Sometimes the negotiation planning process takes longer than anticipated, but that extra time can be critical to achieving the best possible outcome.

On October 30, 2012, Robert A. Iger, then CEO of The Walt Disney Company, announced that Disney would acquire Lucasfilm, the studio best known for the hugely successful Star Wars franchise. After months of careful, behind-the-scenes negotiations, George Lucas, Lucasfilm’s founder and sole shareholder, agreed to sell the company for $4.05 billion, a deal structured roughly evenly between cash and stock.

To the joy of Star Wars fans everywhere, Iger revealed that Disney planned to release new feature films in the franchise every two or three years, beginning in 2015. Lucas included a detailed treatment for the next three films in the deal and negotiated to be a consultant on them, the New York Times reports.

The agreement is projected to be highly lucrative for Disney, which plans to expand Lucasfilm’s product-licensing revenue beyond North America and its current focus on toys. Disney also acquires Lucasfilm’s special-effects business, audio operation, and consumer-products division in the deal.

“It’s now time for me to pass Star Wars on to a new generation of filmmakers,” Lucas said in a statement. But he did not make this decision lightly, as a recent in-depth article by Devin Leonard of Bloomberg Businessweek reveals. As we will see, Iger and Lucas engaged in a negotiation planning process that included methodical negotiations that were built on strong reputations, mutual understanding, and thorough research—fundamentals that all negotiating professionals can capitalize on to create new sources of value.

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1. Develop a long-term strategy.
In May 2011, Iger and Lucas met at the Walt Disney World Resort in Florida to kick off an upgraded Star Wars ride, which Lucas had been heavily involved in developing. Over a private breakfast, Iger asked Lucas, who had just turned 67, if he would ever consider selling his company. Lucas responded that he would “love to talk” to Iger about a sale in the future but wasn’t yet ready to plan his retirement, writes Leonard. And so began the negotiation planning process for Iger.

Far from being dissuaded, Iger was exhilarated that Lucas was open to the possibility of eventually entrusting Disney with his beloved Star Wars characters. Iger believed that Disney’s success had been built on its ability to develop enduring—and lucrative— characters, from Mickey Mouse to Jack Sparrow. Since being named CEO in 2005, Iger had focused like a laser on this strategy, spearheading deals that gave Disney a fresh influx of character-driven franchises. Iger masterminded an acquisition of Pixar Animation Studios for $7.4 billion in 2006 and of Marvel Entertainment for $4 billion in 2009.

The deals proved profitable right out of the gate: Disney rejuvenated its California theme park with a new ride based on Pixar films, and the Marvel film The Avengers grossed $1.5 billion, becoming the third-most-lucrative movie in history. Moreover, these deals helped Disney to thrive even as many of its entertainment-industry rivals struggled to stay afloat. Disney’s stock has doubled since Iger was named CEO, and the company’s healthy coffers enabled him to set his sights on other acquisitions, with Lucasfilm being his prime target.

Negotiators often fail to see the connections among various dealmaking opportunities. As a consequence, their individual deals often fail to add up to a coherent strategy. Iger’s success points to the value of a different approach: Set strategy first, and then look only for potential deals that can help you fulfill your organization’s long-term strategic goals.

2. Identify nonmonetary concerns.
As he mulled over his possible retirement, Lucas struggled with the idea of handing over creative control of the fictional universe he had created. In an interview with Leonard, Lucas claimed that for him, financial success had always been incidental to a larger concern: maintaining creative control of his movies. “I’ve never been much of a money guy,” he said.

As it turned out, Iger had experience negotiating agreements with highly creative people and had a sense of what they valued. Iger personally negotiated the terms of Disney’s Pixar deal with Apple CEO Steve Jobs, then Pixar’s head. “Steve and I spent more time negotiating the social issues than we did the economic issues,” Iger told Leonard. More specifically, Jobs successfully lobbied for Iger to keep Pixar’s creative team in place at Pixar’s Northern California headquarters, operating with minimal interference from Disney in Los Angeles.

3. Enhance your value before negotiating.
Even as he debated whether the time was right to let go of his company, Lucas recognized that he had an opportunity to shape its future before turning it over to Disney or another buyer. His first step was to hire Kathleen Kennedy, a close friend and a founder of Steven Spielberg’s Amblin Entertainment, as Lucasfilm’s new CEO.

Together, Lucas and Kennedy began laying the groundwork for a new Star Wars trilogy. They hired a respected screenwriter to get to work on the script for the next installment, Episode VII, and began talking to members of the original Star Wars cast, including Mark Hamill, Carrie Fisher, and Harrison Ford, about appearing in the new films.

Lucas’s effort to move his company forward served two main purposes. First, it gave him a good shot at guiding the overall look and feel of the next Star Wars films before passing them off to Disney. Second, he likely understood that lining up top talent, including Kennedy, would make the Star Wars brand even more attractive to Disney and, if those talks fell through, to other potential buyers.

When someone tries to open negotiations with us, we tend to assume that the only possible answers are yes or no. By responding to Iger with a maybe, Lucas bought himself time to think about whether he was ready to enter a new, less-active chapter in his life. He also created an opportunity to enhance his company’s value prior to engaging in substantive talks. His methodical approach serves as a reminder that in negotiation, patience is indeed a virtue.

4. Deepen your knowledge.
In June 2012, Lucas called Iger and told him he was ready to talk about a possible sale of Lucasfilm to Disney. During the five months of negotiations that followed, Lucas argued that members of his inner circle were the most qualified to create the new Star Wars films. Iger agreed in principle but stressed that Disney would have to be the ultimate decision maker regarding future movies in the franchise.

One October weekend, Iger sat down to watch all six Star Wars films again, notepad in hand. To further bring Iger and other Disney executives up to speed, Lucas loaned them Pablo Hidalgo, a Lucasfilm manager who is known for his encyclopedic knowledge of the Star Wars universe—and its approximately 17,000 characters.

Iger’s research impressed upon him the importance of determining whether Lucas had a stockpile of story lines that Disney could draw on for the next Star Wars trilogy. Without a rough idea of the plots, how could Iger assess the fantasy world’s value?

Yet when Disney executives pressed Lucas to share his treatments for the next trilogy, he vacillated. Only after Disney put the broad outlines of a deal in writing did Lucas hand over the treatments, and even then he required Iger and two other Disney higher-ups to sign an agreement stating that they would not share the content with anyone else.

It isn’t only movie executives who must sift through a dizzying array of technological knowledge as part of their negotiation preparation. At times all of us face the task of dealing with complex information that’s pertinent to the deal at hand. It can be tempting to gloss over the details, but as Iger’s experience shows, great insights can come from careful study.

Epilogue

Thrilled with Lucas’s film treatments, Iger brought him to Disney headquarters in Burbank, California, to sign off on the sale. Iger felt giddy, he told Leonard, but sensed that Lucas was in a melancholy mood: “He was saying good-bye.”

Persuading a reluctant director by optimizing the negotiation planning process

This pattern continued when Iger acquired Marvel. Seeking to profit from Marvel’s vast experience developing superhero movies, Iger kept the company’s leadership in place.

Not surprisingly, the hands-off management style Iger had shown with these acquisitions appealed to Lucas. As it happened, Lucas had founded Pixar as the Lucasfilm Computer Division in 1979 before selling it to Jobs in 1985. Lucas was reassured by the idea that he might still have some control over the next Star Wars trilogy if he sold his company to Disney.

Dollars and cents are important in negotiations, of course. But don’t assume that price is the other party’s foremost concern. Over a long career spent negotiating with “creatives,” Iger had come to understand the high value they place on artistic integrity. (In fact, he had even negotiated with Lucas in the past.) Iger had also discovered that loose control of acquired companies often paid off both creatively and financially. This attitude enabled him to quickly identify the issues that mattered most to Lucas and win his trust.

What does your negotiation planning process look like?

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The opening stages of negotiation can be filled with uncertainty. How assertive should you be? How can you set yourself up for success? What should an opening offer look like? To answer these questions accurately, thorough preparation for negotiation is key. Negotiation research offers guidelines to get talks off on the right track.

Boost Your Assertiveness

We frequently pass up valuable opportunities to negotiate, ample research concludes. Individuals often fail to negotiate for higher salaries and special assignments at work, and organizations miss out on promising partnerships.

In a paper that assessed how people respond to negotiating opportunities, researchers Roger Volkema, Ilias Kapoutsis, and Andreas G. Nikolopoulos asked graduate business students in Greece to indicate how they would likely react to various scenarios. In one vignette, for example, a consultant had to decide whether or how to contact a freelancer about taking on extra work after the freelancer finished a big assignment and was taking a break. Participants could choose responses that varied in assertiveness, such as not contacting the freelancer, asking him to do the work for overtime pay, or asking him to perform it at his usual rate. Most participants were unwilling to make overt requests, and only a few said that they would make the most assertive request offered.

In a personality questionnaire, participants who made requests scored high on self-efficacy—confidence in one’s ability to meet goals. The researchers concluded that for negotiators to move toward making meaningful requests of their counterparts, they must both be able to recognize negotiating opportunities and have a strong sense of self-efficacy. During your preparation for negotiation, you might boost your confidence in your ability to meet your negotiation goals by observing successful negotiators or practicing your skills in relatively low-risk negotiations.

Claim your FREE copy: Negotiation Skills

Build powerful negotiation skills and become a better dealmaker and leader. Download our FREE special report, Negotiation Skills: Negotiation Strategies and Negotiation Techniques to Help You Become a Better Negotiator, from the Program on Negotiation at Harvard Law School.

Enhance Your (Sense of) Power

Negotiators often feel powerless, as when asking someone for a favor or interviewing for a job, and their performance suffers as a result. A team led by Joris Lammers of the University of Cologne in Germany examined whether giving people a chance to reflect on past powerful experiences would set them up for more successful negotiations.

In one experiment, some French undergraduate students were randomly assigned to write about a time they felt powerful, others were assigned to write about a time they felt powerless, and others received no writing assignment. Next, all participants engaged in a mock interview for entrance to business school. Despite being unaware of the writing assignments, the interviewers, most of them professors, chose to admit 47.1% of those who didn’t have a writing assignment, 68.4% of those who wrote about feeling powerful, and only 26.3% of those who wrote about feeling powerless.

The takeaway? When you’re feeling nervous about a negotiation where you sense you lack power, you might significantly improve your performance by taking a quiet moment during your preparation for negotiation to reflect on a time when you felt more in control.

Make Opening Offers with Precision

Think of the last opening offer you made or received in a price negotiation. How many zeros were at the end of it? Chances are, at least two or three.

Whether the first offer in negotiation comes from the buyer or seller, it will generally be a round number rather than a precise one, Malia F. Mason of Columbia University and her coauthors confirm in their research. They reviewed opening offers that MBA and executive students made in class negotiation exercises and found that 48% contained only one digit other than zero (e.g., $500, $5 million), 49% contained only two digits other than zero (e.g., $9,200), and none were specified to the dollar place (e.g., $524). They also found evidence of the round-number phenomenon in real-world markets, such as the online real-estate marketplace Zillow.

The opening offer in a negotiation anchors the discussion and can significantly affect the final agreed-upon price. Perhaps contrary to intuition, precise first offers actually serve as more potent anchors than round ones, Mason and colleagues found. Whether playing the buyer or seller in a negotiation scenario, study participants made greater price adjustments away from round offers from their counterpart than from precise offers. At times, this was even true when a precise offer (such as a $19 sale price) was less aggressive than a round offer ($20). Why? In one experiment, relative to participants who received round offers, participants who received precise opening offers perceived the offers as more reasoned and informed.

Thus, during your preparation for negotiation, you might consider making a precise opening offer to gain credibility. There’s a caveat, however: Mason’s study looked at negotiations involving relatively small sums of money, from about $10 to $4,000.

By contrast, precise offers for high-value commodities (such as a house listed at $1,285,498) could seem so unusual that they backfire. Perhaps the key during negotiation preparation is to choose an offer that’s precise enough to convey your knowledge of the commodity—say, $1,285,500 for that house—but not so precise that your strategy seems odd.

 In your own preparation for negotiation, what strategies and considerations have you found to be helpful?

Deal structuring and negotiating can feel challenging in the best of situations. But when you’re dealing with “bad acts,” there are additional factors to consider when you structure your negotiation strategy. This is what one reader asked about when facing a deal to buy out a company. Here’s their question:
Q: I work for an international nonprofit that tries to eliminate “bad acts” around the world—not illegal activities, but ones that we consider unethical. We are currently negotiating with a U.S. business owner who is engaged in these bad acts. His business is generating losses, so we are trying to buy him out and put him out of business. Our due diligence shows that he has a commitment to pay $275,000 per year for the next six years on his lease. Our board has authorized us to pay him up to $2.1 million to cover his lease commitment and then some, so there should be room to bargain here. He turned down our first offer of $687,000. What should our next step be?

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How to handle deal structuring and negotiating when you can’t trust your counterpart

With your offer of $687,000, you have launched a price negotiation, and if you continue along these lines, you and the business owner likely will settle for an amount greater than $687,000 and less than $2.1 million.

A natural “focal point” for this negotiation would be $1.65 million, since it’s the number that would make him whole on his lease commitment. But let’s reexamine your assumptions about what would happen next. If the landlord can readily find a new tenant, the business owner would likely negotiate to get out of his lease commitment for much less than $1.65 million. This would leave him with a windfall in the deal structuring and negotiating with you—an outcome that may not square with your commitment to not reward “bad acts.”

You might anticipate this risk by having a “clawback” provision in your agreement with the business owner: For example, you would get back 50% of any money that he saves in a renegotiated lease commitment with the landlord. But this approach has at least two problems. First, it assumes that the “bad actor” will truthfully report to you what he has renegotiated with the landlord and then actually make the required payment to you. What if the bad actor and the landlord collude to avoid the clawback provision in your contract? Second, and perhaps more important, this provision would reduce the business owner’s incentive to renegotiate the lease terms in the first place.

The better approach, in my opinion, would be a different kind of deal structuring and negotiating. Instead of negotiating a price deal, negotiate a deal in which the tenant simply assigns the lease to you—in essence, sublets it—and walks away from the business. You now have every incentive to renegotiate the terms of the lease commitment with the landlord. In the worst case, you pay $1.65 million over six years, which is better than a single payment today in terms of cash flow.

Stepping back, your question raises the interesting issue of “incentive-compatible” deal structuring and negotiating—that is, making sure that parties’ incentives are aligned in a way that leads to long-term value creation. Sophisticated dealmakers are constantly looking to structure deals in ways that minimize such contractual problems as moral hazard (as in your case), adverse selection, information asymmetries, and asset specificity. Just as negotiators can leave value on the table by not identifying win-win opportunities for trade, these problems, if unaddressed, act as a tax on the transaction that reduces overall value. In your situation, reassignment of the lease is likely a better way to maximize incentives than a flat payment.

How have you handled deal structuring and negotiating with a party you don’t feel you can fully trust?

Q: I work for an international nonprofit that tries to eliminate “bad acts” around the world—not illegal activities, but ones that we consider unethical. We are currently negotiating with a U.S. business owner who is engaged in these bad acts. His business is generating losses, so we are trying to buy him out and put him out of business. Our due diligence shows that he has a commitment to pay $275,000 per year for the next six years on his lease. Our board has authorized us to pay him up to $2.1 million to cover his lease commitment and then some, so there should be room to bargain here. He turned down our first offer of $687,000. What should our next step be?

A: With your offer of $687,000, you have launched a price negotiation, and if you continue along these lines, you and the business owner likely will settle for an amount greater than $687,000 and less than $2.1 million.

A natural “focal point” for this negotiation would be $1.65 million, since it’s the number that would make him whole on his lease commitment. But let’s reexamine your assumptions about what would happen next. If the landlord can readily find a new tenant, the business owner would likely negotiate to get out of his lease commitment for much less than $1.65 million. This would leave him with a windfall in his negotiation with you—an outcome that may not square with your commitment to not reward “bad acts.”

You might anticipate this risk by having a “clawback” provision in your agreement with the business owner: For example, you would get back 50% of any money that he saves in a renegotiated lease commitment with the landlord. But this approach has at least two problems. First, it assumes that the “bad actor” will truthfully report to you what he has renegotiated with the landlord and then actually make the required payment to you. What if the bad actor and the landlord collude to avoid the clawback provision in your contract? Second, and perhaps more important, this provision would reduce the business owner’s incentive to renegotiate the lease terms in the first place.

The better approach, in my opinion, would be a different kind of deal structure. Instead of negotiating a price deal, negotiate a deal in which the tenant simply assigns the lease to you—in essence, sublets it—and walks away from the business. You now have every incentive to renegotiate the terms of the lease commitment with the landlord. In the worst case, you pay $1.65 million over six years, which is better than a single payment today in terms of cash flow.

Stepping back, your question raises the interesting issue of “incentive-compatible” contract design—that is, making sure that parties’ incentives are aligned in a way that leads to long-term value creation. Sophisticated dealmakers are constantly looking to structure deals in ways that minimize such contractual problems as moral hazard (as in your case), adverse selection, information asymmetries, and asset specificity. Just as negotiators can leave value on the table by not identifying win-win opportunities for trade, these problems, if unaddressed, act as a tax on the transaction that reduces overall value. In your situation, reassignment of the lease is likely a better way to maximize incentives than a flat payment.

Guhan Subramanian
Joseph Flom Professor of Law & Business, Harvard Law School
Douglas Weaver Professor of Business Law, Harvard Business School
Academic Editor, Negotiation
Author, Dealmaking: The New Strategy of Negotiauctions (W. W. Norton, 2011)

In negotiation, two (or more) heads are better than one, most researchers have found. In several studies conducted in the United States, teams were better than solo negotiators at exchanging information with counterparts and making accurate judgments, and teams also achieved better outcomes for everyone involved.

The tendency of teams to outperform solo negotiators has been attributed to several factors, including the high economic goals that teams set for themselves, their heightened sense of competition, and members’ tendency to challenge one another’s views. It may also be important that team members monitor one another’s behavior, while individuals often negotiate unobserved by others in their organizations. Monitoring tends to amplify the social norms, or behavioral expectations, that are salient in a given situation. In the individualistic culture of the United States, for example, the social norm that predominates in economic situations such as negotiation is self-interest. Thus, members of U.S. negotiating teams may have a strong incentive to show one another that they are advancing the group’s interests.

By contrast, in collectivistic East Asian cultures, group harmony is generally a more salient social norm than self-interest. In a new study, researcher Michele J. Gelfand of the University of Maryland and her colleagues set out to determine if this difference affects the negotiation performance of teams.

They compared the outcomes of individual negotiators and negotiating teams in both the United States and Taiwan in a two-party negotiation simulation. In two experiments, U.S. teams and solo negotiators achieved similar outcomes, a finding that diverges from other past research, perhaps because the negotiating exercise was easier than exercises used in prior research, Gelfand and her colleagues theorized. Meanwhile, Taiwanese teams performed significantly worse than Taiwanese solo negotiators. Taiwanese teams appear to have sacrificed value because of a desire to maintain harmony.

The results suggest that the question of whether to negotiate alone or as part of a team is less straightforward than past research suggests. Negotiators operating in cultures where harmony is a stronger norm than self-interest, for example, might find advantages to going it alone.

Resource: “Toward a Culture-by-Context Perspective on Negotiation: Negotiating Teams in the United States and Taiwan,” by Michele J. Gelfand, Jeanne Brett, Brian C. Gunia, Lynn Imai, Tsai-Jung Huang, and Bi-Fen Hsu. Journal of Applied Psychology, March 2013.

In negotiation, two (or more) heads are better than one, most researchers have found. In several studies conducted in the United States, teams were better than solo negotiators at exchanging information with counterparts and making accurate judgments, and teams also achieved better outcomes for everyone involved.

The tendency of teams to outperform solo negotiators has been attributed to several factors, including the high economic goals that teams set for themselves, their heightened sense of competition, and members’ tendency to challenge one another’s views. It may also be important that team members monitor one another’s behavior, while individuals often negotiate unobserved by others in their organizations. Monitoring tends to amplify the social norms, or behavioral expectations, that are salient in a given situation. In the individualistic culture of the United States, for example, the social norm that predominates in economic situations such as negotiation is self-interest. Thus, members of U.S. negotiating teams may have a strong incentive to show one another that they are advancing the group’s interests.

By contrast, in collectivistic East Asian cultures, group harmony is generally a more salient social norm than self-interest. In a new study, researcher Michele J. Gelfand of the University of Maryland and her colleagues set out to determine if this difference affects the negotiation performance of teams.

They compared the outcomes of individual negotiators and negotiating teams in both the United States and Taiwan in a two-party negotiation simulation. In two experiments, U.S. teams and solo negotiators achieved similar outcomes, a finding that diverges from other past research, perhaps because the negotiating exercise was easier than exercises used in prior research, Gelfand and her colleagues theorized. Meanwhile, Taiwanese teams performed significantly worse than Taiwanese solo negotiators. Taiwanese teams appear to have sacrificed value because of a desire to maintain harmony.

The results suggest that the question of whether to negotiate alone or as part of a team is less straightforward than past research suggests. Negotiators operating in cultures where harmony is a stronger norm than self-interest, for example, might find advantages to going it alone.

Resource: “Toward a Culture-by-Context Perspective on Negotiation: Negotiating Teams in the United States and Taiwan,” by Michele J. Gelfand, Jeanne Brett, Brian C. Gunia, Lynn Imai, Tsai-Jung Huang, and Bi-Fen Hsu. Journal of Applied Psychology, March 2013.

Imagine yourself in these negotiating scenarios:

• After a freelance designer has finished a big project for your company, you discover some urgent extra work that you should have given him. The designer mentioned that he needs a break and is going to take a few days off. Would you approach him about doing the work, and if so, would you offer him his going rate or something higher?
• As a graduating PhD student with some impressive publications, you were invited to interview at several top-ranked universities. However, you have not received an offer from the first three schools you visited. How can you improve your performance in the talks that follow?
• Aware that the first offer put forward in a negotiation is pivotal, you weigh the list price for the car you’re about to sell. Among other factors, you wonder if it matters whether the price is a round number or a more precise one.

Together, these situations illustrate the intricacies of the opening stages of negotiation. We must answer various questions when a negotiating opportunity presents itself, not the least being whether we even recognize and seize on the opportunity in the first place. How assertive will you be in the opening stages? How can you set yourself up for success? What should your opening offer look like? Fortunately, several new research studies suggest answers that will help you start off on the right track.

Maximize the initiation stage
Regardless of how well you negotiate, you may be passing up potentially valuable opportunities to negotiate, ample research concludes. Women in particular tend to overlook or avoid negotiations that could benefit them personally. However, negotiators of both genders could profit from more broadly framing the professional and personal situations they encounter as negotiations. Most notably, individuals often pass up chances to negotiate for higher salaries, flexible work hours, and special assignments at work, and organizations often fail to negotiate new partnerships that could prove promising.

The initiation stage of negotiation has three phases, according to Roger Volkema, a professor at the IAG/PUC school of negotiation in Brazil: 1) engaging (interacting with a prospective counterpart), 2)requesting (asking for something), and 3) optimizing (maximizing the request). For example, after being offered a job at a stated salary, a candidate could mention that she had expected to be offered more (engaging), she could ask for a slightly higher salary (requesting), or she could negotiate for a significantly higher salary, perhaps offering a concession on an issue that matters less to her in return (optimizing).

To assess how assertive people are in response to negotiation opportunities, Volkema and his colleagues Ilias Kapoutsis and Andreas G. Nikolopoulos of Athens University of Economics and Business asked graduate business students in Greece to study three professional scenarios and choose from various responses to indicate how they would likely react. Our first opening vignette, in which a consultant was deciding whether or how to contact a freelancer about extra work, is one example from the study.

Participants could choose responses that varied in assertiveness, such as not contacting the freelancer (not engaging), asking him to do the work for overtime pay (requesting), and asking him to perform it at his usual rate (optimizing).

Most of the study participants indicated that they were at least willing to engage their counterpart in situations such as this. Yet participants were much less willing to make overt requests of potential counterparts, and only a few of them said that they would make the most assertive request (optimizing) among the choices given.

In a personality questionnaire, participants who made requests of their counterparts scored high on self-efficacy, or the tendency to have confidence in one’s ability to accomplish one’s goals. The researchers concluded that for negotiators to move beyond mere engagement and toward making meaningful requests of their counterparts, they must both be able to recognize negotiating opportunities and have a strong sense of self-efficacy. Past research has shown that you can improve your confidence in your ability to meet your negotiation goals—and thus your self-efficacy—by observing other negotiators who perform well during the initiation stage and by practicing your skills in relatively low-risk negotiations.

Enhance your (sense of) power
No one would blame a job applicant for entering an interview feeling powerless. After all, it may seem as if your fate is in another person’s hands and there’s little you can do to control the outcome. Unfortunately, the sense of insecurity that we feel when we negotiate for a new position can undermine our confidence and impair our performance.

Building on past research showing that asking people to write about a time when they had power increased their sense of control, a team led by Joris Lammers of the University of Cologne in Germany examined whether giving people a chance to reflect on past powerful experiences would improve how others viewed them.

In one experiment, Dutch students were randomly assigned to write about a past experience in which they either had power or lacked power. Next, they were asked to write an application letter for an actual job ad. Other participants, assigned to the role of interviewer, each read one of the letters and indicated how likely they would be to hire the candidate. Though the interviewers didn’t know about the “power prime” (the writing task), they were significantly more likely to hire participants who had written about feeling powerful than participants who had written about feeling powerless.

In a second experiment, some French undergraduate students were randomly assigned to write about a time they felt powerful, others were assigned to write about a time they felt powerless, and others received no writing assignment. Next, all the participants engaged in a 15-minute mock interview for entrance to business school. Despite being unaware of the power prime, the interviewers, most of whom were professors, chose to admit 47.1% of the baseline group (those who didn’t have a writing assignment), 68.4% of those who wrote about feeling powerful, and only 26.3% of those who wrote about feeling powerless.

Overall, the results suggest that when you are feeling nervous about an interview or other negotiation in which you sense you lack power, you may be able to significantly improve your performance by taking a quiet moment beforehand to reflect on a time when you felt more in control.

Make opening offers with precision
Think of the last opening offer you made or received in a price negotiation. How many zeros were at the end of it? Chances are, there were at least two or three.

Whether the first price quoted in a negotiation comes from the buyer or seller, it will generally be a round number rather than a precise one, Malia F. Mason of Columbia University and her coauthors confirm in a new study. They reviewed 356 opening offers that MBA and executive students made in class negotiation exercises and found that 48% contained only one digit other than zero (e.g., $500, $5 million), 49% contained only two digits other than zero (e.g., $9,200), and none were specified to the dollar place (e.g., $524). They also found evidence of the round-number phenomenon in real-world markets; for example, on the online real-estate marketplace Zillow, across all price ranges, only 2% of sellers’ list prices were specified to the dollar place.

As you likely know, the opening offer in a negotiation serves as an anchor that grounds the discussion to follow. Indeed, anchors can significantly affect the final agreed-upon price in a negotiation. Mason and colleagues set out to determine whether the round opening offers that we lean toward are more or less effective as anchors than precise offers are.

Perhaps contrary to intuition, precise first offers actually serve as more potent anchors than round ones, the researchers found. Whether they were assigned to be the buyer or the seller in a negotiation scenario, study participants made greater adjustments away from round offers than precise offers. In some of the experiments, this was even true when a precise offer (such as a $19 sale price) was less aggressive than a round offer ($20). Why? One of the experiments showed that, relative to participants who received round offers, participants who received precise opening offers perceived the offers as being more reasoned and informed.

The results suggest that precise opening offers may lend you greater credibility in your negotiations. There’s a caveat, however: Mason’s study looked at negotiations involving relatively small sums of money, from the $10 range to the $4,000 range.

By contrast, precise offers for high-value commodities (such as a house listed at $1,285,498) could seem so unusual that they backfire. Perhaps the key is to be precise enough to convey your knowledge of the commodity—say, $1,285,500 for that house—but not so precise that your strategy is transparent.

On October 30, 2012, Robert A. Iger, CEO of the Walt Disney Company, announced that Disney was acquiring Lucasfilm, the film-production company known primarily for the spectacularly successful Star Wars film franchise. Following lengthy negotiations, George Lucas, Lucasfilm’s founder and sole shareholder, had agreed to sell his company for $4.05 billion, an amount split roughly evenly between stock and cash.

To the joy of Star Wars fans everywhere, Iger revealed that Disney planned to release new feature films in the franchise every two or three years, beginning in 2015. Lucas included a detailed treatment for the next three films in the deal and negotiated to be a consultant on them, the New York Times reports.

The agreement is projected to be highly lucrative for Disney, which plans to expand Lucasfilm’s product-licensing revenue beyond North America and its current focus on toys. Disney also acquires Lucasfilm’s special-effects business, audio operation, and consumer-products division in the deal.

“It’s now time for me to pass Star Wars on to a new generation of filmmakers,” Lucas said in a statement. But he did not make this decision lightly, as a recent in-depth article by Devin Leonard of Bloomberg Businessweek reveals. As we will see, Iger and Lucas engaged in methodical negotiations that were built on strong reputations, mutual understanding, and thorough research—fundamentals that all negotiating professionals can capitalize on to create new sources of value.

1. Develop a long-term strategy.
In May 2011, Iger and Lucas met at the Walt Disney World Resort in Florida to kick off an upgraded Star Wars ride, which Lucas had been heavily involved in developing. Over a private breakfast, Iger asked Lucas, who had just turned 67, if he would ever consider selling his company. Lucas responded that he would “love to talk” to Iger about a sale in the future but wasn’t yet ready to plan his retirement, writes Leonard.

Far from being dissuaded, Iger was exhilarated that Lucas was open to the possibility of eventually entrusting Disney with his beloved Star Wars characters. Iger believed that Disney’s success had been built on its ability to develop enduring—and lucrative— characters, from Mickey Mouse to Jack Sparrow. Since being named CEO in 2005, Iger had focused like a laser on this strategy, spearheading deals that gave Disney a fresh influx of character-driven franchises. Iger masterminded an acquisition of Pixar Animation Studios for $7.4 billion in 2006 and of Marvel Entertainment for $4 billion in 2009.

The deals proved profitable right out of the gate: Disney rejuvenated its California theme park with a new ride based on Pixar films, and the Marvel film The Avengers grossed $1.5 billion, becoming the third-most-lucrative movie in history. Moreover, these deals helped Disney to thrive even as many of its entertainment-industry rivals struggled to stay afloat. Disney’s stock has doubled since Iger was named CEO, and the company’s healthy coffers enabled him to set his sights on other acquisitions, with Lucasfilm being his prime target.

Negotiators often fail to see the connections among various dealmaking opportunities. As a consequence, their individual deals often fail to add up to a coherent strategy. Iger’s success points to the value of a different approach: Set strategy first, and then look only for potential deals that can help you fulfill your organization’s long-term strategic goals.

2. Identify nonmonetary concerns.
As he mulled over his possible retirement, Lucas struggled with the idea of handing over creative control of the fictional universe he had created. In an interview with Leonard, Lucas claimed that for him, financial success had always been incidental to a larger concern: maintaining creative control of his movies. “I’ve never been much of a money guy,” he said.

As it turned out, Iger had experience negotiating agreements with highly creative people and had a sense of what they valued. Iger personally negotiated the terms of Disney’s Pixar deal with Apple CEO Steve Jobs, then Pixar’s head. “Steve and I spent more time negotiating the social issues than we did the economic issues,” Iger told Leonard. More specifically, Jobs successfully lobbied for Iger to keep Pixar’s creative team in place at Pixar’s Northern California headquarters, operating with minimal interference from Disney in Los Angeles.

This pattern continued when Iger acquired Marvel. Seeking to profit from Marvel’s vast experience developing superhero movies, Iger kept the company’s leadership in place.

Not surprisingly, the hands-off management style Iger had shown with these acquisitions appealed to Lucas. As it happened, Lucas had founded Pixar as the Lucasfilm Computer Division in 1979 before selling it to Jobs in 1985. Lucas was reassured by the idea that he might still have some control over the next Star Wars trilogy if he sold his company to Disney.

Dollars and cents are important in negotiations, of course. But don’t assume that price is the other party’s foremost concern. Over a long career spent negotiating with “creatives,” Iger had come to understand the high value they place on artistic integrity. (In fact, as the sidebar “Doing Repeat Business” explains, he had even negotiated with Lucas in the past.) Iger had also discovered that loose control of acquired companies often paid off both creatively and financially. This attitude enabled him to quickly identify the issues that mattered most to Lucas and win his trust.

3. Enhance your value before negotiating.
Even as he debated whether the time was right to let go of his company, Lucas recognized that he had an opportunity to shape its future before turning it over to Disney or another buyer. His first step was to hire Kathleen Kennedy, a close friend and a founder of Steven Spielberg’s Amblin Entertainment, as Lucasfilm’s new CEO.

Together, Lucas and Kennedy began laying the groundwork for a new Star Wars trilogy. They hired a respected screenwriter to get to work on the script for the next installment, Episode VII, and began talking to members of the original Star Wars cast, including Mark Hamill, Carrie Fisher, and Harrison Ford, about appearing in the new films.

Lucas’s effort to move his company forward served two main purposes. First, it gave him a good shot at guiding the overall look and feel of the next Star Wars films before passing them off to Disney. Second, he likely understood that lining up top talent, including Kennedy, would make the Star Wars brand even more attractive to Disney and, if those talks fell through, to other potential buyers.

When someone tries to open negotiations with us, we tend to assume that the only possible answers are yes or no. By responding to Iger with a maybe, Lucas bought himself time to think about whether he was ready to enter a new, less-active chapter in his life. He also created an opportunity to enhance his company’s value prior to engaging in substantive talks. His methodical approach serves as a reminder that in negotiation, patience is indeed a virtue.

4. Deepen your knowledge.
In June 2012, Lucas called Iger and told him he was ready to talk about a possible sale of Lucasfilm to Disney. During the five months of negotiations that followed, Lucas argued that members of his inner circle were the most qualified to create the new Star Wars films. Iger agreed in principle but stressed that Disney would have to be the ultimate decision maker regarding future movies in the franchise.

One October weekend, Iger sat down to watch all six Star Wars films again, notepad in hand. To further bring Iger and other Disney executives up to speed, Lucas loaned them Pablo Hidalgo, a Lucasfilm manager who is known for his encyclopedic knowledge of the Star Wars universe—and its approximately 17,000 characters.

Iger’s research impressed upon him the importance of determining whether Lucas had a stockpile of story lines that Disney could draw on for the next Star Wars trilogy. Without a rough idea of the plots, how could Iger assess the fantasy world’s value?

Yet when Disney executives pressed Lucas to share his treatments for the next trilogy, he vacillated. Only after Disney put the broad outlines of a deal in writing did Lucas hand over the treatments, and even then he required Iger and two other Disney higher-ups to sign an agreement stating that they would not share the content with anyone else.

It isn’t only movie executives who must sift through a dizzying array of technological knowledge as part of their negotiation preparation. At times all of us face the task of dealing with complex information that’s pertinent to the deal at hand. It can be tempting to gloss over the details, but as Iger’s experience shows, great insights can come from careful study.

Epilogue
Thrilled with Lucas’s film treatments, Iger brought him to Disney headquarters in Burbank, California, to sign off on the sale. Iger felt giddy, he told Leonard, but sensed that Lucas was in a melancholy mood: “He was saying good-bye.”

Soon after the deal was inked, Kennedy negotiated with director J. J. Abrams to helm Episode VII. (See the sidebar) Lucas sits in on story meetings for the new film. Meanwhile, Iger is busy overseeing the toys, theme park attractions, and other branding opportunities that come with his latest acquisition. Following in Lucas’s footsteps, he will step down as Disney’s CEO in 2015 and take a less-central position.