Embrace negotiations with a creative mindset without compromises

Joshua N. Weiss – TALKS WITH PETRI

Transcript

(NOTE: The text may contain errors, misconceptions and even comical unintended contexts. Please use it only as a reference to the actual audio conversation from where it has been transcribed.)

Petri: Hey Joshua, how are you doing?

Joshua: I’m doing great. Thanks so much for having me. I really appreciate it.

Petri: Why should you not plan when you’re doing negotiations?

Joshua: It seems a little counterintuitive to think that way because most people want to plan. They want to have a clear sense of how do I go from A to B to C to get to my desired outcome. The problem in negotiation is that it’s rarely linear. Negotiation ebbs and flows. It goes down roads that we often don’t see and can’t really see coming until we’re in the process.

We actually use what we call the 80/20 rule. There’s about 80% of a negotiation that you can prepare for and about 20% that you can’t. You have to just react and respond to. When you have a plan it doesn’t account for that 20%. And that’s often where people get really confused.

They get disoriented because their plan isn’t going in the way they imagine. And so they start to panic. They start to get nervous. Instead, better to approach negotiation from a contingency planning point of view. Which means that you think about what your goal is but then you think about three or four different avenues that can get you to the same goal.

Petri: What is actually a negotiation if you start from the beginning? How often do we negotiate and when it’s important or is it always as important? We have seen in the movies and TV series all these hostage negotiations and high stakes negotiations. Is that the only game in town or what’s the magnitude and when should I care about negotiating?

Joshua: That’s an important question because I think a lot of people tend to not see themselves as negotiating much. But in fact, my view is that you’re negotiating all the time. At work, you negotiate with your boss, your co-workers, people you oversee. You negotiate with clients. You negotiate with subcontractors and then at home with your spouse or your parents or your kids.

And in the world around you, with a company that you might disagree with, buying a house or a car, all of those are opportunities for negotiating. If you don’t realise how much you negotiate, I would encourage you to begin now because it’s not too late. And to learn about negotiation. This is the big challenge. Most people do what I call intuit their way through it.

They take an intuitive approach to negotiation. They don’t prepare. They just think that they’re gonna find their way through the process by the seat of their pants. And it doesn’t work well. Really one of the critical elements of negotiation is that planning phase and doing your research, understanding the parameters of negotiation in all of this.

I believe very strongly that negotiation is something we do every day, all the time. You utilise negotiation for three things. The first is to create a deal. In the business world, it might be to sit down and to try to work out a deal with another company that seems to make sense with you.

The second is to build relationships. This is something I do a lot of where I’m negotiating with people and I’m negotiating the relationships so that in the future when I want to work with them or engage with them, I can. That’s a much longer process. It’s a much more subtle process.

The third usage of negotiation is to deal with conflicts and problems that arise. In fact, negotiation is really our primary tool for handling conflicts in a peaceful kind of manner. If you think about those three realms, that’s an awful lot of opportunity for practice and for usage in your own life.

Petri: And yet it sounds so paradoxical in a way. It’s like the previous episode we talked about selling. It sounds so simple, you just sell, but most of the, even business schools, universities, they don’t have a sales department. They have marketing, they have accounting, all these things, but somehow sales is not there.

For some reason, I haven’t gotten a lot of education from negotiating and I don’t think there was anything, at least in my formal education, about how you negotiate. So putting it like that. Okay. There’re a lot of opportunities to train, but then you say again that we don’t actually really practice that, and we are not even probably conscious that we are actually negotiating.

Where to start and how to do that properly?

Joshua: I would say that I think things have changed. I think now when you look around most, for example, most law schools in the United States offer a negotiation course, at least. Many business schools, many undergraduate schools here in the United States as well are focusing more and more on negotiation.

And I would also say at the middle school and high school level here, maybe 10-18 years old, those kinds of classes are becoming more numerous. That’s good that there’s hope there. I think there’s a recognition that we do this quite a bit and we better learn how to do it effectively.

Where you start in so many ways is with educating yourself because the key to negotiation in so many ways is awareness. For example, when somebody plans to use perhaps some dirty tricks on you, some manipulative tactics. Those tactics only work when you don’t know about them. When you know that another person is taking a good cop, bad cop approach to the negotiation.

In other words, one person is going to look good and the other person’s going to be the bad guy and they’re going to play off each other. When you know that’s what’s happening. You recognise it quite easily and say, okay, I’m now playing the good cop bad cop game. And I know how to do that. The good news is that there’s a lot of information out there on negotiation.

If you Google negotiation books there’s a tremendous amount. It’s a realm that is in some ways open for sort of self-study, if you will, because the books are very accessible. They’re written in many ways for a popular audience. They’re not too academic for folks. That’s really the first step.

When people start to learn about negotiation, what happens is light bulbs start to go off. They begin to realise that if they learn more and more in this realm, it’s going to help them at every facet of their life. I’m currently teaching a class in the master’s degree program that I run.

It’s the first class in the program for students and it’s an introduction to negotiation class. I continually get emails from people saying I can’t believe I didn’t know all of this. I’m 50 years old or I’m 40 years old, and this is so helpful and I can already feel myself feeling more confident.

That’s where you begin and once you start down that road, you realise that when it comes to negotiation you can learn all of this and it will make you much more confident in your approach.

Petri: At least for me, I think the most important thing when you’re starting to think about doing a negotiation if you are consciously doing that is that you go there with the right mindset. It is so important that your mind is in the game and you’re preparing yourself for what’s coming.

For many people, negotiations have a negative connotation.

Joshua: It does and I think that’s due to their experiences. Most people, again, here in the United States, most people’s experience when it comes to negotiation if they’re not doing it in a business context, is buying a car or buying a house. In particular, cars here.

Petri: Lemons!

Joshua: Lemons. But the process itself with the salespeople is often uncomfortable.

Petri: It’s unfair well, isn’t it? They are professionals. They’re selling every day and you’re buying a car, you know, once in a few years or something.

Joshua: It used to be unfair. I would say it’s not as unfair as it used to be. The reason I say that is because negotiation is about access to information. In fact, to me, information is the currency of negotiation. If you think about maybe 30 years ago when there was no Internet, car dealers and the salespeople involved, they had all the information. They knew what they paid.

They knew what things cost. It was very hard as a consumer of a car to know what that information is. Today, however, there are a number of websites out there for you to do your preparation and planning so that you can learn more and more. What you’re actually seeing, certainly here in the United States, is that people have moved away from that model of negotiating car prices.

There are a lot of places here that just have a no negotiation price because so many people don’t like that process. Now, of course, there’s a problem with that, which is that the dealer’s the one that puts the price on there. And that’s usually higher than it ought to be. In general, the problem is that most realms in life when we’re uncomfortable we don’t do well and we don’t want to be engaged with it. That’s where a lot of the anxiety comes from and the uncertainty of it. If we don’t know what the parameters of the negotiation are, then we feel like we’re grasping in the dark. We’re not able to really get a good sense of where I should be headed.

That’s again, back to your research and your planning and your preparation, why that’s so very important.

Petri: What are the biggest fallacies, the biggest mistakes you can do when you start to negotiate?

Joshua: There’s a lot. You referenced one about mindset. A lot of people come into negotiations and the world tells us this. It’s somewhat natural and normal, I suppose. But the world kind of tells us that there’s going to be a winner and a loser. The best negotiators that I work with and have worked with for many years know that’s not true. The majority of our negotiations are with the same people over and over again. Probably not when you’re buying a car but when you think about your negotiations at home obviously they are. But even in a business context, you’re tending to negotiate with the same people time and again.

Having a win-lose mindset doesn’t really help you. If you’re trying to negotiate with a client and maybe you squeeze a little bit more money out of them. But they walk away from the table feeling badly about it or realise after the fact that you took advantage of them, they’re not going to be your client for very long.

You have to have what I call a mutual gains mindset. I don’t think there’s always the opportunity for a win-win where everybody gets everything they want. But I do believe that there is an opportunity for mutual gain for you both to do better than you can when you walked in the door.

That’s the first thing. The second thing…

Petri: Can we pause here just for a sec? How can you set that? If you’re coming to the negotiations with someone, maybe someone you know, and you already know that they may not be in that mindset for whatever the reason. Maybe we were talking with some organisation and there’s a new person coming in, but the relationship between the organisations is an old one.

Is there a way to set the stage in a way that you’ll stack it on your favourite that’s more advantageous for both parties that outcome, or at least at the outset?

 Joshua: Yeah, there absolutely is. The first thing is something that I would call naming the game. When you walk in the room and let’s say you start negotiating and you can tell that the other side is defensive and holding back information and trying to play different games.

One of the things that I tried to simply say, look, we can negotiate this way where we both kind of hold back and push back, et cetera, but I don’t think that’s going to help us over the long-term. Let me propose that we try a different way of negotiating where I think, because we’re going to be doing this for a long time, hopefully, where we can both really try to come up with the best deals possible.

One approach is to just name the game. And it’s interesting because there are a lot of people who don’t realise there’s another way to negotiate. They think what they see in the movies, as you mentioned or on TV is the way to negotiate, when in fact, it’s really not.

That’s one idea is to name things directly and try to highlight for the other that there’s another way to do this that would be very likely more beneficial to both of you over the long-term. That’s one.

The other one that I use and I’ve been using more frequently and comes out in my recent book is using stories to help them to understand how taking a different approach would be beneficial.

What I’m noticing in my negotiations is that when I say, let me share with you a story of how I’ve done this in the past. And lay out a scenario where it looked like we might have a win-lose negotiation, but we reframed it and ended up having more of that mutual gains approach that I told you and that we found value, and it was a much better deal than we would have ever had.

By painting that picture using what we often call illustrative specificity, painting an example very clearly for someone, it can be very persuasive in an almost non-confrontational manner because you’re telling them a story. When you say, let me share a story with you, people’s minds almost immediately go back to say when they were children and an older person, their grandparents sat them on their knee and told them the story. It’s disarming and that’s…

Petri: Once upon a time…

Joshua: Exactly. It’s a nice way of trying to change a dynamic that often exists in a negotiation. That is, by the way, one of the harder things. Because when people come in with a certain mindset, that’s what they’re looking for. If everything looks like a nail, they use a hammer. And the idea is to replace the hammer with something else.

Petri: And you can do that even if you are the weaker power party there if you realise the situation?

Joshua: Yeah, you absolutely can. And in fact, when you are the weaker power, one of the tools and tactics that we often talk about using is framing the agenda and framing the negotiation the way you would like to, or at least trying to, because people don’t realise that the frame that you put on negotiation is critically important.

It’s what you’re going to talk about. So, who gets to frame the negotiation and who gets to lay out the agenda matters greatly. One piece of advice for people who don’t have power in a negotiation is to to try very hard to write up the agenda and frame things in a way that would help you.

That’s one of the tactics that you’ve got at your disposal to do that. And you mentioned, by the way, other mistakes, the other one that I wanted to make sure to mention is this notion of compromise. Often people equate negotiation with compromise. Which is another reason by the way that people don’t like it. Because they look at it and they say, well, so I have to give something up in order to reach some kind of an agreement but I don’t want to give something up because it’s really important to me.

That’s not an effective negotiation. To me, negotiation is about creativity and problem-solving. You can always compromise later at the very end. It should be the last stop on the train, not the first one. What you ought to be doing is thinking I’m going to go into this negotiation and I’m going to try to get the other person to think in a creative way with me and to problem-solve. And to think you and I, as negotiators have a negotiation problem in front of us, how do we solve it? How do we create the best deal possible? How do we manage this conflict? Much of the time I find a compromise is not necessary. It’s only necessary because people seem to rush there and think it is. I would really encourage folks to hit the pause button on compromising and instead think more about being creative and problem-solving and taking that orientation toward your negotiations.

Petri: You’re saying that actually, they skip the process because it’s probably painful and they don’t want to be in that position. And they start to compromise before you should talk about more like, okay, what are we doing here? What is the big picture? Why are we here?

What’s the value for both parties? Set the objectives and see that we are in a bigger frame on the same page and everybody understands what this is really about. When we understand the values and the dynamics there, then later it’s easier to go to the compromising or if you need to do some kind of trading.

Joshua: That’s exactly it. People compromise typically for two reasons. One is that a lot of people, as you mentioned, have anxiety about the negotiation process. And so they don’t want to lose a deal or they don’t want to if the other person is putting pressure on them, they’d rather just compromise and get something.

But the other is, as you mentioned when a difficult issue comes up in a negotiation, people often say, well, let’s just split the difference and move on. The problem with splitting the difference and moving on is you don’t really know what’s important to the other side. You haven’t explored in the way that you just talked about.

What do you value? What really matters to you here? Because what matters to you is how you create better deals. If you don’t dig down for what we would call interest and what’s really motivating people then you’re skipping a big part of the process. When you rush to compromise, that’s exactly what you’re doing.

You’re not really probing for what is it that’s really important to this person. It’s not what they tell me. What they tell me is what we would call their positions. But what’s really important for them. What’s going on on the surface are their interests. And their interests are all of those things that bring them value in a negotiation. If you haven’t dug down and really figured out what’s going on in the negotiation, you’re missing all kinds of opportunities to create those better deals and to not compromise.

Petri: And this goes back to the research. You have to understand what is it even the hidden value or the hidden agendas in there that are actually driving them? What is the most important thing for them? And it may not be any of those things you think that you have to give up in order to achieve a good deal for both parties.

Joshua: That’s exactly right.

Petri: Were those all the fallacies? You just wrote an excellent book and I think there was like five or probably there was something still missing or did we cover most of them already? I just want to make sure that we close the loop.

Joshua: The other one that’s missing is that a lot of times people see their goal in negotiation as reaching an agreement. When in fact that’s actually not the purpose of negotiation and a lot of people are very surprised when I say that. The purpose of negotiation is to…

Petri: Yeah, it’s counter-intuitive. Isn’t it called an agreement…

Joshua: Right. People are like, what do you mean…

Petri: ..what you are supposed to sign.

Joshua: Right. People are like, what do you mean I’m not supposed to reach an agreement? And it’s not that you’re not supposed to. It’s just that that’s not your objective. That’s not your goal. People get things confused in that way. Because if my goal is to reach an agreement…I’ll share a story with you.

One of my first jobs in the world of negotiation consulting was with a small company. I got a call from the CEO and he had a sales team of six people. He said I’d like you to come and do negotiation training with my sales folks and figure out why they’re bringing back such poor deals because they are.

So I said, sure, no problem. I went into the training and then during one of the breaks, I think it was at lunch. I said, your boss told me that you guys are coming back with deals that are not very good for the company. Why would you do that? One of them said, well, it’s our metrics.

And I said, what do you mean it’s your metrics? And he said, well, we’re gauged as salespeople on whether we reach agreement or not. Not on whether it’s a good agreement for the company or not. But whether we come back with an agreement. That’s how we get our bonuses. So, I went back to the CEO…

Petri: You just get what you measure.

Joshua: Yeah. So, I went back to the boss and I said, actually, you’re the problem. I said you’re giving them instructions that are counterintuitive. They are missing the mark. What you ought to be saying to them is that these deals need to be profitable. They were so fixated on reaching an agreement that they didn’t care whether it was actually beneficial to the company because that’s how they were gauged.

The point is that in negotiation we have a goal. We have an objective that we’re trying to meet. That is how you should gauge your negotiations. Did I meet my goal as best as possible? And if you didn’t then…I often say to people because we talk about a concept called your BATNA. And your BATNA is your best alternative to a negotiated agreement.

All that really means is if you can’t reach an agreement with the other side, what are you going to do? What are you going to walk away to if you will? For me, if I go through a negotiation process and I realise at the end that it’s actually more beneficial for me to exercise my BATNA, to walk away from this particular deal than to sign on the dotted line that’s a successful negotiation to me.

A lot of people would say you failed. And I would say absolutely not. Because to me, it’s about meeting my objectives and I can meet my objectives better by walking away to another deal than I can by reaching this agreement. That is again, it’s where you look, it’s where you focus and put your attention.

But it’s a really important difference because when people believe that their goal in negotiation is to reach an agreement, they reach bad ones.

Petri: Yeah, because they want to finish that. They want to have an agreement like in your story. I think it also shows in you, if you have already accepted, I may not have an agreement and I may walk away without a deal and that’s okay.

Joshua: That’s right. It takes the pressure off, actually. You’re exactly right. That when people sit there and they say, you know what? I actually think that especially when you’re planning you also know what the parameters are of what you should accept. This is back in that preparation phase. You do your homework and you say, if they aren’t willing to go past this point, then this deal no longer makes sense for me.

If you don’t do that if you’re thinking to yourself, I need to reach some kind of agreement here, you don’t define those things and you’re really subject to making bad deals because you have not defined the limits for yourself.

Petri: Was it even in your book, this is like a self-harm situation. You don’t have a deal when you walk in. You did a bad deal and now you actually are in a worse position because you did a horrible deal. Maybe you are losing money and you’re tied up and you cannot do anything else. It’s actually way better just to walk away.

Joshua: Yeah. One of the case studies in the book that I share is about a company who was based in the Middle East. They had signed a deal with a shipping company to transport ore, aluminium ore because they make aluminium products. They reached a deal and literally within months, this was back in 2008, we had that global economic meltdown.

For them, the deal they signed was $25 a ton or whatever it was. The market dropped to $10 a ton and immediately they were in this really difficult position. They had to try to think creatively. How do we renegotiate that?

There are factors and there also lots of circumstances that change along the way in negotiation that are important and out of your control. That’s the thing that is really important for people to grasp and it’s back to that 80/20 rule. Which is, there’s a lot that you can determine, but there are a lot of factors in negotiation, whether they’re market forces or other things that might prevail now, but in six months could be very, very different and make it what seems like a reasonable deal then something quite bad now. There are a lot of those factors that come to play. That’s exactly right.

Petri: One of the interesting things I’ve picked up from your book was Post Settlement Settlement. Can you describe what that is?

Joshua: Sure. Post Settlement Settlement. It’s a very interesting idea. It was started by a colleague of mine named Howard Raiffa at Harvard Business School. It ties back into something we talked about, which is compromise. He was convinced that most negotiators compromise. They essentially did not explore for what really mattered to people for all the value in a negotiation that they were compromising too early and too quickly.

He proposed an idea called Post Settlement Settlement sort of the least sexy name he could think of, I think. But the idea is important. What he basically did is he said to parties in a negotiation: come to me. And if I can make your agreement better for both of you, you’ll give me a percentage, not just one or the other, but for both of you.

He was so sure that he could because he knew that most people rushed to compromise that he essentially did about 300 cases over the course of a few year period. In 90% of those cases, he was able to find value for people. It’s a simple question that he encourages people to ask, which is when you believe you’ve reached an agreement, hit the pause button and say to the other negotiator, Hey, would you be willing to look at our agreement and see if we can’t make it better for both of us?

Are there things that we didn’t include before we signed on the dotted line? Are there things that we didn’t include that we could include that would have value for you and for me? And as you say, in the book, there’s a case study of exactly that with a company that does recycling and working with a distributor and they asked that question based on some of my tutorage because I was happy to do training with them at the time. And I probed a little bit and asked them had they had this conversation with the client and it turned out that they hadn’t and they went back and they had the conversation and they were able to make the deal better.

One of the nice things about this is that you already have a deal. You already have a deal that’s on the table and you can always go back there and say, okay, we couldn’t find anything. That’s fine. But back to your point about taking pressure off. There is no pressure when you ask this question because you already have that deal.

Then people are more able to get into a creative brainstorming kind of mode once you know that your fallback is that I already have this deal. So, maybe I could think a little bit creatively and differently in this instance and see what we can find.

Petri: Just a technical question, but I’m curious. Would you recommend to actually sign the original deal because then you have a deal? It’s a signed deal. Because, at least for me, the question comes as well, that okay, if we do this, can I actually blow off the whole deal? If we now start to talk about some stuff and then it’s like, okay, we realised that maybe that the original deal for… stuff happens, you know? What’s your advice, how to do this if you want to do this because it’s not a standard way of doing things?

Joshua: Typically, I don’t. I typically will say, look, I know we have a deal on the table and I’m actually comfortable with it, but before we sign it, can we just take a minute and think about whether there’s anything that we could add from your point of view? I’m going to think about it from my point of view before we sign off on it.

It’s never been my experience that people say, well based on this latter part of the conversation, I don’t want to do the deal anymore. it usually only is an enhancer. It’s only a way of making it better. I don’t encourage people to sign because then there’s a finality to it and I don’t know whether people would take the Post Settlement Settlement process as seriously. Whereas if you’re still holding a little bit of something out there before you sign.

Petri: Can you do that….I’ve seen at least the difference between the big boss or the owner of the company, or someone who has the power to do whatever moves or even exceptional moves in negotiations. And then someone who is sort of a middle-level employee and they just don’t have the power.

It’s not that there’s anything else, but they have their certain limits where they can move. Can you do that in all the levels of the organisation when you are negotiating or is there something in a way that this works better than in other situations?

Joshua: Well, I think you need to know the parameters of what you can do. In my mind, there’s an in most negotiations, there’s an internal element to the process. For example, if you’re negotiating with a client it behoves you to meet with your boss or a team of folks and say, let’s talk about the parameters of the negotiation and where you don’t want me to go beyond.

When you do that, you can negotiate with much more confidence. If you were to go through the process internally you’ll feel a lot more comfortable at the table to do that exploration and realise that, Hey, this is a red line that I can’t cross. So if the other side were to ask you, could you add this?

And you know, you can’t. You know the answer. For me, it’s certainly possible at all levels of the organisation. But in order to do that, I believe it’s important that you ought to spend some time internally talking to those people that the deal is going to impact and saying, tell me your interest here and where are these places that you don’t feel like I should cross? Then within that, you can more freely explore.

Petri: One of the takeaways for me from the book was that leave money on the table. If you have the power position, if there’s something in there, don’t squeeze everything out of every deal. It’s better to take the high road for the sake of the relationship but otherwise as well. Are there some situations where you should not do that or is that always nice and kind advice to the follow-up?

Joshua: Well, I think that when you might not want to do that, and you have to be careful here, but when you might not want to do that is when it’s a one-time negotiation. And you’re really sure that you’re not going to end up negotiating with this person again in the future. As you all know, as you’re listening to this, you know that we never know what the future holds. There’s a lot of uncertainty in life and things like that. If you negotiate with your reputation always in mind you’re going to be safe and that’s the best way to do it. I often say to somebody, it is really not worth sacrificing your reputation for a few more dollars or a few more euros.

If you are in that one-off kind of scenario where you’re purchasing a home and you’re never going to see these people again, or you are buying a car and you want to get the best price or whatever it might be in your business dealings. You’re in an industry where you do have a lot of one-time negotiations and you don’t have a lot of long-term relationships then it’s okay to go for trying to do the best that you possibly can.

In the vast majority of industries, that’s not how it works. I do believe that you need to be really careful because there are a lot of negotiations out there that look like one-time affairs and lo and behold, you turn around and that person is standing there six months later and it’s someone you’ve got to deal with. If that’s the case, you’ve really created a problem for yourself.

Petri: Yeah. I tend to think that people forget the details, the facts, but they never forget how you’ll treat them. The emotional state when you do something and that will stay for decades. It can be that you were the rookie in some company and now you’re the CEO 20-30 years later. And the guy you were treating badly, it’s just on the opposite side. And now you’re getting your payback.

Joshua: Yeah, exactly. There’s a case in the book that is very much about that. About a startup company that needed an infusion of capital and the person who was willing to give it to them did so but really took advantage of them. When he five years later wanted to take his company public, he had to divest of those shares and, and the person involved knew that he could now take advantage of him because he needed that.

As a result, it became that game of one-upping. It’s something you have to be really careful of. A lot of people when they are confronted or when they’re given the opportunity to take advantage of somebody, they might do it without realising that it could come back to haunt them.

I remember my grandmother often saying to me the only thing that you have in this world is your name and your reputation. Everything else is pointless. She’s in the back of my head a lot when I’m negotiating and thinking about some of these things, because it’s a good litmus test to say to yourself should I do this?

Is it the right thing to do, et cetera. And I will tell you that from my point of view, in all the negotiations that I’ve been involved in, I’ve done far better by leaving money on the table, treating the other side in a manner where I know they have a goal as well. That’s the thing about negotiation is it’s an interdependent process.

I need you and you need me. That’s why we’re sitting here trying to figure this out. If we didn’t, we’d just walk away. When you treat the other the way you want to be treated, you’re not going to lose.

Petri: There’s in the book…This is actually about a transportation case. And for those who haven’t read the excellent book you should but just to briefly recap details. I want to ask you about this. There was an ethical dilemma, and it’s not even a dilemma. I want to ask you.

What’s your opinion? You just stated the case there. This case you already mentioned that the price dropped. They had a long contract in the shipping and then they leaked some information in order to gain an advantage and that was kind of an unethical thing to do.

What do you think about that move?

Joshua: I do think it definitely was. I was going to say borderlines unethical, but I think it was unethical.

Petri: Yeah, I think it t’s was a hundred per cent unethical, at least in my books.

Joshua: Yeah. They did a forensic accounting analysis of the situation and they found that there was a consultant that might’ve done some things illegally. They put that out to the press in the country where the shipping company was based. It put pressure on them because the country where the shipping company was based had a very strong, moral and ethical culture.

They certainly being seen in that way was not a good thing. I do believe that you have to be very careful with something like that. That was a very dangerous thing to do. My understanding is that the relationship went forward and they’ve continued to work together over the years.

I think perhaps on both sides, there were some aspects of some of that. But I think in that scenario, it was a very questionable action that did change the dynamics pretty dramatically, but it was absolutely questionable and could easily have come back to haunt them.

They could have easily pulled the plug on the whole deal and said if you’re going to act and engage in that with those kinds of tactics and we’re not doing business with you. I wouldn’t be surprised if other companies would have taken that approach.

Petri: At least in my case, I would ask if I would ever do business with them when they’re going to do it to me? If they’d been doing it once that can happen another time. I’m not sure that I want to be dealing with this type of people then.

Joshua: That’s the prevailing attitude that happens when you have something like this transpire, some questionable behaviour.

Petri: I’ve been having my share of negotiations. A lot of different negotiations, but usually in business, in the startup field as well. I remember one particular case where I was negotiating a deal, a VC deal. That was a series A deal, some millions involved already. I was negotiating with the main partner in the VC company.

When we were supposed to draw the contract and go to the contract negotiations… and that was really weird. I’d never seen that before and afterwards. This happened in Finland. The general partner of the VC company said that, okay, now, the negotiating party, the one who is actually presenting the fund, the actual fund… they were obviously the general partners, managing the fund but the actual fund where the money is coming from, which is just the legal entity is presented by an attorneys-at-law company. What happened was that I already agreed on all the important terms and everything. But then comes the lawyer and this general partner is nowhere anymore. And basically whatever we agreed upon didn’t apply anymore.

And the GP was just like playing the game that, okay, well now you’re negotiating with the lawyer and everything is on the table again. What should you do in that situation?

Joshua: Well, you should begin by asking yourself whether you want to continue with that negotiation.

Petri: Indeed. But if you cannot walk away, you’re already drained out of funds and it’s been going on too long and it’s like the other option is basically folding the company. How do you turn it around?

Joshua: First of all, recognise what’s going on is the first thing. Because they, what I think they were probably doing is…

Petri: It was a good, bad cop type of thing. It was a conscious act to do it that way because they had the power. They were just using their power. And thinking about from the lawyer’s perspective, painting the picture here, they do it by billable hours. They are representing the fund. They are squeezing everything out of it. I will never see that lawyer again. I have to only deal with the general partner later on. Obviously, it was not the smartest move from his side either, but that was sort of the setting.

Joshua: He probably got that advise that if you go in and get some of the parameters down, we’ll come in and we’ll be able to improve things for you. We’ll drop the hammer on them and, and take that approach. So you’re right. You have to recognise exactly what you said. You recognise what it is, which is a good cop, bad cop thing.

When you create a sense of commitment in a negotiation like that you and they have agreed. People tend to not want to walk away from that. They tend to feel like, okay, we’ve committed to this, so we need to see it through. There’s a psychological dimension that they’re also picking up on, which is creating the sense of commitment in you to not walk away from the process.

And then taking a harder line with you and hoping that that will stick. For me, I guess what I would have done one of two things. I would have said, look, I need to go back to the person that I spoke to and discuss this. Like, I’m not talking about this with you as the lawyer.

Petri: The GP refused to do that.

Joshua: Well, so again, that would be a red flag.

Petri: I’m saying this is not the optimal way of doing this thing, but it’s just like, okay, do we fold the company? We are already due. That was the tactic as well. They just want it to wear us down.

Joshua: There’s a lot of that. Back to the popular conceptions of negotiation, I remember one time I was meeting with a union representative of auto workers union. He said we definitely ascribed to the idea that the first person who has to get up to go to the bathroom loses the negotiation. I thought, well, okay.

I don’t really know why, but okay. I guess if you really needed that negotiation, what I would have said is to the lawyer, look, if you’re going to open up this whole deal that I thought we had already agreed to, there are some parameters that we would like to focus in on that we’re not really happy about it.

What I think I would have done is sent the signal that look, I want to go back and talk to this other guy. If you’re not comfortable with me doing that then you need to understand that if you guys want to open up the conversation again from where I thought we were that there are going to be some changes on our end too, and it’s not going to be us just going along with whatever you say.

I think I would also send that signal to them that if you want to play this game. Okay. But the game’s going to cut both ways. It’s not gonna end well for anybody, but I think that because of the tactic that they’re using I think it’s really important to send a signal that you know what people are doing. Because a lot of times people think they’re being very savvy and very clever about using a good cop bad cop thing. And you need to say to them, actually, I’m very clear-eyed about what’s happening here and you need to understand that if you guys, like I said, if you want to open things back up, then we want to renegotiate these clauses because they weren’t as good as we wanted on our end.

Petri: Yeah. So, just thinking about it now, I would probably being in the same situation again or in that situation, I would say that, okay, I understand that we are starting from scratch again. What we discussed before doesn’t apply. You are actually the person now who has the decision making power and the other guy was just a practise run.

Joshua: Yeah, exactly. That’s right. That was good fun. Now we’ll get down to business.

Petri: Yeah. It’s good that we can now close this quickly because we have the decision-makers on the table.

Joshua: Right. And by the way, that’s an important point. And it’s an important tactic that people utilise, which is, and it’s something to clarify early on in your negotiations is to say to the other side, if it’s unclear, do you have the decision-making authority here? Because a lot of times we assume because we’re sitting with them that they did, and there’s nothing more frustrating than going through the whole process thinking that they had the ability to decide, and then they say, okay, well, we’ve made really great progress. I just have to get my boss to sign off on this. And you’re like, wait a minute. What! I thought you could decide. It’s an important point in terms of process when you begin a negotiation that you want to ask that question to see what happens.

Petri: Another thing I come across quite often is that when somebody gives a contract or that’s the first proposal what they are offering it’s so outlandish that it’s not even anywhere near what you are sort of acceptable. What’s the next move?

Joshua: First of all, any proposal, any initial offer is designed to anchor the conversation where the other side wants it. If an offer is so outlandish that it’s completely unrealistic to me instead of … People fall prey to this trap, which is they start negotiating from there.

What you ought to do is say to them. I did my own analysis and my numbers are quite different than yours. Can you help me understand how you got there? Why do you think that this is a reasonable offer? What’s it based on? People don’t ask that question nearly enough.

They just start negotiating as opposed to trying to probe for what assumptions did you make? What were you trying to accomplish? What usually happens when people make those outlandish offers is there’s no basis for them. It’s just a trick to get you to start negotiating there, because then what happens is often they will come down a good bit.

They’ll turn that around and, and remind you of that and say, well, I did start at $5 million and we’re down to a million, so look how far I’ve conceded, right? It’s another tactic or a trick. And so to me, the best way to handle that is to make sure that you don’t get anchored by that but to then turn around and say, help me understand how you got there.

What is this based on? People can give all kinds of outlandish offers for things. But there has to be some justification. There has to be some reason for those offers. I think that’s where you want to go is paint a picture for me about why this is reasonable.

Why should I say yes to this? Usually, they can’t. That’s the thing.

Petri: One of the difficult things is that if the deal is a bit bigger. It is an important deal. You’re negotiating with important people as well and then comes to the lawyer, the in-house lawyer or the legal department who is drafting the contract. Not just once, but a few times as well. This happened that we made some modifications.

I just went through the terms to nitty-gritty details, but the important ones and the lawyer from their side comes back. And it appears that our business partner from the other side is not involved in the process. And those modifications, those comments, those things we wanted to change, they are completely omitted and they do new ones. You see the power game there.

Just giving a bit of a reasonable doubt as well. The benefit of the doubt in a way that maybe the business people were not involved and they just let the legal people to run the negotiations there, the details, but what should you do?

Joshua: Well, you have to be careful because every action that you take in negotiation sends a signal and sets a precedent. If you were to just let that happen, the other side knows that they can manipulate things a bit. If you were to call it out and say, you know what happened to these clauses that were here that we wanted to discuss or whatever it might be. So recognise that in negotiation. If your actions send a signal to the other side, positive or negative. It’s funny because I do a lot of work with an engineering consulting group and they’re often confronted with… They work on very big government projects at the national level and at the state level here. And a lot of times they’ll have the clients who would be the federal state government, come back to them and say, Hey, we need to add this, this and this into the scope. And we don’t want to pay you for it. It’s $50,000 worth of work or it’s $10,000 worth of work.

That’s not included in the contract. Can you just do it? And a lot of times they would say to me, look, we’re working on a $5 million project. We should just if it’s $10,000, we should just do it. And I say, I get it. Yes, it should be a business decision. But when you make that decision, you need to understand that you’ve just sent the signal to the other side, that things that are not in the contract are okay.

And that they may very well come back again and ask you for more things. Because you just said yes to something else. One way to handle that and one of the things that I’ve said to these folks is look, if you’re going to do that, you need to be really clear with them that you’re willing to do this once.

And you’re not setting a precedent about this kind of action. In negotiation, it’s really important, in my mind, to be excessively clear in your communications. I know that sounds like an oxymoron but it’s really important. Because communication should have really been called miscommunication because it’s rare that you really understand what it is that I’ve told you.

If I’m not explicitly spelling out to you that, Hey, we’re willing to absorb this $10,000 cost for the sake of the relationship, but we’re not doing it again. So don’t ask. Something like that. It has to be really clear. if you’re going to go down that road.

Petri: Yeah. Is it even enough? Should you even just ask that to say that they’re not going okay. If I absorb this thing I want something from you as well.

Joshua: Yeah. Generally, what I often say to the consulting firm is your first response to them should be, well, let’s drop in an addendum to the agreement. And, what’s the scope, et cetera. You should absolutely start there. You should definitely ask if something is outside the scope of what you’re talking about.

It’s always important to say, well, is there some kind of back and forth here, you know, we’re willing to do it, but it’s not part of this contract. What can you guys do for us? Let’s just imagine that you happen to know them and they say, listen, can you just do this for me?

We’re good friends and things like that. I’ll figure out how to do this, something for you later or whatever. When somebody asks for a concession for the sake of the relationship. That’s actually a manipulation and they’re not really a friend or an associate in that way if they ask that because it’s a manipulation.

If they’re asking for a concession, they ought to be thinking there’s something that they should be doing in return. Be careful there. Our tendency, when we do like people, is to want to do things for them and help them, but we don’t want to be manipulated. And it’s that fine line.

Petri: it’s also important to understand that sometimes the people you’re dealing with may not be the ones who you’re having the consequences later, or maybe that person leaves. Or the relationship is not there anymore, but you still have to deal with what’s written in the contract.

Joshua: Yeah, I see that a lot with this company, by the way, where the state or federal government will say, Hey, if you do this for us, there’s another phase of the work. And they say, okay, well, all right, well, we’ll do this. And then the person who made that promise is gone, they leave the organisation or whatever, and nobody has any recollection of that promise.

So, right. In that instance, I often will say to them, look, can you get anything in writing that actually demonstrates that there was some sort of back and forth concession here. Because otherwise, you’re leaving yourself…

Petri: So you can call the bluff?

Joshua: Or call in the agreement, right?

If they say to you, Hey, you’re going to be absolutely in line for the next phase of this if you guys were to do this. And, you have something in writing that says that. That carries more weight than well, Bill told me this when we agreed to it. Well, sorry, but Bill doesn’t work here anymore and we have no record of that.

Petri: I can not help to think about while we were talking about this. This is like going back to kindergarten or school. It’s like how do you deal with a bully?

In a sense that we were just a moment ago talking about how you should not absorb those costs. Take something and it’s just not acknowledged that you realise what’s happening here. So, how do you respond to a bully?

Joshua: Bullies typically push hard against you until there’s pushback. For me, when I deal with a negotiator who I think is over the top, you have to let them know that this behaviour is not okay or you’re not going to be forced into anything and you’d rather walk away. Most kinds of bullying negotiators are people who think that they have the ability to just try to force things on you. And when you let them know, one of the best ways to try to deal with sort of that bullying approach in negotiation is to know what your BATNA is.

I mentioned that before. If you understand that you can walk away to something else than what power or leverage does the bully really have? The answer is not much.

Petri: If you understand the value of what the other side is really wanting to get out of the deal. No is a really powerful word as well. Just say no.

Joshua: Yeah, exactly. There are a lot of negotiators who try to use threats. You have to be very careful when you use threats because if you’re not prepared to follow through on your threat as a forceful negotiator, you’ve lost all credibility.

I think we see this in the political realm. I’m thinking of a particular politician that resides on this part of the ocean, who uses that tactic a lot. And, when those threats are not followed up by action, they lose a lot of luster and people look at it and say, well, okay, this is their approach to negotiation.

And by the way, if you’re known as a negotiator who just is going to be issuing threat after threat, not only are you not going to have a lot of deals, but people are going to recognise that this is the way you try to get things done and they’re going to resist you. They’re going to find ways of doing deals elsewhere.

We fail to realise a lot of time that there are different avenues. You’re not the only game in town much of the time. And as a result, if you’re going to just issue threats and things like that a lot of people are going to go elsewhere. They’re going to find another company that’s going to do things differently.

Petri: Absolutely. And the reputation will stick with you or you just don’t see it at first. People start to avoid doing deals with you and your deal flow will go bad and that’s what happens, but it may take some years for that to go around.

Joshua: Yep. That’s right.

Petri: What is your favourite word?

Joshua: My favourite word. I think my favourite word is interesting because it signals to the other person that I might be using it, that there’s something in there that they’ve said or done that is noteworthy. And yet interesting is a vague and general enough idea that it doesn’t necessarily always convey exact meaning.

Petri: Whether you are not meaning it the British way? Because it’s exactly the opposite of interesting.

Joshua: Well, maybe I am, maybe I’m not. When someone tells me something and I’m not quite sure what to make of it, I’ll often say that’s interesting, which means I’m thinking about what you just said, and probably need to think more about what you just said.

Petri: What is your least favourite word?

Joshua: I might be tempted to say interesting as well.

Petri: Now, I hear the lawyer talking.

Joshua: My least favourite word I think is any word that is really definitive. Voltaire said, there’s nothing worse than uncertainty except certainty. When someone is so certain that they’re right or that they’re on the right side of history or whatever it might be, that’s dangerous because you fail to continue to take information in and you fail to learn from your mistakes.

You fail to recognise the atmosphere around you. Any words that have to deal with a very certain perspective position approach to things that makes me very nervous because it means that people are probably not open to thinking differently, thinking creatively, et cetera.

Petri: What turns you on creatively, spiritually, or emotionally?

Joshua: I love what I do. I love working in the world of negotiation. I could have conversations like this every day, all day, because I find them fascinating. I would say that, and also the sort of unknown elements of what I do. I love the adventure of the unknown. I’ve done a few different things in my life where there was a lot of uncertainty.

There was a lot of question. There was a lot of, sort of trusting in taking steps and seeing what happens, seeing what emerges in front of you. In part that’s because when I was a kid, I failed a good bit. I was a bit of a slow starter. I’m not afraid of failure. Not being afraid of failure is really helpful.

Petri: What turns you off?

Joshua: I think the biggest turnoff for me are people that have a condescending attitude toward you, toward life. That they believe they’re better than everybody else. And they act that way. I think that we all need to be humble as we go through life and have an air of humility about us because there’s a lot of things out there in the world that make life challenging.

We have to be forgiving of people a lot of times as well. We’re not nearly as forgiving as we are. When I come across somebody who is really condescending and has a bit of a superiority complex. That’s a very big turnoff for me.

Petri: What is your favourite curse word?

Joshua: I do say shit a lot. I find it to be a very helpful word, a lot to blow off some steam.

Petri: What sound or noise do you love?

Joshua: I guess I would answer that as sort of sounds of nature, crashing waves and birds chirping. I do a lot of walking and hiking and those things really soothe me. They really take me down a notch, and I’m a big fan of the ocean. I love the waves, the crashing waves and watch quite a few shows about dolphins and whales and how they communicate.

It’s all of those sounds in nature. We live in an area that’s right along a bird migration route where Canada geese fly North and South. When I’m walking and I hear them honking away like those things are very soothing to me.

Petri: What sound or noise do you hate?

Joshua: I don’t like whining and complaining. I have three kids, so I’ve heard plenty of it. I’ve gotten to a place in my life where I believe that most problems that we are confronted with can be solved if people put their shoulder to it and put their mind to it. Whining and complaining that you’re bored or that you’re not happy is the opposite of that is not really focusing on the problem, but just wallowing in your own sorrow, if you will. I’m not a big fan of that.

Petri: What profession, other than your own, would you like to attempt?

Joshua: I’m also a sports fan. I grew up as a kid wanting to be a professional baseball player, which I know in Europe, you all wouldn’t understand. But I love sports. It’s a good release and a good distraction for me. Baseball was the sport that I grew up here and it was sort of the national pastime in America. And so I always wanted to be a baseball player.

Petri: What profession would you not like to do?

Joshua: Well, I’m actually not a lawyer. I got my PhD instead because I felt like that process fit my style much more. I think the profession that I would least like to be in is one that is adversarial in nature. And in fact, part of the reason I didn’t go down the road of being a lawyer was because I felt like there was a lot of adversarial aspects to the world of law and it just didn’t suit my personality. I’d prefer to be far more engaged in creativity, problem-solving, brainstorming, thinking that way about the possibilities than about people pitted against each other. That’s why I kind of see negotiation differently. I don’t see it in that adversarial way as much as I can, because I don’t really believe it benefits us.

Petri: If you could be a co-founder of any startup in any era, which one would you choose?

Joshua: This is an interesting question. I thought about it and I thought probably Apple. Mostly because I thought, and I still think that there was so much interesting creativity that went on in Steve Jobs’ garage about what the world could look like and about how technology could aid in that process of moving humanity forward. But I think it was because of the creativity aspect of it in the process that they brought to the table that I thought was so fascinating.

Petri: Any final words for the audience?

Joshua: Only that I would encourage you to embrace negotiation. It’s something that I think a lot of people have run away from. And not run toward. It’s a little bit like the old Chinese finger trap where you put your finger in each end and when you pull away, it gets tighter. But when you come together, it loosens.

When people come toward negotiation, when they embrace it, when they understand its value and its power and how it can really help you in your life, then you get almost entranced by it. It becomes a fascinating process of how you live your life, how you deal with problems and conflicts and situations.

I would encourage people to try to see negotiation more along the lines of what we’ve discussed today than what they might know and maybe just to try to learn negotiation anew. Go out and pick up one of the books that’s out there on negotiation. It could be mine, it could be others.

Petri: Can you name a few good ones to get people started?

Joshua: Sure. Mine is The Book of Real-World Negotiations. If people really want to change their perception on negotiation, I would have them start by reading the book called Getting To Yes: Negotiating Agreement Without Giving In that was written by Fisher and Ury in 1981.

And it’s still in the bestseller list and really transformed the world of negotiation. There’s another book called Never Split the Difference by Christopher Voss, which is also good. There’s a book called Negotiating the Impossible by Deepak Malhotra. There is a book called The Art of Negotiation by Michael Wheeler who talks about how the essence of negotiation is really being able to think on your feet and being adaptable. And as a result, he encourages people to learn the skills of improv as a core skillset.

There’s also a really good one called Negotiating Rationally by my friend Mark Young, but another one called Beyond Reason by Roger Fisher and Daniel Shapiro about the role of emotions in negotiation.

And this is a place where a lot of people struggle which is in managing the emotional side of negotiations. And so they offer up some ideas about how to do that more effectively,

Petri: Thanks, Josh! It was so fun to talk with you. I could do this, like you say, to the whole day long. I thank you so much for having you in my show and good luck with all your negotiations!

Joshua: Thank you. I really appreciate you having me on and taking the time to do it and all your great questions as well.