Often, in negotiations, people get bogged down in positional bargaining, butting heads and wills in a way that frays nerves, destroys relationships and may not ultimately get anyone what they truly want. One way around the perils of positional bargaining (and there are a variety of ways) is to turn the discussion into a rational one. Switch the focus from a battle of wills into a search for the appropriate external fair standards or benchmarks, often called ‘objective criteria’.
Objective criteria are factual pieces of information, independent of the parties in the negotiation, that are relevant to what should or should not be agreed to in that negotiation. As an example, in negotiating to purchase a particular car, we would want to look at what that car sells for at other dealerships. What do similar cars sell for? What does the blue book (or red book if applicable) say the price should be? What is the previous year’s model selling for? All of those pieces of factual information are relevant to what you should pay for that car, some more relevant than others.
We have all used objective criteria at some point in our lives, but much of the strength of objective criteria comes not only from which objective criteria we use, but how we use them. This article reviews tips and techniques for getting the most out of such objective standards.
The Most Effective Objective Criteria are:
• obtained from as objective and credible a source as is possible (e.g. respected providers of similar goods and services in the marketplace), and are confirmable from multiple sources;
• clearly similar and relevant to the issue in question (e.g. if looking at the car, compare the cost of the same model, same year, same options, same mileage etc., so you are comparing apples to apples);
• simple to work out and understand (i.e. the more convoluted the explanation as to why it is relevant, the less likely it will be persuasive). One could contruct an elaborate argument based on gas mileage and inflation rates that the price of the car should be $10,000, but that’s a circuitous and unconvincing route when more direct comparables exist;
• in a form that is verifiable by the other side immediately or in advance (e.g. share details in advance, bring copies of written documentation and share it, provide contact information so they can verify facts independently, etc.);
• up to date (e.g. a recent appraisal is more persuasive than a six year old one); and
• persuasive not only to you, but to the other party, and to a neutral observer. For example, a valuation from an expert that was chosen and paid by you may not be persuasive, even if they are right, because they are seen as being “in your pocket”.
In Order To Effectively Communicate Objective Criteria, You May Want To:
• ask the other party about criteria of which they are aware;
• There may be overlap (you won’t need to convince them of the credibility of your source if they have already found it);
• Doing so shows your willingness to listen and your interest in their views, and may promote mutual respect;
• You may learn something that surprises and educates you (e.g. you won’t damage your credibility by using outdated or wrong information); and
• Giving serious and sincere consideration to their criteria will model the way you want them to treat your information. In addition, you need to understand their views fully in order to respond to them.
• avoid showing a patronizing attitude when presenting your data. You might be right, but if you present your information in a way that tells the other person they are “wrong”, it may just make them defensive and resistant to your ideas;
• interpret, use and apply the objective criteria provided to you by the other party (you won’t need to convince them of the credibility of their own information, just how to properly apply it);
• present reasons (criteria) first, conclusions later (e.g. so they hear and understand the reasons before reacting to the conclusion);
• give the other party assistance in verifying the objective criteria (e.g. provide reference contacts, copies of documents etc.) If they can’t verify it with their own eyes, why should they believe you;
• share details of objective criteria in advance, if appropriate, so that everyone can do their due diligence and be ready to negotiate when they meet (gives time for information to be digested and tested);
• work together to identify sources of objective criteria which all parties will accept (e.g., neither party may know what the prime rate of interest is, but both might agree that it is the appropriate measure of a fair rate of interest); and
• give the other party time to digest the information and come to terms with it before they decide whether to accept it and be guided by it. To progress, they need to digest.
To Find Effective Objective Criteria, You May Want To:
• identify the options you want to propose and then find the criteria needed to support those options;
• prepare, prepare, prepare. It takes time, but it pays off, and it impresses;
• call appropriate sources to explore the facts (record contact information and conversation details for future use);
• follow up verbal discussions and get relevant written documentation (quotations, specifications, diagrams, etc.);
• use the internet, but use it wisely. Don’t use sources that will cause you to lose credibility;
• ask people with the expertise in the field where to look;
• use third party neutral experts where appropriate and cost-effective (ideally, choose people that are acceptable to all parties as being impartial, or even better, select the expert by agreement with the other parties). A neutral expert that you hired, even if acceptable to the other parties, will be taken with a grain of salt…or two;
• use trade journals, and relevant advertising sources;
• use precedents where appropriate. In deciding what provisions to put in a contract, for example, don’t get into an argument, look at similar contracts in your organizations, in the industry, or look at legislation or model contracts such as the Uniform Commercial Code for guidance;
• where time and money allow, check multiple sources (you can then compare and use the most appropriate and favourable sources). Not every piece of factual information needs to be revealed to the other side. This is why procurement professionals seek at least three quotations, but don’t limit it to just three if time and money warrant casting a broader net;
• ask the other party- they may be a source of useful objective criteria, if you consider them trustworthy and they are willing to share the information (e.g. what have they paid for similar services in the past). You can do this in an RFP if you are seeking proposals;
• review credible sources (e.g. industry leaders, respected individuals or companies); and
• test and improve the criteria to the extent possible (e.g. if a good or service is listed at price X, ask whether you could get it for any less than the list price)
The Limitations of Objective Criteria Include:
• some issues or points are not easy to value, or may not be comparable to other goods, even if they are discussed that way (e.g. in a personal injury claim, how much is the loss of a finger worth?);
• objective criteria can establish a range, but should not become a position or anchor. If you find yourself stuck on a figure (or in a competition between two valid but different objective criteria), add other issues or items to supplement the value of the agreement for you. Review your interests and consider some creative option generation to resolve the difference;
• Relative values may be based on principles or priorities that do not depend on objective criteria, and using objective criteria may not be persuasive or useful. For example, market prices for a particular item will not usually reflect sentimental value (the market assumes that neither buyer nor seller has any particular attachment to the item). An actual seller however may have sentiments that add real value to the item for that person. Listen to them to find out what the other party values and why. You may wish to put them in your shoes, acknowledge that it has that additional value for them (without implying that you should pay for that value), or try some creative option generation. Try respect and creativity when rational debate fails;
• As an example, a homeowner may refuse to go below $215,000 for a home they are selling even when the market clearly shows it should only be worth $200,000. They may take that view because they paid $215,000 for it initially and are not willing to sell at a loss even if the market says the value has dropped. By recognizing their desire to save face and match their initial purchase price, you might find a creative way for them to add $15,000 in value to the house so they get $215,000 and you get $215,000 or more in value (e.g., by throwing in a car, or furniture that would not normally form part of the sale).
Used properly, objective criteria can provide you with a great deal of confidence and support in a negotiation. An understanding of the applicable objective criteria protects you from being taken advantage of by the other side in any procurement or other negotiation. It allows you to more effectively justify decisions that are made in negotiations to third parties like upper management and auditors, a particular concern for today’s procurement professional in the shadow of events like Enron and the sponsorship scandal.
Being armed with the facts also gives you the firmness that prevents you from appearing soft. In fact, if you are well prepared with objective criteria, you can be a very impressive negotiator, inspiring respect not only from your co-workers and superiors, but from the other side as well. And that is one of the best marks of a strong negotiator.
Remember though that it is not enough to have the factual information. Spend some time thinking about how you will use and present that information, and you will find that the extra preparation time pays dividends.
Written by Paul Godin.