When media giant Viacom bought Black Entertainment Television (BET) for more than two billion US dollars in 2001, its founder Robert Johnson became the first African-American listed on the Forbes Billionaire list.
What started as a US$500,000 investment became a huge fortune, but it might not have happened if Johnson’s early negotiations in the 1970s were ineffective.
But Johnson was astute.
Recalling his negotiations to recruit John Malone, known as the “King of Cable,” to invest in BET, Johnson said, “I knew Malone and what he believed in. Malone believed in entrepreneurial initiatives and in individuals helping themselves. So everything that I talked about [in the pitch to invest in BET] was designed to hit these points. I had to convince him that I share his value system in a way that he would come into the deal.”
With Malone, Johnson focused on compatibilities and built on similarities, and eventually secured a big investment through an effective 30-minute pitch.
Introducing Master Negotiator, Dr. Michael Benoliel
Engaging stories like these are plenty in the writings of Dr. Michael Benoliel, himself a renown top-class negotiator, consultant, and Associate Professor of organisational behaviour, negotiation, and conflict resolution, whom I’ve had the privilege of working with.
Across his many engaging books, including Negotiation Excellence, The Upper Hand, and Done Deal, Benoliel seeks to uncover the art of effective deal-making by interviewing a range of master negotiators across the globe and distilling the key takeaways of their negotiation craftsmanship.
Here’re some important dimensions that master negotiators are mindful of, according to Benoliel and the various negotiators he has interviewed.
Preparing and Working for the Best Outcomes…
The masterstroke that Johnson did with Malone falls under “Compatibility,” one of the important dimensions of effective influence, persuasion and negotiation. The other dimensions are:
3) Both sides of the table
4) Creativity and Resilience
5) Take it or leave it
6) No deal
The “Homework” dimension is about doing your due diligence and being well prepared. As obvious as this is important, a study of 250 executives involved in mergers and acquisitions (M&As) found that many did not put in sufficient due diligence efforts. This led to critical issues being overlooked and thus many failed M&As.
Former U.S. Secretary of State James Baker, who has been called Washington’s “Miracle Man” for his uncanny ability to solve insurmountable problems, said that his father taught him the rule of “5Ps: Prior Preparation Prevents Poor Performance.”
Indeed, former Singapore Ambassador-at-Large, Tommy Koh, suggested that we should treat each negotiation as unique, and prepare for them as such. It’s easy and in fact instinctive to assume that all negotiations have commonalities, but it’s also a mistake to categorise people and overgeneralise.
If you did five transactions that’re successful, there’s no guarantee that the next one will be successful even if it’s a similar deal. Likewise, the people you’ve negotiated with before can also change.
Being prepared also helps a negotiator do well under the dimension, “both sides of the table.” Former Israeli President Shimon Peres said, “I try to map in my mind the interests and the difficulties that the other side might have and invest a great deal of thought on how to overcome them.”
In his negotiations with France, Peres developed convincing arguments to persuade his French counterparts that it was in France’s best interests to support Israel.
Baker also believes that one obstacle to effective deal-making is that negotiators can be too self-centered. By making the effort to take the perspective of the other side, one can understand better where the other side is coming from as of their goals, interests, fears, risk level, and the things the other side can or cannot do.
Understanding your counterpart(s) also allows you to give concessions that can sweeten the deal for them so that they are more likely to move in your direction.
… and also Preparing for the Worst
By nature, negotiations can cause conflict. Despite our best preparations and efforts to seek commonalities and negotiate from both sides of the table, discussions can stall. Negotiators then need to understand the nature of the impasse.
An impasse typically happens because negotiators are fixated on a single issue, such as price. A typical situation is when you’re haggling with a flea market storekeeper over a $10 shirt.
One way to resolve an impasse is to move away from that specific issue. In complex negotiations, there may be many issues bundled together.
According to Eric Benhamou, the former CEO of 3Com and Palm, the best negotiators are creative and can think out of the box. When a negotiator is open-minded, creative, and agile, he or she can realise, for instance, that the composition of the negotiating team can be changed, or that maybe the positions of negotiators may be in conflict but the hidden underlying interests are the same.
The famous story of the sisters and an orange illustrates this point. Two sisters walk into a room and see an orange on the table. They both want it and argue about how to share it for a while. In the end, they decide that a fair deal is to cut the orange in half. Is this an optimal outcome?
After the orange is cut in half and shared, one of them squeezes the juice from the flesh and throws the peel away. The other sister throws the flesh away and uses the peel for making marmalade.
What happened here? A suboptimal outcome just occurred, because half the orange flesh and half the peel got thrown away when all of it could have been put to use. If the sisters had discussed the interests (the peel and the juice) that underlie their positions (they both wanted the orange), one sister would have gotten all the peel and the other the juice from the whole flesh.
By taking the time to slowly uncover each others’ interests and move away from the stubborn focus on positions, impasses due to conflicting positions can be dislodged.
Sometimes, it’s about giving your negotiating counterparts more time and space to understand what you want. Superstar sports agent Leigh Steinberg asserted that inexperienced negotiators leave the table prematurely. Negotiators must be resilient to try and convince the other side and work towards a highly optimal deal.
However, negotiators should also avoid bombarding the other side with the same arguments that do not work. Creativity and resilience go together because one must be creative such that the other side is not frustrated by repeated demands that’re restated in different ways.
When an idea is laid on the negotiating table, people may not accept it right away. Do not rush the process and give it time and be creative.
Sometimes there may be no more room to compromise, and the frustration becomes intolerable. Frustrated and emotional negotiators might adopt a “take it or leave it” stance by issuing threats or ultimatums.
Such an approach is not the most ideal, as threats and ultimatums do not always work and can sour the relationship between negotiating parties. Master negotiators suggest that it’s something that shouldn’t be used too casually either, as it can undermine one’s credibility.
However, this is also not to say that one should never use them. Negotiations are costly and it doesn’t make sense to negotiate endlessly. Especially when the other side is being unreasonable and refusing to move, you have to make a stand. In such situations, “take it or leave it” is not a threat, but rather serves as a constructive means for negotiations to come to an end.
Benoliel suggests that ultimatums should be used sparingly, rarely, and also smartly. And this brings us to an important bias that all negotiators should avoid.
Deal or No Deal?
Regardless of whatever happens during a negotiation, the same final question always remains: “Do we have a deal?”
Carlos Gutierrez, who was the former CEO of Kellogg Company and US Secretary of Commerce, believes that negotiators need to be ready to walk away from a bad deal. Gutierrez said, “Even though this was a deal that we desperately wanted, I conditioned myself mentally to say we might not have it.”
When there is no hope for a deal, it’s meaningless to hold on to it. Experienced negotiators can see that things are going around in circles and a good deal isn’t possible, while less experienced negotiators waste time trying to create a deal that doesn’t exist.
No deal is better than a bad deal, but sometimes it’s difficult to walk away. People have a bias to make a deal as long as they begin negotiating, which arises from escalation of commitment.
As negotiation is costly in terms of time, emotional investment, and effort, people can be afraid to walk away from the negotiation process after so much sacrifice.