Introduction
Knowledge speaks. Wisdom listens.
-Jimi Hendrix
THE SIMPLE TRUTH is that often we don't really know what we want, but we think we know. And because we don't know what we want, but we think we know, we interact with others in deals and disputes chasing blurred objectives. But the process of negotiation, when properly pursued, can be a process of joint self-discovery by both parties, one that leads us closer to what we want and also brings to our counterparty or parties what they want.
The path of that process begins with the recognition of this fact: that we don't know what we want. This recognition is followed by a period of intellectual curiosity during which we ask and listen, culminating in the final stage of preparation, reflection, and classic problem-solving techniques. The success of this process is dependent on shifting our thinking from "what we want" to "why we want it" and then back again to "what we want." This dynamic process is one of investigation and discovery. It involves not just introspection but also an examination of the counterparty's interests and motivations.
Understanding the "why" requires a lot of preparation. This preparation comes in the form of examining the underlying motivations you have and also, the underlying motivations of your counterparty. You need to develop the mentality of an investigative journalist. With this perspective, you become proficient at asking questions of others and even of yourself. You need to become proficient at listening to others and to yourself. By engaging in this type of negotiation strategy and style, you can create and promote a healthy climate of intellectual curiosity and openness throughout the negotiation process. Negotiation needs to be viewed as a process of discovery.
Case Study #1: The Two-Year-Old and the Red Car
A two-year-old toddler is going to have breakfast with her two cousins-both also two years old-and her father. Knowing the importance of keeping young children occupied, Dad brings three kid-pleasing toys: a small red car, a fluffy stuffed monkey, and a toy cell phone.
Since they all are his daughter's toys, her father gives her the first choice of which toy she wants to have. She doesn't hesitate as she picks the fluffy stuffed monkey. One of the cousins picks the red car while the other cousin picks the toy cell phone. All is fine-briefly. Each toddler got what they wanted and was happy with their choice. And then things started to fall apart.
The cousin who picked the red car enjoyed it greatly and made loud "vroom" noises as she rolled it back and forth across the breakfast table. The two-year-old daughter, seeing the obvious happiness of her cousin as she played with the red car, tossed her fluffy stuffed monkey on the floor and burst into tears, demanding the red car instead.
But she had the first pick; how could she now be upset? She had chosen the fluffy stuffed monkey. She was happy with her selection. She got what she wanted. She got the toy she chose. So, what happened?
What happened was this: What the two-year-old really wanted was to have the most fun. As soon as she saw that a different toy gave someone else more fun than she was having, she wanted that toy. Perhaps, given they were her toys, what she wanted was complete control over all the toys. She wanted the power. Why did she want the fluffy stuffed monkey? She wanted control over the situation. I am willing to bet that if you asked the two-year-old why she wanted the fluffy stuffed monkey, she would simply have said, "Because it is mine."
"Well, that is typical for a child," you may say.
Not necessarily. Over a 36-year career, I have seen this similar human behavior in many negotiations by seasoned business executives. The observed behavior is an outward expression of desire that is not consistent with true intentions. The child appears to have made a choice based upon what she wanted. But really, the child wanted control of the outcome because these were her toys. The world of business is very similar. Often what appears to be about choice is about control over choices.
Case Study #2: It's Not Always
About the Numbers
As a young lawyer, I witnessed a remarkable negotiation in which a 60-plus-year-old, highly educated, seasoned, and experienced senior executive (I'll call him "the maven") of a mega-corporation grossly overspent on an acquisition. That was my first true glimpse into the critical importance of understanding the "why" before drawing conclusions about the "what."
The maven opened the acquisition process with a bid of several hundred million dollars for a company that had been started by an entrepreneur and had grown successfully over the years, until it was now a large and significant business that became a publicly-traded company. The financial analysis of that business showed it could be worth another 50% more over the initial acquisition bid, which was slightly at a premium to its public stock price.
In response to the offer from the maven, the entrepreneur owner said, "Sorry, my company is not for sale."
The maven from the much larger company raised the bid 50% higher but still in line with the financial analysis. The entrepreneur again responded the same way, saying, "Sorry, my company is not for sale."
The maven then asked, "How much do you want?"
The entrepreneur said at a later time that the figure he should ask for his company had come to him in a dream. In the present negotiation, he followed that dream and asked for three times the original bid, adding that it was his final number, take it or leave it.
Now the ball was squarely in the maven's court. He had a choice. Since the deal no longer made financial sense, he could walk away from the acquisition. But that's not what happened. The maven took the deal back to his financial team and explained away the financial discrepancy, reframing the acquisition as a "strategic deal." He even redid the assumptions of the financial analysis, which created new industry distinctions to reach the result he wanted. The acquisition of the company was made. Of course, the deal was ultimately a disaster and divested at a substantial loss.
So, what happened? Why did a man who was an experienced and successful senior executive make such a disastrous acquisition, risking far more of his own company's financial resources than the numbers warranted? The answer again lies in the "why" before the "what" principle of negotiation.
Beware the Strategic Deal
As a young lawyer with a strong business sense and an MBA, after graduating and entering the business world, I thought, "Wow, the real world sure is different than business school!"
So, I set out to understand why. Why did poor business decisions happen? Why did some deals go so badly wrong? Why did some seemingly rational, experienced leaders and decision-makers make such disastrous acquisitions? I have said for years in speeches and to business classes to "beware the strategic deal." If someone says a deal is "strategic" so you don't need to be concerned about the numbers, your antenna should quiver.
Back to our maven and why he overpaid for his acquisition. Why did he go against the numbers generated by his own financial team? Why did this deal happen? At the end of the day, after asking lots of questions, an answer emerged. There was a new CEO coming into the maven's company. There was lots of cash on the balance sheet. I came to believe that the maven, who had been passed over for the CEO job, was determined to design the future of the company and spend the treasury before the new CEO came. And so he did.
What did our maven really want? He wanted control over the future strategy of his huge company. Just like the two-year-old wanting control over the happiness of her cousins because the toys were all hers, the maven wanted to control the future of the company by making financial decisions because he still could.
When a Deal Seems to Make
No Financial Sense
I got to know the entrepreneur involved and spent time after the deal trying to understand what he thought and what he wanted, as well as what he thought the maven wanted. The first thing he admitted was that even though an asking price for his company had come to him in a dream, he had actually made the number up that he presented to the maven-he pulled it out of a hat.
Why? Because he had figured out that the deal he was negotiating had nothing to do with numbers. What he discerned from the maven and the maven's interactions with him was that this deal was going to happen, no matter what numbers were on the table. The maven wanted control over the future of the company, so the entrepreneur could probably get whatever terms he wanted for his company. He discerned this in part because no matter what he said, the maven had a comeback. The maven was sword-drawn and aggressive the entire time. I only remember the maven asking one question. When all else had failed, he said, "How much do you want?" Had the maven started with this question, the outcome would have been very...
