Monthly Archives: June 2015

Should you accept that job? Defining a reservation price

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There comes a time in all of our lives (approximately every three years) when we must decide whether to change jobs. This decision may seem difficult (and it is). But it’s negotiable!

Now, negotiating a new job offer requires a whole host of negotiation concepts and skills, including the ones I’ve described in recent posts. But today, I’ll focus on one that becomes particularly important when you’ve actually gotten a job offer and are deciding whether to stay or go: your reservation price.

To be clear, this is the situation: you’ve already looked far and wide for the best alternative opportunity; you think you’ve found it, and they extended an offer. This alternative job, in the parlance of the last post, is your BATNA. You’re now deciding whether it’s good enough to get up and go.

Now’s the time to consider your reservation price. It may sound technical, but the concept of reservation price is already second-nature: it’s just your bottom line. How you define a reservation price and what you do with it, though, is more like third or fourth nature for many of us. That’s where this post seeks to help.

Suppose, for the sake of argument, that your current job pays $50,000. You like the job; your coworkers are friendly; the commute is manageable; you see a clear career path forward. It’s just that pesky $50,000, which doesn’t seem to pay the bills and still leave enough for that long-awaited Hawaiian vacation. Thus, you decided to hit the job market and eventually found a similar job in the same field. Though waiting for the actual offer, you do have some concerns: your prospective coworkers don’t seem all that welcoming; you would have to drive 45 minutes instead of 20; and you’re not sure of the promotion opportunities. Now—before you receive the offer—is the time to define your reservation price.

In any upcoming negotiations over the new job, you will have a BATNA—your current job—and it will have a value: the $50,000 salary. Yet, $50,000 is not your reservation price; your reservation price is your numerical bottom line, adjusted for all of the intangibles. $50,000 doesn’t yet reflect the intangibles. Since you like your current coworkers, commute, and career prospects, you might say to yourself: “Self, I will not accept the new job with ambiguously-friendly coworkers, a longer commute, and unclear prospects unless it pays at least $60,000. That number, not the $50,000 salary, is your reservation price. The extra $10,000 makes up for the intangibles.

Now the situation becomes a lot clearer. If the new employer extends an offer of $65,000, you should probably eventually accept it; if they extend an offer of $55,000, you should probably negotiate. If you deploy your best negotiation tactics (and hopefully the previous posts will help) but still can’t clear the $60,000 hurdle, then you should probably decline.

Easy enough, right? Yet, few people define a clear reservation before entering into a negotiation. Still fewer both define a reservation price and then resist the temptation to “adjust” it once the offer comes in. Receiving the $55,000 offer, they convince themselves it’s “good enough.” But to perform reasonably well in negotiations, this is exactly what you cannot do. Only by clearly defining a reservation price and sticking to it unless your BATNA changes dramatically can you hope to avoid a poor outcome.

Reservation prices don’t have to be prices; they can be conditions: “My office has to be in Fort Worth rather than the Dallas to accept this job” (for example). Regardless, my advice to any negotiator would be to understand with clarity where the line falls between what will and will not work. Drawing and not deviating from that line, though far from easy, is nothing short of essential.

Have you defined a bottom line in a previous negotiation? How?

 

How to out-negotiate the car dealer: Cultivating your alternatives

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My last post discussed one of the toughest negotiations—convincing a toddler to comply. This post considers one of the most feared—dealing with a car dealer. Most people would rather extract their teeth through their eyeballs than talk to a car dealer. How can we hope for a decent deal when the guy across the table is continuously snapping his jaws?

This problem is formidable, but negotiable. The key is to recognize that there is not just one guy or one table—that you (like the dealer) have alternatives.

Anytime you negotiate anything, you have a primary negotiation partner and you have a next-best alternative: whatever you would do if the current negotiation fails. Since the landmark book Getting to Yes, this alternative has been called your BATNA: your best alternative to negotiated agreement. As I usually repeat ad nauseam in a negotiation course, BATNAs are your greatest source of power in a negotiation. If you have a good BATNA, you can walk away from the current crocodile. If you don’t, he might as well snap away. So, speaking now to those of us who don’t “like” negotiating, take heart! Being a powerful negotiator doesn’t mean acting like Donald Trump; it means having a viable plan B.

I know of few negotiations where BATNAs are more important than car purchases. As the buyer of a car, you typically have multiple—often many—dealers to choose from. The single-most important thing you can do to get a good deal is to visit enough dealers (by taxi, if you have to) to fall in love with at least two cars—each at a different dealer. As I often remind my students, falling in love with one person is a beautiful and wonderful thing in everyday life. Yet, falling in love with one house, one car, or one job is almost guaranteed to make you a sucker. Why? Because if you’re head-over-heels over one car, for example, you have no choice but to submit to every snap of that crocodile’s jaws. You have to accept whatever terms they offer.

Conversely, what happens if you find yourself swept away by two cars at different dealers? At a minimum, you learn about the market. Quite often, the cars are quite similar, but one is inexplicably cheaper. I recently found the exact same car at two dealers, 10 miles apart, but $3000 different in price. That’s right, a $3000 discount, no “negotiation” in the traditional sense. In addition to learning about the market, cultivating an alternative immediately affords you confidence. With a $3000 discount in hand, I can assure you that I felt much more comfortable pushing back on the original, higher-priced crocodile. As a result, and most importantly, having a good BATNA immediately gets you a better deal. Without revealing the exact amount of the discount to any other dealers (which is a topic for another post), the $3000 discount gave me the confidence to go to a third dealer and get the same discount on the same car with better features (all-wheel drive for those icy mid-Atlantic hills).

In sum, one of the single-most important strategies in any negotiation, especially a consequential purchase, is to cultivate a good alternative, a strong BATNA. Doing that is not only effective; it’s heartening for the non-born negotiator, as it doesn’t require negotiation tactics as much as time. As little of that as we all have, I would advise any serious negotiator, negotiating any serious issue, to find enough time to find a BATNA.

Have you cultivated your alternatives in a past negotiation? How has it worked?

Why won’t they eat (sleep, use the potty)? Making the first offer to a toddler

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Why not start with one of the toughest problems of all—convincing a toddler to do what you want them to do? If you have kids, you know that this problem often seems insurmountable. From eating, to sleeping, to using the potty, your priorities for toddlers only occasionally correspond to their priorities for themselves. Not that I’m speaking from experience.

Yet, this problem is not insurmountable. It’s negotiable.

Now, negotiations with toddlers could fill up a book or two, and chances are that future blog posts will take up the topic. But today, I’ll just touch on one research-based negotiation principle that I consider useful for this situation: making the first offer.

Negotiation research shows that, with a few notable exceptions that I will probably discuss in the future, it’s generally a good idea to make the first offer—that is, to make an offer before the other side does. Why? Because doing that focuses their attention on what you want—your goals—rather than what they want. Focused on what you want, they adjust their own goals.

This principle applies to toddlers in many ways, but let’s discuss just one, in the context of convincing a toddler to eat their dinner. If your toddler doesn’t like to do that, the typical evening probably looks something like this: you sit them down in front of a lovingly-prepared plate. They stare at it dubiously while you eat your own food, all the while imploring them in increasingly frustrated terms to eat theirs. Eventually, the pot boils over and someone gets upset—either they or you. Either way, the toddler throws a tantrum and refuses ever more strenuously to eat. Eventually, perhaps, you give in and offer them an array of goodies—a cookie, Sesame Street, a new toy—whatever will quell the rising storm. They demand TWO cookies AND Sesame Street; exhausted, you agree, and they win.

There are at least two problems with this approach: you give them more than the one cookie you really wanted to, and you reinforce the idea that temper tantrums “work,” thus creating the impetus to throw another one tomorrow. On the basis of negotiation research, how about trying this instead? Before even sitting them down at the table, say something like: “Now it’s important to eat our dinner. If you eat all of your dinner tonight, you can have one cookie. If you don’t eat all of your dinner, you can’t have any cookies.” No guarantees with a toddler (to offer one would be the height of foolishness), but mine often smiles and digs into dinner.

Note what you’ve done here: you’ve made a clear first offer, on your terms. You’ve focused the toddler on your goal—eating the dinner—while offering them something that satisfies their own goal—getting a cookie. In the process, you’ve avoided throwing in the second cookie and Sesame Street, and you’ve also avoided setting the precedent that bad behavior gets rewarded. Family serenity prevails.

I consider this an effective strategy, but also one to use sparingly. Just like you don’t want to reinforce tantrums, you don’t want your toddler thinking that the only reason to behave well is an extrinsic reward like a cookie. So this is a strategy that I’d recommend using occasionally, if and only if you’ve got a problem with your toddler’s behavior. But it is a strategy, and that’s better than a dinnertime meltdown.

What do you think? Have you used a similar approach, and if so, how did it go?