Welcome back. What I'd like to talk about is a framework for thinking about the negotiation process. And I want to share a couple of key themes that we're going to pull through the entire course. Here are some ideas. First, the foundation of negotiations are built on two things. First, information. Information that we gather before the negotiation and through the negotiation process and information even matters after the negotiation concludes, and I'll say more about that in a little bit. So information is one of the key pillars of negotiation. The second are relationships. And I think carefully about the relationship idea where again, we're going to build relationships before during and after the negotiation process. Here's what I think about for relationships, when we have a transaction with a total stranger, so you think about say buying a ticket or you go pay for a restaurant meal, you're dealing with somebody that you do not know. And there you want to close that account and that account has to be in balance. So you go into a convenience store, you pay a certain amount of money, you expect a certain amount of goods and if you paid too much money, you're expecting change. That as you want that to match exactly. And so here with the transactional relationship, there's not a lot of wiggle room for a broader, more creative kind of deal, it's a very simple transaction. So at one end we have transactions with people that are complete strangers, on the other extreme you can think about a continuum where here's somebody I know really well, I have a close relationship with, maybe even a significant other or a partner. That kind of person we're willing to let the deal get way out of whack. So you might drive this person at the airport at 5 in the morning, you might loan them a substantial amount of money, not expecting that money to get repaid anytime soon. And you might not be very particular about the interest that they pay you. So those kinds of relationships are totally different. There there's lots of room to find creative opportunities where we're willing to explore somebody else's needs and address those, and they might address your interests and needs, where there's a lot of room for a deal. So I want to sort of think about this, that is the relationship that we build is going to be extremely important, both in the ability to create a deal and then ultimately, once we have that deal, how committed we are to it. So I want to think about information and relationships and we'll keep coming back to these two key ideas throughout the course. Okay, next, I want to to build just a framework for thinking about the negotiation. And here I want to think about three broad pieces of the negotiation process. The first is preparation, so preparation, it is not glamorous, but this is where all of the hard work gets done. I was consulting for a software company and I was talking to their sales executives, and the head of sales was talking to me and I was talking about the importance of preparation. He said, yeah, you know our best salesperson, you know what that person does? He just prepares, and prepares and prepares. And he takes notes before he goes into a meeting, he's followed up to find out about the son's broken arm, about the new puppy, about the vacation they went on. He has all of these ideas prepared before they go into the deal. And that's the exact same way in negotiations that is we need to prepare, we need to plan, we need to build relationships, we need to prepare ourselves for the negotiation. This is not the glamorous part of what you see in the movies, but the best negotiators spent a lot of time preparing. The second stage is the bargaining stage itself. And here I want to break the bargaining stage into two parts. One is the exchange of information. That is when we're face to face, there's probably a lot of information we gathered ahead of time, but there's some information we didn't. There are questions we need to ask, there are questions we're going to be asked and we need to answer. And that exchange of information is really important. We don't want to race through it before we start exchanging offers, that's second key piece of the bargaining stage. So the bargaining stage has these two pieces, the exchange of information, exchange of offers. The third stage is closing. When we go to close, so what do we do when we go to close? When we're closing, we're making sure we're gaining commitment and we're making sure we're managing satisfaction as we go through and close the deal. So preparation, bargaining and closing and we need to keep our eye on all three of these pieces. And here's the idea, I don't know if you've ever taken a tennis lesson or a golf lesson, if so you're probably better at these sports than I am. But here's the idea, we often get really excited when we just hit the ball. So when the racket or the club strikes the ball, that's the exciting part. That's what we're all really excited to do, that's the bargaining stage. But we know that to reliably and predictably do really well, this backswing and this follow through are really important. And we might neglect the preparation or rush the preparation or not focus on this follow through or the closing. And here's the idea, sometimes we actually might hit the ball just fine with a bad backswing and a bad follow through. But the pros, the people that predictably, reliably and consistently hit that ball well, they bargain really well, they're doing this preparation and they're doing that closing. So that's the idea that I want to suggest, that is the preparation and closing, they're actually extremely important, the bargaining is too, but we want to be able to put all of it together. So that's the framework, what I want to dive in to say a few words about, I want to say a few words about preparation. So we think about preparation, the first thing I want to think about is identifying opportunities to negotiate. So step one is to figure out is this negotiation, is this worth negotiating for or not? And there's some context or some domains when hey, I really have an opportunity here to ask for more but maybe the relationship is so important that it's not worth doing. Or maybe the upside in that moment isn't worth what's going to happen later when you don't have all the cards and they're going to come and extract concessions from you later. And so now building and managing that relationship is really the top priority. So, I want to think about is this an opportunity negotiate and should I negotiate? And what I want to think about is when negotiations confer the greatest value? When do negotiations really matter? And the idea here is to think about how thick or thin the market is, how idiosyncratic or common the good and service is. And you can think about this also with your salary negotiations, is this really an idiosyncratic unusual thing? So you can think about real estate, so is it an unusual piece of land or is it a condo where there are hundreds just like it or similar. You want to think about this as a continuum, that is how unusual is this good or service. So at one extreme it could be say stock, you're going to buy 100 shares of IBM stock and there's a really well developed market, there's a lot of information, a lot of buyers, a lot of sellers, a lot of substitutes. I don't really care if I buy this 100 shares or that 100 shares, the idea here is if it's a really thick market negotiations don't matter much. It's only in that idiosyncratic thin market, few buyers, few sellers where what you might have are really discrepant valuations. So of course, we want to pay the fair market value of something, but there's a zone of indeterminacy, that we're not sure exactly what that number is. So if I were to ask you what's the right salary for you, there's some zone of indeterminacy. You might concede, yeah, 10 million is probably too high, $1000 is too low, but there's going to be some zone where we're not quite sure there's a range of numbers that might be okay. And in that zone, that's where negotiations will help us find the number, and that's where negotiations matter. So I want to think about this zone of indeterminacy and to think about whether it's a very thick market, like a stock market or very thin market, like a very unusual piece of real estate. And we want to think about that continuum and recognize that it's in these thin markets that we should put on our negotiation hand. Okay, the next idea is to think about when we should negotiate. And there's this idea, a term in the negotiation literature called ripeness. When are people ready to negotiate? And sometimes people aren't ready. For example, if somebody is selling their house and they put a for sale sign, they've mentally geared themselves up to sell their house. That's a much easier time to buy somebody's house than before they've committed to selling. You go knock on somebody's door, you're probably going to have to pay more to get them to sell their house. So are people ready, are they receptive to negotiating? You can think about this idea of ripeness. The second idea about when you should negotiate is to think about patients. Patience is extremely important in negotiations. You want to be patient, you don't want to feel as if there's time pressure as if you're just trying to get out of that negotiation. You can think about in some car dealerships, you'll be sitting there and it'll take hours and hours. The salesperson has to go back, talk to their boss like I haven't sold a car before they're going out, maybe they're playing foosball in the back. You don't know what they're doing, they're, taking a lot of time. And what I want to suggest is the moment you say, hey, I just want to get out of here. That means you're impatient and that you're willing to trade off concessions for that patience. So we want to think about that patience or to put it a different way sort of think about when UPS workers go out on strike, if you're a retailer in the United States, there are basically two seasons, there's Christmas and not Christmas, those are the two seasons. And the UPS workers super busy during October, November, December. When it's February, March and April that's far less busy. So when do they have more leverage? If you're the UPS workers, you want to be negotiating in that or ahead of that very busy period when you're most in need. And so you want to think about that or trash collectors. So here in Philadelphia, the trash collectors go on strike in the summer, not in the winter in the winter, it's just a big snow pile. It's not a pressing issue, in the summer, every week really counts. So you can think about the relative time pressure and you think about when you plan the negotiations, you want to think about when the contract is set to expire, that timing really matters. Well I'll share one final example. You think about school teachers, when do school teachers go on strike? They're not going on strike in May or June, they're going on strike in August, September right when all the parents are like, my gosh, my plan is for my kids to be in school. I really care about this, let's get this settled. So that's the idea,sort of think about the timing of the negotiation, where that's going to be another key issue to plan as we prepare to negotiate. So this is even before we get to the table, the idea is to think about the opportunity to negotiate and when we should be negotiating.
