1 Practical Practical Negotiations Negotiations Alan Bentley Director of Commercialization Office of Innovations
Feb 19, 2016
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Practical Practical NegotiationsNegotiations
Alan BentleyDirector of CommercializationOffice of Innovations
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Principled negotiationsPrincipled negotiations
•Most in the industry subscribe to the “win-win” philosophy of negotiations
•Famously covered by the book Getting to Yes, teaching principled negotiations (Fisher, Ury, and Patton)
Separate people from the problem Focus on interests, not positions Invent mutually beneficial options Employ objective criteria to resolve
differences•Negotiation is not (generally) a zero-sum game
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Separate people from the problemSeparate people from the problem
•Build a relationship for the long term Build trust by being honest and open Listen actively and ask lots of questions Work together to resolve issues
•Understand that things can get emotional•Understand the other party’s needs
Realize that different teammates may have different needs/expectations
•Let the other party save face•Address perspectives head on
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Focus on interests, not positionsFocus on interests, not positions
•It is difficult to convince people that their position is wrong
They are often based on deeply held belief The more unreasonable they seem, the more deeply
held they are likely to be•Focus instead on interests – you may be able
to give them what they need through alternative means
•Arguing positions tends to result in deadlock
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Invent mutually beneficial optionsInvent mutually beneficial options
•Cooperative brainstorming to address issues often effective
•Provide alternative approaches that are value-neutral to you
•Focus on “needs”, not “wants”•A problem for them is a problem for you•Sometimes you need to make the problem
bigger to find a negotiated solution
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Rely on objective criteriaRely on objective criteria
•One way to move past debating positions is to seek out and rely on objective criteria
•3rd party referees can be used•Objective criteria prevents pressuring other
side (pressure results in hard feelings and feelings of inequitable results)
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The breakdown of cooperative The breakdown of cooperative negotiationnegotiation
•Though cooperative, win-win negotiation is the goal, sometimes the negotiation turns competitive
Competitive = win-lose = “zero sum game”•People are competitive by nature, and like to win•Emotions can come into play
Embarrassment Anger Fear
•Time pressures / performance pressures come into play
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Degrees of Win-WinDegrees of Win-Win
• There is Win-Win
• And there is
Win-win
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Competitive negotiation - psychological Competitive negotiation - psychological warfarewarfare
What happens when a negotiation turns competitive?People resort to slight of hand:• Brinksmanship• Tactics• Chicanery• Deceit
Cooperative negotiations results in a positive outcome, but we all need to know how to spot competitive negotiations, and to avoid succumbing to the tactics employed therein.
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Types of psychological warfareTypes of psychological warfare
•Reduced aspirations•Pressure•Confusion•Persuasion•Threats
We shall hit on some of the common examples of each of these tactics.
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Reduced aspirationsReduced aspirations
•I refer to these tactics as “psychological warfare” because negotiations is essentially an exercise in psychology
•Reducing expectation levels is a powerful tool•Several common tactics:
Righteous indignation Good cop – bad cop My boss is a bastard
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Righteous indignationRighteous indignation
“That’s ridiculous!”, “Nobody in their right mind would ever agree to that!”; often followed by a string of expletivesA basic emotional reaction: sometimes understandable, often intentionally overblown• If you listen for it, you hear it repeatedly in every
negotiation (by both sides)• Not generally seen as violating the Implied Covenant of
Good Faith and Fair Dealing
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Good cop – bad copGood cop – bad cop
• Virtually everyone has experienced it in one form or another (comes in many variations)• Designed to lower aspiration level of negotiator• One person is constantly confrontational, stubborn, and demanding; the other is understanding, supportive, friendly• To be effective, the good cop need be equal to or subordinate to bad cop• The fallacy is that the good cop is trying to help you satisfy the bad cop!
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My boss is a bastardMy boss is a bastard
• The negotiator had agreed to accept a term you wanted (or “will try to get them”), but later laments that his/her boss wouldn’t go for it• The negotiator apologizes for the boss, and complains that he/she is a tough taskmaster• Often they never talked to the boss at all!• Sometimes they ask the boss to disagree!• Classic tactic of automobile sales professionals• This is really a variation of “Good Cop, Bad Cop” with invisible “Bad Cop”
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PressurePressure•There are various means to apply pressure to
your counterpart. Two common and effective types of pressure are time-based and success-based.
•Several common tactics:Time-based:
Nibble Leapfrog Go negotiate with yourself Slow yes / slow no
Success-based: I am not authorized We have a policy Broken record I have a better offer
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NibbleNibble
After you thought you had a deal, they come back and tell you that if you can give them this one more thing, then it’s a go
• Other party praying on your desire to close the deal• Often combined with “Boss is a Bastard”
If you concede that point, they will probably do it again!
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LeapfrogLeapfrog
“No, I don’t think I can agree to that, but let’s move on and come back to this.”
• Prays on your desire to make progress in negotiations• Usually occurs well into the negotiating process
An attempt to get you to concede on many points, without giving anything in return! Usually when you do go back, they will dig in their heels, resulting in you conceding on many points, and they concede on few
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Go negotiate with yourselfGo negotiate with yourself
• You provide the other party with an offer or counter offer• Instead of countering your offer, or discussing the outstanding issues, the other party selects one issue of importance, and indicates that they cannot accept this term• The other party asks you to reconsider your position with respect to this one term, in an attempt to get you to reduce your expectation
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Slow no / slow yesSlow no / slow yes
• “Sounds very interesting. We will get back to you about this.”• When you get the same kind of enthusiastic delay over and over, it’s a “Slow No”• Can result from being overly polite• Can be deadly if you don’t recognize it, because other options may fade away
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I am not authorizedI am not authorized
If the negotiator lacks authority to make key concessions, those concessions can probably be avoidedAllows negotiator to “cherry pick” concessions from other party without reciprocating
• Also give ability to take back concessions previously made
User often backs it up with “My boss is a bastard” (implying the boss is authorized, but will be unwilling)It is important to realize that having no power is in fact a position of power
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Authority/experience matrixAuthority/experience matrix
High authorityLow experience
High authorityHigh experience
Low authorityHigh experience
Low authorityLow experience
Who fares the best?
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We have a policyWe have a policy
• “Sorry, we can’t do that. We have a written policy against it.”• Sometimes, they are writing the policy as they speak!• Creates a presumption that the policy is rational and well thought-out, whether it is or not• A very common strategy for universities, as falling back on policies is a method that is used widely in internal management
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Broken recordBroken record
Opponent takes a hard stance and politely (or not) repeats the same justification over and over againYou are inclined to get tired of hearing it and walk away, but you are often not in a position to walk away, due to
• Political ramifications• Research funding ramifications• Relationship ramifications• No BATNA• Time investment• You’ve already made promises to internal constituents
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I have a better offer / others waiting in I have a better offer / others waiting in the wingsthe wings
• Companies sometimes claim they have alternative technologies lined up; universities sometimes claim they have other potential licensees lined up• Commonly a bluff, but one can never be sure• So shop-worn it rarely has an effect – unless, of course, they really DO have another in the wings, and are willing to risk losing your deal!
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ConfusionConfusion
• Confusion is designed to throw a negotiator off of his or her game, to distract from principal issues. • Several common tactics:
Mix up Mulligan Amnesia NPV shell game
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Mix upMix up
• You get a fax or get copied on an e-mail that was intended for a competitor, or for company insiders• The correspondence makes it appear that your deal is facing serious competition, or is facing considerable internal resistance• Whether you tell the sender about the supposed mix-up or not doesn’t matter; what matters is if you believe it is genuine!• Rule of thumb: the more worrisome the message is to you, the more likely it was no mistake you got it
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MulliganMulligan
• They tell you there has been an acquisition, change in management, change in corporate strategy, etc., and that as a result, they can’t accept any of the prior agreed-upon terms• Sometimes they send a new negotiator, sometimes they just send the same ones with a new boss (who is likely to be a bastard or a loon!)• This can happen more than once in a single deal
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AmnesiaAmnesia
They adamantly deny having made concessions you clearly remember
• Often followed by Righteous Indignation: “I never would have agreed to such a thing!”
May result from misunderstanding, or from their realization they went too far in their concessions
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NPV Shell gameNPV Shell game
• The opposition employs complicated business models, including arbitrary discount rates and other assumptions to advocate for a below-market deal• It is easy to get caught up negotiating the assumptions instead of negotiating the value of the property• It is easy to be persuaded by seemingly well thought out mathematical models and not do the hard work of verifying the approach
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PersuasionPersuasion
• Persuasion comes in several flavors, two common types being flattery and advocacy. The key is that persuasion is rarely based on third party validation.• Several common tactics:
Flattery: Massage You are our kinda person Wounded dove
Advocacy: Stanford does it that way Hindenburg Silent investor Selective benchmarks Statute stretch
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MassageMassage
• “We have heard so many great things about you. Everybody tells us what a great guy you are to work with! What a pleasure to be able to work with someone of your experience, instead of the harsh and inexperienced people we have had to deal with at other universities.”• Makes it kind of hard to be tough with them, doesn’t it?
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You are our kinda personYou are our kinda person
An exaggerated Massage that includes an implied or explicit job offer!Often used when the stakes are quite highCreates a serious ethical issue:
• Decline, and ruin a potential career opportunity• Show interest, then, how do you interact with the
company going forward?• Hide it, and risk accusations of impropriety
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Wounded doveWounded dove
The negotiator on the other side sheepishly admits they have less experience or expertise than you, and they ask for help (and mercy!)Similar to Columbo’s “bumbling inspector” or Matlock’s “simple country lawyer” Invites you to give up too much information
• You may want to demonstrate your vast knowledge/experience (showing off)
• You may want to be helpful in educating others – studies have shown that more experienced negotiators tend to go easy on less experienced negotiators
Can be incredibly effective, if it makes you relax your guard (so don’t!)
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Stanford does it that wayStanford does it that way
• If a top company or institution is agreeable to a particular deal structure, who are you to take a contrary position• Makes you want to strive to ‘keep up with the Jones’• Makes you feel inferior if you cannot appreciate the insight used by the benchmark institution
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HindenburgHindenburg
• “Oh, my God, no. We did that in a deal once, and it was a total disaster!”• Usually accompanied by a moving war story• Sometimes sincere, sometimes contrived. But who can tell which?• Intent is to imply that you will unbendingly insist on a particular position without actually having to aggressively dig in and risk impasse
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Silent investorSilent investor
• Company argues that they cannot accept a specific provision or deal structure because present or future investors will never agree to capitalize a company with such unfavorable terms• Concerns at first are broad-sweeping, but can usually be narrowed down to one or two terms
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Selective benchmarksSelective benchmarks
• When asked to back up their claim that a particular financial or legal term is reasonable, they show data from deals with similar provisions, and ignore deals with contrary approaches• Data seems to be objective, but in reality is selective to support the other side’s position
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Statute stretchStatute stretch
• Your opponent exaggerates or stretches a state or federal statute or regulation to bolster their point of view• One give away is that they won’t know the specific statutory citation, or have a copy handy; or the provision is so awkwardly written, it is subject to multiple interpretation• Popular variation: Other side points to a particular lawsuit decision to justify demands or expectations• Most court cases are so multidimensional and complex it is difficult to differentiate specifics from your situation
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ThreatsThreats
• Intent is to cause you to follow instinct for self-preservation.• Several common tactics:
High hat Whipsaw Tap on the shoulder I’d hate to tell the papers
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High HatHigh Hat
The other side contacts your boss and explains that unfortunately, they aren’t making any headway with you. They suggest that the boss should appoint someone else, have a sit-down with you, or handle negotiations personallyReasons given are your inexperience, your lack of flexibility, or lack of authorityThey usually try to keep the door open for a follow-up with the boss, to keep you on edgeNot very effective if the boss knows and trusts youSeveral variations, but not a true High Hat unless you are unaware of the contact
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WhipsawWhipsaw
Very common for companies with relationship with faculty inventors (particularly, funding relationships)While you feel both parties are proceeding fine, the negotiator on the other side contacts the faculty inventor, and tells them you are totally screwing up the deal
• Usually with an implied threat to abandon plans for laboratory research funding
The inventor then blasts you (or your boss!) for ruining everything, and pressures you to back down/ make concessions
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Tap on the shoulderTap on the shoulder
• Somebody (local lawyer or business leader, other licensee, etc) from out of the blue says he/she has heard that this negotiation isn’t going very well• The person who approaches you is usually an innocent person who is trying to help• They usually say your counterpart is a very good person, and that you should “try to work it out”• Creates an implied threat that the other side could affect you in ways you can’t even imagine!
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I’d hate to tell the papersI’d hate to tell the papers
Anybody can threaten to make you look bad publicly; few can actually do itNewspapers and TV are aimed at ordinary people, and contracts put most people to sleep! So few reporters will work such a story, UNLESS:
• The complainer is well known (e.g., large company or institution, perhaps with impact on the local economy)
• The technology is hot (e.g., bioterror defense)• Your side is already under attack• An accusation of conflicts of interest can be made
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Take away messageTake away message
• Keep emotions in check – do not let others’ actions affect your expectation level• Once you’ve achieved a value baseline, do not offer unilateral concessions• Trust, but verify – investigate assertions of others (assertions that cannot be investigated cannot be considered)• Keep others on your side involved and aware of negotiation status – do not be a hero