The Art of Negotiation: Benchmark, Bundle, Trade

“Everything is a negotiation,” says leadership expert John Burrows. Whether you’re working on a multimillion-dollar M&A deal, arguing for a better salary during a job offer, or simply trying to choose where to order takeout for your family dinner, “we’re all negotiating all the time, which means there’s huge opportunity and upside to getting better at it.”

But Burrows noted during a recent Travelers Institute webinar that “in the real world, we very rarely have hard data on how we performed in a negotiation. Sometimes we come out and feel like we can put our hands up and uncork some champagne. Maybe that’s justified, but the truth is we’re much more reliant on reactions to the negotiation and our feelings, which aren’t necessarily a good guide to how we did.”

He gave the example of a job negotiation, where you ask for a bit more money than you’re hoping for because you know “some haggling is going to ensue. They’re going to beat me down a little bit and I’ll end up somewhere else… So, I want $120,000. I ask for $140,000 and they say yes. Did I win?” There’s really no way to know, he said. “No one pats you on the back at the end of that conversation and says, ‘Oh, by the way, if you’d asked for $180,000, we might have gone up to $160,000.'”

“The reality is we often hold ourselves to fairly low bars and maybe overachieve. But that isn’t the same as success,” he said.

So, how do you become a successful negotiator? Burrows offered the following advice.

Know your bottom line. “I would argue [BATNA] is the most important term in negotiations,” Burrows said, noting that the acronym stands for “best alternative to a negotiated agreement.” It’s the benchmark against which any proposed deal is measured, he said.

“A mistake that is often made is people don’t fully understand what happens if they get up and walk away,” he said. Knowing your BATNA “gives you a very good sense of who has the power and leverage at the negotiating table and enables you to assess more methodically, more accurately, ‘Are we coming to terms on an agreement that’s actually better than my BATNA?'”

Burrows said that people often do deals “because they get caught up in the moment… A BATNA can be thought of as a flashing neon light reminding you what happens if you get up and walk away.”

Knowing your BATNA also gives you a chance to improve your leverage, he said, giving the example of securing a job offer from a competitor before negotiating with your top-choice employer.

Bundle the options. “We tend to take what we think is a logical approach” when we negotiate, going through the issues one by one to determine where we’re in agreement and then fighting over the remainders. Burrows suggested that a better approach is to bundle the issues into several different options that you’re “relatively indifferent about” and then asking the other side if they have a preference. He gave the example of offering a job candidate a choice between two packages, each with a different location, salary and bonus. “What I’m doing is revealing some preferences in a somewhat masked way, but you perceive this as I’m sharing, I’m initiating, and you feel the urge to respond in kind.” This approach subtly reveals your preferences and encourages the other party to do the same, he said.

During the process, pay attention to the other party’s emotional reactions to glean data on their priorities, he said. “Through the back-and-forth, you start to build rapport and trust one another.”

Trade on your differences. “We often think of negotiations as things that must be won, and in order [for me] to win, the person across the table must lose,” Burrows said. But that’s only true in zero-sum negotiations, where you’re “fighting over a fixed pie.”

For most negotiations, it makes more sense to think of the person on the other side of the table as a collaborator rather than an opponent, he said. Figure out which items each side values more, then work out a deal that takes those preferences into account so everyone at the table ends up in a better position. He said a good starting point is to consider time, money and quality. “You might want all three…but think about if one or two of those is more important than the other to you,” he said. If we can identify what is more important to each of us, “then we’ve got the ability to trade on these differences and create value.”

That doesn’t mean compromising, Burrows stressed. “We often do what we think is fair and equitable, reasonable. We meet in the middle, we compromise, we split the difference.” He said that’s the wrong way to look at it because neither side may end up with what they actually want.

Adopt a scoring system. Burrows said that “one of the mistakes we all make in negotiations is we overly fixate on the hard numbers…because they’re very salient and we can assess whether we won or lost fairly quickly.”

He advised creating a scoring system to subjectively weigh the various elements being negotiated and then attaching a number to each. “What this means is when I’m weighing ‘is this bundle of things better than that bundle of things,’ I actually have numbers to assess,” he said.

Don’t rush. “Our bodies don’t like uncertainty,” Burrows said, noting that this can cause negotiators to rush when they should slow down.

“We negotiate successful outcomes with people with whom we’ve built a relationship,” he said. “Relationships often take time to establish. There’s a back-and-forth,” he said, and it takes time to build rapport.

Taking your time also helps to prevent mistakes, he said, such as tossing out a number that’s too low due to a feeling of pressure.

“It’s OK to pause,” Burrows said. “It’s OK to ask for a timeout. It’s OK to say, ‘I’m not sure I know how to proceed right now, and I need a few minutes to think about this…”

Anchor aggressively. Anchoring is making the first offer in a negotiation to set a reference point for the rest of the discussion, Burrows said. He noted that “the goal of anchoring is not to get that number but to ensure that the orbit of the conversation occurs in a range that is more favorable to me than you.”

If you’re going to anchor, be aggressive, he said, pointing to his earlier example of negotiating the salary for a new job. “We want the number we’re thinking of throwing out to turn our stomachs.”

Don’t be afraid. “We think of things as not being negotiable,” Burrows said. “And we also think that negotiating is seen by the person on the other side as us being pushy, abrasive, and not sufficiently respectful and deferential.”

He said you shouldn’t let that fear stop you. “You’ve got to negotiate—always. That doesn’t necessarily mean you’ll get what you’re asking…”

Burrows said sometimes it isn’t so much about winning the negotiation as showing “you’ve got the gumption to go and advocate for not only yourself but the broader set of stakeholders whom you represent.”

“If I’m putting you on my team, you’re going to represent my organization,” he said. “If you can’t even negotiate and ask for a little bit more money, or a slightly greater work-life balance, or slightly more equity, or a slightly more senior title—if you can’t do that, I’m actually going to judge you. I’ll actually think less of you because now I worry did I make a mistake extending this offer to you.”