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FMI Quarterly/December 2013/December 1, 2013

Using Design Thinking for Negotiations

businesscharacters41_interview_imageIn American culture, we tend to look at a compromise negotiation as a win-win result. In many cases this is actually a lose-lose. You started way over on the left, they started way over on the right, and when you reached the middle, you settled. That is what most people call a win-win.

Most of the time, when you have reached that point, you have given away so much that you have lost sight of your interests. You both are so sick of negotiating that when you reach the point where you cannot stand it anymore, they give in, you give in, and everyone wants to come to a conclusion, stop negotiating and go home. We call it a win-win to make ourselves feel better.

We are not always honest with ourselves about whether we have achieved a successful negotiation:

  • When you have let something enter a resolution that has become more important than your interests, you have not achieved win-win.
  • If reaching a resolution has become more important than your interests, you have not achieved a win-win, but a lose-lose.

The goal of a negotiation is not to win, nor is it to compromise:

  • The goal of a negotiation is to satisfy MY interests.
  • The means is to focus on THEIR interests.

That does not mean giving in to their interests, but rather to focus on their interests. This method of negotiation is different from your counterpart losing something or being unsuccessful. It is also different from everything we learn in our culture about negotiation.

Three possible strategies are available to us during negotiations:

Strategy No. 1Goal: Achieve my interests
Means: Defeat their interests
Strategy No. 2Goal: Achieve my interests
Means: Focus on my interests only
Strategy No. 3Goal: Achieve my interests
Means: Focus on the interests of both sides

Let’s look at each of these strategies:

Defeat them —that is, beat them into the ground. This is the “Attila the Hun” technique. You go into a negotiation, and your counterpart tells you what he wants. You tell him what you want, and he or she spends all of his or her energy telling you why you are wrong, because the goal is to defeat you. It is not a particularly effective technique.

Focus on my interests only. This could also be called the “thank you for sharing” technique. This happens when you go into a negotiation, explain what you want, and the other side explains what it wants. Then when you try to proceed to the next step, the other side tells you what it wants again, as though you did not hear them the first time. All of their energy goes into justifying their position because their goal is to focus on their own interests. They have no interest in hearing your position at all.

The third strategy is to achieve the interests of both sides. This is the most confusing strategy of the three, because you have to focus on the interests of both sides. This is the compromise solution, sometimes called “the search for the lowest common denominator.” You might hear someone come out of one of these negotiations saying, “I thought it was awful, but the other side thought it was awful, too, so it must have been a good resolution.” Do any of us really believe that two “awfuls” make a nice? Compromise is not an appropriate way to negotiate. Both sides leave the table unhappy. We do not want to come out of a negotiation with a compromise. What we want is to find a creative solution.

A BETTER WAY

Finding a creative solution is a skill that architects and engineers have in abundance and practice all the time: It is called design. You start with programming, asking the clients about their interests in detail. Then you combine your interests as a designer with the clients’ needs to develop design alternatives.

This is exactly how you should negotiate — as though you were in the programming phase of a project. Architects and engineers know the technique, but have trouble figuring out how to apply it to the situation during a negotiation.

Architects are great at negotiating on behalf of design. They will go to the mat to make sure the client retains and respects the design’s integrity, but they do not do a very good job on behalf of their own interests.

The goal of a negotiation is to achieve my interests by focusing on their interests, just as you do when you are designing. This is the only way to produce a true win-win solution. It also forces you to reach for creative solutions. You cannot do that unless you understand the other party’s interests. You have to put time into delving into its interests and looking for the matchups between you that will lead to creative solutions that will satisfy your interests.

CASE STUDY

The epicenter of an earthquake was located directly under the campus of a government agency. Almost every building had damage. The agency selected an architect that was working on another project at the campus, in tandem with a local firm, to repair the buildings. They were invited to negotiate an agreement for these repairs. The agency asked the firms to prepare estimates for the medical building, which was severely damaged and required demolition and replacement, and also asked for ideas of what to do about the other 25 damaged buildings.

The architects negotiated a fixed fee for the medical office building, but told the client that they could not accurately provide an estimate for the 25 damaged buildings.

The client’s representative said, “Let’s talk about the work on the other 25 buildings.” The architects responded, “We can’t discuss this yet. We haven’t even been inside some of these buildings yet to assess the damage, so we do not know the extent of repairs needed.” The client’s representative said, “I understand that, but you will have to take a fixed fee of $1.3 million to do the repair work on those 25 buildings.”

The architect told the officer that he did not understand what architects do, they did not know what the scope would be, and the team could not possibly accept the fee. The architect spent 20 minutes yelling at the client, which usually is not effective. At the end of his tirade, the contracting officer said, “You make a good point. It’s still $1.3 million.”

The engineer, who had remained quiet during this, said to his partner, “Let’s go out of the room and have a conversation.” They went to lunch and the engineer said, “When we go back to the negotiation, give me an hour. If we haven’t settled in an hour, we’ll go home; but during that hour you have to be quiet.”

When they went back to the negotiating table, the contracting officer had consulted with his boss and confirmed that all they had was $1.3 million. They needed the joint venture partners to take that amount of money; there were no other options.

The engineer asked him a series of questions, but did not learn much until he got to this one: “How did you get the figure of $1.3 million?” The client said, “Last night a congressional committee made a special authorization of $10 million to fix the 25 damaged buildings. We met this morning before you got here, and nobody in our office can define this scope of work. We had to agree on the highest number we could offer you for design as a percent of construction, so we came up with 13%. Thirteen percent of $10  million is $1.3 million.”

The engineer asked, “What if you get more money?” The client said the committee also stated that $10 million was the maximum for the project. The engineer persisted, “But what if you do get more money?”

“If I get more money, I will give you 13% of whatever additional construction monies I get,” said the client. The engineer said, “Write that down.” The client asked, “What? Are you taking the $1.3 million?” And the engineer said, “Will you agree that if you get more money above the $10 million, that you will give 13% of it, no matter what it is?” And the client replied, “Can I go upstairs and tell them your team took the $1.3 million offer?” The engineer replied, “If you will add that clause, we have a deal.”

In the end, the client spent $110 million from additional government authorizations for the 25 damaged buildings. All with a 13% fee!

What is the point of this case study? In that negotiation, the engineer focused on the client’s interests. He did not say one word about what he needed; he focused on what was going on with the client and saw the opportunity for a creative solution.

This is the type of negotiation that works. It is hard work, and it goes slowly sometimes. You have to put in a new kind of effort that you have never thought about putting in before. This means changing your behavior and thinking in new and different ways about negotiations.

You already know the method: It is design. Now you just need to learn how to apply it to the negotiation process. Your job as a negotiator will be to achieve your interests and figure out how to be creative in developing solutions to the problem.

Portions of this article are excerpted from Steve’s book, Negotiate With Confidence: Field-tested Ways to Get the Value You Deserve (Greenway Communications, 2013), now available at Amazon.com


Steven J. Isaacs is a division manager for Architecture and Engineering Consulting Services at FMI Corporation. He can be reached at 925.934.7200 or via email at sisaacs@fminet.com.

 

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