During a meeting with a potential customer, a new salesperson leaves the room several times to make phone calls. Each time when she returns, she tells the customer she can’t accept the terms they just negotiated. Exasperated by her apparent lack of authority, the customer ends the meeting abruptly.
As this scenario shows, your counterpart’s constituents are bound to play a role in negotiations, whether you realize it or not. When the other side negotiates on behalf of an organization, his superiors and coworkers have a stake in the outcome. In more personal negotiations, his friends or family members may attempt to sway his choices.
Most negotiators will never engage in the kinds of high-stakes bargaining we read about in publications such as The Wall Street Journal and The Financial Times, but almost every negotiator will encounter the dreaded salary negotiation during the course of her career, a scenario that is, in many ways, the definition of a “difficult conversation.”
We stress preparation for negotiations in our literature and in our Negotiation and Leadership executive education course but both research and experience recognize that even the most prepared and adept negotiator can have her planning and negotiation preparation scuttled by unforeseen circumstances and invisible barriers.
That is why women often encounter difficulty during salary negotiations, according to a recent article by Tara Siegel Bernard for the New York Times. Self-advocating for a pay raise in the workplace often places women in the unenviable role of attempting, “…to juggle when they are on a tight rope.”
On April 9, the Paycheck Fairness Act, legislation intended to close the pay gap between men and women, was defeated in the Senate due to a lack of Republican support. The bill would have made it illegal for employers to penalize employees for discussing their salaries and would have required the Equal Employment Opportunity Commission to collect pay information from employers.
Pay inequities and a lack of women in upper management remain enduring problems in the workplace. Absent government initiatives to mandate solutions, how can women themselves better advocate for higher pay, promotions, and plum assignments? Negotiation researchers advise women to avoid a backlash against asking for more by connecting their interests to those of the organization.
Negotiating the right process for your negotiation is well worth the time and effort, for two important reasons.
First, process drives substance.
Imagine what might have happened if the pharmaceutical company and the biotech firm had agreed up front to resolve the royalty issue rather than simply exchanging their best arguments before splitting the difference.
Discover how to boost your power at the bargaining table in this free special report, Dealmaking: Secrets of Successful Dealmaking in Business Negotiations, from Harvard Law School.
Sometimes the courts will be unwilling to get involved in the substantive terms of the deal but will impose procedural constraints on the more powerful party.
Consider the case of a controlling shareholder in a publicly traded company – someone who holds more than 51% – who wants to “cash out” the minority shareholders.
Under the corporate law of every state, the board of directors and majority shareholders must approve the terms of the offer.
Consider the following hypothetical negotiation scenarios, in which you seem to hold all the cards:
- One of your customers has just landed a lucrative new contract, and you’re the only supplier who can add a critical component to that customer’s production process.
- You own a controlling interest in a publicly traded company and are seeking to buy out the minority shareholders and take the company private [LINK to Michael Dell’s Negotiations with Shareholders article].
- You sell umbrellas, and a man in a well-tailored suit rushes into your shop at the start of a downpour.
What’s the problem, you might reasonably ask?
In a related maneuver aimed at protecting the weaker party to the deal, courts might infer additional terms within the contract or expand common-law notions of fiduciary duty.
Consider the famous case of the Page brothers – let’s call them “Big Page” and “Little Page” for simplicity – who started a linen supply company in Santa Maria, California, in the late 1940s.
Big Page was the brains of the operations; Little Page supplied equal capital but deferred to his older brother’s expertise.
Business was slow for several years, and the partnership lost money.
A recent ruling by a regional branch of the National Labor Relations Board (NLRB) raises the question of whether college football and basketball players will engage in the kind of collective dealmaking with university administrations that is found in business and government.
In March, the NLRB in Chicago sided in favor of a group called the College Athletes Players Association (CAPA), which had petitioned for Northwestern University’s scholarship football players to be allowed to unionize as employees. The regional NLRB director, Peter Ohr, ruled that Northwestern’s players should be considered employees rather than students because of the amount of time they devoted to team activities and the fact that coaches control their scholarships.
This three-step approach to managing process issues in negotiations will reap significant rewards at the bargaining table.