How to Business Part III: Negotiations

An Example of a Strong Opening Position
A lot of people tend to view negotiations as something antagonistic, a matter of “winning” or getting one over your opponent. Sometimes these attitudes can be helpful, but much more often, a mutually beneficial deal is the very worst you should be able to get out of a negotiation, and if you’re willing to be flexible and creative,  all parties might actually end up better off than anyone expected.
Leverage – Anything that strengthens your negotiating position or weakens undesirable parts of your counterpart’s position
Best Alternative – The next best option if you do not come to an agreement in a negotiation
Walk Away (Reservation) Point – The very least favorable terms you are willing to accept
Goal – The terms you hope to achieve through negotiation
Distributive vs Integrative Negotiating
Okay, I’ve got some fancy terminology to drop on you, but I thought it was a bit technical to put in the key terminology section: Distributive Negotiation and Integrative Negotiation.
First off, Distributive Negotiation is stereotypical haggling, slicing up the pie, trying-to-get-the-most-for-yourself negotiation that you’ve seen in TV shows and maybe used at the car dealership. It’s not bad, and most negotiations are at least partially distributive. The name comes from the fact that there’s some amount of value (usually expressed in dollars) on the table, and you are negotiating how to distribute it (more for you is usually better).
Integrative Negotiation on the other hand, is about trying to find solutions that create more value than you started with. You’re making the pie bigger. Often there are opportunities for this where the parties involved can make something happen that will benefit all of them more than any one of them could do by themselves. I’m a big fan of recommending you almost always start with an integrative approach to make sure all options for helping everyone involved out have been found, and only then worrying about how to divvy them up.
Factors to Consider in Negotiations
Your approach to any given negotiation is going to be colored by a number of factors, and you should consider them before actually starting the negotiation.
Value of this Deal
Obviously, you need to consider how much this particular deal is worth to you. If it’s worth a lot, you should prepare more and consider if it is worth relatively as much to your counterpart. What might be the chance of your life could be routine business to the other guy. Having some idea of how important this deal is to you and to any other parties is one of the most important steps in adequate preparation.
Is this deal a one-time thing with a stranger, or is it an ongoing situation with a close friend? You’ll probably prepare and act differently in those situations (as well you should!). Negotiations can be a great way to build relationships, but they can also sour them. If you have, or want to have, an ongoing relationship with your counterparts, it helps to be more conciliatory and to offer more concessions. If you’re never going to see the other person again , and you know that they’re trying to take you for as much as they can (see car salesmen referenced above) then maybe you adopt a harder stance and fight tooth and nail for every concession you can drag out of them.
Particular fields of business tend to be small worlds, and that is especially so of the gaming world (especially especially so of the professional gaming world). So, the way you treat people in deals is gonna get around. Maybe you got a book full of top notch artwork for what you knew to be a steal out of a newcomer, but when that gal finds out and starts telling everyone how you hosed her, good luck ever hiring a quality artist again. Likewise, word will get around in a good way if you occasionally make some concessions that are fair and reasonable, but maybe not the best for your bottom line in the short term – “hey, this guy cut me a sweet deal so I could focus on his project more, you should work for him.”
Personal Style
Different people are better at different kinds of negotiations by their nature. Some folks thrive on combative, head-to-head, high stakes distributive negotiations. That stuff gives other folks hives just to think about. It’s good to know different techniques and tactics, and it’s good to develop skills in areas where you’re less comfortable, but for the most part, you’re going to be best in negotiations that play to your style. If you have a really important negotiation that doesn’t fit your style (maybe a publisher is welching on paying you for delivered artwork, but you don’t like confrontation) then do your prep work and have a friend help you. I bet everyone reading this has at least one conciliatory “let’s all work together” friend and at least one “hard-charging, loves confrontation” friend.
Medium of Communication
How is this negotiation going to be conducted? In person? Over the phone? Via email? All of these have strengths and weaknesses, but generally, face to face is preferred for all the same reasons gaming in person beats the hell out of a hangouts game. Email or other asynchronous methods allow you to take the time not to get caught up in emotions and to do spot research on specific offers or terms, but it also makes the deal slower and makes it almost impossible to pick up on possibly important cues from body language or tone. With the highly distributed nature of hobby gaming, you’re probably going to have to conduct many of your negotiations remotely, but for any negotiations that are seriously important, consider if it’s feasible to do them in person.
What to Do
Preparing before a negotiation is the single most important thing you can do to maximize your chances of success. Many people assume either that there’s too much to prepare for, so it’s best to just wing it, or that they understand their own position well enough that there’s no need to prepare. Preparation isn’t about clarifying your own position (though you should do some of that too) – it’s primarily about learning as much as you can about your counterpart’s position. Ideally, you want to walk into a negotiation knowing exactly what your counterpart wants. You want to understand their position better than they do, so you can figure out how your position can fit with theirs in a way that gets you (or hopefully you both) what you want.
The sorts of things to research are basic facts on your counterpart, industry averages for the type of deal you’re discussing, recent activity around the sort of deal you’re discussing, that kind of thing. Anything you’ll be asking for or making an offer based on? Research that really well, so that you have facts to back up your moves.
Your Opening Move
There are various pros and cons to being the first person to put something on the table, but a safe place to begin with for just about any negotiation is to get clarification on what you’re there to discuss and what everyone hopes to get out of it. So, you could start a negotiation with a freelance artist with something like “Thanks for meeting me today, I really like your stuff. I’d like to talk to you about how much art you can do for my book and what your rates will be. Is there anything else you want to make sure we cover?”
That gives them an opportunity to add anything they especially care about to the agenda, and might give you more information. If the artist responds “Yeah, that sounds good, but I also want to make sure we hammer out when payment will be made for work” then that tells you that the timing of payment is also important, not just the amount.
Now, if you find yourself needing to lay down a number (or a bundle of terms or whatever), a good rule of thumb is this: start as optimistic as you can possibly justify. It doesn’t have to be a rock solid justification, just a good one. If you were in a job interview, and they ask you what you expect salary-wise, you might go “Well, based on my research, people in this field make $80,000 a year plus bonus, so I think that would be fair”. What’s that based off of? Maybe that’s the very top of the starting range of salary for people in that position, or maybe one guy put that amount on The reasons other people got those values may or may not apply to you, but you have a fact-based justification as a starting place to determine whether they do or not, and you don’t cede possible bargaining space before you even start.
Shoot for your Goal
While you’re engaged in the negotiation, you want to always focus on your goal. While doing your research before beginning the negotiation, you should come up with a somewhat audacious “best case” result, and start thinking of that as your target. Research has shown that negotiators with ambitious goals do better than negotiators with moderate or “reasonable” goals. Obviously you don’t want to come up with something totally ridiculous, nor should you get too attached to your goal if you need to be flexible to get to a mutually agreeable deal, but having a well-researched and optimistic goal will give you more confidence and start you from a better position than coming in with a worst-case mindset.
But Don’t Forget your Walkaway Point
Speaking of which, your “worst case” is your walkaway point, or as some formal negotiations books will call it, your reservation point. This is the position (be it a dollar value, a bundle of benefits, or whatever) that is the absolute worst you will accept - crucially, though, you will still accept it. So, how do you figure out your walkaway point? You look at your best alternative (some fancy negotiations books go so far as to call it a “Best Alternative To a Negotiated Agreement” or BATNA).
Your best alternative is the thing that you fall back on if you can’t come to a mutually agreeable deal with your counterpart in the current negotiation. The simplest example is this: you have a job that is just fine, but someone offers you a new job. Without any other job hunting, your best alternative is probably your current job. If some element of negotiation with the new job offer doesn’t go well - it turns out the people at the new place suck, or the pay is less, or the chance for advancement isn’t what you want, for example - then it’s in your best interest to sit tight at your current job.
It’s super important to keep your walkaway point handy because people get caught up in “deal fever”.  My professor even recommended that you write it down, put it in your pocket, and check it before you finalize a deal. After all, haggling and negotiating can be exciting! And after you put all this time and work into the negotiation, you totally want something to happen, right? Remember that sunk cost fallacy, though? So, if you’ve been wrangling over something and you feel relieved that you and your counterparts finally seem to see eye to eye, before you shake hands or sign anything, pull out that walkaway point that you made in the cold light of rationality and make sure the deal on the table beats it. If not, then you walk away.
Some Specific Tools and Tactics
Leverage is a topic that most people have at least some grasp of, but the key piece that many people forget is that it is anything that strengthens your position as perceived by your counterpart. Say you’re going to your boss asking for a raise. You know that you have a job offer for more money at a new company, but you like the people here and would rather stay if you can. If you never tell your boss that you have an offer for more money, you have no leverage from that job offer. Say you do tell her, but she was planning to fire you anyway – no leverage there either. So while you’re best alternative is often your basis for leverage, your counterpart has to know about it for it to work as leverage, and deciding what to share with your counterpart brings us to our next topic of openness.
Even though I’m a pretty open guy, and I’m all about sharing information and coming to mutually beneficial deals and all that integrative stuff, I still have problems with not defaulting to “cagey” in negotiations. There’s this natural tendency to think that your secret information is power, and that anything you reveal to your counterpart will give them an advantage over you. Honestly, though, most of the time the opposite is true. Usually, the more you tell your counterpart, the more opportunity he or she will have to find opportunities for mutual benefit and compromise. The one exception to this general rule of openness is your walkaway point – the only time you should reveal that is when you are literally ready to walk away unless your counterpart will budge off of something seemingly intractable.  The reason you don’t want to reveal your walkaway point unless you have to is that as soon as your counterpart knows the bare minimum you’re willing to accept, he or she has very little reason to offer you anything more favorable than that.
Much of the time in life we just accept how things are “supposed to go” and take what is presented to us. Sometimes, though, if you just ask for more, you’d be surprised what you can get. Now, of course, don’t be rude, don’t be ridiculous, but just ask. The worst they can say is no, or “maybe, but what can you give me in return?”. For example, when I go to Chipotle, if I’m not happy with the amount of steak they scoop into my bowl, I go “could I get a little more steak, please?” and sometimes they just give it to me, and other times they go “it’ll be extra for double meat, is that okay?” Either way, I’m no worse off than I was with my stingy scoop of meat. Obviously, this can apply to bigger stuff too, like asking for a higher salary, a bonus, royalties from a final product, or whatever. Practice doing it with the little stuff (like Chipotle) and you’ll feel more comfortable doing it with the big stuff (like your salary).
Anchoring is a technique that all of us have experienced, but most of us don’t ever bother to put a name to. It is quite simply the practice of throwing out a point (usually a dollar value) as the “starting point” from which all other negotiating will happen. The exaggerated haggling of many a dungeon-town merchant is an example: “How much for the rope?” “This is amazing rope – 50 gold” “Bah, it’s rat chewed and made of who knows what, I’ll give you 5 coppers for it”. Both people in that negotiation are trying to establish the bounds within which fine tuning will happen.
A more subtle example is in real estate. The list price of a house serves to anchor all offers that will be made on it. Sellers and buyers alike will evaluate how well they did by how much above or below asking price they got. Real estate agents will estimate prices within a range above or below the list price (studies confirm this – groups of realtors asked to provide a “fair price” for a house showed way less variation in values when given the list price than those who didn’t have one).
But be careful! You could fall into a trap here in your zeal to anchor the debate. Say you throw out a number and it secretly delights your counterpart because you grossly under or overvalued something. They’re not going to correct you. Heck, they may still haggle with you to get an even better deal, and leave you feeling pretty proud of your acumen. Research is the best antidote to this - know what the reasonable range is for your negotiation based on the most comparable deals you can find. If someone tries to aggressively anchor you, go back to the stereotypical hawker and counter anchor just as aggressively.
Log-rolling is a technique you can use in negotiations that involve multiple issues where you trade concessions quid pro quo. For example: “Okay, sure, I can work weekends, but I’m going to need 5 more vacation days a year” or whatever. Ideally, you want to find the issues that don’t matter that much to you but matter a lot to your counterpart, and trade those for the issues that do matter a lot to you. Say you’re an artist, and you do illustrations for a living. Your counterpart is trying to publish a book on a short schedule and has money to burn to make it happen. Since getting illustrations done on a short schedule is not that big a deal to you, you could offer a shorter deadline in exchange for something that is important to you, like more money, a headline spot as the featured artist, or whatever else is valuable to you and not a big deal for your counterpart to give you.
When dealing with multiple issue negotiations, it is almost always better to present complete packages than it is to deal with issues one by one. The reason is that each party may place different values on each issue, and if you nail one down, you lose flexibility in reaching accord elsewhere.
Let’s take the example from above, where you’re an illustrator working with an author. The author places a high priority on timeliness (he’s promised dates to his adoring fans), but not that high a priority on price (it’s a vanity project and he’s independently wealthy). You place a low priority on timeliness (you’ll be painting for hours every night regardless, it’s just a matter of what topic), and a high priority on pay (this is your job).
If you and your counterpart sat down and worked out the timeline first, then pay separately, you both would end up satisfied but not totally happy with the agreement.  But if you instead discuss both issues as a package and say something like “I can give you all the illustrations you need for cheap in a long time, or I can get them to you fast for more money”, there’s a much better chance you’ll both maximize the benefits of the overall deal to each of you. The author can go “I’m happy to pay for faster pictures!” and both of you end up happier than if you had haggled down price and then based how fast you were willing to do it based on that.
There’s a few cases where “point by point” can be useful, but that’s really only in very large, complex deals that are very transactional in nature (not building a relationship for later deals) where it becomes more important to make sure each item is adequately addressed than it is to find opportunities for varying preferences to complement one another.
Playing Hardball
Honestly this sections is more here to help you identify other people trying to use these techniques against you. It is almost never a good idea to use hardass tactics in negotiations, and pretty much the only time is when your counterpart is already dead set on being a pain in the ass. That being said, lots of people equate playing hardball with being good at negotiating, so you need to be able to recognize the techniques, what’s wrong with them, and know how to counter them.
Good Cop, Bad Cop
Pretty much anyone who’s seen a police procedural knows this one. It comes up in group negotations, and one party acts like a friend that understands you, and another acts like the bad guy that questions everything you say and can’t budge on their positions. This tactic is usually pretty transparent, and honestly, the best counter to it is to just call it out, like so: “Really? Are you guys pulling ‘good cop, bad cop’ on me? I was hoping we could all negotiate in good faith about our interests, here.”
A more subtle variation is for the person negotiating with you to say they have to check any real concessions with their superior, and to talk about how much they are on your side and want to make things work. If you find your counterpart constantly seeking approval for any and all concessions, you’re well within your rights to ask to resume negotiations when they clarify their side’s requirements, or to negotiate with someone who has the power to make decisions directly.
“Tactical Misinformation”
More commonly known as “lying”. Different people have different views on this in the context of negotiations – some see minor fibs as exactly the same as bluffing in poker, an expected part of the “game”. Others see it as craven deception of the worst sort. You’re going to have to figure out where you come down on this one, but I’d caution against it.
Without even going into the damage getting caught in a lie can cause to your relationships and reputation, there’s the practical side to consider. You might accidentally miss out on an opportunity the truth would have got you. Did you tell that recruiter you won’t be available for months because you thought it would help to get a better offer? Well, maybe if you had been honest and told her that you’re available within 2 weeks, you could have started your dream job, but she’s not looking for someone who can only start months later. I really do think honesty is usually the best policy.
That being said, there are definitely times where selective honesty is more useful than full disclosure. Maybe you stress that you’ve done art for hire before but you don’t mention that it was for a friend for crap rates unless they really press you. Or maybe you tell a potential employer that you could accept today if they make a little better offer, and you don’t mention that you have no other pending offers, and the only reason you wouldn’t accept today is because you want to see how much better you can do.  In the long run it pays to be ethical, but it also pays not to be completely naïve.