Be honest – you go into every negotiation wanting to win, right? You want to win each negotiation in every mediation, lease, partnership agreement, employment agreement, purchase, sale and contract.

Negotiation is a fact of life; you do it every day with your staff, your spouse, your children and your colleagues. Few things have more impact on the long-term success of your business than your ability to negotiate successful deals with your clients, opposing counsel, landlords, bankers and other key constituencies. However, while most lawyers feel that they are excellent negotiators, they are actually very poor negotiators because they take the wrong approach to the negotiation process. They want only to win.

This article is about how to “win” a negotiation through interest-based negotiation and mutually working out a wise solution to a shared problem. This article will help you “win” by showing you a better way to negotiate, where you no longer argue over positions, but instead focus on interests and creating options for mutual gain.

 

Competitive vs Cooperative Negotiation Style

Right now you are thinking I must be talking about someone else because you are an excellent negotiator. Here is how you can test your negotiation skills. Have you ever viewed a negotiation as a kind of mental and verbal sparring session, where the side with the sharpest mind, toughest resolve and most aggressive tactics emerges as the victor? Typically, this competitive and combative negotiation style results in a win-lose or, worse, lose-lose outcome.

However, if you were to approach negotiation as a cooperative and mutual problem-solving process, the results would more likely be a win-win outcome. This approach may sound “soft” to those who enjoy going toe-to-toe with the other side during a negotiation. Yet, trying to win a negotiation is like trying to win a marriage. If you think that way, you have lost sight of the bigger and more important picture concerning how you deal with each other and your shared and differing interests.

The inept negotiator sets unrealistic objectives and falls irreversibly in love with a position. The more emotionally attached to a position, the harder the negotiator bargains to achieve it. Soon, perspective is lost. However, if you attempt to resolve all the parties’ different interests, this problem will not occur. Bargaining is competitive; negotiation is cooperative. Negotiating also creates long-term deals and relationships.

The most effective negotiators use open, cooperative and friendly negotiation strategies. They separate the people involved in the negotiation from the issues being negotiated and avoid personalizing the issues. Effective negotiators focus on the substance of the negotiation, not the people involved and can be tough on the problem, while being soft on the people. Effective negotiators are as concerned with getting a good result that is fair to both sides as they are with maximizing their side’s outcome. When judged in mock negotiation exercises, cooperative negotiators were twice as effective as competitive negotiators. Following these principles will dramatically increase your chances of creating outcomes that benefit both sides and lead to positive long-term relationships.

 

Win-Win Negotiations

By now you have learned that negotiating a good outcome has nothing to do with bargaining, compromise or competition. To create a win-win outcome, both sides must want to negotiate a good outcome by taking the time to build a relationship before getting into the deal’s specifics. The key to most negotiations is building communication, relationship and trust. You build these components by exchanging information, active listening, and acknowledging the other side’s needs. Negotiators should be guided by this basic principle of human psychology: PEOPLE WILL SUPPORT WHAT THEY HELP CREATE. You help people get what they want by asking open-ended questions such as, “What exactly are you looking for in this deal?” Always learn the complete list of the other side’s wants before you begin the actual give-and-take of the negotiation.

Negotiators should also be guided by a second basic principle of human psychology: PEOPLE WANT FIRST TO BE UNDERSTOOD BEFORE THEY UNDERSTAND. Make sure the other side feels that you understand their wants and needs before you try to get them to understand your wants and needs. During the discussion phase of the negotiation (as discussed below), avoid the temptation to bargain and compromise. Instead, listen attentively to the other side to identify areas of mutual gain and shared interest. Consider whether any non-monetary options might be valuable in the negotiation and how to enlarge the pie of possibilities, rather than dividing it up. Remember, negotiation is a communication process; there is no limit to what you can accomplish as a team, as long as you do not care who gets the credit. Realize too that win-win does not necessarily mean an equal win. One party may gain more than the other. But as long as both parties gain more by negotiating, a win-win outcome is usually achieved. To create a true win-win outcome, solve the other person’s problem as well as your own.

 

Phases of Negotiation

Four phases should be followed in every negotiation: preparation, discussion, proposal and bargain. The phases should proceed in this order, and remember which phase you are in during the negotiation.

1.  Preparation – Every negotiation requires preparation and planning. The better prepared you are as a negotiator, the better the results you will achieve. A well-prepared negotiator can narrow the issues for agreement, formulate detailed options and evaluate tentative offers far more quickly and wisely than a negotiator who is not prepared. Your preparation should consist of more than creating a wish list of what you want and what you are willing to take. To be well prepared you should concentrate on the following four elements:

a. Interests – Determine your interests and those of all other parties to the negotiation;

b. Options – Determine as many pieces to as many agreements as possible;

c. Alternatives – Determine what alternatives you have to negotiating an agreement and what you are willing to take at the end of the negotiation;

d. Legitimacy – Determine what external standards to use to judge for yourself and to persuade others that everyone is being treated fairly.

2.  Discussion – Take time to build a relationship and find common ground before diving into the negotiation’s specifics. The key to most negotiations is building rapport through communication, relationship and trust by giving the other side an opportunity to identify interests, needs and wants. During this phase, you can state your interests, needs and wants so the other side can start thinking about areas of mutual gain. This is not the time to start talking terms and numbers. The rationale behind the numbers always counts more than the actual numbers.

3.  Proposal – All discussions are still hypothetical during this phase, but both parties are starting to explore options, send signals and make tentative proposals. These proposals take the form of “if-then,” such as, “if I do this for you, then could you do that for me?” These non-binding proposals allow you to explore options for mutual gain and open the door to the final phase.

4.  Bargain – The actual negotiation of terms and numbers takes place during this phase. Based on your preparations, what you learned in the discussion phase and the tentative offers in the proposal stage, you are now ready to exchange actual firm offers. Be prepared to open or respond with a realistic offer and be prepared to engage in two-way movement. Following the previous three phases, working out the terms and numbers becomes almost a formality, and you should be rewarded with an outcome that satisfies all parties’ interests.

 

Ethics of Negotiation

Although a number of ethical issues may confront a lawyer who is negotiating on behalf of a client, the most troubling is the extent to which a lawyer may engage in deception. The common sense approach is to never deceive because, putting aside morality and ethics, honesty is just good business. However, as lawyers we must be aware of and adhere to the State Bar Rules as well as the common law rule of contracts. If a negotiated agreement, a contract, is entered into by fraud or deceit, it is subject to being set aside. If the lawyer who negotiated that agreement was aware of the fraud or deceit, could he be in violation of the State Bar Rules?

Under Texas State Bar Rule 1.05, a lawyer shall not knowingly reveal confidential information of a client to a person that the client has instructed is not to receive the information, or anyone else other than the client and the client’s representatives. However, under Texas State Bar Rule 4.01, in the course of representing a client a lawyer shall not knowingly make a false statement of material fact to a third person. What do you do if your client tells you that they want you to negotiate the sale of their factory for $7.5 million, but will allow you go as low as $6.75 million for a quick sale? The confidentiality Rule says you cannot disclose that the client will go lower than their asking price, while the Rule on truthfulness to others says you cannot make a false statement of material fact to a third person. What do you do? Fortunately, the comments to the Rule on truthfulness allow you some latitude. The comment states that certain types of statements, like estimates of price or value placed on the subject of a transaction, are not ordinarily taken as “material” fact because they are viewed as matters of opinion or conjecture.

What do you do if your client tells you that there is toxic waste on the property which was not discovered by the purchaser? The comments state that Rule 4.01(b) relates only to failures to disclose material facts. Generally, in the course of representing a client a lawyer has no duty to inform a third person of relevant or material facts, except as required by law or by applicable rules of practice or procedure, such as formal discovery. However, a lawyer must not allow fidelity to a client to become a vehicle for a criminal act or a fraud being perpetrated by that client. Consequently a lawyer must disclose a material fact to a third party if the lawyer knows that the client is perpetrating a crime or a fraud, and the lawyer knows that disclosure is necessary to prevent the lawyer from becoming a party to that crime or fraud. However, failure to disclose under such circumstances is misconduct only if the lawyer intends to mislead. The comments go on to state that when a lawyer discovers that a client has committed a criminal or fraudulent act in the course of which the lawyer’s services have been used, or that the client is committing or intends to commit any criminal or fraudulent act, other of these Rules require the lawyer to urge the client to take appropriate action. See Rules 1.02(d), (e), (f); 3.03(b). Since the disclosures called for by paragraph (b) of this Rule will be necessary only if the lawyer’s attempts to counsel his client not to commit the crime or fraud are unsuccessful, a lawyer is not authorized to make them without having first undertaken those other remedial actions. See also Rule 1.05.

It is a shame that we even need to have this discussion though, when it all comes back to the fact that honesty is just good business.

 

Nine Negotiation ‘No No’s’

Now that you have learned what to do to be a successful negotiator, you also need to learn what not to do.     

Do not possess partisan perceptions - The attitude of “I am right, they are wrong” will never allow a negotiation to achieve a successful result. Try to view the situation from the other side’s perspective. You do not have to agree with the other side’s position; you just need to be able to see it.    

Do not rule out reasonableness – The attitude that the other side is being unreasonable limits you to believing that only your side is reasonable. This prohibits any possibility of generating options for mutual gain. Always try to foster brainstorming of ideas and available options.

Do not lower your aspirations- Always go into a negotiation with the highest view of what you can reasonably expect to accomplish. No offer is too high provided you can present valid justification that it fairly meets the underlying needs of all parties. Therefore, you must be prepared to support this view with legitimate and reasonable criteria.

Do not make unreasonable opening demands or offers – The quickest way to lose all credibility and any rapport that may have been established is to make a demand or an offer that is not supported with legitimate and credible criteria. This will often shut down the negotiations altogether. Always view any demand or offer from the other side’s perspective. Just because you view it as reasonable does not mean that the other side will. Remember, their perception is their reality.                           

Do not underestimate your case – Always know your Best Alternative To a Negotiated Agreement (BATNA) before going into the negotiation. That way, you will have a reference point by which to judge your progress and position at all times. Define your goals in the negotiation so you have a clear view of what it is you hope to accomplish. Conduct a risk analysis of your case by examining all of your weaknesses.    

Do not underestimate the other side’s case – Always calculate what the other side wants to achieve in the negotiations and be prepared to discuss this. Calculate the other side’s BATNA as well. Conduct a risk analysis of your case by looking at the strengths of the other side’s case.                                                                   

Do not give something up without getting something in return – A cardinal rule in negotiation is to never negotiate with yourself. Always make sure that you get a concession in exchange for every concession you make. These concessions do not necessarily have to be equal in value.

Do not value your offer in your own terms – Always value your offer in the other side’s terms. Just because something means a great deal to you does not mean it will mean anything to the other side. Remember, people do things for their reasons, not yours. Whenever possible, trade what is cheap for you and valuable to the other side.   

Do not ignore the other side – Listen carefully to what the other side is saying to determine their needs and what it is they really want to accomplish in the negotiation. Find out what is of high value and low value to them so you know what to trade for. The better you understand the other side, the more flexibility and creativity you will have to generate options.  

 

A Good Negotiation Possesses Seven Traits

1. Is better than the alternative to a negotiated agreement (BATNA).

2. Satisfies the interests of:                      

a. the client – very well;                    

b. the other side – acceptably (enough for them to agree to follow through); and 

c. third parties – tolerably (so they won’t disrupt the agreement).       

3. Adopts a solution that is the best of all available options.

4. Is legitimate – no one feels taken.              

5. Involves commitments that are clear, realistic and operational.        

6. Involves communication that is efficient and well understood.        

7. Results in an enhanced working relationship, so the parties and/or their attorneys can deal with future differences more easily. 

 

Conclusion

The limited space of this article allows only a glimpse of what a good negotiator knows and does intuitively in every negotiation. However, it does provide you with a basic framework by which to better prepare for and conduct you next negotiation. Whether it is face to face negotiations with your opposing counsel or through the assistance of a mediator, the basic rules are the same. Remember, the key to a successful win-win negotiation is preparation and commitment to a cooperative mutual problem solving style. Nothing is more empowering and enjoyable then when the parties successfully conclude a negotiation feeling like they have both won.

Trey Bergman, president of Bergman ADR Group, has mediated and arbitrated more than 1,200 cases since 1990 and is national president of the Association of Attorney Mediators. Since 2002, Bergman has been an adjunct faculty member at South Texas College of Law, teaching courses in mediation and in  negotiation, where he coached a student team to the national finals of the 2006 ABA negotiation competition. He also is board certified in civil trial law.

Copyright 2007, Bergman ADR Group. All Rights Reserved. www.BergmanADRGroup.com. You may email the author at Trey@BergmanADRGroup.com.