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Evaluating Blue Chips vs. Bargaining Chips

Written by Marty Latz, Latz Negotiation Institute


“Pay extra attention to the minutiae and ensure you fully understand every term and condition,” this senior partner told me when I was a junior associate. “Some lawyers will try to bury critical provisions in the least obvious places. It’s your job to catch and negotiate them before the agreement gets signed. Details matter.”


This sounds obvious. Understand everything. But it’s not so easy, especially in complex deals with tons of intersecting issues.


And it’s especially challenging as negotiators – in business and law – will often mask an issue’s importance in an effort to either a) slip a major issue past you, or b) get you to believe a minor issue is more significant to elicit something bigger in return.


So how can you best evaluate what’s really critical to your counterpart versus what’s not (what longtime Wall Street lawyer James Freund, author of Smart Negotiating: How to Make Good Deals in the Real World calls “Blue Chips” versus “Bargaining Chips”)?


Here are six tactics to help you make this crucial determination.


1. Independently research their issues and interests

There’s no substitute to doing your homework, stepping into your counterpart’s shoes, and trying to figure out what they want, why, and how much.


Ask a colleague to brainstorm with you, too. People think in different ways. We’ve all heard the phrase two heads are better than one. It’s true here.


2. Ask and confirm

I’m constantly surprised at what you can find out in a negotiation just by straight up asking and being genuinely curious. And use open-ended questions like what, how, why, tell me about, describe, and explain. Perhaps even ask them to “help me understand what’s important to you about …”.


Plus, follow up by requesting that they prioritize their issues and interests, maybe even inviting them to rank them on a 1–10 scale. Or give them a choice and ask which is more important – A or B or C? And why?


Finally, confirm your understanding of their priorities and give them an opportunity to modify or expand on it. “So, what I understand is …” or “It sounds to me like …”.


Active listening, right?


3. Investigate their credibility through strategic intelligence gathering

Check out your counterpart’s reputation on the credibility front. Contact individuals who have negotiated with them before and ask them whether and to what extent they’re straight-shooters on issues important to them. Do they bluff on these issues and/or try to slip things past you in the fine print?


Years ago, I raised significant funds to start a software company. Early on, I asked my lawyer what he knew of my list of possible investors. He told me one had a reputation as a sleazy operator. Invaluable advice!


4. Evaluate the differentiation between their issues

Sophisticated negotiators know it’s not credible to say that all your issues are “critical.” In fact, it’s a red flag. Some issues are invariably more or less important than others.


Your challenge is to ascertain how your counterpart differentiates between their issues. Longtime Wall Street lawyer James Freund says in Smart Negotiating, “You gain credence for your inflexibility on a few choice issues [signaling an issue is extremely important to you] by your willingness to give ground on the rest [signaling the rest are less important]."


So pay attention to their language and moves and how they differentiate between their issues.


5. Their offer-concession moves mean more than their rhetoric

In negotiations, what they do is more impactful than what they say. It’s relatively easy to engage in puffery and “exaggerate” by indicating an issue is more critical than it really is – they just say it. But the rubber hits the proverbial road when they put that issue into an offer or counteroffer.


Why? Because if you accept their offer – they can’t easily take it back.


Let’s say your counterpart tells you the term or length of the deal is extremely significant. But in their counter, they hold firm on other issues but fairly quickly cave on the term. Their quick caving on the term communicates that it’s not that critical, despite what they said earlier.


Also carefully note when, how often, and how far they move on their issues. Many negotiators taper their moves and hold off on significant concessions until near the end. Perhaps even track them on a spreadsheet to systematically evaluate your counterpart’s priorities.


6. Evaluate their tone and body language

Deeply listen and focus intently on their tone, body language, and how they talk about their interests, especially the strength and feeling in their language and rhetoric.


Easier said than done, I know. But it’s crucial.


Latz’s Lesson: It’s often not easy to ascertain what’s actually important to your counterpart and why. But it helps a lot if you do your research, ask the right questions, and check out their reputations. Pay attention to how your counterparts differentiate between their issues, the changes in their moves and countermoves, and how strongly they talk about all this.

____________________________


Marty Latz is the founder of Latz Negotiation Institute, a national negotiation training and consulting company, and ExpertNegotiator, a Web-based software company that helps managers and negotiators more effectively negotiate and implement best practices based on the experts' proven research.  He is also the author of Gain the Edge! Negotiating to Get What You Want (St. Martin’s Press 2004). He can be reached at 480-951-3222 or Latz@ExpertNegotiator.com



ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN • Premier Indiana CLE


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