With one group, most came to agreement, many splitting the money fifty-fifty, though often only after extended haggling. Richard then gave another set of paired subjects—call them group B—the same amount to divide, but he told them that the prize would shrink with every tick of the clock. Because time literally was money, these people reached agreement quickly, almost always splitting the prize equally.
With group C, Richard added a devilish twist. Again there was a tax that grew bigger with time, but here he specified that only one side—not the other— would pay most of the entire penalty. As you might guess, the people who were more heavily taxed usually got a smaller share. The surprise was that untaxed parties often did poorly too. These subjects typically overplayed their hand. Believing that time was on their side, they expected their counterparts to buckle because of the ever- mounting tax.
By the time they reached agreement, the pie had shrunk significantly, resulting in less for both sides. People fall into the same kind of trap in real-world negotiations.
In business transactions, each side may be hesitant to make a concession to close a deal, fearful that they will look weak.
Likewise, litigants pour money into lawsuits, never expecting to try their case, on the assumption that they can wait out the other side. It takes only one stubborn party to create a stalemate. If both sides are committed to outlasting the other, the costs can be colossal. The National Hockey League and the NHL Players Association ended a protracted dispute early in , but only after each side suffered enormous losses due to cancellation of half the regular season.
Each group thought that time favored it. In many ways, this was a lose-lose negotiation. Both sides would have been substantially better off if at the outset they had somehow managed to reach the same terms that they finally agreed upon. The lost ticket, concession, and media revenue is gone for good; so are the paychecks that the players would have received if there had been no stoppage. The outcome seems all the more irrational given that both sides had been down this road before: Half a season was squandered in —95, while a lockout in —05 caused the cancellation of the entire NHL season.
That can be the case if the added time enables you to gain leverage by improving your fallback position or winning key allies. Stringing along customers may prompt them to look for better terms from your competitors. For instance, if you hold out for a better price on a new home, mortgage rates may rise.
Certain things about your counterparts—their priorities, temperament, and trustworthiness—may be learned best by negotiating in earnest. A few years ago, Iberia Airlines approached Boeing and asked it to propose a new midrange plane. The aircraft industry had been in a deep slump since , and Iberia was one of the few carriers making money at that time. The prospect of new business for Boeing seemed a godsend to the company.
Nevertheless, it was hesitant to make a proposal. In the past, Iberia had always favored Airbus, a European consortium. It was likely that the Spanish airline just wanted to use Boeing as a stalking horse to wrangle better terms from its longtime supplier.
For Boeing, the cost of bidding for the Iberia contract—and losing—would be substantial. Beyond managerial time and millions of dollars in design work and financial expenses, there were important reputational factors. It would also cause morale problems within the company.
But any real chance of securing the Iberia contract would require Boeing to court the airline aggressively and make a bold bid. Halfway measures would not work. Initially, Boeing decided not to bid. The odds of winning were just too small, and the costs of losing were correspondingly high. Coming up empty-handed in this negotiation was worse for Boeing than never trying at all. Having to go all in with its proposal—and doing so publicly —compounded its problems.
Those chips may be your time, money, or status— or all three. The first driver to swerve loses face. Schelling speculated about what would happen if one of the drivers yanked his steering wheel off the steering column and conspicuously tossed it out the window. The other driver would have to veer away to avoid disaster. Schelling wrote his essay at the height of the Cold War, so many of his examples have a hard edge, but his insights also apply to business today.
Even though audience ratings were sagging, the upstart network offered almost twice what CBS had been paying for the prime Sunday-afternoon time slot. The preemptive strategy worked. With one aggressive move Fox not only won NFL rights but also elbowed a place for itself at the table with the three established networks. It might have been able to acquire the football contract more cheaply, but by making a blow-out offer, Fox ended the competition then and there.
Sandy already owned a two-acre island nearby, a low-lying pile of granite with sparse vegetation. But it had a camp, and when the tide was right and the wind was calm, he could row over and enjoy being master of his little kingdom. Sandy discovered that a widow in upstate New York owned the property. He wrote her a letter, introduced himself, and asked her to let him know if she were ever interested in selling.
He heard nothing back in return, but the inquiry had cost him only a few minutes of his time. He wrote again the following year. Again, no answer. For the next six years, he composed his annual letter, reiterating his interest in the island and updating the owner on family news. Never did he get a reply. He would call, he said, and if she wished him to stop, he would respect her wishes. Several months later, Sandy received a letter from the owner saying that she was now ready to sell.
She wanted him to make an offer. Sandy calculated the most he could afford and sent a proposal, explaining his circumstances. This time the woman phoned him to say that she would accept his figure. Sandy was ecstatic. Sandy wrote back to the owner that he understood the circumstances, but his offer was the best he could do given his family obligations. Two days later, the woman overruled her lawyer.
Sandy now owns Bold Island. Do you go all in? Having mapped backward from point Z—your goal—to your starting point, A, you may persuade yourself that there is but one true way that things can go. Klein has found that slightly rephrasing the question conjures up a richer picture of what could unfold. Imagine that the negotiation is under way.
What is it? That subtle shift in framing will animate your vision. Your focus will shift from whether something bad might happen to assuming that trouble will occur. But consider things that are unlikely yet still could happen. A seemingly simple transaction with a supplier could drag out longer than expected, for instance. If that happens, meeting commitments to your own customers could be difficult.
Rather, limit your analysis to the outer bounds of reality. Think of something positive that has a 10 percent chance of occurring. If so, you might get a better price or faster delivery than in the past. Optimistic scenarios will raise your sights. Studies show that negotiators who set lofty goals get better deals. Instead of contenting themselves with outcomes they can live with, these negotiators focus instead on how much the other party might be prepared to grant.
In addition, imagining upside scenarios prepare you to recognize opportunities and find creative solutions. Research also shows that positive and negative expectations about negotiation can be self-fulfilling.
In a recent experiment on psychological priming, Adam Galinksy and his colleagues gave some subjects five minutes to write a pep talk for themselves. They were told to list the outcomes they desired and the behaviors they would use to achieve, or promote, them. The subjects in a second group were instructed to list mistakes that they might make and what they could do to prevent those errors. But there was an added bonus: when promotion-primed negotiators were matched up against one another, they created far more value than did pairs of prevention-primed people.
Those in the latter group tended to accept anything that met their minimum needs, while the promoters pushed harder for their real priorities instead of just compromising. As a result, they were more likely to spot mutually beneficial trades. Optimism can generate value and put you in a better position to get a goodly share of it. But being unrealistic is doubly dangerous.
Ungrounded optimism can also blind you to obstacles that may pop up. The snowbound soldiers in the Alps drew confidence from their map. It renewed their hopes and gave them direction.
Instead, as with strategy for negotiation, they used it as a tool for ongoing learning, adaptation, and ultimate survival. In complex cases, formal analytic tools can help formulate and test different scenarios. In a lawsuit settlement, for example, decision tree software can gauge risk at different stages of litigation.
Similarly, elaborate financial models can reveal alternative ways of structuring deals in the face of turbulent markets.
For most cases, though, thinking out loud and back-of-envelope assessments are sufficient. When the owners came to that provision, they were shocked.
Arvind sheepishly tried to explain, but it was too late, and the deal was dead. If he had thought more imaginatively about the risk of rejection, instead of just crossing his fingers, he could have managed the downside. Suppose, for example, he had begun his conversation with the owners by assuring them that he would buy the property. With that settled, he could have sought their help in solving his problem with his coinvestor.
And what of Liz and Tony Weiler, our other buyers, who said yes to an apparent ultimatum but still brood over whether they overpaid? If the parties can agree on an appropriate standard, then it may be easier for them to arrive at a workable price. With little to gain and much to lose by prolonging the negotiation, it was best simply to say yes. The Weilers got the house that they wanted, after all.
As with any successful deal, it came with the nagging question of whether they could have done a little better. That kind of doubt is better, though, than the regret that Arvind lives with.
But you have to accept that in negotiation your fate is never solely in your hands. Some of what happens in a given case will be either unpredictable or beyond your control. Negotiation strategy must allow for that reality. They earn their living by hammering out big contracts with their players—or, more specifically, with their agents.
Deals for superstars add up to millions of dollars and can lock in a team for up to a decade or more. The NHL imposes an overall salary cap on teams, so signing the right players at the right prices is critical to success on the ice.
To illustrate the importance of preparation, we split the participants into two groups and put them in separate rooms. We asked people in one group to be in their familiar role of general manager. We had the others be agents. We wanted to know their planned first offer or demand, in the case of agent and their absolute walkaway. When we paired up people to negotiate, the most that teams were prepared to pay was almost always less than the minimum that the agent was willing to accept.
In more than 90 percent of the matches, there was no room for agreement. Many participants were hundreds of thousands of dollars apart. Almost all of them had predicted a stalemate. Not so. They knew from experience that players and teams work things out. But for most of these GMs, negotiation is about getting the other side to cave in. This zero-sum model positions an irresistible force on one side the player and an immovable object team management on the other, with each pushing hard until somebody budges.
Seeing negotiation this way makes it a win-lose proposition. The one-dimensional model fails to reflect the real-world complexity of negotiation. When people believe that there is only a given amount to be divided, the long knives come out.
And even if you recognize the potential of value-generating trades, the one-dimensional framework is no help in weighing one package of proposals against another. Take the case of my friend Jack when he was car shopping a few years ago. He likes Volvos, but only the sporty coupes and fancy sedans. On a visit to the dealer, however, he spotted a jet-black, souped-up wagon with a plus horsepower engine, a six-speed gearbox, and high-tech wheels.
Although Jack usually buys brand new, he asked the salesman why this particular vehicle already had five thousand miles on it. Privately, Jack loved the car, but he also loves a bargain, so he was doing his best to mask his craving. Jack knew there would be a deal. Even then that much was certain.
The situation was hazier for the salesman, who was trying to assess this stranger who had ambled into the showroom. Was Jack a prospect or just a tire kicker killing time?
Either way, what would be the best way to pitch him? Should he push on price or just be happy to move an offbeat vehicle off the lot? Jack dresses well. Maybe the salesman sniffed a thick wallet. Underneath all the posturing and bantering, Jack and the smooth-talking salesman were negotiating seriously.
Each was trying to scope out the bargaining range. Jack had to see this car himself, hear why it was being sold, and revise his antiwagon bias. Walking into the showroom, Jack would have bet dollars to donuts against even looking at a station wagon.
That same afternoon, after a lot of haggling, he happily drove one home—and at a good number, too. He decided on the latter. Did he want to finance the purchase? Jack had planned to pay cash, but Volvo was subsidizing a 1 percent rate.
That was too good to pass up. He also got an extended warranty at cost. The terms were worked out in back-and-forth discussion. In the end, price was still an important factor, but other items proved to have value too.
This chapter presents an alternative, more realistic model for conceptualizing the area of potential agreement, as well as a tool for developing appropriate strategy. This triangle image allows parties to move into a broader area of workable deals, not just back and forth along a taut line.
And when there is no deal space starting out as with the hockey GMs , agreement may be reached by finding creative solutions rather than through concessions. Explaining the deal triangle concept is easy. Getting an accurate fix on real- world possibilities is more challenging. It can flex, grow, or vanish as conditions change in negotiation. Even so, keeping that picture in mind will help you chart your progress as you test assumptions and update your expectations. What you discover as you negotiate may justify either upping your demands or softening them.
You need to draw a line somewhere, but define it broadly. Rather than putting a single stake in the ground, prepare by identifying a set of different outcomes that would be acceptable—though only barely. Together those marginal deals constitute your baseline, or the border that separates your saying yes from your saying no.
Drawing the baseline involves three simple steps: 1. Establish a benchmark deal. Identify equivalent packages. Anticipate likely change. The first step—establish a benchmark deal—is Negotiation From the first chapter, recall the classic BATNA concept the best alternative to a negotiated agreement. A particular offer is tempting only if it at least matches your fallback option, all other things being equal.
Correspondingly, if your nonagreement alternative is poor, you may have to take less than you hope for and feel you deserve. It also gives you a standard for evaluating alternative deals. Step two is to identify equivalent packages—better in some respects, worse in others—that on balance would be worth the same to you as your benchmark. Everything in the bag may have some value to you, but some items you like, while others, such as fresh raspberries, you love.
How many cans of soup would you give up to get another pint of berries? Maybe ten? Rather, imagine a different assortment that would be worth exactly the same to you as the bag you won initially.
Any offer that you receive in negotiation will likewise be a mixed bag of provisions: some that you gain from the other party, and other items that you must grant in return.
Remember that the task here is to find deals that put you on the knife edge between accepting and rejecting the proposal. Going through this preparation exercise forces you to weigh trade-offs. Thinking them through ahead of time is a whole lot better than making snap decisions in the midst of a negotiation. Mulling over your preferences also opens up your thinking the same way that warming up before a match makes a tennis player limber and focused.
Research suggests that negotiators who prepare by toying with alternative solutions generate still more ideas when they negotiate with other parties. Karen Lacey was reasonably happy in her job but was being wooed by QXData, a top-tier company that she liked a lot. She hoped that it would offer her a handsome compensation package, but she wanted to determine her baseline: the lower boundary of acceptability.
But on the other hand, she had some hesitations about the risks of changing jobs. With that in mind, Karen thought next about trade-offs, using a yellow pad to note different deals that would be minimally acceptable. She asked herself, for instance, what she would require to make up for a hypothetical 10 percent lower salary.
Getting some equity could offset living on a somewhat smaller income. She hoped to do better than any of these bundles, of course, but she understood the need to lay out the boundary between yes and no. That meant deliberately confronting herself with hard choices. If one of her hypothetical deals looked better than the others, she trimmed it down a bit. If another was trumped by the rest, she sweetened it. After tweaking these packages, she now had three points that constituted her baseline, the first side of the deal triangle.
Thinking imaginatively about your baseline is important whether the negotiation affects your career as it would for Karen or is a simpler transaction. Next, conjure some equivalent deals. How deep a price discount would it take for you to be tempted by a demo with ten thousand miles on it? Or go in the other direction: How much more would you pay if the dealer included a premium sound system? When Karen sits down to close the deal with her new employer, her enthusiasm for the job may grow.
Together they may think of other items that she values a discretionary budget, for example. As new issues and alternatives arise, her initial trade-off analysis will give her a solid foundation from which to work.
This leads to the last step in establishing a baseline: anticipating change. The analysis so far has been premised on what you know today and how you currently rank your priorities. Circumstances may change as well. She imagined what might happen that would raise her minimum requirements. What if in the midst of negotiating with the new company, her current employer gave her a promotion—and the pay increase that would go with it?
But she also considered what situational changes might justify accepting less than her original baseline. If Karen had to cover two mortgages, straight salary could look better than stock options. She might readjust her trade-offs accordingly. When Karen took into account how her baseline could change, it looked more like a brushstroke on a watercolor painting than a clear-cut line on a blueprint. She was all right with that ambiguity. It reminded her that her success negotiating with QXData would be influenced not just by her skill but also by external factors.
Moreover, she knew that her baseline was merely one boundary of the deal space, not a measure of success. Instead, she understood her baseline as simply the lowest rung on a ladder of potentially ascending value. One reason is strategic. Or they might turn the same question back on you. You must look for clues elsewhere. Judgments often have to be made case by case.
Agreeing to a high salary might be hard for him if it would disrupt existing pay scales. If that turns out to be a problem, a performance bonus might be a solution. Thinking about what other parties should value is always a risk, however, as they may see things differently. Test your thinking with disinterested friends who may suggest other perspectives.
Maybe a friend knows someone else who once worked at QXData and is familiar with its compensation policy. So be it. Floating different packages will give her a feel for where her counterpart has flexibility. Anticipating the concerns of the other party also provides a basis for influencing its thinking—and shifting its baseline in your favor. Someone looking to buy your house might have calculated how much of a mortgage she can afford. You might persuade her to bump up her offer by explaining how special energy-saving features will reduce operating costs.
Or in litigation, revealing key documents may convince the other party to reassess its chances of winning in court. Mislearning is inevitable. Another car example makes the point. I was at a dealership waiting for an oil change. She was wearing jeans and a tattered sweatshirt.
Alex explained that she and her husband had come in two months earlier and asked about the highest-end model that the dealership sold. They wanted the sunroof, the heated leather seats, almost all fancy options, but not a turbocharged engine.
Sure enough, when he phoned them after the car came in, they seemed evasive. Could you hold it for another week? Alex half expected never to see them again. She and her husband wanted a plush-looking ride, but with a fortune in hand, they planned to drive as cautiously as their grandparents. Depending on our personalities and dispositions, we may hope for the best from them or fear the worst.
A family may be looking to build a new home. They solicit a bid from a well-regarded contractor and are ready to sign a contract when world timber prices shoot up. What then? The buyers will either have to stretch their budget and pay more than they expected, or shrink their plans and live in a smaller house.
The builder, in turn, will have to recalculate his bid, figuring out what portion of the added cost he can pass on and how much he will have to eat. The family may end up with less house and the builder may get less profit because economic conditions narrowed the deal space. Of course, if lumber prices dropped, room for agreement would expand, leaving one or both parties better off. Some constraints are economic.
Others can be based in law. Two competing businesses might wish to keep their prices high but be legally barred from price fixing. The ticking clock can be a limit as well. When my friend Jack bought his souped-up Volvo, the 1 percent financing improved the deal, but it was available supposedly for only two more days.
Company policy and procedures can be constraints as well. Formal analysts would quibble about diagramming the deal space in this way. A key element would be lost, however.
Sometimes the deal space can be expanded by addressing external constraints. A developer would pay twice that, however, if condos were allowed. In that instance, the parties would have a shared interest in lobbying local officials for a rezoning. Thus, all three sides of the deal triangle are fuzzy. In time the resolve of one or both parties may wane. They may engage in less posturing or discover creative ways of breaking the impasse. When that happens, the size and nature of the deal space may change.
Your own baseline is merely a floor. Outcomes above it are better for you; some may be much better. Establishing a stretch goal calls for best-case-scenario thinking. Specifically, imagine an outstanding result, one that might have only a 10 percent chance of materializing.
Goal setting involves guesswork, of course. Much depends on the needs and perceptions of your particular counterpart. Start with the baseline you estimated for them. Then, because you need to stretch, go a bit beyond that by imagining what conditions or beliefs would convince the other party to be even more generous than that. From those potential deals, pick as a target whatever bundle serves you best. Call this intentional wishful thinking. Have high hopes but also ponder what conditions would have to exist to make them come true.
In addition to negotiating her compensation, Karen realized that she was also establishing her relationship with her prospective boss and colleagues. Jack Binion, a celebrated Las Vegas casino operator, tells of an old Mississippi family that owned some prime farmland that another developer was trying to buy.
Fortunately for them, the buyer started first. You can think of intermediate levels of satisfaction as rungs on your value ladder, or gradients on a wilderness map that mark increasing altitude as you approach the summit. From a purely strategic viewpoint, it would be ideal if you alone could see the deal space, and your counterpart could not.
Information is power. If nobody reveals his interests, nobody gets exploited. Then again, if there are no disclosures, no deals get made. This is the classic creating-claiming dilemma inherent in all negotiations.
Out of necessity, negotiators must exchange information. Where relationships are strong and trust is high, this may come easily. Even if both parties were forthright and the deal triangle was transparent, there still could be jostling over where the deal should end up.
Splitting it down the middle might be a practical solution in some cases, but in other situations, one or both parties may believe that they deserve the major share. One way or another, they should not settle near point C, where their respective baselines intersect. Such an outcome would work for both of them, but just barely.
Seeing the deal space as an area that potentially can be expanded provides a richer and more realistic view of the process.
Such hesitation is another reminder to be modest when making assumptions. You may prefer to sketch a broader band of probabilities instead of committing to a hard number. So, not to jinx herself, she put the odds of making a deal at 75 percent. Does your guess reflect your personality, or is this case particularly promising or daunting?
What specific facts or assumptions inform your estimate—and what more would you like to know to confirm or revise it? Even after reflection, it may be hard to tell if there will be lots of room for agreement or only a little. You should have a good sense of your own alternatives but find it hard to gauge how badly your counterpart needs to make a deal with you. Instead, factor it into your plan.
Call this the latitude of possibility. The next step is estimating the potential upside of a deal—the longitude, if you will. Ask yourself whether this particular deal will yield a lot or only a little, compared with your fallback plan, given the effort needed to pull it off. To locate where you are on a scale, think back to your deal triangle, specifically the baseline you estimated for your counterpart. Her current employer might match any offer.
In dollars-and-cents terms, the upside of agreement seemed modest, at least in the short term. She liked the people at QXData and felt the company was poised for a great future. She wanted to be part of it. Going through this exercise helped her remember what mattered most to her. She drew a bold circle around Large. In the upper right-hand cell are the grade-A deals. Think of this area as standing for abundance, if you like. It represents negotiations where both the odds of agreement and the expected payoff are high.
If your assessment of an upcoming negotiation lands you here, congratulations. If you have competition, however, you may have to sweeten your offer to win agreement.
Again, the chance of agreement is high and the outcome is better than your fallback, but the upside is lower.
The left-hand column represents relative long shots. You rarely want to be down in category D: dead-end territory. There are exceptions, though. Each category calls for a different strategy. Once in a while, you may find yourself in the grade-A area. Good for you. But you should revisit your assessment of the upside. Your walkaway may be better than you expected.
Others may be eager to do a deal with you. Later, when we were alone, I told him that his unblemished record was an odd thing to be proud of. If you trudge on, you may miss other, more promising opportunities. When Karen looked at her matrix, she had mixed emotions about finding herself in the abundance box. It was partly superstition, she knew. But it also surfaced a conflict she was feeling. Drawing a deal triangle and constructing a prospect matrix had bolstered her confidence.
There were still question marks, many that she could resolve only in the course of negotiating, but she knew that she was in a good position. Moreover, she had thought about her baseline, her trade-offs, and different ways of structuring an agreement. Karen had even set a stretch goal. She had done her homework. Whichever way negotiation unfolded, she was well prepared to learn, adapt, and influence.
Instead, they focus on what they think they can persuade their counterparts to accept. They think big, make bold demands, and compromise slowly. Sometimes they succeed, but they run a greater risk of stalemate. The satisficers were content with doing a bit better than their next best offer, while the maximizers bemoaned not accomplishing their lofty goals. It would be great if we could switch these traits on and off. During the actual negotiation, we could tap the maximizer side of our brain to expand the deal space.
In its worst form, it generates self-doubt and insecurity. Consider Hollywood producer Jerry Weintraub, who seems to embody both these traits. But in addition to recounting his successes, Weintraub also speaks about failures without regret.
Nowadays, lining up an all-star cast for relatively short money would seem next to impossible. Nevertheless, he called Clooney, Roberts, Pitt—the whole gang—and shamelessly told each one that all the others were on board.
Nobody wanted to be the spoiler, so everyone signed up again. His optimism proved irresistible to the actors, all of whom had become good friends. Instead, he took a step at a time—though they were bold steps, to be sure. It may seem as if the fifty-nine-story tower, with its sharply angled peak, has stood in Midtown Manhattan forever. Up into the s, however, the block that fronts Lexington Avenue between Fifty-third and Fifty- fourth Streets was sleepy and timeworn.
It was home to low-rise residential and commercial buildings, an old Gothic church, and other properties owned by various organizations, trusts, and individuals. The tale still serves as a master class in formulating and implementing negotiation strategy. Deliberate learning was a priority for the New York Realtors who acquired the properties for Citi.
It enabled them to adapt to changing circumstances and to persuade reluctant owners to sell. Sometimes the land assemblers extended an olive branch. Other times they brandished big sticks. In still other cases, they reached agreement not because of specific terms they offered but, rather, due to patient relationship building. Each acquisition was an end it itself—getting all the properties was essential—but every transaction also helped the assemblers recalibrate as they moved forward.
The project was audacious, certainly falling in the low-odds, high-payoff category in our prospects matrix. The assemblers recognized that reality. Even so, the negotiations took several years to complete—and they involved scores of parties and millions of dollars. Few of us engage in deals of such magnitude or complexity, but small-scale everyday transactions require the same kind of flexible, creative, multilevel approach. You may have already grasped some of these lessons from your own experience.
Here are nine key principles that you will see in action: 1. Set a Provisional Goal. A general sense of direction is essential, but narrow objectives can make negotiation an all-or-nothing proposition. Have a Plan B. An obstacle to agreement may harbor seeds for a different deal, perhaps even better than first expected. Envision the End Game.
Reason backward from your goal to discover plausible paths for getting there. Make Learning a Priority. Use early tests and probes to illuminate the negotiation landscape. Adapt When You Have To. Think Like a Competitor. Stress test your strategy by seeing how others could exploit it.
Be Multilingual. Bring along both carrots and sticks. Guard Your Exit Option. Always Be Closing. From start to finish, each step should be aimed at getting closer to agreement. Rather, each element is a gear, lever, or spring in the machinery of dynamic strategy. In particular cases, some parts may prove more vital than others, but all must link smoothly. Don Schnabel, a young broker with the real estate firm of Julien J. Studley, had been hired by St. Its board hoped that a profitable sale would help expand its social services.
Schnabel scrutinized all the properties on the block to generate his estimate. One unified piece of property would have much more value than the sum of its separate parts. It would be a win-win-win solution: the current owners would get a premium over market value; a major corporation could erect a landmark building; and, oh yes, whoever brokered the deal would make handsome commissions.
Success, however, would depend on Schnabel reaching agreement not just once but almost twenty times with that many different owners. He knew the real estate market generally. All told, it was an all-or-nothing proposition. Shutting down the project midway could be expensive. The only thing that Schnabel had was this high-risk, high-reward vision.
To solve that problem, he had to imagine who might be the ultimate purchaser if he could pull off each separate acquisition. In strategic terms, this kind of thinking is called backward mapping. Schnabel identified a likely prospect right across the street: First National City Bank, as it was then called. The bank was outgrowing its present offices and looked with envy at the spectacular headquarters of its downtown rival, Chase Manhattan Bank.
Schnabel approached First National City Bank cold. After months of internal meetings, the bank gave its go-ahead. Proceeding discreetly was essential, however. If the various neighborhood owners learned about a deep-pocket buyer, they would hold out for top dollar.
Competitors could swoop in too. Schnabel set up a straw holding company, Lexman Realty. He was listed as vice president, and his boss as president, but the identity of the sole stockholder—the bank—was not public record.
Having conceived his grand strategy, Schnabel had to go back to square one and choose which owner to approach first. The physical map of Manhattan is precise, but the map of possible deals on a single city block is complex. To get his bearings, Schnabel had to start moving, just like our snowbound soldiers in the Alps.
Instead, he needed to find vantage points that would give him a realistic sense of possibilities. Schnabel decided to hold off on the Lexington Avenue parcels, as important as they were. They would be the most expensive, and if he were to make a move there—right across from the bank—other real estate people might sense what he was attempting. It seemed safer and cheaper to begin around the corner on Fifty-third Street. For his initial probe, Schnabel chose a four-story building that housed a gourmet restaurant on the first floor.
After some bargaining, they arrived at an acceptable price for the three properties—a result that made Duell millions of dollars of profit on contracts that he had held for only a few months at most. If you want me to take over these contracts, I need to know you are going to stay off the block from this point on. I want this to be good-bye, Manny. Maybe that nice one at Sixth Avenue. If you stay off the block for eighteen months, it reverts to you.
Schnabel waited until the seller calmed down and yielded to his demand for security. Schnabel worked on multiple levels. He was pushing forward with his grand plan of assembling the block.
But he was also hammering out deals with individual owners, adapting to circumstances as they became apparent. Closing the first purchase was more work than he had anticipated, though it was better to discover potential obstacles early. The experience underscored the importance of moving quickly before others learned of his plans.
He guessed that the owner, Eva Trefner, might be seeking to retire after having operated the place for twenty years. He was right, but she was also concerned about what would happen to her loyal staff.
Schnabel promised to keep the place open for at least another year, so that sale went through smoothly. It was important that Schnabel not overpay in any of these transactions.
He owed it to his client to be prudent with its money. There were also strategic considerations. The more properties he acquired, the more costly it would be to be stymied by holdouts. Schnabel also had to worry about the downside of possible competition. Secrecy was one line of defense. In addition, he sequenced his acquisitions, hopping around the block like a Monopoly player bent on controlling key portions of the game board.
Schnabel thus turned his attention to Fifty- fourth Street, where he started acquiring brownstones. He also approached the pastor of St. Dealings with some other owners differed from the hard- nosed bargaining with Manny Duell.
Schnabel kept his word with the church, of course. Timing was a key factor in other cases. There was no room for agreement at any price. Nevertheless, McArthur kept visiting and once brought slides of his recent European trip.
Finally, after two years of quiet courtship, McArthur felt it was time to press the issue. The bank—which was funding the acquisitions—gave its approval, and the owner bought himself a handsome brownstone farther downtown.
Think about how this worked both at the outset and then again at the end. For months and months, McArthur held off, recognizing that it was not yet time to negotiate. And when the time seemed ripe, he moved delicately.
Leaving the purchase price open was a sign of the respect and trust that had grown between the two men. McArthur sensed that Tom would reciprocate this gesture. By contrast, neither he nor Schnabel would have ever given Manny that kind of control. Sometimes it was both. Most were in high tax brackets and unlikely to be tempted by cash. Schnabel proposed a swap for a better building. The doctors fired their board for even considering it.
Once again there was no apparent room for agreement. The Medical Chambers was a stock company. It could merge with the bank and thus give the doctors shares in Citi. Out of nowhere, enormous room for agreement suddenly blossomed. In hindsight, stories such as the Citibank acquisition suggest a certain inevitability, as if each step inexorably led to the next.
But Schnabel and his colleagues might have been just as savvy and resourceful yet still have failed due to factors beyond their control. In an alternative universe, Manny Duell might have refused to stay off the block. With deeper pockets and perhaps more skill, it might be able to secure enough parcels to prevent Duell or anyone else from controlling the block. On the other hand, holdouts like him could demand exorbitant prices for their remaining properties.
Just walking away might have been easier. If his firm had stepped out, maybe Duell would have stepped in. Everything could have turned out very differently, not because of anything our protagonists did but because of seemingly minor parties.
Practical strategy must give you multiple options along the way. Schnabel chose to make his first probe on Fifty-third Street, where properties were cheaper. He protected himself from being blocked by holdouts elsewhere by not getting in too deep. He guarded the option of reselling the early acquisitions to people who might be interested in them as stand-alones or who were more optimistic about pulling together the whole block.
Backward mapping can take you only so far, however. As a result, you need to keep a sharp eye out for exit options and half-a-loaf solutions that may be better than none. In deal making and dispute resolution, discretion sometimes trumps valor. Sometimes in negotiation you have to backtrack. It required hard bargaining over a shoddy corner building owned by an estate that leased ground floor space to an optometrist and a liquor store.
Schnabel agreed to pay the executrix a premium for the property, rationalizing that it was worth it to complete the entire deal. At the closing, though, she slyly informed him that she had recently extended the commercial leases by a full twelve years. According to Hellman, Schnabel was furious. The buyer was Sam Salerno. He did not look like a man in a hurry to sell out his lease. It seemed prepared to build around him, if need be. And so, in full view of the public, the bank and this streetwise operator played out a game of chicken.
He was all in too. Where this transaction fit into the whole sequence of acquisitions was critical. Secrecy was no longer a factor. Indeed, the fact that Salerno knew the bank had a fallback made it less likely that it would have to use it. Thinking through the possible upside and downside of a negotiation takes something of a split personality. You need optimism, even daring, to undertake negotiations that others might pass up as fruitless, yet at the same time, you must accept the reality that achieving success is never fully within your control.
Assembling the Citibank block proved a big success for the bank and the Studley firm that negotiated all the acquisitions.
At the time, it was the highest-priced land purchase in New York City history. Clearing the site and erecting the tower took years as well.
Almost a decade passed between the day that Schnabel first ambled around the block and when the new Citibank Center opened in Charles McArthur and other colleagues in the Studley firm played big roles in executing the project.
Together they had the imagination to see that the obstacle to one deal —a simple, stand-alone sale of St. Quite literally, they generated economies of scale. You can see that by looking at what can happen when the precepts are ignored. The agreement is a means to achieve the goal, which are the benefits. Our collection of books on negotiation in PDF format is made up of more than 20 texts on the subject. In this selection we include books in Spanish and Portuguese.
Fuente: University of Chicago. Fuente: World Bank Group. Fuente: Universiteit Twente. Fuente: Chartered Institute of Management Accountants. Fuente: Biotechnology Innovation Organization. Fuente: Upstate Medical University.
Fuente: Gargi College. Fuente: Queensland Government. Fuente: Indico. Fuente: Organisation for Economic Co-operation and Development. Fuente: University of Exeter. Fuente: International Finance Corporation. Fuente: University of Nebraska Omaha. Fuente: Harvard University. Fuente: Sales Training Workshops. If you found this list useful, do not forget to share it on your social networks.
All the texts that make up our selection are in PDF format, for your greater benefit. Here we present our complete selection of Negotiation books:. Jackson, Hugo F.
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