Let me tell you the secrets of bargaining today. For example, how did we win the Godiva bargain? How did I buy a machine from a Swiss manufacturer when we couldn’t afford it? What is industrial destiny? You will find the answers to these questions in the article. Bargaining is inevitable in business life. In order to continue your business, you have to get the other party to accept the most favorable price. As you can appreciate, I have sat at the bargaining table with many companies, both small and large, in every country so far. I have quite a lot of experience in this matter; it is said that experience is the result of the times you’ve been a loser. I have read and consulted at the same time. The best thing any bargaining method can do is to protect you from accepting a deal you should refuse and help you make the most of the assets you have. Again, as always, let me first summarize what writers and illustrators say about successful bargaining, then let me explain my own actions and approach.
I think the most influential book written on this subject is “Getting to Yes, Negotiating Agreement Without Giving In” by Harvard Professor Roger Fisher and his friends, originally written in 1991 as a Harvard Negotiation Project and published by Bilgi University in Turkey in 2016 (1). In 2021, the Best Alternative To a Negotiated Agreement method (BATNA) from this book appears as the basic method in almost every publication on this subject.
Fisher et al. argue against the process of positional bargaining: In its standard form, positional bargaining involves many different decisions, such as what to offer, what to reject, and what major concession to make. The process is difficult and tedious. Threatening through wall-building or leaving the table are fairly common tactics. Bargaining by taking a position, increases the time and cost of reaching an agreement and increases the risk of no results. The competition between wills becomes tense and spoils relations. Painful feelings can last a lifetime.
Many people are aware of the risk of this difficult positional negotiation and take a softer approach. They treat the other as a friend and emphasize the agreement as their goal rather than victory. Making offers and concessions, being compassionate and trusting, and avoiding confrontation are the norms. This is how many bargains happen between families and friends. This is effective in reaching agreements quickly; however, these agreements may not be wise to take into account the fundamental interests of each party. Any bargain where keeping the relationship is the primary concern runs the risk of being a bad deal. Those who pursue soft, friendly positional bargains are vulnerable to a negotiator who plays hard.
The name of the bargaining method developed by the Harvard Bargaining Project is “Principled Negotiation“. The four key points in this negotiation method are as follows:
1. People: People cannot communicate openly and confuse their ego with their position. Attack the problem instead of the people.
2. Interests: Focus on interests, not positions. Work to satisfy the core interests that drive the parties to adopt their positions.
3. Options: It is difficult to design optimal solutions under pressure. Making decisions in the presence of the other party narrows your vision. If you have too much at stake or if you spend all your time looking for the perfect solution, you can stifle your creativity. To remove these barriers, designate a specified time to generate possible solutions and options that advance common interests and resolve differences creatively.
4. Criteria: Base terms on impartial standards such as market value, expert opinion, custom, or the law. No one has to surrender. Both parties can work together for a fair solution.
Fisher and colleagues say that setting the “worst outcome as the bottom” can protect people from a very bad deal, but it will prevent finding acceptable solutions. As an alternative to the “bottom line”, they propose the Best Alternative to a Negotiated Agreement (BATNA) method. They say that BATNA is flexible enough to allow exploration of creative solutions and that the best result will be achieved by comparing the proposal to BATNA. Your strength in negotiations depends on the quality of your BATNA, not on resources such as wealth, physical strength, or political affiliations. Wealth can even weaken the bargaining position of someone trying to get a lower price. The relative negotiating power depends on how attractive the no-deal option is to each party.
The authors recommend these three different processes for creating BATNA: First, make a list of actions you can take if no agreement is reached. Then, turn the ideas with the highest potential into practical alternatives. Finally, temporarily choosing the best alternative. This is BATNA. It is easier to improve the terms of any deal negotiated with a good BATNA. Knowing where to go will give you the confidence to close negotiations. The willingness to let go of a negotiation allows you to present your interests more strongly.
The authors put forth that thinking about the other party’s BATNA can better prepare you for negotiations. Knowing the alternatives allows you to anticipate what to expect during a negotiation. If their BATNA is good enough that they don’t need to negotiate on the merits, consider what you can do to change their BATNA. If a power station is polluting a local area with harmful gases and their BATNAs are to ignore the protests and continue operating as usual, perhaps a complaint to the authorities will suffice to halt their operations. This makes their BATNA less attractive than it is. When both parties have attractive BATNAs, the best outcome may well be no agreement. In such a situation, a successful negotiation may be the one in which you decide to look elsewhere amicably and efficiently rather than reach an agreement.
If the BATNA approach fails, you can resort to a strategy that focuses on what the other party can do, say the authors. This involved countering the basic movements of bargaining that took a position to turn their attention to the merits of the case, and this was called “bargaining jujitsu.” So just like in the martial arts of judo and jujitsu, it’s about avoiding using your strength directly against your opponent, but instead using your ability to step aside by using your strength against them. The basic principles of jujitsu are to use questions instead of statements and choose silence if the other party expresses their position very strongly, attacks your ideas, or makes personal attacks
Questions can lead the other party to confront the problem. Questions educate rather than criticize. Silence creates a sense of stalemate. When people doubt what they’ve just said, the silence can be quite uncomfortable. Often, the other party will feel compelled to break the silence by answering your question in more detail or by coming up with a new suggestion. Ask questions, then pause. When you’re not talking, you have some of your most effective negotiations, state Fisher et al.
When all else fails, the last resort is to call a third party. Mediators can more easily separate people from the problem and steer the discussion towards interests and options.
Another important book on the subject of bargaining is ‘Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond, written in 2007 by Harvard Professors Deepak Malhotra and Max Bazerman. This book also uses the BATNA method developed by Fisher et al. They added a field called the “ZOPA-zone of possible agreement” valuation to BATNA. So, the range of all agreements acceptable to both parties is the gap between the values you have allocated. “How much did you exceed your allocated value? How much of the current value did you claim?” These are two important questions to ask about this gap, the authors say. Then, they make the following suggestions:
· At the table, pay attention to the BATNA of the other party and the “allocated value”. When privileges dwindle, it’s a sign that you’ve reached ZOPA’s limits, or so the other party wants you to think.
· You have two goals in responding to proposals: To complete the specific deal being negotiated and to strengthen your relationship with the other party. To create real value for both parties, keep the issues in balance with each other.
- Both parties should seek ways to make changes that improve the agreement for at least one party without anyone losing. Such changes can range from delivery dates to financing plans.
- After negotiation, check the deal again to see if there will be an improvement to a ‘post-settlement agreement’. If it cannot be done, there is an agreement already signed. Everyone benefits if they can.
As a bargainer, you have to face the fact that “people act irrationally and make mistakes,” writes the authors. But the upside is that most mistakes in negotiations are “systematic and predictable,” they add. For example;
- The “fixed pie bias” mistakenly assumes that there is a limited amount of values to split. Overcome by creating more value.
- The “vitality bias” begins when one factor becomes too prominent, preventing consideration of other factors, such as when a proposed salary dwarfs all other factors in a job offer.
- The framing effect is a phenomenon that means that the decisions of others change depending on the way the information is presented. Another common bias is the “proneness to framing” bias. In other words, you think that the way you present some information will shape the other person’s decision. To get rid of this bias, redefine the key points objectively. Use different reference points to evaluate the data.
- “Motivational biases” arise when what you want conflicts with what you know you should do. To deal with this, delegate decision-making authority to someone else, especially for troubling points.
- “Egocentrism” is another source of prejudice. People tend to interpret events in their favor, so different parties do not disagree about what they want; they also disagree about what is fair. To answer, use the “alien lens” to see things from a third-party perspective.
Overconfidence and optimism are interrelated prejudices. People tend to see themselves as good and others as bad. Be aware of the risk of overconfidence. Avoid judging people as inside or outside your group; instead, build trust between the parties before negotiating.
The authors also underline the following issues as a bargaining principle;
· Emphasize that people will lose by rejecting your offer because they are more afraid of losing than they want to win.
· Try making an excessive request first. The other party will reject it, but your real offer will then appear more moderate.
· Do not lie. Be ready when others lie.
· It is also necessary to pay attention to conflicts of interest. People, including professional representatives such as lawyers or real estate brokers, interpret situations in ways that benefit them.
· Negotiating in an extremely weak position is extremely challenging. Don’t let people know you’re weak.
· If they are really angry when the other party is very angry, accept this and address the basic motivation that drives the emotion.
· Finally, remember that you can’t negotiate everything and you shouldn’t always try. Don’t try to negotiate when it’s culturally inappropriate, “if everyone knows your BATNA”, if you’re under severe time pressure, or when it will damage an important relationship.
In 2017, Malhotra Deepak wrote another book, Negotiating the Impossible (3), and suggested using the strategies of “empathy”, “process”, and “framing” to develop a more collaborative, value-creating negotiation, especially for stalemate negotiations. The main highlights are:
· When the other party opposes a proposal, think about how you want to “frame” it. Framing is the way you present something, as aforementioned.
· “Changing the Framework” helped resolve a 2011 contract dispute between owners and players of the National Football League (NFL) team in the USA. The main point of contention was how to divide profits. Players asked the bosses to split the money 50/50. Bosses offered players a 58% stake, but only after they took $2 billion in profits. With the fate of the upcoming season at stake, bosses overcame the stalemate with yet another new sharing model framework (presentation form): They proposed splitting profits into three parts. For the first part, they gave players more than half of the profits from TV rights, while other parts, including stadium and post-season revenues, bosses had a larger share. Both sides declared “victory” at the end of the bargain.
· Think of the process as the nuts and bolts of the bargain. It includes who will be involved in this process, what will be on the agenda, and in what order you will address the issues. Identify the process as the first step in the negotiation. An agreed-upon format can help prevent deadlocks and ugly conflicts, as well as costly mistakes such as untimely compromises.
· Empathy allows you to see the negotiations from the other party’s point of view and to understand and anticipate their actions. Your goal is to understand the other party’s behavior, not justify it. When you can discern possible reasons behind their actions, you multiply your options to respond. Whatever the outcome is, stick with it; There may come a time when the deal you’ve reached can be improved or what you haven’t got taken back.
· In 1962, US President John F. Kennedy empathized with resolving the Cuban missile crisis, a conflict over the Soviets building nuclear missile facilities in Cuba. Had JFK assumed the Soviets were acting in bad faith, he could have responded with airstrikes. Instead, he understood the Soviet point of view. The Russians tried to balance the US nuclear advantages, including the US missile launch sites in Turkey and Italy. When the US promised to remove the Turkish and Italian facilities under a negotiated agreement, the USSR agreed to remove the missiles from Cuba.
Psychology professor and negotiation expert Daniel Shapiro, in his book, ‘Negotiating the Non-Negotiable’ (4), explains that emotional conflicts threaten your identity in bargaining, so that’s where you need to look to resolve them. To heal the conflict, he recommends that we go beyond our core identity and look at the role identity plays, rather than dealing with superficial issues of conflict such as finance or politics. He says that if we feel that a conflict threatens our identity, we may think that our only alternative is to fight. Your opponent may feel this way too, he says, explaining that both sides can come up with alternatives. Shapiro states that two aspects of our identity, your “core identity” and your “relational identity,” are vital to resolving conflicts.
According to Shapiro, our relational identity consists of attributes that determine our relationship with a particular person or group. In conflict, we face a special challenge with our relational identity. We need to know how to balance our need to engage with our group against our desire to preserve our freedom of choice and action. Shapiro states that if we believe we can resolve our differences, we can find ways to reach the people we disagree with. But if we feel our identity is threatened, we can respond according to the “tribal influence”, which can make us behave of our point of view,
Finally, Joshua N. Weiss, also from Harvard, in his book The Book of Real World Negotiations, gives examples of bargaining from the business world and daily life, summarizing the literature and listing the five principles that make a bargain perfect:
1. Good preparation
2. The mentality and the importance of the relationship
3. Creative problem solving
4. Managing the emotional dimension of bargaining
5. Revealing the hidden dimensions of the bargain.
As for my tradition, we have a ‘knife margin ‘ tradition inherited from my father, both in establishing partnerships and in negotiations. This “knife margin” is also not something I come across in bargaining literature. The late Sabri Bey used to say: “When dividing a cake, try to cut it right in the middle. But the knife with which you cut the cake has its share; the blade share. Always leave this share of knive
s on the other side.” This is another expression of the win-win principle.
There is a beautiful proverb in Turkish, “Check your purse then bargain”. It is true, your bargaining power is as much as your money in your safe, in your pocket. However, I have seen from experience that sometimes money alone is not enough in bargaining. I lived this in the Godiva bargain. After we had agreed on everything, including the price, the CEO invited me back to dinner in New York and asked about our human resources policy. When he was satisfied with my answer, he admitted that; we weren’t the highest bidders, but they trusted us. After reading Deepak and Max’s book, I wonder if the CEO had called me for a “post settlement agreement”. Maybe, but he didn’t want to.
While I wholeheartedly agree with the adage I mentioned above that “if you don’t have money or can’t afford it, don’t try to buy goods”, sometimes even if you don’t have enough money, you can find different, creative solutions at the bargaining table, as Joshua Weiss states. We had to buy machinery from a Swiss monopoly manufacturer. But, if I pay the amount they are asking for, it doesn’t save me in the end. Because you have to calculate the return of the money you give. The calculation is also simple, actually, “this is my money, this is my market, and this is how much money I can make.”
I also made these calculations, but I could only pay half of the price they wanted to save the investment. Yet, if I don’t get that machine, I won’t be able to get anywhere in productivity or quality. That’s all I can give, I say, but the man is discouraged and leaves. But he also knows that I really want to buy it. Actually, he doesn’t want to miss this sale opportunity either. Finally, he came to me with a solution and said, “I will not give you the whole machine, but I will give you some technical drawings. You can get it done in Turkey,” he said. It was a good idea, but unfortunately, the price he asked for technical drawings was also very expensive. I used his offer and on top of it. I said; “Don’t give us the technical drawings, but give me a day with the engineer who made the technical drawings. Let me come with my engineer and see where the machines are made and how the machines work. Instead of technical drawings, give me sketch drawings of the machines. So I’ll make the machines. Then send your engineer to our factory and he will check if it is correct.” He accepted. In this way, I made half of the machines myself. I bought other parts from them as well. We modernized our facility with these machines. At the bargaining table, it is necessary to take into account different alternatives. There is no such thing as two plus two makes four, it can be three or five, depending on the situation.
There were times when we got up from the bargaining table by being rejected. In the past, technology transfers were never easy. Fortunately, these are outdated issues now. In this sense, Jacobs has a very different meaning for me between the brands that fall under United Biscuits and the pladis roof. When we set up a new modern biscuit factory in Davutpaşa in the 70s, we want to produce crackers. We tried cracker production in the factory, but it didn’t work. Better to ask someone who knows? Back then, there was a very famous cracker called TUC. The sole manufacturer of this biscuit and the owner of its technology was a man named Monsieur de Beukelaer. His factory was on the Belgian-Dutch border. My father made an appointment to meet and went there. However, Monsieur de Beukelaer made my father and my cousin wait because he was taking a lunch nap. Anyway, he woke up and our people told him crackers could not be made in Turkey and they wanted to establish a facility. They asked him how they could go about doing it. De Beukelaer said: “I would like 4 percent of your turnover as a license fee.” Besides he wants it from sales, they would give it if it were out of profit. Will it even make that much profit? That was not clear either. Moreover, how would we pay the 4% he wants from Turkey? There were no laws regarding this in Turkey. There were commercial conditions and other problems. They explained this, but Monsieur de Beukelaer did not warm up to the idea. So they returned empty-handed.
Then, fortunately, we got support from the USA from an organization called The International Executive Service Corps. This establishment operated like a foundation providing experts to companies from industrially developing countries. Retired managers who were successful abroad usually came with their wives for a certain fee, a certain donation to the establishment and expenses to be covered, and helped us with the issues we needed in our country. An expert from IESC called Richard Scheneider came. The man did indeed manage to make the cracker in one go. We named it the Crown Cracker. It has become a classic product that we sell a lot in Turkey.
In time, aside from the technology of TUC, which Monsieur de Beukelaer refused to give away, the TUC brand became ours in England. It must be some kind of industrial destiny. Fate!
I have many such stories. We needed to diversify our products in the 1980s, but it was only possible with BOPP flexible packaging, which is known as gelatin film, that protects those products from external influences. However, it was not manufactured in Turkey. No one intended to invest in this area either. We had to do it ourselves. My father had a feasibility study done and saw that a total of 10 million dollars was needed. $10 million was a huge amount at that time. The World Bank gives loans to develop the industries of developing countries. They went to the World Bank. They explained the project. Bank experts did not believe in the project. They did not give the loan. In the end, local and foreign partners were found and Polinas was established. Then years passed. One day, while I was on a plane, a man came up to me. “Are you Sabri Bey’s son?” he said. I said yes, and he continued, “Your father has asked us for a loan for Polinas and we didn’t give it. We said that you could not sell 5,000 tons, now we see that there are 50,000 tons of production. We made a mistake”. Then he sent his greetings to my father. Today, Polinas, which is only one of the facilities in our country with a capacity of 100 thousand tons, sells to hundreds of companies in more than 65 countries on five continents.
I will talk about partnership with foreign cultures in another article very soon, but let me mention this: During the final stage of my negotiation with the Japanese, I saw that I could not give the number they wanted, so my offer would be below the number they wanted, I said what I would say it and kept silent. Whatever they said, I never answered. They said my offer was too low, they even mentioned our previous deals because my price was lower than what we had paid before, and again I kept quiet. After a long silence, the chairman of the committee, the old Japanese Chief Engineer, said, “Sir, we have not seen a bargainer as good as you, we accept your offer.” Jujitsu worked, and well, I also was a judoka in my youth!
To sum up, after all this experience, I think that bargaining is first and foremost an art of compromise. When I look at what I had done during the negotiations, I see that I acted in accordance with what was written on this subject. I personally always try to reach a win/win situation in negotiations. Every bargain has a “bottom point,” or the final “twisting point” as Fisher et al. call it. I don’t do that, so I don’t go down to that point. I take care of the other person’s BATNA. This is not written in books. When you do this, the person on the other side of the table will be pleased. Maybe at that “point of twisting”, he earned 50 thousand, whereas in the bargain, he left a million, but that 50 thousand makes him happy. This is the secret of bargaining.
Note: This article is open source and can be cited by mentioning the author. Does not require copyright.
(1) Fisher, R. and Ury, W. (1991), Getting to Yes, Penguin; Fisher R. et al. (2016), Evet, Bilgi University Publications.
(2) Deepak, M. and Bazerman, M. H. (2008), Negotiation Genius, Bantham.
(3) Deepak, M. (2017), Negotiating the Impossible, Berrett-Koehler.
(4) Shapiro, D. (2017), Negotiating the Nonnegotiable, How to resolve your Most Emotionally Charged Conflicts, Penguin Books.
(5) Weiss, J.N. (2020), The Book of Real World Negotiations, Wiley.