Negotiate like a Gambler

Knowing When to Walk from a Business Negotiation

Most executives delight in upcoming business negotiating sessions with about the same enthusiasm as they have about a root canal at their local dentist. The stakes are high. Negotiate too hard and the deal is lost. If you’re too timid then you will leave money on the table, which in today’s economy is nearly as bad as losing. Having been a strategic negotiator for a lot of years, I realize that successful negotiation is an art, rather than a science.

However, behind the skills that come from years of senior executive level negotiations are several basic principles that I call “THE GAMBLER” principles, after the song immortalized by Kenny Rogers. Lest you form the wrong idea, I do not want to suggest that negotiating and gambling are synonymous, or even remotely associated. In fact, following my counsel will effectively insulate you from taking ill-advised and unnecessary risks in a moment of desperation. Now on to Kenny’s famous words:

You got to know when to hold ’em
Know when to fold ’em
Know when to walk away
Know when to run

You never count your money
When you’re sittin’ at the table
Ther’ll be time enough for countin’
When the dealin’s done

The three most important concerns in any negotiation are, first, relationship, then risk, and lastly, value. These concerns are the actual decision criteria that underlie any business transaction leading forward into the future. My starting goal is always to seek a win-win outcome. A win-win outcome is usually possible, but there are those unusual cases where win-lose or walk/run away become the only practical outcome. It should only be the other party’s intransigence that necessitates the latter results.

First, however, in order to have a successful negotiation, there are three important mental bridges that must be crossed over before you enter the room to negotiate. These are:

1. Clarify the relationship – Simply put, what is the current real and perceived business and personal relationship and its true value to your organization’s future? All too often, we hold on to the past, not realizing that often we must be willing to let go of what we have in hand if we are to be free to reach out for something better. We must cautiously determine what could be lost in this negotiation but alternatively look for new doors which may open before us, given the new-found freedom we would gain without the existing relationship. As business leaders, we frequently continue to pursue existing relationships beyond their prime, simply because it is easier and more comfortable than striking out to develop a new relationship that better suits our organization’s future. Thus we must place a well-focused thought on value in continuing the relationship, and be mindful of the pending negotiations.
2. Clearly Structure the Outcome Desired by Both Parties – I often find that teams will start a negotiation with the drive to win or even win-win, but have never committed to paper beforehand precisely what that means. Oh yes, they have a general idea, i.e., to place the contract at the best price or cost. However, the teams have not defined what is the optimal combination of price/cost and all other terms that reflect both teams’ best long-term interests. What is that magic package that permits everyone involved to believe they have been dealt with fairly and therefore, the relationship blossoms? I like to begin by preparing a written scenario that outlines what each team should view as a “great deal.” This is the optimum “win-win” agreement.
3. Determine Your “Walk-Away” Point – This is sometimes the hardest, but usually the most important, pre-negotiation decision it is important to reach. It is not a decision to be considered later, in the heat of the negotiation. The walk-away point must be approached calmly and with the prior two points in mind, for we truly must understand what each team needs to make it a “great win-win” agreement. Then, if the other team becomes unreasonable and prevents a win-win from occurring, we must weigh the predetermined value we placed on the relationship as well as ask the question, “do we really have a mutual relationship or merely one party taking undue advantage of the other?”

With the answers to these three questions firmly in mind, we are prepared to start negotiating. I am not a believer in much of the posturing that some negotiators put great stock into, such as who opens first and how, etc. What I do believe in is TRUTH when negotiating, as in all interpersonal affairs. Truth and candor are of paramount importance in developing trust between the teams. This does not mean, however, that you should, returning to Kenny Rogers’ song, necessarily show all your cards at once. After all, negotiating is merely a more formalized variation of common marketplace bargaining. It is all about give and take and each party’s perceptions of value. You offer; they counter. You reply, and so on it goes. For this reason, it is so important that before the play begins, you clearly understand the structure of what that “great deal” looks like from both perspectives. But what if there are mutually exclusive components to achieving that “great deal” for both teams? You will have already thought about this in your earlier analysis and concluded what give-and-take is required on both teams to arrive at the best possible compromise, something slightly less than a “great deal,” now maybe only a “good deal.”

Furthermore, if your counterpart has not arrived at this determination beforehand, you can gradually educate them to this conclusion through the bartering process. Knowledge is indeed power. Most importantly, you clearly know when you are approaching the point of no return or that point where you have already concluded in the quiet calm preceding the storm of collapsing negotiations, and when you will walk away. Thus, you have the opportunity to steer the negotiations away from falling unnecessarily into a lose-lose downward spiral where relationships deteriorate and from which it is virtually impossible for the parties to recover. The chart below provides a visual reminder for your negotiating strategy.

Ev’ry gambler knows
That the secret to survivin’
Is knowin’ what to throw away
And knowin’ what to keep

The “Relationship” +/- typifies the relationship as strategically important and mutually beneficial or not.

The “Priority/Risk” +/- shows the level of current and future priority and risk from high to low for any given issue.

Thus an important relationship (+) with a high priority/risk issue (+) is worth holding out to achieve, whereas the exact relationship (+) with a low priority/risk issue (-) is an opportunity to let the other party to win on the issue.

Now for the song

You got to know when to hold ’em

Negotiation necessitates that you have the patience and confidence to be still. If the other negotiator perpetuates a long silence, wait, that’s right, just simply w-a-i-t. Let the other negotiator break the silence. If it is truly a relationship, they will. Remain steadfast, solemn, but not sullen, and wait. Hold out firmly for your high priority/risk issues.

Know when to fold ’em

Holding out for a lost cause is not only against your best interests, but it also makes you seem stubborn and foolish. Know when to give in on a point. If it is not a “walk-away” issue, then concede graciously and continue to negotiate.

Know when to walk away

If the deal cannot be obtained without violating your prior walk-away decision, then walk away, but just walk. Clearly express your position and reasons, then leave courteously, letting your counterpart know that you mean what you say, but are still leaving the door open for them to reopen the discussion after conceding to your walk-away issue(s). Never, never re-evaluate your “walk-away” position while sitting at the table. I have seen this done too many times under the guise of “new information,” a code phrase for “giving in.”

If, indeed, completely new facts come to light, then take the time to recess, get away, preferably for a few days, or, at a minimum, overnight. It is too simple to convince oneself that you should alter your “walk-away” position when you see the negotiation going down in flames.

Remember, the whole reason for developing “walk-away” positions well ahead of the negotiation, was to prevent being pressured into giving up ground on these critical issues an inch at a time. This is an instance where unless the other negotiator reconsiders, you will be far better served strategically in the future by building a new relationship or looking for another way of accomplishing your goal, despite the momentary discomfort. Face the fact today that the relationship is no longer mutually beneficial and move on.

Know when to run

Run? Yes, run, when the other negotiator demonstrates bad faith or a lack of regard for the truth. No business relationship is worth the risk and the inevitable pain that results from dealing with disreputable people and organizations. After all, would you continue playing cards with someone after you learned that they were using a marked deck? Run! Do not walk, and do not leave the door open behind you. Make them understand that you have no time or interest in doing business with those who do not understand the meaning of the words TRUTH and INTEGRITY.

You never count your money
When you’re sittin’ at the table
Ther’ll be time enough for countin’
When the dealin’s done

Do not talk openly about how much you or your company will profit from the deal and, definitely, do not gloat over the terms of the agreement afterward. Both are evidence of bad taste and a severe lack of personal discretion. Also, such news has a habit of reverberating around. I have seen successful negotiations sour after the fact because someone with loose lips slips an indiscreet comment that leads the other team to believe they had been taken advantage of or misled.

On the positive side, do celebrate the outcome together with the other party at the conclusion of the deal. Go out together to lunch, dinner, or whatever. In doing so, you celebrate the success of everyone involved and thereby further reinforce the relationship for the future!

Although gambling and negotiating are not similar, we can learn a great deal from Kenny’s straight-faced poker player.

John Di Frances is the Managing Partner of Di Frances & Associates.