique globe from an elderly shop owner:

• A Poker School adherent might lie about the globe's value to get a lower price.
• A Pragmatist might avoid outright lies but might still try to negotiate the price down without full disclosure.
• An Idealist would be completely honest about their knowledge of the globe's value and their willingness to pay.

Shell provides Warren Buffet as an example of the Idealist School. Despite being one of the most successful capitalists in modern times, Buffet always conducts himself with a commitment to truth, proving that one doesn't need to be a Machiavellian trickster to succeed in business.

Understanding these different ethical approaches can help you:

1. Identify your own ethical stance in negotiations.
2. Recognize the ethical approach of those you're negotiating with.
3. Navigate ethical dilemmas that may arise during negotiations.

It's important to note that while different ethical approaches exist, maintaining a reputation for honesty and fairness can often lead to better long-term outcomes in both business and personal relationships.

The Importance of Preparation in Negotiations

While not explicitly mentioned in the key ideas provided, it's clear from the various examples and strategies discussed that thorough preparation is crucial for successful negotiations. This theme runs through many of the concepts presented in the book.

Preparation involves several key aspects:

1. Research: Gather as much information as possible about the other party, the context of the negotiation, and any relevant market conditions or industry standards.

2. Self-assessment: Understand your own strengths, weaknesses, and ethical stance. This helps you stay authentic during negotiations.

3. Setting expectations: Based on your research, set optimistic but justifiable expectations for what you hope to achieve in the negotiation.

4. Identifying leverage: Determine what sources of leverage you have and how you might create more if needed.

5. Understanding motivations: Try to discern what motivates the other party and how you might align your proposals with their interests.

6. Anticipating obstacles: Consider potential impasses or challenges that might arise and plan strategies to overcome them.

7. Practicing: If possible, role-play the negotiation with a colleague or friend to refine your approach and identify any weaknesses in your strategy.

By investing time in preparation, you increase your chances of achieving favorable outcomes in negotiations. It allows you to enter negotiations with confidence, armed with the knowledge and strategies needed to navigate complex bargaining situations.

The Role of Relationships in Negotiations

Throughout the book, Shell emphasizes the importance of building and maintaining positive relationships in negotiations. This is evident in several of the key ideas discussed:

1. Fair and reciprocal relationships often lead to better long-term outcomes.
2. Understanding the other party's motivations can help build rapport and find mutually beneficial solutions.
3. Overcoming impasses often requires a willingness to take the first step towards reconciliation.

Building good relationships in negotiations involves:

• Treating others with respect and fairness, even when you have the upper hand.
• Demonstrating empathy and understanding for the other party's position.
• Being reliable and following through on commitments.
• Maintaining open and honest communication.

Strong relationships can provide several advantages in negotiations:

1. They can create a more collaborative atmosphere, making it easier to find win-win solutions.
2. They can help overcome impasses or disagreements more smoothly.
3. They can lead to future opportunities and partnerships beyond the current negotiation.

While it's important to build positive relationships, it's equally crucial to maintain professional boundaries and not let personal feelings cloud your judgment in negotiations.

The Dynamic Nature of Negotiations

Another underlying theme in Shell's book is the dynamic nature of negotiations. This is particularly evident in the discussions about leverage and overcoming impasses.

Key points about the dynamic nature of negotiations include:

1. Leverage can shift during negotiations based on new information or changing circumstances.
2. Perceptions play a crucial role and can be influenced throughout the negotiation process.
3. Negotiations often involve a series of moves and countermoves, similar to a game of chess.
4. Impasses can be overcome through small, strategic steps that can change the dynamics of the negotiation.

Understanding the dynamic nature of negotiations is crucial because it:

• Encourages flexibility and adaptability in your approach.
• Highlights the importance of staying alert and responsive throughout the negotiation process.
• Emphasizes the potential for turning around seemingly deadlocked situations.

To navigate the dynamic nature of negotiations effectively:

1. Stay attentive to shifts in the negotiation landscape.
2. Be prepared to adjust your strategy as new information comes to light.
3. Look for opportunities to change the dynamics in your favor, such as by introducing new information or reframing the discussion.

Conclusion

"Bargaining for Advantage" by G. Richard Shell offers a comprehensive guide to becoming a more effective negotiator. The book emphasizes the importance of authenticity, preparation, and ethical conduct in negotiations, while also providing practical strategies for setting expectations, leveraging norms, building relationships, and overcoming impasses.

Key takeaways from the book include:

1. Embrace your authentic strengths in negotiations rather than trying to mimic someone else's style.
2. Enter negotiations with optimistic but justifiable expectations based on thorough research and preparation.
3. Appeal to norms that the other party respects to strengthen your position.
4. Build fair and reciprocal relationships for long-term success in negotiations.
5. Understand and address the other side's motivations to find mutually beneficial solutions.
6. Recognize the power of leverage and look for ways to create it when you don't have it naturally.
7. Overcome impasses by maintaining objectivity and taking small steps towards reconciliation.
8. Be aware of different ethical approaches to negotiation and consider how they align with your values and goals.

By applying these principles and strategies, readers can improve their negotiation skills in both professional and personal contexts. Remember that becoming a skilled negotiator is a continuous process of learning and refinement. Each negotiation provides an opportunity to apply these concepts and gain valuable experience.

Ultimately, the art of negotiation is about finding ways to create value for all parties involved while achieving your own objectives. By approaching negotiations with preparation, empathy, and integrity, you can build a reputation as a fair and effective negotiator, opening doors to new opportunities and partnerships throughout your career and life.