Breaking the Stone Tablet

Write down your goals but don’t chisel them in stone. Goals can and should change throughout the course of your life. Use your written goals as a roadmap to your success. Writing them down sets the process in motion and allows you to frequently review your goals.
During a negotiation, you should state your goals as just that. If you state your goal as a take-it-or-leave-it demand, you create a terrible dynamic.
Remember these keys:

• Goals
• Limits
• Opening offers

If you keep these three concepts separate in your mind, your negotiations begin — and end — on a much happier note. Even if you never change your goals, you should review them just before you close the deal. Then look at your goals again after closing the deal. If they were too high, or maybe not high enough, consider what information you didn’t have before you set your goals that caused you to miss the mark. Don’t kick yourself if you decide that your goals should have been higher. Remember the reasons for making the deal you made and learn from the experience.

How to Set the Opening Offer?

The opening offer is nothing more and nothing less than the first specific statement of what you’re looking for in a negotiation. After you have set your goals for the negotiation, you can consider the opening offer. For example, in a job interview the opening offer is the salary you’re seeking. Don’t look for any hard-and-fast rules or magic formulas. To determine your opening offer, you should draw heavily on the goals and limits you set and the information you have gathered while preparing for the negotiation.

Obviously, your opening offer should be higher than the goals you have set for yourself. But it shouldn’t be so outrageously high as to be off-putting to the other side or make you look foolish or inexperienced Whether the amount you state in your opening offer is higher or lower than the amount of your goal depends on whether you’re the buyer or the seller (you determine how much higher or lower through good preparation):

• If you’re the seller, your opening offer should never be lower than the goal you set.
• If you’re the buyer, the opening offer should never be higher than the goal you set.

People are quite anxious about the opening offer. They’re fearful that they will mess up the entire negotiation by blurting out a demand that is too modest or too ambitious. State your opening offer positively and precisely. You want the ability to measure your achievement. Use your anxiety level as a measure of how well prepared you are. Part of being well prepared is knowing relative values. If you know the value of what you’re offering, the opening offer is easy to deduce. You just decide how much negotiating room you want to leave yourself. Have your opening offer in mind even if you don’t plan to state it openly. This approach speeds your reaction time to whatever offer the other side makes.

How to prioritize your goals?

Be sure to rank your goals in terms of importance. Ideally, you want to achieve 100 percent consensus about the official ranking of your goals. However, different individuals may hold onto their personal agendas. In those cases, let the majority prevail and note explicitly the view of the minority. By making special note of the minority view at the beginning, you record it for the duration. Later, you can allow the repeat discussion, but remind the advocates of the minority view that they were outvoted.
It is a rare negotiation in which you achieve all of your goals. You must know which are the most important. This decision can become contentious. Teams often abandon the critical step of prioritizing in the name of keeping the peace. Unfortunately, such teams only defer the argument to a later point in time — and probably a worse time, such as

• When not enough time exists to deal with a side issue.
• When the team needs to hang together.
• When the stakes in the outcome seem higher because they are more immediate.
• When a distraction from negotiating is the most damaging. What a disaster! Bite the bullet and get the team together on this important issue when you settle upon the list of goals.

How to set challenging yet attainable goals?

It is absolutely certain that you never achieve more than your goals. Experiments testing this thesis have shown it to be true. Surprise! At the same time, you must ground your goals in the real world, otherwise you’re just daydreaming.
If you’re asking $525,000 for your house, and no house in your neighborhood has ever sold for that amount, you’d better have some good reasons for setting your goal that high. Maybe you’re in a rising real estate market. Maybe your house is larger or noticeably nicer than any other house in the neighborhood. Maybe a state-of-the-art shopping center is under construction nearby, making your location more desirable than ever before. Any of these factors make a record-breaking price for your home attainable. Without special factors like these, you’re wasting your time by starting with such a high goal. Likewise, you want to be sure that the $525,000 is challenging. If every house on the block sells for $525,000, that price isn’t much of a goal — unless your house is noticeably more run-down than the others (in which case, you may want to consider some landscaping or painting first). You may have to do some research to find ways to justify asking a higher price than the others in the neighborhood. If you find out that major construction is planned for the near future, for example, you can make that part of your sales pitch. Too many of us suffer from setting our goals too low. Shoot high or not at all — you can be sure that the other side will never ask you to raise your goals. But remember that you don’t have to become rich and famous before breakfast. Goals that are too high for the deal lead to frustration and failed negotiations. For the specific negotiation at hand, consider the marketplace, current values, and your available options.
You can quickly see that setting a challenging yet attainable goal requires that you have a good deal of information — information you always need before you start negotiating. Setting your goals is one way you know whether you’re prepared for your next negotiation.
Think of that big thermometer the United Way puts up before every fundraising drive. The number at the top of the thermometer represents a figure generally a little higher than the previous year, but not too much higher. A better economy, more members participating in the fundraising drive, or a special event (such as building a new recreation center) justifies an increased amount. As group members raise money, they fill the outline of the thermometer with red paint to show exactly what has been contributed. Whether the organization reaches its goal or not, the thermometer looks very red at the end of the campaign, and those who contributed feel good.

Setting specific goals rather than general goals

Your goals shouldn’t be so abstract that no one — including you — can tell whether you achieved them. To avoid any ambiguity, quantify your goals as much as possible.
If you’re selling your home, for example, saying, “I want as much as I can get” is not a good goal. This is probably a true statement, but it doesn’t help you achieve anything. A well-stated goal for the price portion of the negotiation must include an exact amount, like $525,000. If you can’t be that specific, you’d better prepare some more.
Along the same line, you can’t buy a house listed for $800,000 if your income goal is only $60,000. This kind of contradictory goal will sabotage all the work you put into achieving your goal. You should strive to rid yourself of contradictory goals at every step of the goal-setting process.

How to set the right number of goals?

The negotiation itself dictates the number of specific goals you should set. It’s amazing how many goals some people can squeeze into even a simple negotiation. Recognize that you can’t get everything done in one negotiation. For example, if your priority is to get a raise, don’t demand a car allowance, overtime pay, and an assistant all in the same session. By putting too much on the table at one time, you just confuse people. Your boss’s eyes will glaze over, and you may not get anything at all.
You want to be realistic about your goal setting. Setting too many goals in a negotiation can make you look ignorant and naïve. To combat this situation, walk into the negotiation with a written schematic of your goals. Stay on course with what is written on the page.
Conversely, you don’t want to set goals too low. Setting very low goals is as detrimental to a negotiation as setting unrealistically high goals. Setting low goals signals weakness and indifference during a negotiation. The other party will see right through you. You should set goals that are slightly out of your grasp, but not so far that you can’t achieve them.

How to keep the goals on course?

Many people out there are frustrated at not being heard. If you ask them to participate in the goal-setting process, the list of demands may get a bit excessive. Before long, the list of goals contains demands that are outside the particular negotiation in which you are involved. This result is especially true in workplace negotiations because, when asked to contribute, frustrated employees may feel that this is finally their chance to relieve their frustration. Allowing people with specific agendas to take your goal off course can keep you from getting what you want.

This caveat doesn’t contradict the good advice in one of my favorite mantras:
“There is no harm in asking.” If your goals relate to the specific negotiation, you can choose to add an unrelated matter to the discussion. You can raise an unrelated issue appropriately, but be prepared to abandon it quickly if the reaction is too adverse. Although asking for a few extras probably won’t hurt, you should be conscious that you are doing so. Be careful that you don’t sabotage the primary goals you’re trying to achieve in the negotiation.

How to get active participation from every team member?

Whether you’re representing someone else in a negotiation or you’re part of your company’s negotiating team, goal setting is a shared activity. Your first negotiation is with the other team members to be sure that the goals are realistic and understood by everybody on the team. In the entertainment industry, these types of relationships are common. For example, the agent/ writer relationship is one of the tightest relationships in the industry. Agents must know their clients’ work and the type of work their writer clients seek. It’s important for agents to know this to send their clients to appropriate pitch meetings that will benefit both team members. In essence, agents must know their clients’ goals.

There is no sense for an agent to send out his or her hot comedy writer to meet with a production company looking for the next great science-fiction project. For one, the writer client doesn’t achieve his or her goal of attaining a writing assignment. Secondly, the negotiation, or pitch meeting in this case, stalls and goes nowhere. Both agent and writer lose out. When assessing your team, odds are that you have someone on your team whom you would prefer to leave out of a planning session. Perhaps this person’s pace is slower than yours, and you’re afraid the team’s work will slow down. Or the person may be cantankerous and hardly ever agrees with the group. Don’t succumb to the temptation to exclude that individual. This person can end up being a stumbling block later when you’re close to a decision deadline. Be sure that everyone who is a member of the negotiating team participates to the extent possible in setting the goals. Some people may not be verbal, but make sure that they’re on board, even in a passive way. You need everyone to agree on the goals. Then they are more likely to own the goals — and the results.

Steven Spielberg’s Munich is an excellent example of how important it is for every team member to actively participate in goal setting. The film is set during the 1972 Olympic Games in Munich, where 11 Israeli athletes are taken hostage and murdered by a Palestinian terrorist group known as Black September. In retaliation, the Israeli government recruits five Mossad agents to track down and execute those responsible for the attack. The agents all come from different walks of life, but they share the same goal: vengeance. In the roundtable scene where the group members gather for their first dinner together, the meal starts jovially. But as the scene progresses, the conversation shifts to an intense discussion about the ramifications of their goal. Is vengeance a justifiable option? It’s a divisive goal, but despite objections from some of the team members, they ultimately find common ground and proceed with their mission. Without that discussion beforehand, the mission surely would have broken down later.

Even with a personal goal that seems to be your decision alone, you can benefit from consulting with your family or friends. These people are affected by the decision. If you make your friends and family a part of the goal-setting process, they can be invaluable in helping you reach your objective. For example, if you want to write a book, your loved one can join in, if not with content, then with helpful encouragement so you don’t let less important tasks get in the way. Telling another person about your goal makes it real and also puts a bit of pressure on you to keep working toward your goal.

How to Set a Good Goal?

Setting goals for yourself, for others, or for your organization is a practical activity that demands preparation and disciplined focus. Setting goals is not wishful thinking. It’s not fantasizing. It’s not daydreaming. A goal is any object or end that you strive to reach. For example, becoming rich and famous may be the result of achieving certain goals, but fame and fortune are not the goals themselves. Deciding to write a bestselling book is not setting a goal; it’s daydreaming. Deciding to write a book that is interesting and makes solid contribution is a goal (an ambitious one, but a goal nonetheless). Research shows that individuals who set challenging, specific goals do better than those who don’t.
When you set goals, you need to consider what you want to achieve. Setting specific goals gives you an overall perspective that shapes your decisionmaking process. Use the following lists of questions to help you brainstorm during your goal-setting session.
For business goals, ask yourself:

• What level do I want to reach in my career?
• What kind of knowledge, training, or skills will I need to reach a certain level in my career?
• How do I want my partner or other members of the team to perceive me?
• How much money do I want to earn? At what stage in my career do I want to earn this amount?
• Do I want to achieve any artistic goals in my career? If so, what?

For personal goals, think about:

• Do I plan on starting a family? If so, when?
• Do I want to achieve any fitness or well-being goals? For instance, do I want to remain healthy at an old age? What steps do I need to take to achieve this goal?
• How much time will I reserve for leisure? What hobbies do I want to pursue? Remember, these goals are about you. You have to pamper yourself every now and then. Once you have answered some or all of these questions, prioritize your goals in order of importance. Be sure to prioritize until you’re certain that the goals reflect your business and/or personal aspirations.

Here are a few points to keep in mind when thinking about your goals:

• Distinguish between a goal and a purpose. If your purpose in life is to become an Olympic champion, set all of your goals with that ultimate purpose in mind. You must take many steps along the way to becoming a champion of any kind — the training, the dedication, the discipline. Think about your purpose in life; your negotiating goals should contribute to that purpose deal by deal.
• Don’t confuse goal setting with the process of deciding what to put forward as an opening offer. (Opening offers are discussed in the “Setting the Opening Offer” section later in this chapter.) You must set your personal goals yourself, before a negotiation begins. Get all the information you can from others about the marketplace and the person whom you’ll be negotiating with, but set your own goals. Only you know what your personal dreams are and what will make you happy. Keep a practiced eye on your goals during the course of the negotiation.
• Decide whether a goal is a good goal when you set it, not after the fact. Sometimes people say, “Shucks, we didn’t set our goal high enough.” If you’ve ever said that, one or more of the qualities described in the following sections was absent from the goal-setting process. Each of these qualities is important. You don’t have to wait until after the negotiation to find out whether your goals are well set. You can judge your goals at the moment you make them by determining whether they contain the qualities presented in the following sections.

Risk and Strategic Relationship Consideration Before Negotiation

Risk
Every deal has a certain amount of risk in it. If you are taking most of the risk, you deserve compensation against the occasional time when the risk becomes reality — when you have to fix something because you took the risk. For instance, if you are contracting a job and your client wants you to hire certain workers instead of him hiring those workers, you are taking a risk. You are taking the risk that they won’t show up or that they will do sloppy work or . . . or . . . or. You deserve — no, you need — to mark up the cost of those subcontractors because you are taking the risk that they won’t perform. Maybe not on this job, but someday you will have to make good for somebody else’s goof.

Strategic relationship
Watch out for this one. People will often try to get you to lower your price on the promise of more business in the future or because they are such an important customer. If none of the other factors that are listed above are present, don’t do it. It’s seldom worth it. These important clients can run you into the ground. More often than not, you want to take care of these customers with superior service. That will get them talking you up, and it will make it easier for you to hold your price with everyone else. After all, if Joe Big Shot is paying $X, surely everyone else will have to pay $X also

Preparing for Changes Before Negotiation

Anyone who has ever added a bathroom to her house or updated a kitchen knows that she will have to pay something when she changes from red tiles to blue tiles. Even if the tiles haven’t been ordered, most contractors let you know that “changes cost money.” At a minimum, the contractor has to change the order. He may have a hard time getting the new color, or it may not arrive on time. These are all risks that have to be taken into account. He ought to be compensated for that.

Scope creep is the most insidious form of a change, and it happens all the time. You have a big job. The client says, “Would you mind just doing this one little thing?” It sounds sort of like when you’re at home and your spouse calls out, “While you are up, can you get ----?” Typically, you’re happy to do it at home, and you’re happy to do it on a job site. The difference is that at home, you will be back in bed or back at the dinner table and that is the end of it. And sometime in the not-too-distant future, you will want to make the same request of your spouse.

At work, it’s usually a one-way request and once it starts, it doesn’t just stop there. Over time, you have done a lot of extra uncompensated work. Most companies have a policy to control this. If your company does not, install one now. At the very least, be sure that the customer is aware that he has been given something for free. You can do this a number ways. One is just to drop him a note saying that you were happy that you were able to do what he asked, and you wanted to let him know that there would be no charge for it. You put that in the job file, and that way you can keep track of these little extras. They tend to add up, but you forget all about them if you don’t make a note of them.

Time, Quality and Quantity Preparation for Negotiation

Time
Whenever someone wants something in a rush, pull out your pocket calculator. The price should go up. Even if you decide not to charge more, mention the possibility and push some buttons for a while. Many businesses post the extra tariff for a rush job. If you don’t have a preset increase for a job or product that has to be delivered with extra speed, at least be aware of the concept and think about charging a little extra for the pleasure of a fast delivery.

Quality
When specifications tighten up, the price must go up. There is nothing wrong with a customer being very specific about the shade of blue or the width of a cabinet, but pickiness comes at a price. It takes extra time for you to be sure that you meet those specifications, and you must factor that into the price.

Quantity
It almost goes without saying that a large order lowers the per-unit price whether you are purchasing widgets or legal services. Is the reverse ever true? Well, yes. If the purchase is so large that it corners the market or takes the supplier off the market, the price should go up, not down. For instance, if someone is buying so much silver that he controls the silver market, make sure he pays a premium for that purchase because after he has cornered the market, he controls the price that you can charge in the future. You and everyone else would be at his mercy. Or if you’re a CPA or a lawyer and one client takes so much of your time that you can’t service any other clients, then you have to be sure that you earn the same amount annually from that one client as you would from many clients. You also have to be prepared in case that megaclient dies or leaves you. This means that this megaclient does not get a price break and may actually pay more per hour than someone else.

How to stay informed on everything?

Prepare yourself on an ongoing basis for the most common negotiations in your life. If you sell boats for a living, you should know more about the kind of boats you sell than anybody else in the world. Attend boat shows open to the general public as well as seminars for the professional salesperson. Seek out the designers and manufacturers of your boats for detailed information.

Talk with your co-workers over the water cooler. Take advantage of all these varied resources. For instance, if you are a talent agent in Hollywood, know the type of material studios and production companies are looking for. Don’t waste your client’s time by sending him or her out to pointless meetings. Moreover, you don’t want your clients knowing more about the marketplace and having them tell you what companies they should target. Stay up-to-date on the latest deals, the latest information about the prices that things are being sold for, and the latest company mergers.

Staying informed will benefit both you and your client. The quality of the advice and information you receive varies widely. Decide what to keep in your treasure box of information and what to reject, but keep exposing yourself to anything and everything that can increase your stockpile of information. You never know when some bit of trivia can become your secret weapon in a negotiation.

Recognizing agendas: The source shades the results

As you gather information about the negotiation you are about to enter, remember that everybody has an agenda. Everybody. If agenda sounds like too strong a word — or if it sounds somewhat pejorative — let’s say that everyone has a point of view. No human is without bias. It’s the way we are wired. It’s not bad that the source you go to has a point of view.

That point of view may differ from yours. Prepare to be challenged if it does. Your job is to recognize that point of view and to factor it in as you gather your information. Say that you find a painting in your late grandmother’s attic and you’re curious as to what it’s worth. It’s a handsome painting, but you know nothing about painters or painting. You are trying to decide what to do with it. Your best friend is of no help whatsoever, so the two of you take it to various sources to find out what it is worth.

• Your mother: To her, this painting may have great value because of the emotional attachment that she has to it. She puts a high value on it.
• A gallery that takes paintings on consignment: The gallery may take an objective view of the painting — no emotional attachment. A high offer may be made if the painting is from a renowned artist.
• A pawn shop: A pawnbroker may offer a low amount of money because he is making a loan that he doesn’t expect to be repaid. The pawnbroker will have to sell the item. If you have ever been in a pawn shop, you know that there is a huge stock of items. Things must sit on the shelf for a while to allow people time to redeem them.

Each one of these people is giving you his or her honest opinion. Each one is coming from a different place, a different point of reference. When you talk to each of these people, you’ll need to factor his or her point of view into the person’s evaluation of what the painting is worth. Depending on whether you want to sell the painting or keep it and insure it, you will know what figure suits your purposes.

How to solve the mystery of value?

Some types of preparation seem almost instinctive to many people. Every family seems to have a designated researcher. If preparation know-how doesn’t come naturally to you or your family, try to make a game of it. If you are entering a negotiation to buy or sell a product or service, pretend that you’re solving a mystery — the mystery of value. What is the product or service worth? Forget about the asking price — what is it really worth?

Begin with these two important facts:

• Value is always in the eye of the beholder. When you finish with your research, only you can conclude the ultimate value a service or product holds for you. You’re the one who will be spending (or receiving) your money. You must decide.
• From diamonds to dime stores, experts compile price surveys and put out a report on what various items are fetching in the marketplace. These publications are how insiders know what’s going on in the world. Whether you’re buying a hotel or a holiday in a hotel, you can find insider information on the price of the purchase.

Don’t forget that values change over time. One important thing for you to decide, if you are a purchaser, is how long you’re going to keep the item you are buying. The longer you plan to keep your purchase, the longer it needs to hold its value. Information about normal depreciation is as available as information on current value — usually in the same place. Knowing the rate of depreciation for an item is certainly just as important as knowing its current value.

As you gather information, be sure to keep good notes. You can’t expect to keep all the facts you gather in your head. Good notes are easy to make as you go and can be invaluable as negotiations progress. Usually, one or two kinds of negotiation recur in your business. For those recurring negotiations, you may want to keep a separate notebook with the information you gather. For example, if you are a service provider or a consultant, your time is your inventory.

You may have a set fee (or fee range) depending on how much time you spend and how far away the contract takes you from your home base. (Remember: You usually can’t charge for jet lag recovery time, but you expend your time nevertheless.) Keeping accurate notes can help you determine whether your fee structure is adequate or whether you need to demand more during future negotiations.

Know the subject matter, before making a negotiation

When you begin the actual dialogue, make sure that you know more about the subject matter than does the person with whom you’re negotiating. You aren’t arming yourself with this information so you can be a showoff or so you can put the other person down or to make the other person feel inferior. It’s to make you the authority figure in the room. Don’t rush it. Let all your preparation come out naturally and with as many specifics as possible. Think of your favorite teacher you had in school — the one with patience and the ability to explain ideas clearly. That’s how you want to deliver the information that you have stored up for this meeting.

Also, if you’re really knowledgeable and someone says something that you have never heard before (and you suspect is not true), it carries a lot more meaning when you say, “Hmm, I haven’t heard that before. Let me check into it.” If you, with all your knowledge, haven’t heard of something, maybe it isn’t true. You won’t have to say anything. Everyone will fill in the blanks for you.

All organizations, big or small, have information available to you whether it is via the Internet, in print, or through word-of-mouth. You impress the person on the other side of the table when you walk into a room with all the knowledge at your fingertips. Sometimes, I hear people say that they overprepared for a certain negotiation. That’s never true. The fact that you had information that didn’t come out of your mouth doesn’t mean that you overprepared. All that preparation made you confident. You were unafraid of any question. You had it all in your head, and it served a purpose, even if the purpose was never put into words in the actual negotiating session. The negotiator with the most information wins!

Rob Reiner’s A Few Good Men is a film about playing detective and preparing for the ultimate negotiation — in this case a courtroom battle between a disgruntled lawyer played by Tom Cruise and an evil military commander, played by Jack Nicholson. Watch Cruise’s character and his team plan and strategize their courtroom argument. The preparation is intricate, the team knowing well that the defense will put up a tough fight. The story is based on fact, where a Marine at the Guantanamo Naval Air Station in Cuba dies after a hazing incident. Two Marines are charged with the death, but Cruise and his team suspect there is more to the story. They gather much information. The climactic trial is an engrossing battle of words, but with Cruise’s team well prepared with information about the commander’s notorious history, they win the case. Digging for information is hard work, but the payoff can be rewarding.

Always read insiders report before taking on a negotiation

Take time to find out what the people in the business pay for the goods or services you want to buy or sell. This strategy can save you a fortune over the course of your life. Don’t rely on what friends tell you, although they may provide good hints and direction. Go to the people who tell the merchants what to charge. Go to the source the insiders use. No matter what the subject, someone has devoted a lifetime of work to evaluating and commenting on it. This is just a fact of modern life. Nothing is too arcane to study, dissect, catalog, and chronicle. Often, you find out about these insider reports from someone trying to convince you of just what a great deal you are getting.

• For automobile dealers, the bible is called the Kelley Blue Book Auto Market Report.
• The cost of money for almost anything (home mortgages and interest paid on savings accounts or car loans) is printed regularly in The Wall Street Journal.
• In the entertainment industry, the daily periodicals Variety and The Hollywood Reporter announce script sales, weekend box office numbers, new production entities, and executive shuffles.
• Prices of gold and other basic metals are printed in the Sunday editions of most major metropolitan newspapers.

Ask questions to enhance your negotiation chance for success

Even after a negotiation gets under way, you can continue your preparation by asking your counterpart questions. Some people are reluctant to ask questions because they’re afraid of appearing dumb. This is false pride at its most expensive. You’re flying blind without accurate information. You can’t worsen your position by requesting information from your counterpart. Your job is to get a good outcome — not to impress the seller. If you have unanswered questions, ask. Keep in mind that the answer you receive to your question during a negotiation may or may not be accurate. Always accept it with respect . . . and then check it out for yourself. You have an obligation to be sure that any information you are relying on is, indeed, reliable.

What if you’re out of your element? Don’t try to hide your lack of expertise. If you’re dealing with someone who is really knowledgeable in a field, and you’re not so experienced, honesty — once again — turns out to be the best policy. Eventually, the differential will surface. It’s better to reveal your inexperience yourself, and then you can ask all the questions necessary and request additional time to research the topic.
You don’t have to make a deal until you are ready. Closing a deal is a voluntary act. Get your information from anyone you can — including the opposition. The more your counterpart wants to reach an agreement, the more quickly you will receive the data you need to make your decision.