The Naked Negotiator

The most exciting research to emerge from brain research is the work on pattern recognition. In Human: The Science Behind What Makes Us Unique, Michael S. Gazzaniga, the director of the University of California at Santa Barbara’s SAGE center for the study of the mind, makes the point that the brain may not even ‘think’.

It may be a memory and prediction machine that functions by retrieving and applying patterns learned from the past to new situations. Experts (think master chess players) can recall up to 50,000 past chess games in their heads. When they look at a chess board, they look for a similar ‘past’ pattern. They then select their next move.

In our work on negotiation we have experienced great success by teaching trainee negotiators to read the patterns of success. When up-skilling negotiators, it’s remarkably easy to accelerate progress of experienced managers who have participated in lots of deals. With young graduates, no matter how bright they are, it’s much harder. Young graduates usually don’t have the body of experience that allows for skilful pattern recognition.

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One of Maubisson’s insightful comments in his must read book Think Twice (2010) is how to recognise the difference between skill and luck.

Many human activities are a mix of skill and luck. Compare a golfer’s scores over 3 or 4 rounds. An exceptional score over one round is often the result of skill combined with exceptional luck. That’s why exceptionally skilled players triumph over 4 rounds. Great luck rarely holds for four rounds. Over time skill shines through as luck runs out.

If you can deliberately lose a game then skill is the driving factor. If you can’t, it’s luck.

Think of chess. Chess is a game of skill. You can deliberately lose. Roulette by contrast is a game of luck. You can not deliberately lose.

Negotiation is a process of combining skill and luck. However the prime driver of success is skill. It is clearly a game you can deliberately lose.

To lessen the role of luck, negotiators should focus on management of the process. That’s the best way to drive results.

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In her book, Beyond Deal Making (2010) international negotiation expert and mediator Melanie Billings-Yun outlines her five step GRASP method for negotiating long-term sustainable relationships.

The acronym GRASP is not just a mnemonic device.  By following the GRASP method you can increase the odds of creating a sustainable agreement.

The GRASP Method

Goals: What do I/they want to achieve or avoid?

Routes: How can I best achieve my goals by supporting theirs?

Arguments: What reasons support my/their routes?

Substitutes: How else could I/they accomplish this?

Persuasion: What’s in it for them?

The GRASP method is practical and easy to follow. Beyond Deal Making offers a fresh innovative approach to negotiation.

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How do you judge when a deal is fundamentally rotten?

In exploring different types of compromises and his book, ‘On Compromise and Rotten Compromises‘, Avishi Margalit compares what he called “cockroach in the soup” deals where a rotten clause spoils the entire agreement. ‘Fly in the Ointment’ clauses are where a suspect clause makes a deal flawed but not necessarily worthless.

A ‘cockroach in the soup’ clause infects the entire agreement. The acceptance of slavery in the American constitution was ‘the cockroach in the soup’. In the end it would take a civil war to resolve what the absolutist Lloyd Garrison slammed as an “agreement with hell”.

Historical examples aside, every dealmaker should lookout for a ‘cockroach in the soup’ - a clause that makes the deal fundamentally rotten.

‘Fly in the ointment’ clauses cause difficulties but they can be justified and usually resolved over time

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The way you negotiate can make a huge difference to the margins you retain in a deal.

A study by Simon-Kucher and Partners of 56 automotive suppliers showed these companies faced price reduction demands from the manufacturers of between 4.7% and 5.1%.

The successful negotiators were able to limit price reductions to just 1.4%. The less successful suppliers had to accept price cuts of 3.8%. The difference of 2.4 percentage points was higher than the margins of most suppliers.

According to Hermann Simon, Chairman of Simon-Kucher and Partners, the successful negotiators paid much more attention to price setting and implementation. By contrast, the less successful attached much more importance to cost-cutting.

To quote Simon, “the successful suppliers put 50% more energy into improving margins that their less successful counterparts”.

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