If you've ever signed a bad contract or paid sticker price for a new car, these negotiation principles may save you from another rotten deal.
Fam Pract Manag. 1999 Nov-Dec;6(10):24-27.
Like it or not, all day long we negotiate. We are asked favors by our colleagues, we coax our patients to take their medications, we tell our kids “I'll read you a story, but first you have to clean up your room.” In fact, most human interactions have an element of negotiation: a casual, almost unconscious effort by both parties to get their needs met.
But despite our everyday experience, most of us aren't as skilled in the art of negotiation as we should be. In many cases, we'd rather sign a bad contract or pay list price than sit down and negotiate a tough deal.
As director of a family practice residency program, I have taught the art of negotiation and have practiced those skills in real life for many years. One thing I have realized is that the more I learn about negotiation and exercise its techniques, the more fruitful — even fun — the process becomes. It can be the same for you too.
The goal of negotiation is not to win at the expense of the other party, but to create win-win solutions.
Physicians can be successful in negotiating, even with large insurers, if they lose their fear and are willing to walk away.
Physicians should enter negotiations with a clear idea of what they want out of the process and what is minimally acceptable.
Three mistakes; three lessons
The most common mistake people make in negotiation is thinking that their goal is to win at the expense of the other party. Adopting this win-lose approach almost always results in a failed, or less than optimal, negotiation. Whether you're dealing with a managed care plan, a colleague, a sales rep or your mother-in-law, a win-win approach, where each party gets its needs met, is the most successful way to negotiate.
Another way to look at win-win negotiation is to think of it as barter negotiation: I have something you need; you have something I need; let's trade. For example, my wife asked me to run out and get some milk one morning just as I was getting up to get ready for work. Unfortunately, I don't get up any earlier then I have to, so going to the store would mean being late for work. My wife could have said, “I went shopping the other night. It's your turn.” Instead, she offered to iron my pants while she was ironing her skirt, freeing up 10 minutes for me to go to the store. The win-win here is that neither of us had to get up any earlier, but we both got what we needed through the help of the other.
Lesson #1: Abandon win-lose negotiations. They interfere with you getting the most out of any negotiation. Instead, make a legitimate attempt to care about the other person and to meet his or her needs.
A second mistake people make in negotiation is buying into the belief that they have no power. “How can I negotiate against a big corporation? They have all the big-gun attorneys. They have all the power.” In a word, bull. You have the ultimate power: You can sign the contract, or you can walk away. The only power the other side has is not to give you what you want. This is a passive power and mostly psychological. Your fear is the other side's biggest ally. Lose your fear, and they lose their power. Retain your fear, and pay list price for everything.
Lesson #2: Understand that you do have power in negotiation. Don't be afraid to negotiate, and don't be afraid to walk away.
A third mistake people make in negotiation is coming across overly confident, even pompous. It's human instinct to want to let the other side in a negotiation know just how good you are. After all, aren't you more afraid of the seasoned negotiator than the new manager who just fell off the truck? Wouldn't you like to be that seasoned veteran, able to win the negotiations just by showing your business card?
This is a trap. It's good to be that seasoned veteran, but all you accomplish by posturing is getting the other side's guard up. Instead, act professional but not smug. Look engaged, interested, maybe even a little vulnerable. If the other side swoops in like a bunch of vultures, walk away. If they come to the table looking for a win-win negotiation, stick with them.
Lesson #3: Don't look so smart that you put the other party on the defense. Act professional and human.
The opening offer
Whether you're negotiating a new employment contract, capitation rates or the price of a new car, one of the most critical moments of the negotiation is when you present your initial offer. You should follow these six steps:
1. Know your walk-away point. Before you enter the negotiation, have a clear idea of what you want out of the process and what would be minimally acceptable to you. For example, if the focus of your negotiation was salary, your walk-away point would be the amount below which you simply would not go, even if it meant losing the job. Once you've decided on your walk-away point, do not let the other party know what it is.
2. Avoid being the first to present an offer. If you make the other party present its offer first, you'll have a better idea of what you should offer. For example, if the recruiter asks you for your income goal, politely decline the opportunity to give everyone in the universe your information. Instead, ask, “What does the job offer?”
3. If the other party's initial offer is absurd, don't counter with anything concrete. For example, if the recruiter offers $75,000 for an office-based position, don't say, “I can't accept anything less than $110,000.” If you do that, you've just backed yourself into a corner. Rather, say, “You'll have to make a more reasonable offer if we're going to move forward.”
4. Never take the first offer. Even if the first offer is reasonable, don't take it, for two reasons. First, it makes you look overly eager, which gives the other side a greater sense of control. Second, it makes the other side feel as though they've lost that part of the negotiation (meaning they'll probably want to beat you on the next issue). For example, if you were selling your car, and a buyer came along and snapped it up at your asking price, what would your immediate feelings be? “I should have asked for more.” For the same reason, don't accept the first offer. You don't have to be unreasonable, but find something to negotiate about — even if you plan to lose that part of the negotiation.
5. Don't use your walk-away point as your first offer. Instead, present the other side with an initial offer that is more advantageous to you. For example, let's assume you're looking for an office-based practice and your walk-away point is $120,000. If the practice were to make an initial offer of $100,000, you might want to counter with $150,000. Your counter offer is well above your walk-away point, leaving you plenty of room to negotiate.
Narrowing the gap
By now, the negotiation has begun, you and the other side have made your initial offers, and they couldn't be further apart. How do you keep the negotiation moving forward?
1. Sweeten the deal. To bring the other party closer to your offer, throw in something you know they want. For example, in employment negotiations you might offer to do obstetrics, take additional call or cover extended office hours in exchange for more money. But don't commit to performing extra duties until you need to; save them for leverage. For example, when the talk turns to money you can counter with, “I can't accept $120,000, but I know that you need folks in the call schedule. If you can meet me at $140,000, you can add me to your call group.” This not only sweetens the deal, but it prevents the negotiation from being focused solely on money. When money is all that's on the table, people tend to dig in their heels.
2. Throw away concessions. At some point in the negotiation, you're going to have to concede something to the other side. This may mean giving up things you really want or, if you plan it right, giving up things you don't care about but the other side does. For example, early in the negotiations, you might request two weeks of CME, an issue you don't feel strongly about. Later, when you're trying to get the salary you want, offer to give up that second week in exchange for the additional $5,000 in salary.
3. Decelerate your concessions. Don't start out with small concessions and then concede more and more. Instead, make your concessions progressively smaller. For example, when negotiating salary, you might go from $150,000 to $140,00 to $135,000 to $132,000.
This is perhaps the most important negotiating tip because it sets the psychological mood for the negotiation. If you make small concessions first, followed by larger ones, the other party will begin to think that if they just hang in there, you'll keep going. But by decelerating your concessions, you establish a pattern that does not look optimistic for the other party.
4. Uncover hidden agendas. A common reason that talks stall is something called position negotiation. When someone starts talking about “the principle of the thing,” you know you're about to go head-to-head with a position held by the other person. (Philosophical and theological debates tend to circle around position negotiation.) To get past obstructing positions, talk with the other person, try to care about him or her, and see if you can find a hidden issue. Above all, don't assume you know what the other person wants. It isn't always money.
Recently, I negotiated a contract with a faculty member who dug in his heels on the issue of giving lectures to the residents. He said the lectures took too much time and effort compared with the compensation being offered. This seemed like a small point to get hung up on, but I needed each of the faculty members to give a certain number of lectures a year, and I couldn't let just one person refuse to give lectures. Besides, I believed, as a matter of principle, that faculty members should want to teach.
We had both picked our positions, and were about to go head-to-head, when it occurred to me that there might be a bigger issue at work. Indeed there was. After a few minutes of simply talking with the faculty member, I discovered that the real issue was an almost pathological fear of public speaking. We created a win-win solution by changing the lecture format from a traditional didactic presentation to small-group workshops and group participatory case presentations, which, as it turns out are more effective teaching methods anyway.
5. Fait accompli. Faced with the choice between a done deal or more negotiations with the chance of losing the deal, most people will go for the done deal. For example, “Here is a check for $350 ($50 less than the asking price). Take it or leave it.”
One way to practice this is when you are faced with a contract clause that you cannot accept. Simply rewrite the clause, sign it, and send it back. You can also attach a note explaining that you could not sign the contract as written and took the liberty of rewording lines 21 through 25, or whatever the case may be. Presented with a signed contract, albeit an amended one, the company may be willing to close the deal.
The idea here is to take pre-emptive action, and leave the other party with a choice between certainty and uncertainty. The fait accompli is an end-game gambit that can result in small to modest concessions, so keep it reasonable. Don't use it to win another $100,000 in salary. You're banking on the other person saying, “Let's just get this over with.”
The last word
Little negotiations happen all day, every day. They represent your opportunity to practice before the stakes are large. Negotiating is fun if you go in understanding that you have the power, look for win-win solutions and practice the principles and strategies discussed above.
I believe there are only two kinds of people: good negotiators and bad negotiators. How you do is up to you. Good luck, and have fun.
Editor's note: In an upcoming issue, in our Salaried FP department, Dr. Giovino will cover negotiation gambits that family physicians should try — and try to avoid.
Copyright © 1999 by the American Academy of Family Physicians.
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