How I Learned To Stop Worrying And Love Negotiating

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'I never planned to go into business, much less to own and operate one. In fact, I studied Shakespeare. I taught Shakespeare at the Chinese University of Hong Kong and taught Faulkner in Bombay. But through a variety of odd circumstances, I dropped Macbeth to go first into real estate, then into the rag trade. I found that one was as dramatic as the other -- Shakespeare, real estate, retail.

That surprised me. I had never understood from the outside how exciting business can be -- the strategizing, the risk taking, the untidy surprises, the successes. And to my mind, there is no place where all of these things come into play as fully as when I sit down at the negotiating table, be it with my banker, my vendors, or one of my landors. The fun of negotiating is that it's alive.

The art of negotiation has not come naturally to me. It's taken a while to realize that the process improves with patience -- by no means my long suit. And the truth is, I started out backwards. I prepared for each round by focusing on my goals and alternatives first, and then on the people I was negotiating with. My reasoning went something like this: who has ever won the Olympics without knowing where the finish line is? Who has ever won a chess tournament without assessing alternative moves and outcomes?

But this strategy doesn't always work, as I found out 10 or 12 years ago, during my first job as a buyer for a large department store. I'd been there only a short time when my boss laid out my assignment: "Marjory, the department is overstocked, and the markdowns are way too high. One of the major problems is such-and-such a vendor. On this New York City trip, go tell him the inventory levels are too high, the goods aren't performing, we need to send back 25% of our inventory, and we need $8,000 to help cover our markdowns."

No sooner had I shaken hands with the vendor in his Manhattan showroom than I told him precisely that. It was my first experience with the boom-zero effect. He was insulted and angry. Who was I, brand-new in this area, to say his products weren't good? And who was I to make demands of him? Ignoring his needs, not to mention his feelings, I scored a fat zero.

Still, I couldn't go back to Minneapolis empty-handed, and over the next three or four weeks we arrived at a compromise. But it was clear to me that I had reached an acceptable solution by the sheer force of the store's buying power and by my will and determination. By guts, not skill. By force, not finesse. I had won financial concessions but not a strong relationship. And I'm in a business where ongoing relations with vendors is key.

More important than the financial results, I brought out of that experience the awareness that one ignores the feelings of the other side at one's own risk. Determination and goal setting are good complements to people skills, but not good substitutes.

Some people think of negotiating as a game, which is certainly the way I first looked at it, with my Olympics-and-chess mind-set. And the analogy has a lot of appeal. The idea is that each party is out to pursue his or her own interest and to win, which makes each wary of the other. It's assumed that it takes certain skills to play well ans succeed, and that, above all, a sportsmanlike attitude is appropriate.

Now while all these points are true, I believe that negotiating is not a game. It's a business relationship in action. And nothing can kill a negotiation more quickly and more completely than a me-against-you attitude. While the "gotcha" approach may work in a single transaction, it is hardly likely to produce a successful, ongoing business relationship. Over time, both partners have to win. Otherwise, the loser will drop out.

Certainly all of us have negotiated with folks who, emotionally, just don't have all their ducks in a row. At the extreme are those with the Agent 007 complex: they believe the world is full of guile, jeopardy, and illusion, but that they will prevail because they are ready and able to go for the kill. They believe any overtures and any efforts at mutual problem solving are a game of deceit, that they can't win unless you lose.

It's with just such people that being a chief executive officer really comes in handy. As often as possible, I choose to deal with these would-be negotiators by dealing them out. Who's in a better position than a CEO to select which resources to use and which not to use? Surely there's another bank, another accounting firm, another vendor, another site. Why negotiate at all with 007s? Better to walk.

Maybe you've had the experience, as I have, of one of these dropping uninvited into your business life. Meet "Alfred," the new president of your number-one vendor. Agent 007. You can't ignore him without jeopardizing your business. Here I just keep it smooth, take the grief, and start developing new vendors so I can scale this one down, down, down.

Aside from the 007s of the world, I've found that most businesspeople respond favorably to looking for mutually beneficial solutions. There's a catch, though. "Mutually beneficial" means not only that they have to benefit from the deal, but also that they have to perceive that they are benefiting. The perception factor is so strong that sometimes I've had to put in much more effort than seems necessary to get the other side to see the benefits. Here's an example.

Not so long ago, I was very happy with my bank, but not at all happy with the terms of my line of credit. I sat down with the bankers, laid out the reasons why my company was a good account, and asked for a better rate and other improvements in the terms of the credit line. They explained their position, listened to me, and said they would get back to me. When they did, the news wasn't good.

I was annoyed. I knew the account was a money-maker for them, and safe. So what was keeping the bankers from satisfying a good customer? Apparently, they did not perceive that they would benefit. Did they want to lose this account? No, the problem was that they didn't feel there was any substantial risk that they would lose my company's business. Therefore, to charge me less interest would be giving up something for nothing.

As it happens, they were wrong. They had a very good chance of losing our account since my research had shown we were overpaying. But they were right -- switching banks was not my preference. I sat down with them again and said, "I don't want to change banks. Let's come up with terms we can both be satisfied with." No. They still didn't see anything to be gained by satisfying my request.

The choice now was to accept overpaying or to look for a new bank. After I had invested hours in talking with various banks, my bankers suddenly realized that, indeed, I was going to leave. Finally, they saw the benefit to them of improving the rate and terms, which they promptly did. They won me back and I won my terms.

While negotiations weave in and out of my business life, they are not my main activity. Occasionally, though, I work with people -- a leasing agent for a regional mall, say, or for a retail specialty center -- whose primary job is to negotiate. Some of them have phenomenal skills. The thing that strikes me about the great negotiators is that they are outstanding problem solvers. And they are persuasive. Now, when I work with these experts, I focus strongly on my own goals, so that I am not swept into a situation that is bad for my company. I can easily think of times when I have let my guard down too much, and the reason I can remember those times is that I am still living with the results.

One incident involved the developer of an upscale shopping center in Minneapolis, who had targeted our company as a prospective lead tenant. Since this center would have no major department-store anchors, the developer had to land some strong specialty stores and restaurants, known within the local retail community, in order to attract other local stores.

The leasing agent came to talk to me. I listened and said, "The project sounds great, and I wish you success, but it doesn't fit our plans." I wasn't negotiating -- I simply had no interest. My location plan called for six stores in the area, and SHE Inc. had five stores up and running, with space for the sixth already leased. I had no intention of opening a seventh store at that time in the Twin Cities.

Soon afterward, the leasing agent brought me back a proposal, which I, of course, rejected. Since I didn't want the location, I didn't negotiate at all, and he left with very little information. Somewhat to my surprise, he drafted a second proposal, which I again refused. Then I didn't hear anything. As 8 to 10 weeks went by, I assumed that the book was closed.

But no, he was simply waiting. If I had been bluffing, his tactic would have flushed me out. I would have been thinking, "Whoops, I had better renew contact." Since I virtually never bluff, however, and wasn't bluffing here, he lost a lot of ground by his delay. When he came back after a couple of months, with no more tenants signed up than before, I thought, "They really must be having a hard time getting lead tenants. Clearly, they are hurting." If I didn't want to go in before, I certainly wasn't going to budge now when the success of the project was so clearly in doubt. If the agent had started out at minus 10, now he was at minus 100.

But budge me he did, by taking me unawares. "Look," he said, "we want you in. If you go in, a lot of others will follow. Surely there must be terms under which it is in your interest to be in our center. Tell me what those terms are."

I was unprepared for this approach. It attacked me at my Achilles' heel: I am susceptible to reasonableness. How could I maintain that there was no terms under which signing on would make sense? Besides, he had appealed to my pride.

So I talked to him. But here was the catch: being susceptible to reasonableness, I couldn't get myself to suggest a package that was totally unreasonable from the landlord's point of view. So I did half the negotiating for the developers by ruling out from the start any outrageous requests. And, since I was involved in saying what would satisfy our needs, how could I reject the proposal?

I was hooked and they pulled me in. Not only that, they successfully negotiated their minimum rent up through the term of the lease, because otherwise how were they going to make money with the terms so favorable to me? Reasonable, right?

Of course, to look on the bright side, I did learn a lot. And there were advantages to working with such skillful people -- they put together an excellent specialty center.'