2 Common missteps in negotiation — and why you need to avoid them.

“Negotiation is a core competence for life, “not merely an important skill to be wheeled out for special occasions,” say James Sebenius and David Lax. The pair, a current and a former professor of the Harvard Business School (respectively), are also partners in a negotiation consultancy and the authors of

3-D Negotiation: Powerful Tools to Change the Game in Your Most Important Deals.

In a recent Q&A with HBS’s Working Knowledge magazine, the two discussed some of the most common mistakes in business negotiation, and offered their advice for how to avoid them. Since founders negotiate something important just about every day — we figured the Sebenius & Lax “tip sheet” might be of help.<!--more-->

Most negotiation mistakes come from one of what the authors term the Three Dimensions of Negotiation: negotiation tactics; deal design; and the set-up. As the authors tell it, when a negotiation fails, most of us assume that it is a tactical problem: “‘It’s purely a price gap.’ ‘They’re being unreasonable.’ ‘We’re not communicating well.’ ‘We’re in a weak position,’” etc.

But instead of focusing on the automatic tactical explanations, they say, “you should critically diagnose the key barriers to the kind of agreement you have in mind.” In other words, examine the potential flaws in the second and third-dimensions of negotiation: the deal-design and the set-up. “Without an accurate barriers assessment, [the] tactics you craft may address the wrong problems.”

In their Q&A, the authors worked backwards from least familiar mistakes to the most familiar. We like this method, which delivers the most surprising — and, therefore, in some ways the most useful — information, first.

#1: The Set-Up According to the authors, the least familiar kind of negotiating mistakes are “flaws in our 3rd dimension”, also known as flaws in “the set-up” of the negotiation itself. It begins when you choose the person who is going to negotiate for you. Most of us make our first mistake by choosing a party or representative with a vested interest in the outcome — or even the wrong vested interest in the outcome.

The example they offer is of a corporate board that chose to place the company’s general counsel in charge of negotiating the compensation package of an incoming CEO. Now, it might seem obvious to put the company’s legal braintrust in charge of this sensitive deal. But duh! Doing so meant that the GC would be negotiating against his future boss, thus placing the GC’s future interests in conflict with those of the company.

“the board made a simple set-up error; it got the parties wrong in this negotiation….the board should have hired an outside specialist, with properly aligned interests and incentives.”

And the CEO apparently got everything he wanted out of that negotiation!

So, when you’re going into a negotiation, make sure you

look hard at a potential agent’s other interests and relationships to determine whether he or she is part of the right negotiating set-up.

When possible, choose a third-party to negotiate for you, someone who can negotiate for you without placing his/her own vested (or future) interests in jeopardy. Other flaws of the 3rd dimension, a.k.a. “set up mistakes,” include choosing “the wrong issues, wrong walkaways, wrong sequence, wrong basic process choices.”

#2: The Deal Design Another reason many negotiations go wrong is that most of us focus on the stated positions of the parties in a negotiatoin, rather than on the real interests of the parties. When we confuse positions for interests we end up with “mistakes in our 2nd dimension [or] deal design.” This is when we run the risk of “treating potentially more cooperative agreements as pure price deals.”

Consider any historic UAW vs. Big Three automaker labor dispute, and you know what they’re talking about, here. In the past the UAW wanted more money for job and pension guarantees, the car companies want to limit their costs. The flaw in the deal design there was that the talks were binary, and opposed (more money; less money.)

But, if we spent more itme trying to understand the motivation of the parties, we “can discover hidden sources of value and then craft agreements to unlock that value and overcome barriers created by poor deal design.”

Like in a recent labor negotiation where the UAW got more control (control can seem like a path to a “guarantee”) over its healthcare pension benefits , and GM got to limit its costs. See these resources, and this blog.

The authors suggest you ask these questions to avert deal-design flaws in your negotiations:

a) Is price truly the only issue? b) Can we unbundle different aspects of what looks like a single issue and give each side what it values most—at low cost to the other side? c) Are there other high-benefit, low-cost trades? d) Should we add value-creating contingencies and risk-sharing provisions to the contract? e) Can the contract cope not only with economic issues but also with the egos involved?

Only after you’ve addressed potential problems with the deal design and the set-up can you then turn to improving your negotiation in the 1st dimension, a.k.a, your tactics. For tips on doing better with your “communication”, “argument”, “offer-issue”, “price-terms”, “time-limts”, etc., tune in tomorrow… Oh and read the rest of the HBS post.

You might also want to consider this tome by negotiation guru,Herb Cohen:

You Can Negotiate Anything.

Find it here. We will refer to it tomorrow.