Advantage Of the Information Barrier by using an Emotional Signal
Sometimes we encounter eager negotiators in our classes and workshops who ask us if we can teach them to “win” every negotiation. If you have a competitive streak, negotiation is indeed a competitive game, and winning is close to your heart.
To people who ask us if we can help them win their negotiations, we say yes, but: We don’t mean to split semantic hairs, but it depends on how you define winning. This takes us back to the metaphor of negotiation as a game. In most games, there are winners and losers, which is what makes them exciting to watch. But in negotiation, winning can mean different things. It may mean getting a better outcome than your opponent, but it may also mean getting the
outcome you desire and helping the other party get its goals met.
If the two parties have different goals, both may be able to “win.” Or it may mean strengthening the relationship with the other party. The more you can define winning as a way to help both parties achieve their goals and strengthen their relationship, the more productive your negotiations will be.
You also don’t want to win every negotiation. Sometimes it’s wiser to avoid a conflict. Sometimes it’s better to split the difference and go on to something more important. And sometimes it’s a good idea to cooperate with the other parties instead of trying to “kill” them. So, yes, we can teach you the techniques you need to go for the big win, but you have to use them appropriately—not every time you negotiate.
And even when you decide it’s right to compete and try to outmaneuver the competitor, remember this secret of great competitive negotiators: always leave something on the table. You don’t have to clear the field to win a battle, and you don’t have to win every aspect of every negotiating point to win the negotiation. People who don’t allow the other side dignity in defeat are resented and cultivate revenge down the road. Nobody wants to do business
with them. And the deals they cut are resented too and tend not to stick. If you want a durable win—a deal or agreement or understanding that the other party can and will live with—then leave a
little something on the table for them.
We’ll show how complex this becomes in a real negotiation. One of us (Alex) just sold his office building and moved his business to larger quarters. The buyers played a tough competitive negotiating game during the course of the sale, so Alex did too. At first, it wasn’t clear the buyers were going to be tough negotiators. They opened with an attractive offer: just a small amount below the asking price. Then Alex offered to split the difference between his asking price and their offer, and they quickly accepted.
Next, they insisted on an early closing date to consummate the sale. This wasn’t a major problem for Alex, so he accepted, even though it gave him just a few weeks to move out of the building.
He already had a new building lined up and could push the date of his move up without too much inconvenience.
The other shoe fell at the end of the one-week inspection period the buyers had built into their offer. They brought forward a laundry list of “severe” problems with the building, including a bad roof, siding that needed immediate replacement, and structural problems with the foundation. They demanded a big reduction: about 10 percent off Alex’s original listing price.
If these problems were real, Alex would not have been surprised. However, the building was in good repair, except that the roof shingles were within a few years of their twenty-year life. Alex asked his own contractor to take a look, who agreed that the building was in very good shape. Armed with the information from the contractor that did not support the buyers’ claims, Alex decided he needed to “play hardball” in this negotiation.
First, he decided to do some additional research on the buyers. Asking around, he learned that they were under pressure to close the deal rapidly because they had a buyer lined up for their old building and needed to move. This convinced Alex that they were serious about closing a deal, and not just playing games. He also learned that the buyers had a reputation for being tough negotiators. From these two pieces of information, he surmised that they were perhaps regretting how quickly they’d negotiated the sale price and now wanted to see if they could nibble any more
concessions in their favor before closing.
Alex decided to send an emotional signal to the buyers through his agent. Instead of responding with a counteroffer, Alex asked his agent to let the buyers know that he was upset with their behavior and would think about whether he wanted to complete the sale over the coming weekend (it was Thursday afternoon).
Then he put the matter out of his mind for a few days. By midday Monday, Alex’s agent was on the telephone, sounding desperate. “They want to hear something,” she said to Alex on his cell phone. “Their agent says you have to reply today, since the closing date is only two weeks away.” This sounded promising to Alex. Probably by putting the time pressure on them plus his showing that he might not be interested, he was now building a feeling
of urgency on the buyers’ end.
Late Monday, before he left the office, Alex called his realtor and left a message on her voice mail saying that his inspector said their claim about the roof was reasonable and that he would be willing to add 25 percent of the estimated cost of replacing the roof to the deal. This would bring the final price down to about 98
percent of Alex’s original asking price. It was a small but significant concession. It illustrated the principle that a negotiator needs to leave something on the table rather than going for the jugular.
These buyers might have been desperate enough to back down completely, but it would have been risky to push that hard. It was better to give them something they could feel good about. But Alex also wanted to avoid further nibbles, so he said his offer was firm and final and delivered it with as much time pressure as he thought he could get away with.
Alex intentionally made his counteroffer late in the day and used his agent’s office voice mail instead of her cell. He complied with their request that he respond that day, but he did so in a way that would make it likely they’d have to wait until Tuesday morning to learn about his Monday offer. He wanted them to be good and worried about the deal by the time they heard his terms.
On Tuesday morning, Alex’s counteroffer was accepted, and the papers were drawn up and signed by the end of the day. In the end, Alex sold the building at the price of the buyer’s first offer, which seemed reasonable to him since it was only a few percentage points beneath his original asking price. In fact, he would have
been willing to go another percent or two down but was hoping he wouldn’t have to.
Let’s take a look at how Alex handled this situation. Alex resorted to competitive negotiating tactics to avoid being “nibbled,” the term used to describe a negotiating tactic in which one party attempts to take another slice of the deal after the other party thinks that terms have been agreed to. Alex also used emotional signaling to change the frame of the negotiation from a rational debate about the numbers to one in which the buyers needed to
be concerned about the personal impact their behavior was having on the seller. He did this because there are unwritten rules about what’s fair in the inspection period, and he wanted the buyers to recognize that their violation of these rules could create negative feelings and break down the trust needed to close a deal. Finally, Alex resorted to the oldest but best trick in the book: he used time pressure. Remember that the buyers used this tactic first by not being upfront about their need to close the deal quickly.
Once Alex learned that the buyers had a ticking clock, he realized he could take the upper hand, no matter how aggressively they tried to negotiate. Alex did not have the same time pressure to sell that they had to buy. He preferred not to have to wait for another buyer, as it would mean he’d have holding costs on his old
building, but he was willing to walk away if he had to because his agent assured him the property was appealing and would generate more offers in the future if this deal didn’t go through.
Throughout this negotiation, both parties were uncertain about the other side’s feelings and actions. Why did they do that? What are they thinking? How low will they go? How high will they go? Are they serious about walking away, or just trying to play me?
These are the kinds of questions that we always have in a competitive negotiation. Like a poker player, the competitive negotiator keeps his or her cards close to the chest.
Alex took advantage of the information barrier by using an emotional signal and a temporary withdrawal from the negotiation to raise doubts in the buyers’ minds. The buyers were dealing with
Alex through two intermediaries: their agent and Alex’s agent. They couldn’t be sure about his state of mind. How upset was he? Was he still committed to the deal? Had they gone too far and spoiled the negotiation? These sorts of uncertainties are always greater where there is less information, and they can be a problem in negotiations. Sometimes they can also be a useful weapon. The buyers were probably quite relieved by the time they finally
received a substantive counteroffer and not willing to risk their deal again by playing games with it.
This story illustrates several things we warn negotiators who want to win. First, recognize that parties may have different definitions of winning. For the buyers, it was more about getting a new building quickly; for Alex, it was getting his price and not making further improvements. Second, don’t forget to leave something on
the table so the other side can walk away with dignity and live with the terms of the deal too. Even when you have the other party on the run, don’t humiliate them or strip them clean. Finally, sometimes you can’t achieve a good deal, and you have to recognize this and be willing to walk away.
What if Alex’s buyers had not been able to afford his building but were hoping to bring him down to a much lower price level?
Then no amount of negotiating could have bridged the gap. Alex didn’t know whether there was truly an overlap between his selling range (the least he was willing to take) and their buying range (the most they were willing to pay) until the ink dried on the check. He hoped the buyers could afford to pay what he wanted them to, and he negotiated on the assumption they could. But what if their original offer had actually been way beyond their
means? Then they might have used their phony inspection report as an excuse to back out of the deal, and Alex would have had to wait for another offer.
You never really know if there is a deal to be made until you try. If you keep trying and the other party just seems to get further away instead of closer, then you may need to abandon the effort and look for an alternative. You don’t have to play every competitive negotiating game to its final whistle. Sometimes you find you are on the wrong playing field and with the wrong competitor, and the smartest thing to do is to clear out as gracefully as you can