- Chapter 22 -
THE ART OF NEGOTIATION
he dictionary definition of negotiation is "to discuss with the goal of finding terms of agreement." Unfortunately, in our world today, many people interpret negotiation as being the skill of persuading other people to accept their point of view. When it is said of a man "He's a good negotiator." it usually means that he gets the best of the deal.
Many seminars and books present techniques for succeeding in this manner. A prime example advocates the use of intimidation to win. Such books might suggest compromising in a very limited fashion or letting the other person win on an insignificant point, but only as a last resort. The goal is to overpower the other people, or at least to "talk them into it" as the expression goes. This seems to offer satisfaction to certain personality types.
Frequently when a deal is struck to the advantage of one party and the detriment of the other, seeds of disagreement and retaliation are sown, which can have unforeseen future results. A better way to negotiate is to:
FIND OUT WHAT THE NEEDS OF
THE OTHER PERSON ARE AND
TRY TO MEET THEM WITHOUT
LOSING SIGHT OF YOUR OWN GOALS.
With purposeful effort, it is surprising how frequently this can be done, and fulfill the dictionary definition of reaching an agreement of mutual accord.
The first rule is: "Do not attribute your motives to other people. Find out what they want." It is so logical for us to have such a high regard for our own opinions and motives that we assume that any other intelligent person must think the same way. Wrong. For example, emotional attitudes may influence a person's approach in ways we may not know about.
A classic example of negotiation is between buyer and seller. If the buying group has money as its only motive, it is logical to conclude that this is also the predominant motive of the seller. However, people choose to sell or are forced into it for all sorts of reasons: 1.) ill health, 2.) partners fighting, 3.) divorce, 4.) family problems, and 5.) wish to retire. All of these I have seen, and there are many others as well.
If the one selling has a pressing need to act quickly - and this may be more important than the price - the capacity of the buyer to respond promptly meets this important requirement. A man from Houston owned a sizable tract of land in the suburbs of our city, and offered to sell it to a group of us at what he said was a bargain price, provided we could pay cash and act quickly. The reason he gave was that he was just about to die and wanted to make his estate as liquid as possible. We did act quickly. We did pay cash. It was a bargain. He did die. From his viewpoint there was a strong emotional component as well as considered business judgment. Some might have taken advantage of the situation and tried to beat the price down, but we felt it was fair and accepted it immediately.
Two brothers owned a very fine manufacturing company. After being in business for many years, they became completely alienated and decided to sell the operation. A logical solution would have been for one to buy out the other using a standard formula. In that arrangement, one names a price and the other either buys or sells at that price, under which circumstances the first is not going to put it too high or too low. But the brothers were so angry at each other neither wanted the other to have the business under any conditions. There certainly was an emotional component! I had an interest with a group of venture capitalists, who spent time exploring the situation, got along well with both brothers and we bought them out.
This brings up an important point. In any significant purchase, the buyer and seller usually spend time together during the negotiations. It is during this period that a relationship can be developed, and motives and goals can be discerned.
On one occasion, working with some investors, I went to a nearby town to attempt to purchase Fernwood Apartments, with 150 units. The owner was an 80-year-old man who, though very sharp in terms of mental faculties, appeared to be indecisive about the sale. The one thing he kept emphasizing was that he did not want me to let anyone know that the apartment was for sale, a request with which I was eager to comply, because I certainly did not want any competition for the purchase.
During several trips to his city, I talked and, even more importantly, listened to the old gentleman to attempt to find the key. I tried to learn what were his motives for selling, and what was holding him back from proceeding, so I could comply with the first and find solutions to the second. Price was not a factor, because I was willing to pay the figure which had been named.
It developed that Fernwood Apartments were being managed by the owner's 40-year-old son, who had never found a successful vocational career. Part of the motivation for building the apartments was to provide a management job for "Sonny," but the son was no more successful in this field than in previous endeavors. The result was that the apartments were only 80% occupied, thus causing a consistent loss. The father was loath to sell the apartment out from under the son, knowing that a new owner would not retain him, and he would be unemployed.
Having learned of this situation, I conceived of a plan for putting Sonny on the payroll after the sale -- as a consultant for two years at a generous figure. This did it. The father now felt that he was not abandoning his son. Sonny, who had suspected that he would be unemployed, was delighted at the prospective income. He was also pleased at the prestige of being a "consultant" for city folks from New Orleans, and liked the amount of work for the income involved. From our viewpoint, the fee for Sonny was modest in relationship to the total investment, and anyhow, it was tax deductible to the investors.
Needs had been met for all, for the owner, for Sonny, for the investors, and for myself. The apartment became a very good investment despite the fact that, on one occasion, a woman was found strangled in the swimming pool. Fear of the "silent killer" swelled the vacancy rate for a while. The identity of the murderer was never determined, but I hasten to say that Sonny was not a suspect.
When I taught at the Tulane School of Architecture a star pupil was Bill Fitzpatick, both from his interest then and what he has accomplished since. As his first real estate venture, he pursued a very small ad in the classifieds offering a fourplex for sale on Fisher St. It seemed like a good buy for the price, especially as he figured out how he could arrange financing, based on the rental he could get from the four apartments after he did some work on them. He got to know Mrs. Carson, the owner, and she told him all about the structure, how it had been personally built by her dear brother, and how it had been in the family for years and years.
When it came time to make an offer, Bill assumed that although it was a reasonable price, no one expects to get the asking figure, so he offered her somewhat less. Mrs. Carson was upset, and told him so. He had demeaned the house her brother had built. Bill was crestfallen. "What do I do now, Mr. Bell?"
"All may not be lost, Bill. Write her a nice letter, apologize for offending her, tell her what a fine building it is, and that you would be proud to own it. Finally, of course, tell her that you will pay her price."
Bill wrote the letter. At first, she was still so upset she crumpled it up and threw it in the trash. Later, she fished it out of the trash, smoothed it out, and put it aside. Three weeks later, she telephoned Bill and said she would sell it to him. In the end, they became good friends.
It was a good investment, even if Bill did have a serious altercation with one of the tenants when he cut down the man's marijuana crop in the back yard. They looked like weeds to Bill, although he certainly would have wanted to cut them anyhow.
Clearly, with regard to Mrs. Carson, there were emotional factors related to her attachment to the building. The amount by which he tried to reduce the price was not as important as the fact that he did not appreciate, and was not showing proper respect for something which meant a great deal to her. Again, consider what the person's motives and goals are. What are the emotional factors?
Paul Bedford was having difficulty completing a purchase. I suggested he read "The Art of Negotiation", and as a result, he asked the seller, "What are your goals? What would you like out of the deal?" To his surprise, money was not the primary consideration. The man wanted an interest in the ensuing entity which Paul was able to arrange.
These examples are from the field of business, but the requirements to reach agreements, and the opportunity for solving problems while helping others to achieve their goals, takes place daily in our lives. It can involve family, friends, employees, students -- the list is endless. It is all the more challenging, and therefore, all the more gratifying if a successful conclusion is reached when there are four or five people, each with a stake in the outcome and each with a different need.
The art of negotiation is a valuable skill to teach members of a family, including children. Take a simple example of family members trying to decide about evening plans. Challenge each person to suggest an idea which would, as much as possible, be something to which everyone could agree. It may not work out just as one would like every time (what human endeavor does?), but if the idea is reinforced, if people try to sensitize themselves to discern the needs and emotions of others, and if they really listen, desirable solutions can be achieved far more frequently. What may seem at first completely adversarial positions can be worked out so that the opposing parties become allies in achieving a mutual goal.
It is very gratifying when you can find a solution which meets everyone's needs whether it is in relation to buying an apartment house or deciding which movie to attend.