In Negotiations, Give The Other Side What They Want

Shortsightedness has killed many a potentially lucrative M&A deal. Here's how to get what you want, by giving them what they want.

All too often, negotiators spend their energy arguing with the other side, trying to give them less than what they are asking for. I’m saying you want to give the other side what it is that they want. That doesn’t mean just open up your wallet and give away the store. If you can find a way to help the other side get whatever it is they want, that’s the best way to get what you want.

I learned this lesson from Cade Massey. Cade is a football fanatic who also happens to have a PhD from the University of Chicago. Together with Nobel laureate Richard Thaler, Cade showed that NFL teams way overvalue the top-ranked draft picks. When Cade isn’t thinking about football, his day job is being a professor at Wharton where he teaches Influence and Negotiation. Before that, we taught negotiation together at Yale.

Cade wanted to know what led to success in negotiation. He began by asking successful negotiators what they thought was the reason for their success. And he asked people from a truly wide range of industries. He started with Joe Lemley, a friend of his dad’s. Joe traded cattle, cars, ranches, whatever. His only two tools were a phone and an ashtray. Joe’s answer was simple:

“If you can figure out how to give the other guy what he needs, or better, what he wants, you can get just about anything from him.”

Next up was a successful venture capitalist:

“We try to figure out what the [entrepreneurs] want, and how to give them as much of that as possible, so we can get what we want.”

A pattern was beginning to emerge. The reason to give the other side what they want is not to be nice or generous. It’s because it is in your interest. If the other parties are getting what they what, they will be motivated to reach an agreement.

This has an important follow-on implication: You need to understand what it is that the other side wants. It doesn’t help to give the other side what it is that you would want in their shoes. You need to figure out what they actually want.

With that in mind, think about the mistakes being made in the edited transcript below. (You can also watch a reenactment of the negotiation at splitthepiebook.com.)

Meghan [buyer]: I’d like to talk about buying your station.

Michael [seller]: Let me tell you where I’m coming from. I’ve spent twelve years building this business. … My wife and I want to buy a sailboat and take a trip around the world. and we would like to cover the expenses of that trip. That’s going to come to $488,000. That’s the bare minimum I can accept.

Meghan: Would you be willing to accept $400,000?

Michael: That’s not enough.

Meghan: So, your business proposition is that you would like our company to fund your sailing trip.

Michael: [laugh] Well, what I do—

Meghan: Because I’m not sure why I should care.

Michael: What I do with my money is what I do with my money. I’m laying my cards on the table and I would like for you to reciprocate in some way.

Michael is naïve in that he bases the price of the station on the cost of the trip and not upon the market value of the station. The station wasn’t worth $488k, and the end result was no deal. But the seller’s use of non-economic arguments isn’t what ultimately killed the deal.

The root cause of the failure was the buyer’s lack of caring. Recall Meghan saying: “Because I’m not sure why I should care.” This was the critical mistake. Why should Meghan care? The price of the station bears no connection to the cost of a sailboat.

Here’s the reason: If Michael gets to take his desired trip around the world, he’ll sell the station and Meghan will get what she wants, namely the station.

Just because you care doesn’t mean you pay more. It means you work hard to see what you can do to help the buyer achieve his objective. If Meghan had been more curious about the trip, she would have learned that Michael budgeted $75,000 for a reserve fund to cover living costs when he returns. Meghan thinks Michael is a great manager and would be happy to offer him a job upon his return. With a job in hand, Michael doesn’t need the reserve fund or, at least, doesn’t need a $75,000 reserve fund. With a job offer waiting upon his return, Michael can start tasting the sea spray. He will want to do a deal.

People are often afraid to reveal their inner motivations. They think a Miranda warning is needed: Anything they say can and will be used against them in the course of a negotiation. Was it okay for Michael to reveal his desire to take a sailing trip?

The buyer knows there must be some reason for the sale. There are good reasons and bad ones. A bad reason is that Michael is selling because there’s a leak in the underground storage tank and the station is about to become a superfund cleanup site. Seen from that perspective, wanting to take a sailing trip is just about the best possible reason for someone to sell a station. There’s no bad news underlying the seller’s motivation.

Sometimes, sellers are tempted to tell a “white” lie, as in “I’m looking to retire and spend more time with my grandkids.” While that, too, is good news from the buyer’s viewpoint, it isn’t helpful. Hearing that the seller is looking to retire, the buyer won’t follow up with a potential job offer to work as the station manager upon his return. Misleading the buyer makes it hard for them to give you what you want.

People may be hesitant to tell you what it is they really want—they are often more willing to tell you what they don’t want. This is equally useful information. Learning about the dislikes helps you discover the likes. Finding something the other side really doesn’t want to give up tells you it is important to them. The way they express this is via the no rather than the yes. Getting to no is a great way of getting to know the other side.