Negotiating is hard, no one denies it, but it’s also a valuable skill. An expert from Carnegie Mellon told BNET that if you fail to negotiate a higher salary just once at the start of your career, you can expect to leave $1-2 million on the table throughout your working life due to raises being calculated from a lower starting point. That’s conclusive proof that you need to negotiate, but it’s not enough to just give it a whirl, you also need to do it right. Unfortunately, there are plenty of ways to get things wrong, according to Margaret Neale, director of Stanford Business School’s executive education program in negotiation.
Citing her expertise, Stanford’s Knowledgebase recently outlined six common negotiation pitfalls that commonly trip people up. Some, like treating cross-cultural negotiations like “local” ones, are only applicable to fairly narrow situations, but the three below could apply to nearly any negotiation: Thinking the pie is fixed. Usually it’s not. You may make this common mistake when there is a “congruent issue,” when both parties want the same thing. For example: In the context of an overall negotiation involving salary, bonus, and vacation, the boss wants to transfer a junior manager to San Francisco.
The manager is eager for the San Francisco assignment. But frequently, the employee will look at the situation and believe that since the boss gave him a desired promotion the employee must compromise on the transfer location. The employee might actually suggest a transfer to Atlanta. His psychology is: “I can’t expect to get everything I want, so I’ll take the middle. ” The boss is ambivalent about the transfer and figures she can get someone else to go to San Francisco. You think it is unlikely an employee in a career negotiation would miss such an obvious opportunity?
Neale repeatedly has performed this exercise in her classes and finds that 20 to 35 percent of the students assume it’s a fixed pie and miss an opportunity to get what both parties want. Failing to pay attention to your opponent. Negotiators need to analyze the biases their opponents bring to the table. How will they evaluate your offers? One way to get inside your opponent’s head and influence his attitude is to shape the issues for him, a technique called “framing. ” If you get your opponent to accept your view of the situation, then you can influence the amount of risk he is willing to take.
For example, you are a purchasing manager renegotiating an hourly wage contract with a subcontractor. The subcontractor currently makes $10 an hour. You are willing to elevate the subcontracting firm to $11 an hour. Another organization recently boosted its rate with your subcontractor to $12 an hour. You know that when the negotiators for your subcontractor hear your $11 offer, they may think they are going to have to give up a dollar an hour. You must get them to focus on the point you are starting from — $10, not $12.
You frame the issue positively by talking about all the ways your contract is different from the others. Your contract has some advantages outside of the hourly pay. The other side will be more willing to risk lower wages for the purported other benefits. A common mistake is negotiating from a negative frame: “The other firm’s deal offers more, but we can afford only $11. ” Paying too much attention to anchors. Anchors are part of a bargaining dynamic known as “anchoring and adjustment. ” This involves clearly setting the parameters for negotiation.
For example, a couple was selling their house for $500,000. The first offer came in at $375,000, which was too low to consider. If the couple had acknowledged the offer with a counter, they would have started bargaining somewhere between $500,000 and $375,000. Instead, they responded that it was not a reasonable offer and told the buyers to come back when they had a decent offer. The buyers came back at $425,000. The seller then countered at $495,000. The buyers then came up to $430,000, but the sellers still didn’t accept the offer.
The buyers argued that they had come up $55,000 from $375,000. But the sellers were careful to remind them that $375,000 was not their starting point; rather, it was $425,000, the first reasonable offer. Using that anchor, the sellers argued that they had come down $5,000 from $500,000 — and the buyer had come up $5,000 from $425,000. Both had moved the same amount in negotiations. One more round of bidding had the house sold — for a price well above the buyer’s initial bid. “The point is: You’ve got to watch the anchors and where they are set,” says Neale.