Emotion-Based versus Decision-based Negotiation
It’s crazy out there. In many, many corporations, the sales force adheres to the win-win paradigm and therefore compromises at every opportunity in its desperation to “get the business,” while the various purchasing agents and departments are well skilled in one of the theories of supply systems management that are designed to take advantage of win-win vendors. Do the chief executive officers understand the contradiction here, the absurdity, and do they understand that both the win-win and the PICOS paradigms are self-defeating? I wonder.
Here’s a true story that perfectly proves my point. On one side of the negotiating table was a medium-sized company that sells a product vital to the high-tech world. I’ll call this company Euphoric, Inc. On the other side of the table was a division of a giant multinational that supplies a chemical vital to Euphoric’s product. I’ll call this supplier Worldwide, Inc. In this negotiation, Worldwide approached Euphoric and requested a renegotiation of the contract for their patented chemical, which is petroleum based and therefore had become much more expensive to produce, given a worldwide increase in oil prices. Euphoric refused to renegotiate the contract. A deal is a deal, they said. In reply, Worldwide slowed down its shipment of the chemical, and without this chemical. Euphoric would have to shut down its line.
How much would Worldwide s request have added to Euphoric’s unit cost? About fifteen cents. How much did Euphoric retail this unit for? A little over $2,000. Those numbers are not typos. The battle was raging over a fifteen-cent increase in cost for a $2,000 product. What in the world could account for such blindness? It’s very simple. Worldwide, like vendors everywhere, was so used to compromising at every opportunity in the name of win-win that they were afraid to insist on the justified premium
for their patented product. Meanwhile, the purchasing folks at Euphoric were risking tens of millions of dollars in business because they, like purchasing departments everywhere, were blindly committed to taking advantage of win-win adversaries at every opportunity. Both sides were in an emotional box, committed to abstract theories of negotiation, and neither side made good decisions. In the end, Worldwide got its premium, because it was the best decision for both companies, but the negotiation was ridiculously long and involved and expensive.
This book is a refutation of all such emotion-based negotiating. As an alternative, I present for your consideration rfedsum-based negotiating. In the end, I believe you’ll agree with me that the difference between the two is clear and that the choice between the two is easy.
When I was in the air force, I learned, first in the classroom and then by practice in the cockpit, decision after decision, mistake after mistake, that I could not directly control the actions and decisions of my adversary, but I could, through trained habits, better manage my assessment of my adversary and make certain that it was accurate. With good decision-making skills, I had a chance at maintaining control of the situation and thereby achieving a beneficial outcome. Likewise, I couldn’t absolutely control my emotions – no one can – but I could keep them under check, I could keep them from overly influencing my actions, with carefully constructed behavioral habits.