E-learning MBA Master Degree online from distance
- Economics for Business and Management - Microeconomics
- Economics for Business and Management - Microeconomics
- Marketing Management - Strategic Marketing Planning
- Financial Management - Financial Accounting
- Strategic Management - Strategy and Competitive Advantage
- Economics for Business and Management - Macroeconomics
- General Management - Core Management Competencies
- The Art of Effective Business Negotiation
Handling Difficult Negotiations... and Difficult Negotiators!
TEACHER: Hello! In this Module we will witness a very difficult negotiation process. We will comment on the ploys being used, and the behavioral styles of the negotiators.
STUDENT: Did you say a difficult negotiation? Why, are they any easy ones? My counterparts have always been difficult. They rejected my most reasonable requests and did not agree with me. Any deal I have been able to close has been difficult.
TEACHER: True. Any negotiation is difficult to a certain degree. But when I say difficult, I mean a negotiation where one of the parties is what we have previously described as "Red", be it an "aggressive" or a "devious" red or both.
My purpose is to discuss with you how to handle this type of person in the best possible way.
We will observe the negotiation between Mr. Red A. Sell and Dr. Blue A. Driver. Mr. Red is a salesman for an importer of a brand of very expensive, prestigious European sports cars. Dr. Blue is a wealthy physician and an experienced driver, and he often participates in sports car rallies.
OK, let's listen to the imaginary tape of the negotiation process. And please let me tell you in advance that the statements the participants make are exaggerated on purpose, to emphasize the concepts.
Dr. B: Nice to meet, you Mr. R. I am interested in one of the cars from the line you sell. Your model FF211 would suit me well.
Mr. R: Yeah. Top of the line. Limited production. OK, maybe I will sell one to you. You must pay the full price in advance; that will be 1 million. Cash.
Dr. B: When can you deliver?
Mr. R: Don’t know. We’ll let you know. Got a lot of orders booked. You know that the FF211 is a limited production car. Let me bring a standard contract for you to sign.
Dr. B: I wish we could discuss the matter somewhat more. Price, delivery date, warranty.
Mr. R: Price is fixed. Payment is in advance. We deliver whenever we get delivery. And as for a warranty, our policy is "no warranty". Make up your mind, mister, I haven’t got all day to spend with you. And I may decide not to sell an FF211 to you anyway if you do not sign the order within the next 5 minutes. I am a busy person.
TEACHER: Let’s pause the tape for a moment. Do you care to comment?
STUDENT: Well, looks like Dr. Blue is prepared to negotiate, and Mr. Red is not. He seems to be extremely difficult and has no manners. He expects Dr. Blue to pay the full asking price in advance, go home to his patients and patiently wait for the car (no pun intended!). He is not even offering a decent warranty on his product. And he is threatening the good doctor with not selling him that lovely sport car.
TEACHER: Very good analysis. The A in the seller’s name Red A. Sell stands for Aggressive. He is a typical aggressive Red.
STUDENT: But there is something I don’t understand. He is not selling bananas, he is selling automobiles. I do not think buyers come in droves to buy them. Why does he behave in such a way? It looks that most buyers would simply walk out and go to some other seller.
TEACHER: You are right; some buyers certainly would leave when treated so badly. But the point we are illustrating here is that Mr. R. confuses aggression with toughness because this behavior worked for him more than once. He has experienced that many prospective customers have submitted to him and accepted his conditions. So he convinced himself that being "tough" is effective for quickly closing a sale on his own terms, and he continues displaying this aggressive behavior.
What he does not know is that the A in Blue A. Driver stands for "Assertive". Let’s push Play and continue listening to the tape.
Dr. B: My dear Mr. R, allow me to respectfully tell you a few things: I am not buying any car on these terms; I came to negotiate, not to be bullied into purchasing a high price item on the seller’s unilateral conditions.
I am ready to consider the merits of your propositions, and I expect to trade. You have cars, I have money. I want a car, you want money. That’s a good beginning, but we must agree on how much of a car for how much money, timing of payments and delivery, and the degree of support you give to your product. That is what I mean by trading. No trading, no purchase. There are several good sports cars comparable to the FF211 available for sale. And no hard feelings, this is not personal, it is just business.
TEACHER: We have just seen how Dr. Blue, being an assertive Blue as his name indicates, has reacted to Mr. Red’s aggressive tactics. He has made it clear that he will not submit to intimidation, that bullying does not impress him, and that he is not scared by empty threats. And he has done this in a firm but reasonably polite format. He was firm, not rude. Let’ see if Mr. R has got the message.
Mr. R: You are talking bull, Driver. You probably can’t distinguish a good sports car from a jalopy. And you know what, I think you don’t have the money to purchase a FF211, you are just fooling around with me. For the last time, do you want to buy the car or not? (He looks at his watch and then looks at Dr. B). And by the way, are you a real doctor? Or are you trying to impress me with a fancy title you don’t have?
Dr. B: I can’t understand how this company allows an incompetent character like you to represent them. I bet you did not sell a single expensive car like the FF211 in your life. What are you, the dumb son of the owner? Come on, don’t be stupid and you may still make the first sale of your life. Now, let’s talk business, will you?
TEACHER: What Dr. B has done now is match Red’s style. He is responding by switching from an assertive blue to an aggressive red. The tactic may work, but is very dangerous. The two parties may start trading insults instead of trading in the real sense of a negotiation’s give and take. Matching styles must be carefully controlled and the party initiating it must have a clear idea of how to return to civilized negotiation. Usually offering the other party a chance to change behavior without "losing face" is an effective tactic.
Dr. B may add to his last remark something like: "I do not intend to offend you. I am a bit tense after the long trip here, and I understand your being anxious to make a sale on your terms. But a negotiation involves two parties with different interests; so, may we give it another chance and start again?". If Red is not completely bull-headed, he may take up Dr. B’s offer which allows him to abandon his aggressive conduct without losing face and without giving the impression of surrendering. But again, matching styles is dangerous. Mr. R may continue with his aggressive and insulting behavior and Dr. B may respond the same way. An escalation of aggression and insult may start and may lead to results unwanted by both parties. In our example the worst that can happen is that Dr. B walks away without purchasing a car. But in other types of negotiations, like in labor relations, the results may be very damaging, leading to a bitter strike, a lock-out or even sabotage. And more than a few bloody wars started this way.
STUDENT: So, when is resorting to matching the red style justified?
TEACHER: A controlled match of style may be useful to avoid giving the Red the impression of what is called constructive submission. This is the name given to a situation where the submissive Blue is only saving face with his responses to Red, in fact surrendering in all but name.
Let’s rewind the tape and go back to the aggressive opening remarks of Mr. R, and then illustrate a hypothetical response by Dr. B which possibly Mr. R would interpreted as constructive submission, a surrender disguised to save face.
Mr. R: Price is fixed. Payment is in advance. We deliver whenever we are ready. And as for a warranty, you won’t need one. Anyway, our policy is "no warranty". Make up your mind, mister, I haven’t got all day to spend with you. And I may decide not to sell an FF211 to you anyway if you do not sign the order within the next 5 minutes. I am a busy person.
Dr. B: Mr. R, I like your car, but I certainly would like a better price, a fixed date of delivery, and some kind of warranty on the car. I guess you will be able to satisfy these requests.
STUDENT: I see. The doctor may not be willing to surrender, but his rather bland response may be interpreted by Red as a surrender all but in name. Now tell me, which is the best attitude to negotiate with the likes of Mr. Red A. Sell?
TEACHER: I will quote G.Kennedy again. His advice is:
* Speak more quietly than they do
* Speak more slowly than they do
* Give way to their interruptions, but pause for a few seconds each time they finish
* Not respond in kind if they swear
* Not argue with their attacks on you and their apportioning of blame
* Not defend yourself against ascribed motives
* Ignore all threats
* Respond positively but specifically and without rancor to any Blue moves they make even in the midst of their Red-dominated activities
* Not respond at all to their Red moves, other than to say "no"
* Affirm whenever appropriate the two principles on which you will agree to a solution (merits of the case and trading)
STUDENT: Good advice. I am sure I will be able to handle aggressive reds. Assertive blues are no problem, I intend to behave like one and negotiating with a counterpart with the same style should not be too difficult. But what other kind of dangerous wild animal can I encounter in the jungle of business negotiations?
TEACHER: A very dangerous one. A wolf covered with a lamb’s hide: a "devious Red". The name tells it all. The problem is how to recognize them, because in general they act as assertive Blues until they gain your confidence and then they strike showing their true style.
STUDENT: Scary. I have met them. And the worst part is that sometimes I created the monster myself.
TEACHER: Exactly. Because there is a "Red side" in all of us (even inside yourself, although you claim to be mostly an assertive Blue). It is human nature to grab an opportunity of getting something for nothing. This is why you "created the monster yourself" on occasions when you offered your assertive Blue counterpart a chance to turn into a Red and get something out of you for nothing. Tell me, what types of mistakes did you make to tempt the Blue to become a Red for a moment at least?
STUDENT: Well, once I confided to the other party after they quoted a price I assumed to be final and was ready to accept, that I needed their services very urgently and did not have another supplier. Blue instantly turned Red and said: "Oh, I forgot to mention that the price I quoted did not include my provision for income tax. I was talking of my net pocket income. I am in the 40% marginal tax bracket, so it’s the quoted price plus 67%."
And I was trapped, because I really needed the services urgently. And his arithmetic was correct! Say he quoted $1000 at opening. He then asked for $1670, a net income of ca. $1000 after a 40% income tax. Due to my mistake I had to pay 67% more than the opening offer from my counterpart!
TEACHER: Well, you mentioned that you knew that the other party was normally an assertive Blue. You "created the monster" yourself. But the same may happen if the other party is not a Blue tempted by a chance to gain something for nothing, but a devious Red. The results would have been the same. And the problem is that one can never be sure of what the other party’s true style is, or when an authentic Blue will act as a Red if we tempt him by showing a weakness, as you did.
STUDENT: What you are saying is that a clever negotiator should never not even when dealing with known Blue counterparts, expose himself to exploitation by revealing expectations or true interests.
TEACHER: Right. Also, our clever negotiator will never make an unconditional offer in the expectation that the other part, being also a Blue, will reciprocate automatically. You must never allow yourself to slip from the assertive Blue attitude of insisting that you are open to trading, not to making concessions.
If you keep making conditional proposals (the if-then format) you may be able to deal with all styles of negotiators.
The Reds, once they are convinced that you are serious about your proposals, will realize that they can not bully you into accepting their terms.
STUDENT: Yes, but if the other party is a submissive Blue, I may be losing the chance of getting something for nothing!
TEACHER: You are showing your Red side. I am assuming you are not trying to exploit the other side. Anyway, you avoid the always present danger of scaring a submissive Blue away from the table; and a serious conditioned offer will be quickly accepted by a submissive Blue and you can move on.
As for devious Reds, they must be very careful in handling your proposal because they may show their true style if they reject it emphatically. They must continue being devious and at least make you a counteroffer. And honest assertive Blues will easily understand your movement because it is the way he or she normally acts, and will respond in the same way.
STUDENT: Fine, I guess we have covered the subject of how to proceed with difficult negotiators quite well. I have learned about personalities and styles. But at the beginning of this course you told me that you would teach me all "manipulative ploys".
TEACHER: I will, but remember that I am not recommending their indiscriminate use. Leaving apart any ethical considerations, most of the times they do not work in serious business negotiations. Why? Because most business negotiations are repetitive, with the same counterparts. If you use tricks and ploys with a customer, you may win once. However, you will probably say goodbye to the customer, he won’t return. Also, most experienced business negotiators will immediately recognize a ploy and counter it, and possibly identify you as an aggressive Red and treat you as one.
I said I will describe these ploys and tricks for you to be able to quickly recognize them and counter them when used against you. I am not encouraging you to apply them as a way to become a successful negotiator.
But it will be useful for you to recognize ploys and tricks that might be used against you, both to counter them and to recognize that your counterpart is an aggressive Red stylist. A "red" light will be turned on inside you, and this is good.
Most tricks, bluffs and ploys are targeted to influence your perception of the relative power of your counterpart and yourself. Perception of power influences your expectations. If you perceive that they have less power relative to you, you increase your expectations. And vice-versa. People using these tricks try to manipulate your expectations according to their interests and the strategy they apply. They may feign weakness making you believe that you have a lot more power than they have, to make you jump into a dubious deal by believing you have the upper hand. Or they may feign power to get concessions out of you.
In any case, these are manipulative actions.
Manipulative ploys are usually applied in three phases. To illustrate how a typical manipulator works, let me return to our friend Dr. Blue A. Driver. He did not purchase the car from Red A. Sell, and since he felt he was street dumb he attended a seminar, learned lots of ploys and tricks, and decided to become a manipulator himself. He visited a different sports car importer. Let’s play the tape. Once again, the example is exaggerated to emphasize the concept.
Driver: (in phase 1, establishing his dominance)
"I am interested in your car, but you must give me a 10 year free warranty" (establishing preconditions)
"I am not negotiating payment terms, I need a 5 year interest free loan to pay for the car" (defines issues as non-negotiable)
"Also, we must finish our talks within two hours, I have another meeting" (deciding the Agenda unilaterally)
"And you better give me a good deal, I am very friendly with the head of the Better Business Bureau" (hinting at threats)
"And don’t forget that your car is not the best in the market, and your company has not the best of reputations. And I understand you did not fulfill your sales quota last year" (disdainfully dismiss your product, your company, and yourself)
Driver: (in phase two, shaping the deal in his favor)
"We are almost there, just give me a free voucher for 1000 gallons of fuel"
The seller agrees, and Driver says: "Oh, and I would need you to pay half of the insurance on the car the first year". (using "salami" –cutting a slice at a time to his advantage)
Driver (in phase three, working to close the deal on his terms):
"OK, our two hours are almost up, I have to leave very soon" (a phony deadline) "If I don’t walk out of here with a deal, I’m not coming back" (claiming it is now or never)
STUDENT: That was really a metamorphosis of our doctor / driver. Anyway, did he succeed by using these manipulative tactics?
TEACHER: Well, he bought the car and he is convinced that he won the negotiation. I suspect the seller played along and outwitted him; the doctor was fresh out of a seminar, and the salesman had been at this work for many years. Anyway, we saw how the doctor applied a few manipulative ploys. The rest of this course will be an A to Z of negotiation concepts, including ploys and counters. And whenever you are ready, let’s move to our questions and answers session.
Take the Questions and Answers Session whenever you are ready Top
Homework Assignment Before advancing to the next Module please do the Homework Assignment of this Module click HERE. Thanks.
Questions and Answers Session
These are self-evaluating questions, not to be sent to the school for grading. They are intended for your own evaluation of the knowledge you have acquired. If you feel you need it, just review the Module again. When comparing your responses with the Model Answers, do not expect them to be exactly the same. The idea is to make sure that you have grasped the concepts, not the exact wording.
Why is it that so many negotiators continue displaying an Aggressive Red attitude when this is often a negative behavior?
They have experienced that many prospective customers have submitted and accepted their conditions. So they have convinced themselves that being "tough" is effective for quickly closing a sale on their own terms, and continue displaying this aggressive behavior.
When Dr. Blue firmly stands up to Mr. Red’s aggression, with what style is he behaving?
As an Assertive Blue
When Dr. Blue is quoted as responding insults with offense, what strategy is he following?
What would be the useful purpose of a controlled style matching strategy?
Avoid giving the Red the impression that we are showing constructive submission
What type of attitude may turn a Blue counterpart into a Red?
Revealing expectations or true interests, or making unconditional concessions
Which is the basic purpose of bluffs, tricks and ploys?
Most tricks, bluffs and ploys are targeted to influence your perception of the relative power of them and yourself
Manipulative ploys are usually applied in three phases. Which are they?
Establishing dominance - Shaping the deal in their favor - Closing the deal on their terms
When Dr. Blue, in his new manipulative style, stated: "OK, our two hours are almost up, I have to leave very soon", what trick is he using?
Setting a phony deadline
- Sem1.Effective Business Negotiation (8)
- Sem10.General Management - Core Management Competencies (5)
- Sem2.Economics for Business and Management - Macroeconomics (8)
- Sem3.Economics for Business and Management - Microeconomics (3)
- Sem4.Strategic Management-Strategy and Competitive Advantage (8)
- Sem6.Financial Management-Financial Accounting (8)
- Sem8.Marketing Management-Strategic Marketing Planning (8)