Smart Negotiating: How to Make Good Deals in the Real World - Hardcover

Freund, James C.

Hardcover

ISBN 10: 0671730274 ISBN 13: 9780671730277

Publisher: Simon & Schuster, 1992

Synopsis

A corporate negotiator offers readers proven methods for achieving hard-to-reach agreements in everyday business associations, teaching them how to select appropriate starting points, determine their expectations, and devise concession patterns. 25,000 first printing.

About this title

About the Author

A prominent negotiator in many of the major corporate takeover battles of the 1980s -- from TWA to Federated Department Stores -- James C. Freund is a senior partner at the eminent New York law firm of Skadden, Arps, Slate, Meagher & Flom, as well as an adjunct professor at Fordham Law School, where he teaches a course in negotiating. He lives in New York City.

Excerpt. © Reprinted by permission. All rights reserved.

Chapter 1

A PREVIEW OF THE BASIC SKILLS

This chapter is like the overture to a Broadway show -- a sampling of the major themes you'll be hearing more about later on. These themes embrace what I consider to be the four basic skills of smart negotiating. Stated succinctly, they are

Leverage -- An appreciation of the leverage factors at work in each situation, plus the ability to apply leverage (when it's with you) and cope with it (when it's against you);

Information -- The knack of ferreting out and evaluating useful information regarding the other side, while protecting information about your side you would rather not reveal;

Credibility -- The ability to make those on the other side believe you mean what you say, as well as to assess whether or not they're bluffing;

Judgment -- The ability to strike the right balance between gaining advantages and reaching compromises, in the substance as well as in the style of your negotiating technique.

All these skills are interrelated in a negotiation, and the interplay among them is significant in itself. To observe this, let me recount the facts of a typical negotiation without commentary. Then we'll go back to review the elements of this negotiation that bear on the four basic skills. Keep your eyes and ears open to what's going on here, and before reading my critique try, to form your own opinion about the negotiating involved.

THE CASE OF THE OVERREACHING SUBTENANT

Ted is a tenant in a residential apartment building in Bigtown with a lease that has fourteen months to go, terminating December 31 of next year. Although his lease explicitly prohibits carrying on a trade or business from the premises, Ted has been using his apartment as an office to operate a consulting business under the name "Ted Talks." In early November of this year Ted's landlord, Leland, discovered what Ted has been doing and presented him with an ultimatum: either stop conducting business from the apartment or be evicted and held responsible for the balance of the lease term.

Ted has no choice. Caught in the act, unable to convince the landlord to overlook this breach, dependent on his consulting business, and lacking funds to afford a separate office, he must move out. Leland gives him until the end of this year. Fortunately Ted's lease permits him to sublet, and with two months to find a subtenant, he advertises the apartment for rent. The first week he has no takers. Then, in mid-November, Susan materializes. She's moving from another city into Bigtown to begin a new job on December 1. He shows her the space; she's definitely interested.

Ted's rent (New York City rates!) is $1,500 a month. The real estate market in Bigtown has been relatively static since he signed the lease, so he asks Susan to pay the same $1,500 per month under the sublease -- "no profit, no loss," as he puts it. When Susan asks him why he's moving, Ted doesn't mention his problem with Leland but alludes to having found "larger quarters" he likes better, trying to give the impression that he's under no time pressure to leave.

Susan, who would be willing to pay that much if she had to, decides to negotiate. She offers $1,200. Ted, who doesn't want to subsidize $300 of Susan's rent, holds out for the full $1,500. The issue is unresolved.

Susan then brings up three other items:

* She wants occupancy from December 1, when her job begins. Ted, not yet having found another place to live -- despite his remark about "larger quarters" -- would prefer to wait until the end of December, when he must move out.

* The paint in the vestibule of the apartment is peeling badly. Susan wants Ted to have it repainted at his expense (which he estimates to be about 8300). Ted thinks she should pay for it.

* Susan asks him to leave behind the television set, which is worth about $200. Ted wants to take it with him.

After some discussion Susan says that if Ted is willing to satisfy her on those three items, she'll raise her offer on the rent to $1,300. Ted rejects this proposal but remains interested in continuing the negotiations. They decide to think it over and resume discussions the next day, Susan pointedly remarking that she has another apartment to see later that afternoon.

As Susan is about to leave Ted's apartment, she notices an envelope on the desk addressed to "Ted Talks" at this address. Already suspicious about his vague reasons for leaving, she decides to take a long shot. "Do you run a business here?" she asks.

A lengthy pause. "Why do you ask?" Ted replies warily.

"Because I saw this envelope," Susan says, holding it up, "and I assume that the lease prohibits conducting business from the apartment."

Another pause. "Well," Ted says, recovering a bit, "You aren't going to operate a business here, are you?"

"No," she replies.

"Then you've got nothing to worry about."

Susan decides not to press the issue but now suspects the real reason for Ted's premature departure, which may mean he's under pressure to move out quickly. She also has a hunch, based on other exchanges between them, that no one else is currently bidding on Ted's space. So when she returns the next day to resume the negotiations, she decides to get tough. She goes up only $25 (to $1,325) on the rent and sticks on all three of the other issues -- even the TV, which she doesn't really need since she has one of her own.

"As far as I'm concerned," Susan says, "either you acquiesce on all of these issues or there's no deal. As a matter of fact, that other apartment I looked at yesterday is cheaper than this one." (This last statement is literally true but misleading. She didn't like the other apartment at all and hasn't yet found a decent alternative to Ted's place.)

Ted, provoked by Susan's sudden toughness, would like to say "Then there's no deal. Good-bye," and usher her out of the apartment. But he realizes that she may prove to be his only hope. So he bites his tongue and -- because he thinks her "final offer" is a bluff -- decides to make an accommodating counteroffer. His proposal is to split everything except the television, which he considers to be his. He offers $1,412.50 on the rental (halfway between their positions), a fifty-fifty division of the painting costs, and a December 15 occupancy date. He sits back, convinced that he has been eminently reasonable.

Susan, believing that Ted will go farther on each point -- even the TV, which isn't that expensive an item -- replies that this isn't good enough for her (although, in fact, it would be). "You know my position," she says.

Ted, annoyed that his compromise proposal has produced no progress, hardens his own stance. "That's the best I can do," he says -- even though it's not.

With neither Ted nor Susan willing to budge an inch, they're at a standstill. Do you think this deal will get done? At the very least, it won't be easy.

Now let's step back and examine what was going on here and, in particular, how it relates to the four basic negotiating skills involving leverage, information, credibility, and judgment.

ANALYZING THE LEVERAGE

Let's begin with leverage. Where does it appear in this scenario, and how do the parties handle it?

Obviously a principal negative leverage factor is necessity. When you're forced to do a deal, you can't afford to hold out for optimum terms. Here, necessity is working against Ted. The fact that he has to vacate the apartment puts more pressure on him to reach an agreement -- even on imperfect terms -- than if the subletting were voluntary. (And, by the way, Ted is right to try to dispel signs of this pressure by adopting a calculated air of nonchalance.)

A negotiator who's up against necessity should try to neutralize it by using other leverage factors to his advantage. The prime offset for a forced seller of property (or here, a lessor of space) is to generate competition for the deal. Unfortunately for Ted, however, he has no other takers for the apartment; and in my book, inventing one who doesn't exist would be improper. (This does not mean, however, he has to concede that the cupboard is bare.) And just to make things worse for Ted, Susan is actually trying to use competition against him, by alluding to that other apartment she has under consideration.

Desire is another possible offset to necessity. If the person acquiring the property (or, here, renting the space) wants it badly enough, that provides a strong motivation to make the deal. Susan likes Ted's apartment; but based on her hard-nosed (and thus risky) position, she appears able to live without it.

Then there's the leverage factor of time, which is definitely working against Ted here. If he had more time, he might be able to develop some competition for Susan. In this ease, however, it's partially offset by the pressure on Susan to find a place in Bigtown as soon as possible.

THE ROLE INFORMATION PLAYS

Let's turn now to the subject of information, which can play many roles in a negotiation -- as a means of helping a party understand the other party's interests and motivations, evaluate credibility, predict the direction things may go, and so on. But perhaps the most central role for information is to assist in the appreciation of leverage.

Witness the shift in mood that takes place after Susan spies the "Ted Talks" envelope -- information that reveals possible negative leverage affecting the, other side. Susan is alert in spotting the envelope and insightful in making the connection to pressure on Ted from the landlord. Then, once she has this clue, she attempts to establish the fact by questioning Ted directly. What other channels might she have pursued to pin this down? One possibility would be to shield her suspicions from Ted, obtain the landlord's name from him on some other pretext, and then contact Leland to see what she can find out.

After a slow start, Ted bobs and weaves fairly well, shifting the inquiry to whether the ban on business will interfere with her occupanc...

Edition details

• Publisher: Simon & Schuster
• Publication date: 1992
• Language: English
• ISBN 10: 0671730274
• ISBN 13: 9780671730277
• Binding: Hardcover
• Edition number: 1
• Number of pages: 272