Bite-Size 2018-06-10T02:53:58+00:00

Bite-Size

Looking to keep your finger on the pulse, but short on time?

Enjoy our collection of bite-size thoughts and ideas on negotiation! From commentary on breaking academic research, to watercooler analysis of recent global politics, we keep you informed and your mind sharp… so you can be at your best when you need to negotiate for yourself or your organisation.

Want to see a subject covered here? Contact us using the form at the bottom of the page, and we’ll add it to our blog schedule!

2611, 2018

Utility Curves at a Glance

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Would it mean more to someone to get a payrise from $15,000 a year to $20,000, or from $100,000 a year to $105,000?

You almost certainly preferred the first option above, for a very simple reason: the utlity or value of $5,000 is not constant across every situation, or for every person. Things have different utility based on (for example) how common they are, what they can be used for, and when they are being received.

Different types of utility curves include:

  • Diminishing Returns — Money may mean less and less to you personally, the more you have of it.
  • Accelerating Returns — The more money you have, the more you have spare to invest, allowing you to further increase your wealth faster.
  • Parabolic — Too little free time will burn you out, while too much free time bores you… You may want a happy medium in between.
  • Threshold / Cutoff — if you can’t get at least 30 days off from work to go on your dream mountaineering trip in the Himalayas, you’d rather just work now and do it later. 15 days of vacation time might mean very little too you, if anything.

There are essentially infinitely many types of utility curves (as there are essentially infinitely many types of curve in mathematics!), but let’s not overcomplicate things right now.

What matters is that you keep this concept in mind, and identify when its application is critical to your next negotiation. The “trade-off” rate or conversion between two or more factors at hand is not always constant, and the difference between a “Poor” and “Decent” outcome may be miles more important — or less important! — than the difference between “Decent” and “High”. Make sure these phenomena are factored into your decision making.

2611, 2018

The Hidden Value of Experience

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Experience is often thought of as a “knowledge advantage” that directly helps people make better decisions, but there is also a hidden, more subtle value — it helps us identify better decision-making tools in the first place.

Whether you rely mostly on popular, academic, or institutional knowledge on the art of negotiation (or even the Envoy insight blogs!), you will have likely realised by now that there are far too many different ways to make a decision to possibly use all of them in a single negotiation. It would simply take too much time, and at a certain point that time would be better spent on further human interaction or research rather than refining your decision-making tools even further.

Luckily, there is a shortcut.

Human intuition and experience can go a long way towards selecting only the most appropriate decision-making tools for the negotiation at hand. This typically works through our mind (consciously or unconsciously) picking out prominent themes and traits of the people, solutions, and priorities we are dealing with, and then selecting the best possible, known decision-making tool to work through those themes.

For instance, in negotiations where some component of the deal (a person, company, industry, etc.) is liable to be highly volatile, an experienced negotiator or industry expert may quickly identify that risk analysis should be part of the conversation. Whether this takes the formal shape of some kind of risk analysis matrix, or the informal structure of a simple sentence (“Jim’s Farm is on some pretty low-lying floodlands and it’s coming up to monsoon season, we’d better get a great price from him to justify potential losses”)… risk will become a relevant factor in the decision-making in ways that, say, utility curves and game theory will not.

Experience doesn’t just help you weigh up relevant information better. It also helps you figure out what relevant information or factors should be fed into that decision-making process in the first place, and determine how you should weigh things up before you actually begin that process.

 

2311, 2018

Don’t Count On Numbers

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Quantifiable factors and solid data are incredibly useful tools for deciding your negotiation priorities and strategies – but they must remain a tool, rather than the master.

Professionals across the world have never had better access to data, or data analysis tools to make use of the information. With almost the entirety of humanity’s knowledge at our fingertips wherever we go, it can be easy to think that the solution to our problems always lies somewhere in the numbers, waiting to be brought out by an expert.

Transforming your priorities into hard numbers (e.g. by rating your priorities from 1-10, then taking a weighted average of the value of each of your available solutions) can be powerful, and good data is worth its weight in gold… but we should remember that solid qualitative input can be just as valuable, and bad data still exists today.

If a friend who has been in the tiling industry for 30 years tells you that Brook’s Tiles are notorious for poor handiwork (and that you probably don’t want them tiling your home, even though they are the cheapest option out!), you might choose to value that opinion over 200 online reviews raving about Brook’s products and rating them 4.5 stars out of 5.

Maybe the friend is just wrong, or biased, of course — but it is also possible that the review link has only been sent to satisfied customers, or that the company has bought fake reviews, or that the data has been manipulated in other ways completely unknown to you. Neither data nor qualitative input are inherently better than the other, and you will always have to make a judgement call as to which is stronger in any particular situation.

Further, don’t let yourself fall into the trap of overvaluing quantifiable factors! You might not have any hard data available to confirm or deny your friend’s hunch that Kim’s Burgers are mildly better than Patty’s Patties, but that doesn’t mean that their price should automatically become the tiebreaker in your decision-making. If food quality is a much more important factor than cost, then at the least you should try to find out more about the quality discrepancy, before you let the numbers or data play into your decision making as a last resort.

1911, 2018

Currency Conversion for Negotiators

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Want a creative way to compare two deals, or get the best of both worlds between them? Try “converting” the currency of success in one issue, into the currency of success for another.

Step out of your shoes for a moment, and into the world of a budding cafe owner, seeking to buy a pre-established business. You’ve frequented Cafe Jupiter for a few years now, and their desserts are out of this world… but they’re selling for a cool $5,000,000 price tag and you’re just not sure they’re worth the money.

Meanwhile, Deli Deluxe is selling down the road for just $1,000,000, but their decor needs heavy refurbishment and you just don’t find yourself losing your mind over their chocolate mousse like you would at Cafe Jupiter. How are you ever going to make this decision?

A possible solution might have already struck your mind — you could potentially snap up Deli Deluxe for the lower price tag, and use the $4,000,000 you saved to refurbish the place and hire better (or additional) chefs to bring the quality of the dessert up to scratch. If you worked the numbers, you might be able to end up with a higher quality establishment than either of the two, for a lower cost than Cafe Jupiter wanted to extort from you.

This kind of thinking can also be applied to non-monetary issues. If you are deciding between two book publishers and trying to find the right fit for your groundbreaking political manifesto, Gary’s Great Reads might only be able to offer you mediocre editing services, but give you more time to complete the book before it has to go to market. On the other hand, Yohan’s Books would provide decent editing for you, but really wants to rush you to complete the book as soon as possible.

A creative solution could be to use some of the time afforded to you by Gary’s Great Reads to either edit the book yourself, or work a side job to afford better editing services elsewhere. This way, you might end up with both more free time than Yohan could offer you, and better editing than Gary could offer you; not quite the best of both worlds, but certainly better than the deals that appeared to be on the table at first sight.

When working a deal with multiple currencies of success, keep an eye out for avenues to convert one into the other. It can’t hurt, and you may very well come out the other side a lot richer.

1611, 2018

The Value of Understanding It Yourself

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“Our tech guys took a look at the deal and they don’t think it’s good enough value for money. You’ll have to drop the price a bit for us to consider it.”

What kind of reaction do you think the above sentences would receive? An immediate apology and drop in price, or confusion and defensiveness? In our experience, it is difficult enough to challenge anybody’s beliefs while maintaining a positive relationship… let alone making it more difficult by challenging them using only somebody else’s authority to back you up.

If you want to be the best negotiator possible, you should have at least a basic understanding of the concepts and language being used for each component of the deal you are currently working on. You might never be a field-leading expert, but you should be able to coherently discuss any of the factors of the field without risk of being perceived as too lazy to do your research, or simply too incompetent to understand it.

You might very well have ‘tech guys’ who understand the specifications of the servers you are buying much better than you, but this is no excuse for failing to have them explain to you that the servers simply won’t have enough storage space, or uptime reliability, or whatever trait they may be taking objection to within the example above. Simply passing the buck to them may absolve you of the responsibility of presenting the argument yourself, but it also shows that you have dodged the responsibility of learning enough about the deal you are trying to take charge of.

Even if you do want to play “good cop, bad cop” and pass off authority, there is still never any harm in knowing the concepts yourself, and will certainly give you opportunities to engage with objections or arguments if you feel this will be advantageous in the moment. Having too much knowledge will rarely get you in trouble, and it strengthens so many other core competencies within your negotiating toolbox that it is borderline inexcusable to not know exactly what you are talking about.

1411, 2018

The Deal of Theseus

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When deciding between two or more competing solutions that each have their own strengths, it can be valuable to repeatedly and hypothetically modify each solution, reconsidering their merit each time, until the choice becomes clearer.

Imagine you are deciding to live in the Central Business District of a major city, close to work and entertaininment, or on a gorgeous rural property with sweeping vistas and unique flora and fauna all around. The difference between the two lifestyles offered up by these choices can be so overwhelming that you simply may not know where to begin in evaluating them.

One mental tool you can use to assist you in this process is a “slight modification” exercise, where you modify each deal (keeping only its core features intact) and then reconsider how they stack up against each other. This can reveal important factors or decision-making processes that you could not see previously, helping you return to the original decision with more insight.

Consider now an alternate choice – between Industryville, a productive but relatively bland suburb just a 15 minute drive from everything you’d want to do around the city, and Greensborough, a much leafier and spacier suburb that lies 45 minutes out from the CBD.

Again, you seem to be weighing up proximity against pleasantness, but the tangibility of this choice may make the decision much easier. You might decide that as you’re going to have to drive anyway, you’d really rather the natural beauty of Greensborough to come home to, and you can just put on a podcast in the car to distract you. Or perhaps that extra half hour of driving is going to be a killer for you in the long term, and you’ll get sick of driving so often, so you’ll just take Industryville and maybe throw some pot plants around the place.

Now that you have considered the modified example (and you don’t always need to make them more similar – you can also modify them in other ways, or even add to each deal!), you can take this insight back to the original question. If you can’t stand a regular 45 minute drive, how will you sit with a 3-hour drive to any entertainment prospects over the long term? Or if the simple suburbs of Industryville would make you claustrophobic, how on earth will you deal with the skyscrapers and constant city noise of the CBD?

Thinking outside the box can help you think within the box, too. If stuck with a difficult decision, consider using this mental tool to learn more about yourself and the decision you face.

1211, 2018

Polarise Your Options

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Would you rather be stuck at home, at a beautiful national park, or on the highway in between the two?

Unless you’re a rare breed that enjoys peak hour traffic and being surrounded by other frustrated drivers, you’d much prefer to be either at home or the national park. Home offers the obvious advantages of comfort and freedom, whereas the national park likely offers nicer scenery and prospects of adventure. 1-mile-an-hour traffic flow in between offers neither.

Remember that the same concept applies to negotiation and deal-making. If each party to the negotiation is directly opposed on five separate issues, it may satisfy neither party to just meet in the middle on every single one. You may be better off giving the opposition everything they want on Issue X, just so you can get everything you need on Issue Y in return.

Balanced deals absolutely have their place, and are often the most optimal solution — particularly if you run heavy risks if you overly compromise on any specific issue. Just don’t forget that polarised deals can be equally viable, for instance when negotiating your wage versus vacation time, or trying to buy a product for later resale that absolutely needs to have a standout feature.

1011, 2018

Dream Big… Carefully

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“In trying to find a language that wasn’t culturally specific, the framers of the [Universal Declaration of Human Rights] eventually settled on a style that assumed, rather than reflected, universal acceptance. The end result, says Associate Professor Reinbold, was an avowedly secular document that carried a curiously religious tone and logic, [which] limited the appeal of universal freedoms during much of the Cold War/post-colonial period.”

The language you use when negotiating with others matters, and it must vary based on who you are talking to and what you want to achieve.

To some, extremely friendly or cooperative language may signal weakness or overinvestment in the relationship. For others, it is a simple prerequisite of any healthy partnership, and an insistence on aloof professionalism will strike them as suspicious or strange.

Aspirational language that seeks to philosophically and morally unite everyone engaged in the agreement can sometimes produce greater happiness or satisfaction with the deal… but it can also inspire cynicism, or set up impossible goals that cause people to turn away from the deal when any cracks begin to show.

There is no shame in being a dreamer, nor any shame in practicing simple pragmatism when the situation requires it… as long as the choice is made consciously.

With thanks to: ABC

811, 2018

60-40 Doesn’t Mean 60-40

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Why is it that even small polling differences nationwide can lead to a massive difference in political representation?

The answer is that polling percentages don’t get automatically reflected — or, more accurately, balanced out — across an entire nation. If Republicans are favored 60-40 in every single individual race across the USA, then Republicans will win every one of those races, and the actual representation will end up 100-0 in Republican favor.

Spend some time thinking about how this applies to your negotiated agreements, and to the structure of your organisations and work groups more generally.

For example, it doesn’t take a room full of antagonistic negotiators to leave a possible deal in ruins. It may only take a simple majority, or even a single, vindictive negotiator who has undue influence over everyone else’s attitudes and modes of thinking.

And if every component of a negotiated deal leans just a little on the side of bad faith or distrust, then the sum of those parts could feel outright hostile, or read as a declaration of war.

Beyond the good versus bad dichotomy also lies the question of what values, frames, and thought patterns you are dealing with. Even if only one person in the room really cares about the screen size of the laptops you want to buy, if they can influence a majority of that room to value their opinion, the entire sales process may come to revolve around that single factor.

So don’t just estimate the popularity of others’ opinions and desires; pay attention to how that popularity will actually manifest in more tangible outcomes, and whether it is over- or under-represented.

With thanks to: FiveThirtyEight

611, 2018

Aspirational Lockout

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“Indeed, as the renegotiations of NAFTA and KORUS suggest, the US is pursuing a “20th century” approach to trade, using its considerable leverage to force markets open and increase its advantages at all costs. Any potential American re-engagement with the TPP thus seems likely to undermine its “21st century” provisions and increase the unilateral benefits to Washington.”

Not all negotiated agreements are purely transactional or pragmatic in nature. Some agreements also try to be aspirational — they set lofty goals and values for all involved, and the principles behind the agreement may be considered vastly more important than any individual outcome.

If you gain a reputation as a self-interested actor, you may find yourself locked out of these aspirational deals.

Even if you could contribute value to the agreement, and even if every single other party would be better off with your involvement… the simple suspicion that you will undermine the integrity or intent of the agreement may be enough to sideline you permanently.

When guarding your reputation, try to move beyond considerations of ‘greedy’ versus ‘selfless’, or ‘cooperative’ versus ‘stubborn’. Think also in terms of what values you are aligning yourself with, and whether you can bear being locked out of agreements based on oppositional values in the future.

With thanks to: The Lowy Institute

 

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