Matthew Phillips is CEO of Car Pros Automotive Group, one of the nation’s fastest growing dealership groups, with nine stores in WA and CA.
Negotiations are very much in the news these days, especially around tariffs, prompting me to think about the art of negotiation, the risks of a winner-takes-all mentality and the critical importance of relationships to the process. If preparation is the best tool in a negotiator’s toolbox, consideration of relationships—past, present and future—can make that tool more precise and effective.
Past Is Prologue
Past is prologue to effective negotiations. Have you interacted with this person before? How did it go, from your perspective and theirs? Will they trust you? If the last negotiation was great, they will, because the foundation is there for a smooth transaction. But if they felt unfairly treated, or their hand was forced, their shields will be up. You will need to reestablish trust and build cooperation. If this is a negotiation with a longtime associate, or a family member, is there “baggage”? Is this a case where the negotiation isn’t just about the issue on the table, but also years-old unstated issues? A prepared negotiator will know if there is more on the table than meets the eye.
If this is your first interaction, what might they have heard about you? If you are in the same industry, or operate in the same circles, what information might they have gathered? Be honest with yourself: If they enter negotiations with a negative perception, have a plan to overcome that, and be cautious about doing anything that might confirm their bias. I recently worked a deal with someone I had not done business with before, but who had a reputation as hard to work with. So, I was scrupulous about every single detail, making sure to dot each “i” and cross each “t.” Normally, I am a handshake guy, trusting the other side will be cooperative on the finer details. But this was not the case this time, and I was prepared. While things took much longer, had I not been aware of that “difficult” reputation, the negotiation would not have been successful.
Present And Pleasant
The relationship formed during the negotiation also matters. People are usually willing to do a lot for someone they like. Will they make a bad decision because of this? Probably not, but offering a little sincere pleasantness may be enough to close the deal, get that extra concession or have them choose you over a competitor. In automotive retail, we have a saying, “People buy cars from people they like.”
Being disliked is even more powerful than being liked. A perfect example is the Ultimatum Game, a famous experiment where people are paired up and the first person is given a certain amount of money and has to decide how to split it between them. The second person can accept or reject the deal. If the second person accepts, they get the share determined by the first person, but if they reject it, neither gets anything. If people operated completely rationally, the second person would accept any offer, even if it was only one dollar, because it would make them one dollar richer. However, if the offer is too low, it is usually rejected, because most would rather get nothing than feel unfairly treated. People see value in punishing people they think are treating them unfairly, even if it costs them. This is something to consider before adopting a hardline negotiating style.
Also consider reciprocity. Most people will mirror the way you treat them. If you adopt a hardline approach, the other party will probably follow suit, making it difficult to come to an agreement. But if you appear cooperative, they are more likely to reciprocate with cooperation. You should also be conscious of how (or if) you are mirroring. Are you falling into the reciprocity trap and responding in a difficult way to a difficult person? Make sure you keep your personal feelings in check and your eyes on the prize. Beware of making unnecessary concessions because you like the person, but don’t be unnecessarily difficult if you don’t like them.
Eye On The Future
Always consider possible future interactions with the person you are negotiating with. This year, you might be able to strong-arm your neighbor into cutting down a tree they love because it hangs over your property, only to find that next summer, when you need to access their property for a plumbing emergency, they’ll remember that tree, gleefully denying access.
Being mindful of the future is especially important if you are involved in a long-term complex negotiation, such as the sale of a business, where many little details will be negotiated over the course of weeks, months or years. It is also critical if you have an ongoing relationship with the person, such as a boss, coworker or family member.
Remember, people find value in punishing the people who treated them unfairly. You never know who is in your future; burning a bridge today can come back to haunt you. When I studied negotiation for my MBA at Cornell, they had a clever way of driving this point home. Students were randomly paired up to conduct mock negotiations. For the third mock negotiation, the pairings weren’t random, but with our first negotiating partner. Those who had pushed too hard had a very different experience in the rematch. Blunt though it is, the old adage, “the toes you step on today, may be attached to the rear-end you’re kissing tomorrow,” could not be more true.
A skilled negotiator focuses on analyzing possible outcomes, the concessions they are willing to make and their next best options. Charging into a negotiation with a “take no prisoners” approach can work if you are intentional and strategic and can live with the risks … but without any consideration of past, present and future relationships, it could be disastrous. For the best possible outcome, always pay attention to relationships and their impact on the process.
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