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The Art of Building Trust in Business: Negotiations
by Joel Peterson October 09, 2019
We've all seen fiery versions of onscreen negotiations where both parties are at each other's throats, and each one is trying to bleed the other dry for every last cent. But is that really a smart move for you or your business in its negotiations in the long run?
Winning at all costs is a quick way to lose potential business and destroy trust.
If you want to build an organization built on trust, steer far away from single-minded employees who are only looking out for their own interests, no matter how talented they are.
When stepping into any type of negotiation, it's important to remember that both parties should "win" in the end. By separating the people you're negotiating with from the actual problem, focusing on the issues at hand rather than your position on them, and looking for solutions that benefit you both, you're much more likely to reach a successful and agreeable outcome for both parties.
Naturally, in negotiating with third parties, we must assess whether they can be trusted. We trust our lawyers to be fiduciaries for our interests in third-party negotiations, but there are lots of internal negotiations that are more like conversations—discussions where we're not represented by lawyers but where trust underpins the exchange. It's helpful to think of negotiations as conversations around tradeoffs. Every conversation has a purpose. When your mindset is that you want the other party to "win"—to get something it wants too—you're on the road to successful negotiations.
THE DANGERS OF NEGOTIATING WITHOUT A GIVE-GET MENTALITY
Whether being asked to pick up the kids or to come in under budget, people are constantly making trades with each other—in business, government, families, churches, and schools.
The stylized negotiations surrounding commercial transactions typically involve lawyers and accountants helping business leaders fuss over price, terms, time frames, remedies, and representations and warranties. Such negotiations can either build or destroy trust, as do the conversations that happen every day around the breakfast table or at the watercooler. Aware
of the economy of trust—of the idea that today's conversation is one in a series, not a one-off—we tend to gracefully make trade-offs in the negotiations of daily life, adapting to the constant give-get that is a part of every high-trust relationship.
Contrast these everyday interactions with Hollywood's entertaining version of business negotiation, in which executives fight a verbal battle from either side of a long conference table,
flanked by teams of lawyers, bankers, and consultants. Traps are set, voices are raised, and threats are made until one combatant maneuvers the others into a corner. Triumphantly, Gordon Gekko coldly declares himself the victor: "It's not a question of 'enough,' pal," he says. "It's a zero-sum game—somebody wins, somebody loses."
Thanks to such fictions, many people think the point of negotiation is to maximize immediate economic gain, without regard for the impact on the other side and without any sense that there are long-term consequences. A cottage industry has sprung up with self-styled negotiation experts offering ways to keep prospective employers, suppliers, and other "adversaries" on the ropes. But in the long run, treating negotiation as a boxing match will result in punches that should never have been thrown and a lot of unnecessary bloodshed.
A better way—one that builds rather than destroys trust—is described in the classic Getting to Yes, an early 1980s bestseller by Roger Fisher and William L. Ury, still taught in business schools. The book aims to show that when negotiators "separate the people from the problem," "focus on issues, not positions," and "invent options for mutual gain," they're more likely to find acceptable outcomes for all participants. In a sense, all negotiations are serial, not episodic, so imagine that you're slowly building a brand—a reputation that will follow you for your entire career. Extracting one killer deal from your counterpart can turn out to be costly in the long run. For one thing, you might forfeit the chance to do more business with the person or the people he or she is close to. For another, you may have done nothing more than create an unstable agreement.
SIX ATTITUDES FOR SUCCESSFUL Business NEGOTIATIONS
Practicing and internalizing these six attitudes can help shape the way you build trust while sitting at the negotiating (or dinner) table:
1) Assume this is but one conversation in an ongoing narrative.
Over the course of your career, you'll engage in thousands of negotiations. Getting your way at any cost is not the reputation you want. Though people may not remember the suboptimal result of a single exchange, they'll never forget how they felt when you dismissed their concerns or treated them disrespectfully. You're not obligated to make sure those on the other side get a great deal, but you do want them to walk away feeling respected. If they do, the opportunities that will come to you in the future will more than compensate for whatever it is you think you gave up to ensure a fair deal.
2) Consider the other side's interests.
Understanding that your negotiating partners' interests are legitimate conveys respect. (Assume they may have anxieties about your trustworthiness too.) When they see your efforts to understand their perspective, they're likely to be more willing to engage in honest dialogue, which makes it easier to find a solution everyone sees as a win. Think of your goal as putting a fair price on what the other parties want. It's up to them to decide if their demands are worth the price you've set. You'll know you're getting close when you can describe their needs in a way that satisfies them and they can acknowledge the price of what they're asking for.
3) Aim to create value for all parties.
Nobody's counseling capitulation. The point isn't to pummel the other person into submission, as if you win only when he or she loses. If your counterpart benefits from doing business with you, and you walk away satisfied too, you've created two wins. Strengthening your relationship with the other party can mean more business, more referrals, a stronger brand, and more lasting agreements.
4) Eschew psych-out tactics.
Many people start negotiations by assessing who has more legal or economic firepower, and who's more willing to walk away. This power only mindset can negatively charge a discussion and get it off on the wrong foot, turning a contest of issues into a battle of wills.
You can avoid that by focusing first on the principles both sides agree on. Consider Lee Iacocca, the former CEO of Chrysler. His approach to negotiation was consistent with building trust in negotiations: "Being honest is the best technique I can use. Right up front, tell people what you're trying to accomplish and what you're willing to sacrifice to accomplish it."
5) Find power in inquiry.
Most people will tell you what they want out of negotiations if you simply ask the right questions. In negotiation, as in life, doing more listening than talking is a good rule of thumb. Asking probing questions about the other party's perspective may yield insights into how to structure a deal. If the other side tells you its chief concern is price, and if you're willing to meet the price, you may be able to set the other terms. Understanding the interdependence of the five elements noted at the beginning of this chapter (price, terms, time frames, remedies, and representations and warranties) can help make for win-win agreements.
6) Choose carefully the people you negotiate with.
It's tough to hold productive discussions with people who get no joy out of the process, and prefer Gekko fighting to finding creative solutions. As Trammell Crow used to tell me, "You can't do good business with bad people." You can't come to fair agreements with people whose only concern is their own short-term gain, serving only their benighted self-interests. So if you're intent on building a high-trust organization, choose those who are already on the bus and thereby ensure that at least your internal negotiations are with people you trust. And follow George Bernard Shaw's advice: "Never wrestle with pigs. You both get dirty and the pig likes it." Try to negotiate (and hire and promote) only trustworthy people.
Each conversation and negotiation either advances or destroys trust. Building a brand for fairness deepens trust among all members of the team, resulting in flexible arrangements along with enjoyable relationships among teammates.
Excerpted with permission from The 10 Laws of Trust: Expanded Edition by Joel Peterson, copyright Joel C. Peterson with David A. Kaplan.
I recently moved to a small town in Tennessee, where I encountered a problem I never expected to face. For all intents and purposes, I ended up in "negotiations" with the local post office to have my packages delivered to my door, rather than down the street. For almost four months, I filled out paperwork and talked to every person in upper management that I could reach, all while driving 45 minutes into the city to pick up the packages my mail lady apparently got a kick out of not delivering. There were so many times where I just wanted, for once, to give them a piece of my mind. But, I knew that the second I did, they'd lose any motivation they had, and my hopes to resolve the matter would go right out the window.
Though I'm told by my neighbors that our mail lady still puts up an award-winning protest with each package delivery, at least the packages are now coming! That initial raw deal turned out to be a win-win. I get my packages, and one day (hopefully) she'll get the satisfaction of a job well done.
Have you ever been on the other end of a raw deal? Comment below to share what the other party could have done to make it a win-win for you both. "~ HarperCollins Leadership Essentials
Joel Peterson
Joel Peterson is the chairman of JetBlue Airways and the founding partner of Peterson Partners, a Salt Lake City-based investment management firm. Joel is on the faculty at the Graduate School of Business at Stanford University and has been since 1992.
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