Full Circle with Shawn
Welcome to "Full Circle with Shawn," a podcast where every episode is a journey through the twists and turns of life. Join me, Shawn, as I share stories from my life, starting in foster care, serving in the military, diving into the world of startups, and navigating the challenges of business ownership.
Each episode, we'll explore the lessons learned from each phase of life and discuss how these experiences shape our perspectives and decisions. From heartfelt personal anecdotes to practical advice for those facing their own crossroads, "Full Circle with Shawn" aims to inspire, motivate, and possibly even change the way you think about life's challenges and opportunities.
Tune in for honest reflections and bold conversations about what it means to turn life's obstacles into stepping stones.
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Full Circle with Shawn
Episode 33: Mastering the Chess Game of Negotiation: Unveiling Timeless Strategies for Winning Deals
Unlock the secrets to mastering every negotiation, whether it's landing your dream job or navigating the complex world of international diplomacy. Join me, Shawn, in an eye-opening journey where we dissect the nuanced choreography of negotiation, drawing from the wisdom of history's most celebrated dealmakers. By the end of our time together, you'll grasp the eight pivotal principles that can skyrocket your negotiation prowess, ensuring you stride confidently into any bargaining situation.
Peel back the layers of strategy and emotion with real-world examples from landmark corporate acquisitions to personal anecdotes that resonate with each of us. We dissect Disney's monumental purchase of Pixar and Verizon's savvy acquisition of Yahoo, distilling the essence of powerful negotiation tactics that clinched these deals. Sharpen your communication skills, fine-tune your emotional intelligence, and learn to read the unspoken cues that can mean the difference between a handshake and a stalemate. Step into my parlor of negotiation, and emerge as the strategist others strive to emulate.
Hello and welcome back to Full Circle with Sean. I am your host, sean, and today we're talking about the art of negotiation. Now, if you happen to be a salesperson, then you'll know that negotiation can be a lot more complex than what we're going to cover today, but these fundamentals still apply. So we should be starting with what is negotiation. And negotiation is the process by which two or more parties communicate and compromise to reach a agreement that is beneficial to all parties involved, and there's different skill sets required, so we need to understand the interests, we need to leverage strengths and we need to be able to make concessions. And then the importance of negotiation in business is basically it's critical for closing deals right. It's critical for forming partnership, resolving disputes and managing relationships with different stakeholders. It's also essential for optimizing operational efficiency and strategic positioning, and basically it influences the financial and strategic outcomes significantly, which impacts the overall business success. And then if we switch to our personal relationships, which impacts the overall business success, and then if we switch to our personal relationships, so it's the key to managing family dynamics, friendships and marital relationships. It helps in balancing personal needs with those of others to maintain harmony and mutual satisfaction, and it's really vital for resolving conflicts and making decisions that affect everyday life. And then, if we go further and look at negotiation in diplomacy, so this is really central to the interactions between governments and international entities. It's used to establish peace, form alliances, manage conflicts and negotiate treaties, and it can influence global policies and international relations, and that really plays a critical role in maintaining global stability and global security.
Speaker 1:Now there are different types of negotiation. There's the distributive negotiation, which is win-lose and it's also known as zero-sum right, and that's where one party's gain is another party's loss and the resources are fixed and limited, and it makes the negotiation very competitive. Some of the key characteristics are parties often have opposing interests, tactics involve asserting one's position and often withholding information, and the goal is to maximize one's own share of the overall pie. Common scenarios are, say, single-issue negotiations, like salary discussion, price bargaining, so on and so forth. Then there's integrative negotiation, and this is your win-win, so it focuses on mutual gains and collaborative solution. The aim is to expand the pie rather than dividing it, and it allows all parties to benefit. So some of the key characteristics. So it usually involves multiple issues rather than a single issue, and that allows for creative solutions that satisfy even broader interests. It encourages sharing information and prioritizing trust and cooperation. The goal is to achieve a beneficial outcome for all parties, optimizing the collective payoff. Now this is often using complex agreements like mergers and acquisitions, long-term business partnerships and stuff like that.
Speaker 1:Now there are, say, eight key principles of effective negotiation. The first one is preparation and planning. So you should conduct thorough research on the other party and the subject that you're going to be negotiating. You should already have defined clear objectives and you know your limits and you prepare alternatives and you understand the needs and interests of all parties involved. The next thing you need to do is building relationships, so you should establish rapport and trust before discussing business.
Speaker 1:Always approach negotiations as a partnership rather than a confrontation, and try to maintain professionalism and respect throughout the process. We have effective communication, so listen actively to understand the other party's perspective, communicate your points clearly and avoid misinterpretations. And then there's emotional intelligence, right. So you want to manage your emotions and remain calm under pressure. Be aware of and responsive of other people's emotions and try to use emotional cues to guide your negotiation strategy. Remember, these things are not easy. Negotiation can be very difficult. Negotiation can be very emotional, so like when I got an investor, I got very emotional. I have to give away this and what are they going to do? And you're just going to go back and forth in your head. You need to keep that down and you need to basically keep your emotional intelligence in check. Flexibility and creativity so be open to alternative solutions and creative problem solving right. We want to adapt strategies as negotiations progress and new information unfolds and then basically show your willingness to compromise where it benefits all parties.
Speaker 1:The next one is assertiveness right. So clearly and confidently articulate your needs and expectations, stand firm on your critical issues without being aggressive, and how you can do that is you can basically balance your assertiveness with empathy to maintain positive relations. Then you have problem solving right. So you approach conflicts as problems to be solved in collaboration. You want to seek the win-win outcomes where possible always where possible and then use strategic concessions to move negotiation forward. And then, finally, you have ethical conduct. So you want to maintain your integrity and honesty throughout the negotiation, and I have a podcast on ethics that, if you haven't listened, to go back and listen to it, so you'll get some of the intricacies with that, because everything we're talking about has much further implications.
Speaker 1:As I've already said, you want to avoid manipulative tactics that could damage long-term relationships and you want to respect confidential information and agreements. That's very, very important. So the next thing is you really want to look at the role of nonverbal communication in your negotiation right. So you have your body language, your facial expressions, your tone of your voice and your physical distance and touch okay. So in body language, you wanna utilize positive body language. You wanna nod, make eye contact and open posture to really convey engagement and openness. You wanna be aware of negative body language signals, like crossing arms, avoiding eye contact or fidgeting, which can indicate defensiveness or disinterest. For facial expressions, you wanna use facial expressions that match the tone of the conversation and it can help to reinforce your verbal messages, but be mindful of involuntary expressions that might reveal doubt or disagreement With your tone of voice. You want to adjust your tone to convey confidence without being aggressive, and sincerity to foster trust. The tone of your voice can really impact how your messages are perceived and the reception that the other party has to your arguments. And then physical distance and touch. So respect personal space and this will avoid making other people feel uncomfortable and appropriate minimal physical contact, like maybe a handshake, and you could use that to establish rapport or show goodwill.
Speaker 1:Now let's talk a little bit about the influences of cognitive bias on negotiation outcomes. So you have your common cognitive biases. You have your anchoring bias, and this is the tendency of heavily relying on the first piece of information offered, the anchor, when making decisions. You have your confirmation bias, and this is the preference for information that confirms one's pre-existing beliefs or hypothesis. And then you have your overconfidence bias, and that's overestimating your own ability to perform tasks or to predict outcomes accurately. And these can impact the negotiation right. So biases can skew perception of the negotiation terms. They can affect offers and counter offers and be based on initial values or assumptions rather than objective evaluation. They can lead to misjudgments about the other party's positions or their intentions or flexibility, which again results in suboptimal decisions. And finally, overconfidence. So overconfidence can really cause negotiators to take a greater risk and really push unrealistic outcomes. So how do you mitigate biases right? So you want to be aware, you want to. Awareness and acknowledgement of your own biases are a critical first step in managing them. So engage in perspective taking to better understand the other party's viewpoint and reduce bias. Consult with colleagues or advisors who might provide objective insights and really help balance these bias views.
Speaker 1:Now I'm going to give you, say, seven negotiation strategies. So you have interest-based negotiation, and this really focuses on understanding and addressing the underlying interests of all parties, rather than just bargaining over positions. It facilitates finding creative solutions that can satisfy the needs of all people involved and this promotes a more sustainable agreement. You have bargaining and concessions, so you use a combination of competitive and cooperative approaches, adjusting your tactics as the negotiation evolves. So you plan your concessions carefully, you do not give away too much too early and you ensure reciprocation in concessions from the other party. Then you have contingency contracts right, so proposed agreements that include contingencies to account for uncertainties and that allows all parties to commit to terms on future events or outcomes, and this can really be particularly effective when parties have different predictions about future events.
Speaker 1:Then you have bracketing. So bracketing is basically, you start with an initial offer that is more extreme than your target outcome, like that you said in the beginning. So your anchor right, and then you gradually adjust the offer to guide the other party toward a middle ground that aligns to what you wanted in the first place. Then you have your high ball, low ball technique right. So you start deliberately high or low to shift the anchor point and expand the negotiation range, and it can be really useful in situations where parties are unsure of the fair value of the offer. And then you have silence as a strategy. So you use silence effectively after making an offer or presenting the key points, giving the other party time to think and respond, which can lead to concessions. Silence can exert psychological pressure that prompts further discussion or concession from the other party. And finally you have nibbling. So, after main terms are agreed upon, ask for a small amount of concessions that were not previously discussed, and it's very effective in gaining extra value with minimal risk of disrupting the main agreement.
Speaker 1:Now, if we look at the strategies that we just talked about and try to tie them into our win-win or win-lose strategies, we'll start with win-win right. So win-win we want to focus on collaborative solutions that maximize the outcome for all parties involved. We utilize interest-based negotiation to identify our shared goals and create value through creative problem solving, and we encourage open sharing of information to discover ways to align interest and optimize results for everyone. In the win-lose, we want to employ a competitive approach where one party's gain is typically at the expense of the other. Here we rely on our tactics, such as anchoring, where the first offer sets the stage for negotiation limits, and hand bargaining focused on taking a firm stand on your position. It's useful in one-time deals or when negotiating over a fixed resource, where expanding the pie isn't feasible. Now, when you want to choose the appropriate strategy, you should assess the relationship and the context. So you really want to try to opt in for the win-win strategy, especially when future interactions are expected and maintaining a good relationship is important. You only consider using win-lose strategies in very competitive or adversarial situations where relationships are not a priority, and then you can adapt the strategy based on the dynamic of the negotiation and the relative importance of the outcome versus the relationship.
Speaker 1:So we're there, we're negotiating and we're in a deadlock, right, or we've got a massive conflict. How do we deal with that? So the first thing we want to do is identify the root cause. So we take a step back to analyze the underlying issues and the interests causing the deadlock, and then we encourage open dialogue to allow both parties to express their concerns and their perspectives. And then we might use mediators or third parties. So we introduce a neutral third party to facilitate discussions, offer fresh perspectives or help find common ground. Mediators can also assist in breaking impasses by rephrasing positions and suggesting better solutions. And then we have breaking the negotiation into parts right, so we want to segment the negotiation into smaller, manageable parts to isolate and resolve these issues first, which will build momentum and goodwill, and we can look at alternative proposals and creative problem solving. So we can propose multiple alternative proposals and create a problem solving. So we can propose multiple options simultaneously to give choices and flexibility, and this makes it easier to find a solution that satisfies all parties. Then we have cooling off periods right, so agree to a temporary break.
Speaker 1:If emotions run high, allow all the parties the time to reconsider their position and consult with their advisors, and then we use the time to reconsider their position and consult with their advisors, and then we use the time to analyze the situation, do further preparation and return with a fresh perspective. We have concessions and trade-offs, so we can offer concessions on less critical issues to demonstrate goodwill. You really want to consider trade-offs, where both sides give something up to gain something on an issue that is a high priority to them. And then we have escalation avoidance. So stay focused on the issue at hand and avoid personal attacks or emotional responses that can escalate the conflict right. We want to maintain professionalism, we want to maintain respect and we really want to foster an environment where you know the whole point is to find resolution.
Speaker 1:Let's look at a couple of examples. So Disney acquired Pixar in 2006. And Disney purchased Pixar for about $7.4 billion in stock. Then the negotiation balanced Steve Jobs' leadership at Pixar with Disney's goal of revitalizing its animation studio. So what did we learn? That building a relationship and aligning strategic interests can lead to a deal. The negotiation focused on cultural integration and maintaining creative independence for Pixar, which was crucial for the deal's success. We look at Verizon, who acquired Yahoo in 2017. And Verizon acquired Yahoo's core internet operations for $4.48 billion, a deal that adjusted down from the original due to Yahoo's data breaches. And the lesson is the importance of due diligence and flexibility in negotiations. So Verizon renegotiated the terms after unexpected challenges demonstrated how external events can significantly impact deal terms.
Speaker 1:We have Microsoft and Nokia. So Microsoft bought Nokia's mobile phone business for over $7 billion, and it wanted to revitalize its mobile business and integrate Nokia's hardware with its software. And what did we learn? Strategic fit and clarity of vision are crucial in negotiations. For Microsoft, this meant a significant bet on hardware integration, and we all know how that actually turned out at the end. And then we have Tesla's supply negotiations for lithium, which isn't too long ago, and so, basically as part of its strategy to secure materials for battery production, it engaged in various negotiations to secure long term supplies of lithium, and the lesson in that is forward thinking in negotiations can secure essential resources and stabilize supply chains. And then, finally, we have Apple and Qualcomm right, and Apple and Qualcomm settled a long standing dispute over patent license fees, where Apple agreed to a payment to them and a six year licensing agreement, and the lesson here is sometimes settling a dispute can be more strategic than continuing the conflict. The settlement basically allowed both companies to focus on future operations and opportunities rather than ongoing litigation.
Speaker 1:So some advice, right. So how about we go over some do's and don'ts, so do's? Do prepare thoroughly, so understand all relevant details, including your needs and the other party's needs and the context of the negotiation. Do build rapport, so establish a positive relationship with the other party to really facilitate smoother negotiations and better outcomes. Do listen actively, and I did a whole podcast on active listening. So pay close attention to what is being said and what is not being said to fully understand the other party's perspective. Do aim for a win-win, and I've said that before we should always go for the win-win. Seek solutions that benefit all parties, as these are more sustainable and lead to better long-term relationships. They'll also lead to better outcomes for your brand and your company, or you personally, when you're trying to do the next one with somebody else and they're like oh yeah, but you did a win-lose with that person, so you don't want to be known for that. And then do remain flexible, right? So we want to be willing to adapt our strategy based on new information and the negotiation dynamic.
Speaker 1:And now let's go through some don'ts. So don't rush the process. So rushing to close a deal can lead to oversight of important details and poor agreements. Don't make unilateral concessions, so avoid giving something for nothing. Don't take things personally. Keep emotions in check and focus on the issues rather than the personal feelings and this one is also hard for me at times, especially when you're a founder of a company. So sometimes it's better that you rely on the people around you to even do some of those negotiations if you know that you're going to take it too personally. Don't reveal too much too soon, which basically says be cautious about the amount of information you disclose.
Speaker 1:And then let's recap and expand a little bit on some common pitfalls, right? So we talked about overconfidence. So you believe too strongly in your own position or skills and that can lead to unrealistic expectation and really a failure to capitalize on the opportunities. And then you have poor planning. You've entered in a negotiation and you didn't prepare, and that can really result in weak positioning and just not good outcomes. Ignoring cultural differences so in international negotiations, neglecting to consider cultural nuances can lead to major misunderstandings and even disrespect. Failing to listen so not listening effectively can cause you to miss key information and this can lead to inaccurate assumptions and decrease effectiveness and then finally becoming too competitive. So viewing the negotiations as strictly adversarial can prevent the discovery of collaborative solutions.
Speaker 1:And I guess, as a final point, let's bring it back to reality, right, because this is great and you guys will. When you're doing your own negotiations, it'll be a mix, as it always is, with everything and what works for you and what works for the other person and in the situation that you're in. And that's why we talk about the context and that's why some of my previous podcasts talk about everybody is treated differently. You have to treat everybody differently, based on their own emotional intelligence or other aspects that they need in order to connect with them. This is a skill. It's something that you'll get better over time, but it's not easy, especially if, like I said, if you're a founder of a company and you put your heart and soul and time and time away from kids and maybe you mortgage your house and you're emotionally invested into what you're doing or what you're negotiating.
Speaker 1:So sometimes it's better to take your trusted people and sure you make the decision at the end, but don't get involved in all that nitty gritty negotiation details if you don't have to, and if you do, when you need to take a second, take a second. When you need to compose yourself, take a second when you need to. You know, compose yourself. Compose yourself, it's okay. These things are hard and there's a lot of different resources that can help you out. So, for a book, you got the book by Chris Voss right. So never split the difference, negotiating as if your life depends on it, and it's written by a former FBI hostage negotiator.
Speaker 1:You have online courses. You got a lot of online courses everywhere. Corsia has Successful Negotiation Essential Strategies and Skills podcasts, so there's a good one called Negotiate Anything and another called the Negotiators, and then even websites, right? So Harvard Law School's program on negotiation, and it's an online thing. So there are a lot of things that you can do to continue to enhance your skills, but just be with everything.
Speaker 1:Be cautious about what you learn and who you learn it from, because if they say everything's always different based on the situation, not all things will work in your situation or in the context of what you're trying to do. Then that's good, and to pick up fundamental skills is good. You do have a lot of hype around this stuff and you have a lot of people doing it for clicks and everything like that. So these books are good. Online courses are good. The podcast these two podcasts are really good. So, yeah, have a look at that and continue to elevate your skill in the art of negotiation. And, of course, you can always email me. My email is listed on the podcast and I'm happy to talk more about this or any of the topics that you want me to talk about. Just shoot me an email and on the next episode we will be talking back in startup pain, so we'll be talking valuations, so yeah, so thank you for joining me on Full Circle with Sean, and I look forward to chatting with you next time.
