A Lesson Learned from a Teenager
Recently, a colleague’s son came home from his first day at high school and told his parents that his entire freshman class needed to buy a yellow T-shirt from Abercrombie & Fitch. While they wanted to help their son fit in at his new school, the parents did not want to spend $30 on a T-shirt. After further questioning, they discovered that what he really needed was any T-shirt, as long as it was his freshman class color of yellow.
This is a classic case of wants vs. needs. The son wanted the Abercrombie T-shirt but needed any yellow T-shirt. The parents wanted to buy him a $3 yellow one made by Fruit of the Loom, but acknowledged they needed to get him a more socially acceptable T-shirt. Only after they had exchanged heated words with their son and exhausted themselves in the process did they realize he didn’t care about the price of the shirt; he only cared about wearing something that was socially acceptable. At that point, the family was then able to have a productive dialogue and settled on a fashionable $15 yellow T-shirt from American Apparel.
In negotiations, we are often confronted with what people say they want, rather than what they truly need. To compound the problem, those wants are quickly turned into something tangible such as dollar amounts which then become the primary focus. The wants get “quantified,” rather than “qualified;” and we waste valuable time and energy debating the wrong issues. Instead of discussing, for example, which socially acceptable T-shirt to buy, we launch head first into why Abercrombie is overpriced or whether it has superior workmanship to Fruit of the Loom. Only when both parties get to qualifying wants and needs can they identify the real issues and find the middle ground for acceptable solutions.
Qualifying mutual needs and wants is only the first of four parts of a successful negotiation using the NETS method – Needs versus Wants, Expectations, Trust and Reciprocity and Straight Talking and Logical Decisions. These are critical components to a successful conclusion in which both sides feel that, while they did not get everything they wanted, they did receive more than they needed.
Step 1: Identify Mutual Needs & Wants
The best way to prepare for a negotiation using the needs vs. wants paradigm is to take the time in advance or very early in discussions to identify what each side really needs. Often, real needs are obscured by a focus on the wrong issues. For instance, you might debate the price or the merits of the Abercrombie shirt because that is how the discussion was originally framed instead of getting to the core issue: buying a fashionable T-shirt.
It is important in the initial analysis of needs and wants to exclude tangible items and instead concentrate on the goals to be accomplished. Think more about what each side is trying to achieve than about whether the price point is appropriate or the terms are market rate. While price or terms may kill the deal in the end, they cannot be the initial focus if negotiations are going to make it to the final stage. Both parties must first resolve points based upon the true needs of everyone involved. They must also establish realistic expectations and build trust by negotiating in good faith. One of the factors critical in building good faith is the belief that each side has a good understanding of what the other is truly looking for and acts in a way that honors that understanding.
Step 2: Set the Right Expectations
When parties go into negotiations with the wrong expectations, they are often disappointed by the opening conversations and a pattern of mistrust forms. This can be avoided by setting up realistic expectations to help parties engage in productive discussions. For example, a realtor may forewarn a seller that offers over the past few months have been lower than usual, thus preparing the seller for a less- than-expected offer and avoiding a non-productive emotional reaction. With the right expectations, the seller can evaluate the offer in a rational way and engage in productive dialogue with the buyer. However, expectations can change when other factors—another potential buyer or rising interest rates, for example—enter into the mix. A negotiation is like a football game where the first-down markers are continually moving. Each side must adjust their expectations, and help the other side understand the impact of those adjustments, in order to continue marching down the field towards the goal line.
Step 3: Establish Trust & Reciprocity
It is much easier to establish reciprocity when both parties have already drawn up what they believe are the true needs and wants of each side. If reciprocity is not established early on, negotiations will appear one-sided, which can in turn start a cycle of mistrust and kill momentum. Drawn out negotiations, where every minute point is endlessly debated, drain goodwill and have a higher propensity to grind to a halt and even fall apart.
Let’s go back to our real estate example. During negotiations, the buyer conveys a wish to keep the washer/dryer unit and to move in immediately. However, the seller wants to keep the washer/dryer unit and to extend the escrow one month. Both of these negotiating points at first blush seem like ideal areas where financial considerations can settle the problem. However, the cost of lost goodwill and momentum through such negotiations is vastly underestimated.
If each side could determine the true needs of the other or if, in the spirit or reciprocity, they could ask one another why they had made those requests, they might achieve a better result for both. The seller would find out the buyer is strapped for cash in putting down the down payment and cannot spend another $1000 on a new washer/dryer. The buyer would find out the seller has nowhere to move until the following month when their new home is ready.
A new washer/dryer would be a want for the seller but a need for the cash-strapped buyer. Conversely, the buyer’s desire to move in as quickly as possible does not compare to the seller’s need to wait until their new house is completed. If each party could reciprocate, give in somewhat to the needs of the other and allow any financial inequity to be worked out later, trust could be furthered, and a stronger platform for negotiating finances as well as the rest of the transaction would be established.
Step 4: Straight-Talk and Authenticity for Logical Decision-Making
Many negotiation manuals stress tactics and ploys that can be used to obtain tactical advantage. These ‘games’ can be very effective in yielding short-term strategic advantage but may compromise the overall authenticity of the negotiation. Authenticity and straight-talking are keys to maintaining the trust that has been built up through the first three stages of the negotiation – wants vs. needs, setting expectations and trust/reciprocity. If one side perceives gamesmanship at the expense of authenticity there is a chance that cracks could develop in the fragile trust that had been built between the two sides. However, this does not mean that either side should compromise their position just to maintain authenticity. Each side needs to be truthful and real in the process, but need not disclose information that would prove disadvantageous.
Achieving Success via the NETS Process
The conclusion of successful negotiations usually depends upon the ability of both sides to develop a sense of trust and to overcome negative emotions when making final decisions. As long as the outcome is at least what you truly need, you know that it is a positive transaction even if it is not everything that you want. Conversely, if the outcome is less than what you truly need, you can feel secure in walking away without ever having to second guess whether you quit negotiating too soon.
The NETS process is effective at most negotiations, but is especially effective in negotiations where the parties will need to interact regularly with one another after the negotiation has closed. By employing NETS, both parties can take the positive feelings generated during the process as well as the outcome and use it to further their relationship.
The NETS method is predicated upon both sides negotiating out of strength. Certainly, each side needs to feel very secure in their position in order to take the time and energy to try to give the other side what they need in order to give themselves what they need as well. Each side needs to feel strong and confident in order to set the right expectations and “give before they get” in order to establish reciprocity. And lastly, each side needs to have the strength of character to maintain straight talking when the going gets tough because they understand the value of trust and good will built through authenticity.
About the Authors:
Andrew M. Apfelberg– A partner with Rutter Hobbs & Davidoff, Apfelberg is a corporate attorney specializing in mergers and acquisitions. He advises clients in such “bet the company” circumstances as Mergers & Acquisitions, joint ventures and complex financings. He also serves as outside general counsel to middle market companies and entrepreneurs. A third generation Los Angeles-based lawyer, Andrew’s clients benefit from his strong business and finance background gained from working for investment and commercial banks prior to attending law school. He has been named a “Super Lawyer” in the field of Business Law, Law & Politics for 2005, 2006 and 2007.
Mark Jaffe– Jaffe has successfully served as a catalyst for growth and has leveraged product, service, brand and company-wide franchises for over 20 years. He has held senior executive positions at Warner Bros., Dream Works and EMI and was head of Walt Disney Records. Jaffe has negotiated hundreds of deals and contracts with music, film, and television celebrities as well as with many Fortune 500 companies and labor unions. Currently, he has a successful consulting practice helping CEOs and other senior executives strategically grow their companies and divisions through the use of skillful negotiating.
About Rutter Hobbs & Davidoff- Century City-based law firm Rutter Hobbs & Davidoff represents clients in matters involving business disputes and litigation, real estate, intellectual property, labor and employment, corporate and securities, bankruptcy and corporate reorganization, estate planning and probate litigation. For more than one-third of a century, the firm’s experienced attorneys have represented middle market companies, early stage entities, large corporations and individuals. For more information, please visit www.rutterhobbs.com.