Video: How to get a better deal by refusing to negotiate?

Since the 1700’s academic books, business schools, and everyone in between have told us that if you want a better deal, you have to negotiate it. No one is going to just give it to you.

But have we been wrong all this time?

Watch the Video (7:27)

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Video Transcript


But have we been wrong all this time?
Can we actually get a better result by refusing to negotiate?

In 1716 French diplomat, Francois de Callieres wrote the worlds’ first book on negotiation. It was titled “On the manners of negotiating with princes” and was the first text to illustrate the benefits of negotiating and how the fate of countries depend on the skill of their negotiators.

Since then, business schools, consultants, writers, almost everyone has been telling us that negotiation is a core skill in order to get a better deal.

Here are some interesting facts to prove this point:

  • Every year, more than 2,000 books relating to the topic of negotiation are released on the online book retailer, Amazon
  • Every day, there are around than 100,000 searches on Google about the topic of negotiation
  • As of July, 2015, and according to Google , there are 27M articles relating to negotiation on the internet
  • Further more, if you wish to do a course on Negotiation, it can cost you around US$12k for 3 days for a course at one of the leading universities in the US

But is it as powerful as we think it is?

One of the reasons why people like negotiation is that, for a relatively small investment in time a signification return can be gained. Just think about negotiating your salary. A little preparation and a five-minute conversation can turn into thousands of dollars per year for no additional future effort.

So why is it that businesses are doing everything that can to avoid negotiating? Shouldn’t they be trying to negotiate everything?

If you think about it, businesses try to do everything they can to avoid negotiating. They try to break up unions in their workforce, they try to ensure that they have multiple options for their supplies, and they try to create more demand for their products or services than they supply.

In reality business don’t want to negotiate; they just want to have options.

You see, Negotiation, as defined Oxford Dictionary a discussion aimed at reaching an agreement. And Harvard’s Program On Negotiation describes it as deliberative process between two or more actors that seek a solution to a common issue or who are bartering over an item of value.

In simple terms, negotiation is really a discussion that both parties need to have to better both parties position.

For example:

  • A policeman has to negotiate with someone who has taken a hostage and are surrounded by police. The policeman and the hostage taker need to negotiate because if they don’t there are serious consequences for both of them
  • A company has to negotiate with their employees union because if their employees strike then the employees get any money and company loses money
  • Or if a country is at war with another country and they don’t negotiate, people on both sides are likely to continue to die and both countries are going to continue to spend money on warfare

Therefore, one could say that negotiation is a discussion where, if that discussion doesn’t happen and there is no agreement, no one wins.

Everything else is merely selecting the best option available.

However, in business we are often lazy and see only one option and then try to negotiate. Often with disastrous consequences.

Think of the Pete who is unemployed and has been offered a job. He tries then to negotiate his salary up but his potential employer says no and then retracts the job offer. Pete is left with no job and no other options. Pete tried to negotiate when it wasn’t really a negotiation scenario. Whilst this employer may or may not have done the “right” thing, they didn’t need to negotiate and so they didn’t.

Some of you that have done negotiation training might say, isn’t this just creating a BATNA? The BATNA or Best Alternative To Negotiated Agreement is term created by Roger Fisher and William Ury in their award winning book “Getting to Yes”. And you would be right. Fisher and Ury proposed that we should have an alternative when we try to negotiate. We should have a fall back position.

However, what I am saying is that do we really need to negotiate if we have enough alternatives?

What you might not know is that you can often get a better result by not negotiating but instead by creating a situation where your alternatives actively compete amongst each other for your money, your services, or your products.

These situations are called auctions and there is a whole branch of economics, called “Auction Theory”, dedicated to it.

Think about auctions carefully. People sell a house or car via auction because they can get a better deal than negotiating with each of the potential buyers and they are not limited by what they think is a good or great deal.

All you need to do is see the faces on the on the reality TV show contestants, the ones that renovate a house and the contestants get the profit when the house goes to auction. They sometimes get deals far beyond what they imagined.

Auctions were designed because they are often more efficient than negotiating directly and people will bid up to what they believe it is worth, not what you believe it is work. The typical type of auction is strictly called an English auction but there are many types of auctions.

For example, there are reverse auctions or tenders, which are often, used by procurement departments. Google uses a specific type of auction called the 2nd price auction for getting people to pay for advertising on their various platforms. In this auction people bid for advertising space but the highest bid pays the bid offered by the second highest bidder.

The word “auction” is just the name given to game where the players compete amongst themselves for a desired outcome. And the outcome is what the person who designs the auction really wants.

The key word here is “game”. The reason why there are many different types of auctions is that the game is changed in order to generate the desired outcome based on the situations.

The famous American writer, Sidney Sheldon, once wrote, “Business is a game, played for fantastic stakes, and you’re in competition with experts. If you want to win, you have to learn to be a master of the game.”

Being a master of the game means changing the rules of the game so that you get the results that you want. In order to get the best deal, we can change the game by deciding to use a specific auction technique or no auction at all.

Therefore, by creating or using the right game, we can avoid negotiating and get a better result quicker and faster.

Real Estate agents and do this all the time in order to get a better result for their clients. They help their customers them decide what is the best market engagement strategy they can employ to get the best deal. What a good real estate agent is “what is best game we can play?”. Great real estate agents says, “what is the best game we can get others to play?”

Therefore, the majority of the time getting a better deal in business isn’t about negotiating better. Getting a better deal is about establishing a game where others can play off against each other to deliver what you most desire.

Therefore, if we want better deals, we should be investing more of our time on teaching people how to think about how businesses play games? How people behave rationally and irrationally and respond to others that they are competing against and how to design a game that will deliver what we are looking for.

So when you next thinking that you need to negotiate something, instead, think, “Now what is the best game should I be playing here?”

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