Adapted from “Are You Overly Committed to the Deal?” First published in the Negotiation newsletter.
A telecommuter hires a carpenter to build a workstation for her home office. The carpenter’s contract requires payment of 50% upon signing, an additional 30% halfway through the job, and the final 20% upon completion. When the job is done, the woman is dismayed to find that the cabinets are misaligned. She calls the carpenter and tells him she won’t pay him the final 20% until he redoes his work. He tells her she can keep her 20%.
Sometimes, negotiating tactics and contract terms bind you to an agreement more than they would bind your counterpart. In this scenario, one party is more committed (or risks being more committed) to a deal than the other. The telecommuter is left with a shoddy office, and the carpenter moves on to his next victim.
How can you ensure that you and your counterpart are similarly committed to a deal? Harvard Business School and Harvard Law School professor Guhan Subramanian advises you to follow these three steps:
1. Play “What if . . . ?” Before negotiating, ask yourself how difficult it would be to walk away without a deal, both psychologically and economically. Reduce the potential for escalation by cultivating your best alternative to a negotiated agreement (BATNA). The telecommuter might have negotiated with several carpenters and checked their references before hiring one.
2. Assess each side’s commitment. During your negotiation (and before agreeing to a deal), assess each side’s level of commitment. Ask yourself the following questions:
- How difficult will it be for me to back out of the deal if conditions change?
- How difficult will it be for my counterpart to back out?
- What will happen to me if the other side backs out?
3. Level the playing field. Suppose your answers to these questions suggest that you would be more committed to the potential deal than your counterpart would. What should you do?
First, don’t assume the other party is trying to take advantage of you. Lopsided conditions may reflect industry convention, as with a car dealer who insists on haggling in person. Or it could be that your counterpart is simply trying to protect herself. Most home buyers wouldn’t sign a purchase contract without the possibility of walking away if they couldn’t secure a mortgage. Similarly, a carpenter might insist on upfront payments after being burned by past clients.
It’s up to you to negotiate a more balanced deal-and to be prepared to walk away if your counterpart won’t cooperate. Begin by pointing out your risk exposure to the other side. “What if I’m unhappy with the completed work?” the telecommuter might have said to the carpenter. “How can we both be protected?” If the carpenter were confident in his workmanship, he might have been willing to negotiate inspection rights before payment of the 30% installment or even deferred payment of 80% until after inspection.
A negotiator who wants to do a deal will listen to you and consider making adjustments. If someone won’t cooperate, you may need to explore alternatives to the current deal.