8/5/2020 Bargaining for Advantage Free Summary by G.

Richard Shell

Book

Bargaining for Advantage

Negotiation Strategies for Reasonable People
G. Richard Shell
Penguin, 2006
First Edition:1999 
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Recommendation
Negotiating is one of the most basic yet complex social interactions that
people undertake. These sessions can be straightforward or highly strategic,
and can involve the exchange of everything from sheep to global

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8/5/2020 Bargaining for Advantage Free Summary by G. Richard Shell

conglomerates. Since negotiations are the products of intense human

relations, they produce great stories founded on basic social science and
psychology principles. Author and professor G. Richard Shell has done a
masterful job of presenting the art and science of negotiation. That must be
why he is known as one of the most highly-rated business school professors in
the U.S. This book is educational and entertaining, and contains great
examples of negotiations from such varied sources as African tribes and J.P.
Morgan. getAbstract highly recommends it to anyone who wants to find out
more about this intricate social interaction. Learn exactly how to become
better at getting what you want.

Take-Aways
• Good negotiators know themselves as well as they know their goals.
• Gender and culture affect a person’s negotiating style.
• Although people have individual worldviews, they value similar norms.
• Reciprocity and trust are crucial elements of negotiation.
• Use leverage to exploit the needs and fears of your counterparty.
• However, realize that perception is as powerful as hard fact.
• Open the negotiation if you are in a strong position, so you can establish
the range.
• Introduce the idea of scarcity to accelerate the final stages.
• Agreement is not the last step in negotiation; commitment is.
• People perpetrate fraud both by misrepresentation and deliberate
nondisclosure.

Summary
Everyday Negotiations
Negotiating is a part of daily life. Yet, this basic building block of
communication can still cause great anxiety and drive people to seek
simplistic, suboptimal solutions. To be a successful negotiator, you must
confront your fears and realize that every negotiation is unique. Once you
understand the psychology behind the process, you can embrace new
approaches to bargaining.

“First, all deals that close are win-win deals.”

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Negotiating is a process of resolving disagreements and attaining goals. It

relies upon reciprocity. Negotiations usually follow this sequence: preparation
for the meeting, exchange of views, presentation of proposals and
counterproposals, agreement and finally commitment. However, before you
begin any of these steps, make sure that you have the correct attitude and
approach. The six “foundations” of good negotiation are:

1. Know Yourself
Recognize your personal negotiating style. If you are easy-going, you will not
turn into a hard-nosed negotiator just because you start to bargain. Although
more competitive people thrive on bargaining, fairness and reason also hold
pivotal places at the negotiating table. Based on your personality, you will
respond to negotiation in one of five ways:

1. “Avoid” – You steer clear of bargaining because you deem it

unnecessary or too stressful, or you are content with the status quo.
2. “Compromise” – You agree to share the rewards with the
counterparties.
3. “Accommodate” – You accommodate the other party, but without a
formal agreement about how you will divide the rewards.
4. “Compete” – You are a tough, competitive negotiator. You adopt a
hard line and might resort to unethical acts to get your way.
5. “Collaborate” – You devise creative solutions to dilemmas that block

“
your way.

”
“Consider every bargaining opportunity a ‘laboratory’ to
improve your skills.”

Research shows that gender plays a role in negotiation. Female negotiators

often use arguments based on fairness, are more willing to cooperate and
display a desire to conserve the relationship.

Culture also influences bargaining style. In Lebanon, for example, walking

away from the bargaining table indicates you are a serious negotiator, not that
you are disgusted. Other cultures allow bargaining solely between individuals
at the same executive level.

“There is only one truth about a successful bargaining style:

To be good, you must learn to be yourself at the bargaining
table.”

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People from Latin American, Asian, Middle Eastern and African cultures
prefer to establish social relationships before they negotiate. That means
Western mediators should participate in this important process before getting
to work. Regardless of gender or culture, successful negotiators need good
preparation, attentive listening skills, trustworthiness and self-confidence.

2. Know Your Goals

Negotiating is not about price alone. Many negotiators achieve their target
prices, only to see the deals collapse because the counterparty failed to deliver
or egos intervened. Although ego plays a role in setting an optimistic target,
temper it with logic and reason. People who enter negotiations with high
expectations and clear goals emerge with better results, so write down specific
objectives and, if you need it, bring a “cheat sheet” as a reminder.

3. Recognize Norms and Standards

Negotiators frequently search for a common standard to help them anchor
their arguments and bargaining positions. Adhering to this norm allows both
parties to appear reasonable and consistent. Since people innately strive to
interpret the world in a consistent way, negotiators should present a case
which resonates with the other parties’ worldviews, thus securing common

“
ground.

”
“Contrary to popular belief, perfectly reasonable, cooperative
people appear to have a strong potential to become extremely
effective negotiators.”

You can use this desire for consistency to your advantage. Begin by verifying
simple principles with your counterparty, such as, “Your company should
seek a price that is in line with what similar companies charge, don’t you
think?” If you can subsequently show how their current argument is at odds
with that principle, you can gain ground: “Your proposed price is 30% higher
than comparable firms’ prices.” Relying on standards and norms is a powerful
approach, especially when you link it to an authority figure or a strong slogan
that summarizes your bargaining position. Citing an authoritative source – an
expert, a historical fact or the market – is also potent, since many cultures
emphasize respect for a larger belief system.

4. Build and Exploit Relationships

People expect to be treated the way they treat others. This creates trust, a
prevailing social force. When you make a concession, wait for the other
person to make a similar allowance as a show of reciprocity. Friendship can
be another powerful element in negotiations. Studies show that the styles of
bargaining differ dramatically when friends – as opposed to strangers –
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conduct negotiations. Couples who negotiate together make simple

compromises and do not fully analyze each situation, so they accept less
beneficial deals.

5. Be Aware of the Other Party’s Objectives

Each person perceives the world differently; this can constitute a major
obstacle in negotiations. Three factors explain why it is hard to change a
person’s stance on most topics:

1. Humans tend to see the world solely through their individual lenses.
2. They are naturally competitive and put their own interests first.

“
3. They are unable to recognize shared goals.

”
“If you are basically a cooperative, reasonable person, you
need to become more assertive, confident and prudent in
negotiations to become more effective.”

Top negotiators make big efforts to detect the other parties’ motivations and
fears and to establish common ground. Find shared goals by identifying the
main decision maker; discovering what you can provide that will help your
counterparty reach his or her goal; finding out what the other side objects to;
and determining which concessions you can make.

6. Gain an Advantage
Leverage, “the balance of needs and fears,” provides the added clout you need
to reach a deal. It is fluid and perception-based. It often involves finding a
creative solution to a problem and sometimes requires playing on other
peoples’ concerns. Another way to think about leverage is to calculate which
party has the most to lose if negotiations fail. Employ this relevant social rule:

“
People fear their losses more than they value their gains.

”
“Leverage is having something the other guy wants. Or better
yet needs. Or best of all, simply cannot do without.” [ – Donald
Trump]

Coalitions also affect the dynamics of leverage by providing what

psychologists call “social proof.” People prefer to be guided in uncertain
situations. In a business meeting, the first proposal, regardless of its quality,
often becomes the consensus opinion. This occurs in other settings, too.
Often, the first verdict a jury returns is the same decision it will unanimously
reach later on.
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Let the Games Begin

The first stage of the negotiating process is formulating a plan. Determine
your approach based on the level of tension surrounding the outcome. Four
main variables dictate the tone, style and strategy of any negotiation:

1. The desire or need to maintain future relationships.

2. Whether common concerns exist between the participants.
3. The type of transaction.

“
4. The level of mutual coordination needed.

”
“In addition to the power of clear goals, negotiations harness
one of human nature’s most basic psychological drives: our
need to maintain (at least in our own eyes) an appearance of
consistency and fairness in our words and deeds.”

The second stage, gathering and exchanging information, allows parties to

establish a basis for discussion about the issues, interests and expectations at
hand. Relationship building takes precedence. The other essential actions
during this stage are asking questions, ensuring that you understand the
other party’s position and then summarizing the discussion. These actions
can help you identify the common areas that may serve as negotiating focal

“
points.

”
“Shared interests are the ‘elixir of negotiation,’ the salve that
can smooth over the issues which you and the other party
genuinely disagree about.”

If you have an ultimatum to deliver, experts say the best time to disclose it is
near the start of negotiations. This disclosure will frame the discussion and
temper unrealistic expectations from the other side. You can signal that you
have leverage by using one of four tactics: You can bluff and make the other
party think you have a better offer or stronger negotiating power; you can be
open and present the alternatives for everyone to discuss; you can explain
your alternatives and be flexible to show your generosity; or you can request
sympathy from the stronger party and ask how they would handle the
situation.

Openings and Concessions

Making concessions is the basic interaction that holds society together.
Concession making is also the most studied part of the negotiation process.
One commonly accepted idea is to let the other side make the first offer. This
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“never open rule” holds true if you do not know the market. However, another
popular approach is to do your research and then be the first to set the price,
since it anchors expectations and establishes the range. You can put a price
forward either ambitiously or realistically. Optimistic openings give you more
room to alter your price, which, in turn, encourages the other side to make
concessions. In South America, the Middle East and Africa, optimistic or even
excessive opening prices are the norm. In general, though, if you are short on
leverage, face a bargaining brick wall or want to conserve the relationship,
realistic opening prices constitute a better option.

The End Game

At the closing stages of negotiation, be aware of “overcommitment.” This
psychological factor comes into play when people invest a lot of time in an
activity and develop an interest in seeing it completed. It can lead them to

“
agree to less than ideal resolutions.

”
“Just because you have power in a given situation does not
mean it is smart to use it.”

To close a negotiation swiftly and efficiently, try these techniques: Suggest

scarcity. Make the offer seem temporary; set a deadline; walk out of
negotiations. However, if you need to preserve the relationship, or favor a fair
bargaining style, offering to split the difference is a good tactic. It is quick,

“
easy to understand and shows reciprocity.

”
“People need to feel they have ‘earned’ concessions even when
you are willing to give them away for free.”

Reaching an agreement is not the last step in any negotiation. The ultimate
goal is to get the other side to commit. Then, the parties must implement the
commitment. When individuals receive particular responsibilities, they are
more likely to fulfill their end of the overall bargain.

In the business world, down payments, performance bonds and deposits all
demonstrate commitment. If you fail to perform, you forfeit something. In
1997, when Dean Witter, Discover & Co. and Morgan Stanley arranged to
merge, they each agreed that if one party reneged on the deal, it would pay
the other $250 million. Part of the commitment ritual in Western culture is a
simple handshake, perhaps followed by a public announcement. Writing

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down a commitment, such as filling out an order form or questionnaire,

builds awareness. In more complex deals, such as car or house purchases, the
parties simultaneously exchange a contract and money to secure the deal.

Ethics
Ethical behavior is a major concern in any negotiation, but lying is so
prevalent that it frequently becomes part of the bargaining process.
Numerous studies have found that a variety of professionals regard personal
integrity as one of the most meaningful criteria for any professional
negotiator. The extreme opposite of integrity is dishonesty or willingness to
commit fraud – when a person knowingly misrepresents a crucial fact which
the other party relies upon to make its decision. If you encounter this, walk
away from the bargaining table. In some situations, such as those involving a
fiduciary relationship, the law makes a provision for misrepresentation,
which can lead to fraud by nondisclosure. A good rule of thumb for
negotiators: don’t accept everything at face value.

About the Author

G. Richard Shell is a professor and negotiation expert at the Wharton
School of the University of Pennsylvania. BusinessWeek named him as one of
the nation’s top business school professors three times. He trains executives,
nonprofit leaders and government officials in negotiation.

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