Leverage: How to Get It and How to Keep It in Any Negotiation

Leverage: How to Get It and How to Keep It in Any Negotiation

by Roger J. Volkema

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Overview

Leverage: How to Get It and How to Keep It in Any Negotiation by Roger J. Volkema

"What is the most important aspect of any negotiation? The very best negotiators know that the answer to that question is leverage: the perceived advantage that one party has over another. Since leverage is based on perceptions, this subtle factor can change quickly and frequently during deliberations. Knowing how to identify, gain, and sustain leverage is what sets great negotiators apart from the rest of the pack.

Leverage helps you maximize your negotiation skills by showing you how to recognize and use this often hidden trump card to your advantage in any situation. Written in an engaging, down-to-earth style and packed with self-assessments and sample negotiations, the book is filled with insightful advice and suggestions designed to increase your mastery of this indispensable component of all negotiations.

Whether you’re a negotiation expert or just a beginner, Leverage helps you build personal confidence and advance your skills as a negotiator. Presented in an interactive format and illustrated with numerous examples, the book progresses from two-party negotiations to more complex and specialized situations including multi-party and international negotiations. Along the way, there are questionnaires, exercises, mini-cases, and simulations to help you hone your skills, as well as check your progress and comprehension of important aspects of leverage. The book gives you practical, strategic guidance on how to:
• Identify the indicators or signals of leverage.

• Decrease the amount of leverage held by the other party.

• Manage emotions—both your own and the other party’s—and use them to your advantage.

• Gain leverage in e-mail negotiations.

• And much more.

Anyone who wants to win consistently at the negotiating table needs to master the art of gaining and maintaining leverage. Leverage is a one-of-a-kind book that shows you how to gain the upper hand, and get what you want, more often."

Product Details

ISBN-13: 9780814473269
Publisher: AMACOM
Publication date: 03/28/2006
Pages: 224
Product dimensions: 8.90(w) x 5.90(h) x 0.90(d)
Age Range: 17 Years

About the Author

Roger Volkema is a professor of management at the Kogod School of Business at American University, and a private consultant to business and government. He is the author of The Negotiation Toolkit. He lives in Washington, D.C.

Read an Excerpt

Leverage


By Roger Volkema

AMACOM BOOKS

Copyright © 2006 Roger Volkema
All right reserved.

ISBN: 0-8144-7326-1


Chapter One

INCREASING YOUR LEVERAGE

Like it? Well, I don't see why I oughtn't like it. Does a boy get a chance to whitewash a fence every day? -TOM SAWYER

As suggested by the scoring of the questionnaire, there are two ways of managing leverage: You can increase your leverage, or you can decrease the other party's leverage. This chapter deals with the former; the next chapter addresses the latter.

Essentially, there are two ways of increasing your leverage-by affecting the other party's wants and needs, or by affecting the alternatives the other party perceives to be available.

The Other Party's Wants and Needs

There are several ways of addressing the other party's wants and needs. You can: Match your products or services to the other party's needs, alter the other party's conception of what he or she wants or needs, or take advantage of the other party's affiliation needs.

Match Your Product or Service to Counterpart's Wants and Needs. In an episode of the television show "Sex and the City," Samantha discovers that she has breast cancer. Unhappy with the assessment and advice of her physician, she decides to get a second opinion. But not just from any doctor. This new doctor has been rated the top oncologist by New York Magazinefor the past four years. Unfortunately, this doctor is booked solid for months. Undeterred, Samantha decides to camp out in the waiting room, hoping for a cancellation. She is not alone, as a nun with a similar diagnosis has been waiting even longer. The young receptionist is adamant-there are no openings. Samantha drops every name she can think of, but nothing works. Then, during the second day, the receptionist opens a magazine and sees a picture of Samantha with her much younger and famous boyfriend Smith Jerrod (known as the Absolut Hunk), who just happens to be the receptionist's favorite heartthrob. (His picture serves as her computer's screen saver.) Samantha offers to bring him to the waiting room, and suddenly the receptionist is more than willing to schedule an early-morning appointment, which the doctor does not like but will occasionally tolerate. Samantha gets an appointment for the nun as well.

The first way to affect the other party's wants and needs involves matching what you have to offer (your products or services) to the other party's needs. Sometimes you can gain information prior to engaging the other party face-to-face, such as by talking with people familiar with the other party, searching the Internet for reports, analyses, and profiles, and so on. Large companies, for example, target their marketing ads on data collected from multiple sources by companies like Acxiom Corporation, which develops detailed patterns in consumer behavior based on credit-card purchases, warranty registrations, etc.

Samantha might have done the same, by trying to learn more about this particular doctor's office before arriving or from others in the waiting room. Once at the office, Samantha wasted a lot of time dropping names rather than trying to find out what the receptionist valued. In the end she got lucky, but she only succeeded due to that good fortune. Rather than making declarative statements (dropping names), she would have been better off asking questions and observing the receptionist carefully.

Skilled job applicants are good at doing this. Rather than going into an interview with resume in hand, prepared to sell their skills and accomplishments, and braced to answer whatever question might be thrown at them, skilled interviewees are the ones asking the questions: "Tell me what you are looking for in the ideal candidate?" "What will make the person who takes this position successful?" "Where do you see the company going in five years?" Armed with the information, this candidate then can tailor her experiences and skill-set so that she appears to be the perfect fit for the company.

Asking questions, particularly open-ended questions-questions that cannot be answered with a single word or short phrase-is a good way of identifying the other party's wants or needs. An open-ended question in effect says "Tell me what's on your mind ... what is pressing on your mind." If you cannot tell what is on someone's mind from experience or observation (for example, an item they keep examining), you need to ask. And then you need to show how what you have to offer matches those wants and needs.

As suggested by the examples above, open-ended questions can come in the form of a question (for example, "How can I help you today?") or a statement that requests information or elaboration ("Tell me how I can help you" or "Tell me more"). A similar outcome can be achieved through reflective inquiries, in which you parrot back what the party has said. For example, if you are selling furniture and a prospective buyer says to you "We're here to look at sofas," you might respond "So, you are interested in sofas," or just "Sofas?" This is a reflective response that implicitly requests additional information.

An important part of gaining useful information about the other party's wants or needs is exercising the right blend of asking questions and providing information. While offering alternatives and gauging another party's response can yield some information, asking questions generally yields more information. This makes silence an important tool in negotiating. Sometimes silence alone is the best tactic you can employ, and certainly following an open-ended question or inquiry. Silence makes many of us uncomfortable to the point of jumping in and offering valuable information about our wants and needs.

Alter Counterpart's Perceived Wants or Needs. A second way of affecting the other party's perception that you have what he wants is by altering the other party's conception of what it is he wants and needs. This is perhaps easiest when the other party enters the negotiation uncertain about what he wants. Mark Twain's classic tale of Tom Sawyer, who was given the chore of whitewashing the family fence, illustrates this approach. As his childhood friends walk by, Tom creates the perception that there is nothing he would rather be doing on this beautiful day than whitewashing this fence: "Does a boy get a chance to whitewash a fence every day?" It is a rare opportunity that he would not give up or share just for the sake of friendship. And it is the front fence, the one facing the street for everyone to see, not the back fence. As more boys join in, less space remains for everyone else to be added; there are only so many brushes and so much fence. The other boys, having the freedom to do whatever they choose on this summer Saturday, and not altogether clear on how they want to spend it, eventually offer goods in exchange for their turn to work a brush.

A real estate agent, who technically represents the seller, points out a number of features upon first approaching a new property with a prospective buyer-the small front yard (which is easy to care for), good shade from neighboring trees, a slate roof (which is durable). While none of these would necessarily be on the buyer's list of required features, the agent is seeking to alter the prospective buyer's conception of what is important in a house. Likewise, a company looking to buy an electronic security system might be convinced by the sales representative of a security personnel provider that hiring security personnel would be a better alternative, as onsite personnel can respond immediately to any breach in security as well as provide other services (admits, escorts, and so on). And, an automotive parts supplier, seeking to merge with its chief competitor, pitches the idea as an opportunity to create "the world's largest automotive parts distributorship." The proposal even includes an offer to put the competitor's name first in the combined (hyphenated) name of the new company. Even a shoe salesperson, failing to find the color, style, or size of your requested shoe in the back room, will likely bring out shoes of a different color, style, or even size, trying to get you to change your preferences.

As these examples might suggest, affecting the other party's conception of what he or she wants often focuses on the world of possibilities. Advertising agencies do this when they create a "sample" ad campaign for a potential client, a presentation that is at once breathtaking and unaffordable. The presentation sells the agency rather than the campaign, appealing to the client's imagination and ego. Fashion designers do the same when they introduce their new lines of spring fashions, many of which are impractical but captivating. It often helps to know your client or client group to recognize which ideas will capture their imagination. At one point during his quest to bring John Sculley from Pepsi to Apple Computer, company cofounder Steve Jobs asked: "Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?"

A special case of using this second technique to affect the other party's perception of what she wants or needs is the introduction of future opportunities. Some business negotiators, for example, will allude to the possibility of a long-term relationship, leading to increased sales or purchases. On occasion, this may be part of what a seller wants and hopes for from a buyer. An apartment manager, for example, needs someone to quickly repair gutters that were damaged by a storm, which might lead to a long-term contract to clean the gutters semiannually. On other occasions, such as selling your home to another party because you are retiring to another region of the country, there may be little likelihood of future contact. In that case, an invitation to "stop by and visit the house at any time" may be more fanciful than likely.

The ability to alter what a party really wants, or at least cast light on an issue or feature that did not seem especially important at the outset of the negotiation, is what separates the average salesperson from the great salesperson. The expression "he could sell sand to a man in the desert" captures this capability: A man in the desert would have no use or interest in more sand, but somehow an accomplished salesperson could redirect the man's interests from water or food to believing that what he needs most is more sand.

Tap Affiliation Needs. A third way of affecting the other party's wants and needs is by recognizing that individuals also have social or "affiliation" needs, which represent a potential source of loss or "cost" in a negotiation. Recall that leverage is relationally based; it exists only as long as the relationship exists. If a relationship is important to one party but not so highly valued by the other party, then the relationship can be the basis for exercising leverage. This is most apparent in young children, who learn at some point that telling another child "I will not be your friend if you don't give me what I want" often produces capitulation. (When used on a parent, this ruse is generally taken at face value and defused with a statement like "I'll love you anyway.")

Affiliation needs can be engendered by making the other party feel welcome, important, or part of the team. When the other party makes a mistake or blunder, you say: "Oh, that's happened to me, too." When the other party approaches something in a different way, you respond: "I never thought of it that way before." By listening to the other party's stories or responding with affirmation at critical points, you implicitly communicate that you are more alike than different and, where you are different, that there is something special about the other party.

A friend told me about how she and her husband lost out on a bid for a house, despite making a very attractive offer. It turned out that the couple selling the house had already developed an affinity for the "winning" couple, that was expecting the birth of twins within the next few months. The winning couple had actually enclosed a copy of the mother-to-be's sonogram with their bid.

Many of the advertisements we see on television feature well-known sports figures and other celebrities. These ads are intended to tap our affiliation needs. We want to be like the hero of the last Super Bowl, the star of the hit television series, or the singer whose recording is now topping the charts. We feel as if they are speaking directly to us. If they use it and endorse it, we want it.

Most salespeople tap affiliation needs instinctively. They shake your hand, call you by your first name, tell you funny stories, laugh at your jokes, connect with you on multiple levels. Their friendly, gregarious approach is either part of their personalities, or they have learned through trial-and-error that customers who like them are more inclined to buy their product or service.

Humor can provide an effective means of building social bridges, if it is done properly. Self-deprecating humor, for example, portrays an individual as "human," someone who makes mistakes and who does not see himself as superior to others. In some cases, this is a necessary condition to building a sense of affiliation. Often political figures will do this, as a way of showing that they are "one of the people." Bill Clinton joked about his love of fast foods; George W. Bush made fun of his English syntax. (Humor also implies that the stakes are not that important to you, a potential means of decreasing the other party's leverage, which is discussed in the next chapter.)

Tapping the other party's affiliation need is something that can even be accomplished at the very end of a negotiation. An individual who is selling a desktop computer and agrees to help the other party set it up and learn how to use it (or, alternatively, the individual who throws in some software or a microphone and camera) is likely to gain some affiliation points. That is, you feel some admiration or respect for the individual, which you now don't want to lose. Sometimes what is offered as a type of add-on or sweetener at the end of the negotiation is really of little or no value to the party who is making the offer or gesture. For example, a woman selling her car would have little use for the two snow tires that fit only this particular model. So in throwing the tires in, she is actually getting rid of something with very little value to her. When such an item is initially held out as important, the tactic is referred to as a strawman tactic. That is, an issue or item that is portrayed as having value is later traded for something else of value (in this case, affiliation points).

The Other Party's Alternatives

The other way of increasing your leverage is by focusing on the other party's alternatives. There are two ways to accomplish this. You can discredit the other party's alternatives or eliminate the other party's alternatives.

Discredit Counterpart's Alternatives. If the company seeking a security system mentioned previously is convinced that using security personnel is preferable, and knows of another security firm that provides such personnel, then the security personnel provider can increase its leverage by changing the company's perception of the viability of the other firm. This can be done in a variety of ways, such as indicating that the other firm has been having financial problems and there are rumors that they may go out of business. Who would want to sign a two-year agreement with a company about to go bankrupt?

History is replete with examples of companies, if not entire industries, trying to discredit another company or its product. The inventor Thomas Edison, a proponent of direct current, tried to discredit alternating current as unsafe, going so far as to electrocute an elephant with alternating current. Dairy producers sought to discredit the introduction of alternative spreads, such as margarine. Wendy's ran a memorable commercial for its hamburgers that asked "Where's the beef?" intending to discredit the likes of McDonald's. Cable providers attempt to show the limitations of satellite dishes. Gas companies describe the shortcomings of oil-derived heat. Brick and masonry companies seek to discourage homeowners from building wood houses.

(Continues...)



Excerpted from Leverage by Roger Volkema Copyright © 2006 by Roger Volkema. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Table of Contents

"Acknowledgements

Introduction

1. Negotiation and Leverage

2. Four Characteristics of Leverage

3. The Four States of Leverage

4. The Sources of Leverage

5. Indicators of Leverage

6. Checking Your Progress: Identifying Leverage

7. Managing Leverage

8. Increasing Your Leverage

9. Decreasing the Other Party’s Leverage

10. Checking Your Progress: Altering Leverage

11. The Dance of Leverage

12. Reality Test

13. Playing Defense

14. The Climate of Negotiation

15. Selecting an Approach

16. The Art of Communication

17. Another Reality Challenge

18. Leverage, Uncertainty, and Risk

19. Leverage and Ethics

20. Managing Emotions

21. Negotiating in Cyberspace

22. Multiparty Negotiations

23. International Negotiations

24. Surrendering Leverage

25. Final Thoughts

Resources

Appendix A — Mafia (An Intriguing and Useful Parlor Game)

Appendix B — Three-Party Negotiation

Index"

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