Jack W. Kaine

Program Titles

• How to be negotiator-in-chief. Negotiation in management & Leadership
• Any time two or more people are sharing information with the intent of changing the relationship

Jack W. Kaine, chief financial officers negotiate constantly. Any time two or more people are sharing information with the intent of changing the relationship, they are negotiating. This pretty much sums up what CFOs do all day long.

There are some people who are natural negotiators; for the most part, negotiating skill is exactly that—a skill. Like any skill, it can be learned.

Most people have the impression that a negotiation is a competition—a contest where one side wins and the other side loses.

The problem with this approach is, do you really want anyone on your staff, your vendors, or the guests that stay at your properties to feel that they have lost?

Any negotiation that only favors one party ultimately favors none of the parties. Good CFOs know how to build in value so that everyone wins.

Negotiations usually involve haggling over a scarce resource or what is perceived as one; this is particularly true in the hospitality business, where there never seems to be enough money, time, or staff.

As a result, you negotiate budgets, priorities, and employee agreements, not to mention mergers and acquisitions.

Negotiation is particularly necessary when parties depend on one another; in such cases, both parties have more to gain by negotiating than competing.

The object: a workable agreement

A second common misperception is that negotiation is something that is done to reach agreement. That is only part of the story, however. A successful negotiation produces not only an agreement, but an agreement that will work for all the parties. Getting an agreement is the easy part. Keeping the agreement is the hard part.

If one party feels beaten, that party will not want to keep the agreement and will spend a great deal of energy to get out of fulfilling the terms imposed by the agreement. In negotiating, perceptions are important.

As that great American philosopher Spiro Agnew said, “Image supersedes reality.” Both parties should leave a negotiation feeling that they have gained something they want or need.

Negotiation is the process for addressing and solving problems. The major problem, however, is that problems are not addressed promptly and by the time the CFO is called in they have become full blown conflicts and, in some cases, wars.

Problems and conflicts must be negotiated as soon as they arise, because they do not age gracefully. This is particularly true where money is concerned. Conflict is inevitable. It can be positive, negative, or irrelevant; it is how the conflict or problems are handled that makes the difference.

Eight rules of negotiation

Rule 1: Avoid escalating the conflict. The first task of a CFO is to avoid escalating the conflict. The person who speaks first sets the tone for the negotiation, and it is much easier to set a positive tone at the start of the negotiation than to overcome a bad start.

A good negotiation requires that the parties share information to change the relationship, and when people are angry or distrustful of one another they do not share information. If they do, anything they share will be designed to deceive or mislead the other party.

Don’t worry about getting in the last word. Work hard to get in the first word. The one part of a negotiation that you want to have scripted and rehearsed to the point of spontaneity are your opening remarks.

How you position the negotiation affects the outcome more than any single factor.

Skilled negotiators know how to use aggressive behavior.

Good negotiators avoid aggression escalation in a negotiation.

A negotiation is not a defend/attack spiral.

Skilled negotiators, if they use aggressive behavior in a negotiation, will hit the other party as hard as they can the first time. They do not piecemeal their aggressive behavior.

A bankruptcy attorney I work with said it best: “You can make love and war at the same time. Some people will not make love until they know that you are willing to make war.”

There are people who will not negotiate in good faith until they know they cannot push you around. However, as soon as the other party changes (starts to cooperate) the effective negotiator quickly changes and starts to cooperate as well.

Rule 2: Know when to walk. The world is full of people who feel the first thing they must do in a negotiation is see how far they can push the other party.

Sometimes you have to walk away from a bad deal to make a good deal. If bullies get away with it, they will continue to be bullies.

Difficult people are difficult because they have been rewarded for being difficult. Stop wishing they were different; they are not going to change.

However, if you change how you negotiate with them then they have to change how they negotiate with you.

Simply put, if you can’t walk you cannot talk.

Good CFOs understand that their best negotiating assets are a strong balance sheet and a high occupancy rate.

Rule 3: Agreements are built on agreement. Be a careful communicator. The third rule of skilled negotiation is to be a careful, clear communicator.

The truth is, the better the negotiator, the easier he or she is to understand.

Expert negotiators label their communication.

Labeling signals a change of direction, very much like using turn signals when driving a car, and makes it easy for anyone to follow and understand a conversation.

For example, before making a point, the expert negotiator says

“I would like to make a point.”

He then makes his point.

He says, “May I ask a question?” and then asks a question.

If he has a concern, he will say, “I have a concern,” and then states it.

Why do expert negotiators label their communications?

First, it is clearer. Second, it creates receptivity.

If the negotiator says, “May I ask a question?” and the other person says “no,” it sounds rude.

By asking for permission, the negotiator creates a more receptive environment.

There is one exception: Good negotiators do not label their disagreements.

They do not say, “I disagree with you because…”

When stated in that form, the disagreement comes first and the reasons for it second.

What is being said is “Here I come. Get ready to disagree with me in return.” The other person then starts to listen for points to argue about rather than for reason to change his or her mind.

Another negotiating axiom is: No one has ever won an argument. Someone convinced against their will is still of the same opinion.

An argument creates two people who actively resist one another.

One way in which a skilled negotiator handles disagreement is by asking questions about the points of disagreement.

These questions weaken the other person’s position by pinpointing flaws in their argument. Once the position has been weakened, the skilled negotiator will make a proposal that addresses these concerns.

Note the proposal is put on the table not in opposition to the other party’s proposal but as a solution to the problems that were mutually identified.

The second way to disagree is to say, “I have this point I would like to discuss with you.

It is…, and as a result, I disagree.” In this case, reason comes first, then disagreement. This is much more effective than disagreeing first.

Negotiations are full of paradoxes.

One paradox is, if I agree with you, you tend to like me.

However, if I am always disagreeing with you, you tend to dislike me.

The question becomes; “How can I disagree with you when you are wrong, and still have you like me?”

Practice the 4Fs.

The four Fs are Feel, Felt, Found, and Facts.

When someone is wrong say to them: “A lot of people feel like you do right now. In fact, I felt that way myself until I found out the following (then you share with them the information you have found out that caused you to change your mind.)”

This is a nice way for someone to change his or her mind without losing face.

Rule 4: Lead by questioning.

You control a negotiation by questions, not by talking.

The person who asks the most questions controls the content and direction of the negotiation.

Questions are valuable because questions produce information; questions give the negotiator control; and questions give the negotiator time to think and deprive the other person of thinking time.

(Most people cannot answer a question and think about something else at the same time.)

It is also smart to ask questions to which you already know the answers.

First, it enables the questioner to assess the honesty of the person answering. If the answers are not honest, the questioner should be cautious.

Second, asking questions may make it appear that the questioner isn’t all that well-informed.

People will often share much more information with someone they feel knows less than they do. It’s amazing how much people will tell you about their businesses if they feel they are smarter than you are.

Peter Falk used this technique masterfully in his role as the slow-thinking detective Columbo.

Questions offer another advantage; they allow you to reframe an issue.

Several years ago I got a call from an advertising agency executive who was about to lose one of his large advertising accounts and he wanted to know if I could save the account for him.

Instead, I reframed his question. I asked what would happen if he did nothing.

He said, “We’d lose the account, and I would have to lay off some very good people.” I replied that I couldn’t leave him in a worse position than that, and he decided to use my services.

People want guarantees.

Rather than giving them one, a good technique is to get them to confront their most dreaded fear.

They then will often sell themselves on the change you want. When James Baker was negotiating the formalities for the 1988 presidential television debates, the Dukakis staff wanted their candidate to stand on a box so he would appear taller and more presidential to viewers.

Baker asked if they planned to take a box with them for Dukakis to stand on when he negotiated with Gorbachev.

That question took the issue off the agenda.

The same technique can be used in personal situations.

Several years ago, I was about to buy a new BMW.

My wife asked a question that canceled the sale.

She said. “Do you really need that much car to drive to and from the airport?” She was right; I did not buy the car.

Rule 5: Do not negotiate with yourself.

Most CFOs are harder on themselves than anyone they will negotiate with.

Here is how the CFO does it.

He has prepared a proposal to buy another property.

He is proofing it before he meets with the owner of that property.

When he gets to the “bottom line” and sees what his company is offering for the hotel, the first thing he says to himself is, “They will never sell it for that,” and raises his offer before he ever presents it.

The problem with this is that concessions that the other party does not see have absolutely no value.

All the CFO is doing is giving away his “bottom line.”

The other party in a negotiation is going to ask for concessions; don’t give them until they are asked for.

Rule 6: Avoid making counter proposals. The sixth lesson of negotiation is to avoid bargaining over positions. This also means to avoid making counterproposals.

Most negotiators put their proposals on the table too soon, opposing the other party’s proposal.

(For example, the hotel starts with a low salary figure and the CFO starts with a high one.)

When the other negotiator has advanced a proposal or taken an opposite position, that person is in the least receptive frame of mind.

If you want someone to see things your way, you must first see things their way.

Don’t offer a counterproposal. Instead, ask questions about the proposal of the other negotiator.

How would this work?

What does this mean?

How would this affect…?

And so forth. When the proposal’s shortcomings have been clearly identified, make suggestions to resolve the problems.

Skilled negotiators advance their proposals, not in opposition to the other side’s proposal, but as solutions to problems mutually identified in discussion.

This one technique helps establish an atmosphere of trust and cooperation.

Good negotiators do not think of themselves as negotiators but as problem solvers.

Rule 7: Focus on your strongest positions. Raising weaker points, instead of focusing on the most persuasive point, tends to dilute the strength of your position.

In school, we were taught that the more reasons we advance to a position, the stronger our argument.

However, one cast-iron reason that cannot be challenged will stand up to scrutiny.

When it is combined with two weak reasons, the weaker reasons will be challenged.

When the other party offers a reason, the skilled negotiator will ask, somewhat skeptically, “Is that your only reason?” the person is tempted to say, “No, no…” and offer a half dozen more supporting reasons.

When the negotiator hears one reason that sounds weak, he or she will say “Now, just a minute, let’s examine that last thing you said.” People use facts, reasons, information, and logic to manipulate us in a negotiation.

We undo our own strong cases because we talk too much in a negotiation.

The more you talk in support of your position in a negotiation, the weaker it becomes.

Good negotiators will summarize their findings frequently in a negotiation to make sure each party clearly understands the agreement.

How many times have you and the other party gotten down to the final stages in a negotiation thinking you were in sync, only to find out that their understanding was entirely different from yours?

Testing understanding is a good way to avoid this problem.

Summarizing refreshes what has been covered so that you can keep moving toward agreement.

Good negotiators know that any agreement that will not stand up to close scrutiny will not last, but will be the source of further conflict and negotiation.

Rule 8: Negotiate an agreement that is workable.

Smart negotiators know that an agreement that won’t stand up to close examination will not last and will cause further conflict.

Good negotiators know it is not in their best interest to slip anything past the other party.

In fact, expert negotiators who feel the other party has agreed to something that is not in the other party’s best interest will call it to their attention.

This builds trust and puts an obligation on the other party to make the next concession and help you out.

That brings us to the eighth lesson and a point made earlier—the objective of a negotiation is not only an agreement, but any agreement that will work. Most people do less testing at the moment of agreement than at any other time. Yet an agreement that doesn’t stand up to close scrutiny at the time of agreement will not be strong enough to stand up to the test of real life.

One of the best questions you can ask after the agreement has been reached is “Now if we are going to have problems with this agreement, what do you think they will be?” At the moment of agreement, the trust level should be quite high if you have had a good negotiation, since all parties want the agreement to work. It is at this point that people will bring out their hidden agendas.

When you hear their concerns, don’t argue.

Agree that their concerns are valid and ask what other concerns they may have.

Then talk about what you see as potential problems.

Finally, ask this question: “Now, if this does occur, how are we going to handle it?”

What makes this concept so powerful is that any solution you work out before a problem occurs will be fairer to all parties concerned than a system you work out after the problem.

Good negotiators are hard on problems and soft on people.

Rarely will you get 100 percent of what you ask for in a negotiation.

However, each negotiation should end up with a positive solution for both sides.

There is always a better deal for all parties involved in a negotiation than is first apparent at the start.

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