Negotiate 1-2-3

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CRITICAL MOMENTS

Choosing a Path

Learning Objectives Est. time: 20 min.

  • Aligning short term moves and tactics with larger strategy
  • Recognizing when to expand your options - and when to limit them
  • Seeing how your tactical choices compare with those of other viewers

Overview

Daniel Yin was back on the Harvard Business School campus for the second module of an executive program for people who run their own companies. He and his brother Steven had founded a high-end publishing firm that puts out gorgeous coffee table art and travel books in another part of the world. For reasons you'll soon understand, names in this case are disguised, and information about the country in which they do business and its currency have deliberately been kept vague. The rest of the story is true.

Daniel met with one of his teachers along with a few of his program classmates. After people exchanged pleasantries, he broke in and said, "First off, I want to thank you, Professor. The negotiation classes you taught proved very helpful to me recently." Everyone likes a compliment, so the instructor smiled, expecting for him describe a recent acquisition or resolution of some copyright claim.

He was startled, however, when Daniel continued. "What I learned was crucial when my brother Steven was kidnapped. I had to negotiate his release. For a whole month, we didn't know if we'd see him alive again."

It never occurred to the teacher that one of his students would use the negotiation concepts he learned in an HBS course in such circumstances. But Daniel was convinced that the frameworks used in analyzing business transactions applied to his kidnapping case, too. In fact, many of the points he made anticipated themes in Negotiate 1-2-3, especially in this unit on Critical Moments. Daniel's story works in both directions. The circumstances were extraordinary, yet lessons can be learned from his experience that apply to everyday negotiation.

He spoke, for example, about the importance of presence of mind. "I had to have the mental discipline to see everything that was happening from a neutral point of view." He also thought hard about BATNAs (an acronym for Best Alternative to a Negotiated Agreement, one's course of action if no deal is made). The family had no walkaway alternative; they had to negotiate. But Daniel realized that his counterpart had to negotiate as well, noting that he makes a profit only if he makes a deal.

Daniel also took great care in formulating his offers to influence the kidnapper's perception of the ZOPA (Zone of Possible Agreement, the set of deals acceptable to all parties). He considered the roles and interests of all the parties, including the police—not all of whom he trusted. Daniel's analysis was impressive, as was his poise in a time of great stress. But Daniel didn't mention how well he handled critical moments in the negotiation. That skill may have been the most important factor in his success.

The focus in this module (and unit) is on critical moments, but does not include those that only can be recognized in hindsight; those are the province of historians. In 1940 Adolf Hitler's decision to suspend Germany's air assault upon England and attack the Russians on the Eastern Front proved to be a turning point in World War II, though no one could have known that at the time.

Instead, you will explore moments where, with appropriate reflection, you should recognize that doing one thing forecloses the possibility of something else. Your ability to hedge or straddle may be limited at best, but you must nevertheless make a decision. Several such moments arose in Daniel's negotiation.

Kidnapping for money has become common in his country. The professionals who do it are shrewd. They know how to play on people's emotions. After kidnapping someone, they wait several days before making contact. They want to amp up fear to a point where a family will pay anything to get the victim back safely.

Daniel's brother was seized on a Friday morning. No one heard from him that day or the next, but Daniel used this time to his advantage. First, he received a crash course in ransom negotiation from the police. Next, he reviewed his accounts and figured that he could come up with $1 million, maybe somewhat more in a week or two. The fact that Steven was a full partner in the business limited how much Daniel could borrow on his own, although, of course, he’d pay whatever it took to guarantee his brother's safe release. If that meant financial ruin for the extended Yin family, they would find a way to survive.

Act One

The telephone finally rang just before seven on a Sunday evening. "I have a message from Steven Yin," said the voice on the other end of the line.

"Who is this?" Daniel asked.

"Your brother is all right," said the caller. "He wants you to know how much he appreciated the gold cufflinks you gave him for his birthday last week. What else? Oh, the generous toast that you made, about him being both your brother and your best friend—that meant the world to him."

There had been crank calls earlier, but this one was legitimate. Only the immediate family had been at Steven's birthday dinner. And the cufflinks were antiques that Daniel had purchased on a recent business trip. Yet in spite of having had the three days to prepare, Daniel was speechless. "Tell Steven that we are doing as well as we can," he finally said. "Tell him we are praying for him."

Daniel glanced over at a policeman sitting at the dining room table and listening to the conversation through headphones. A tape recorder had clicked on the instant the phone had rung. He gestured for Daniel to continue.

"What do you want us to do?" Daniel asked.

"I'll make this quick. I've already invested a lot in preserving the safety of your brother. I paid people well to treat him with respect; to be careful. I thought you should know that before telling me: What you are going to pay?"

Act Two

"I'll make this quick. I've already invested a lot in preserving the safety of your brother. I paid people well to treat him with respect; to be careful. I thought you should know that before telling me: What are you going to pay?"

"We can pay you fifty thousand dollars right now," Daniel told the kidnapper.

"That's ridiculous," was the response. "You'll have to do much better than that." The telephone line went dead.

Daniel had a good explanation for his lowball number, however. He had anticipated that his first offer would be a critical move, one that would shape his broader strategy. He thought hard about the long-term consequences of his answer. While preparing for the negotiation, he realized that his first offer, no matter how lavish, would not secure Steven's release. The kidnapper would reject it, confident that he could get more.

With that in mind, Daniel reconsidered his objectives. "My paramount goal at that point was to simply keep the conversation going," he explained. The $50,000 figure likely was less than the kidnapper expected, yet it was a starting point: that's what Daniel meant by adding the words "right now."

One of his program classmates asked, "Weren't you taking a big risk with your brother's life? Daniel didn't think so. In fact, he worried more about the risk of making a high offer. If he had started with $500,000, the kidnapper might have assumed that the family could pay ten times that. In laying out his first number, Daniel was already thinking about the end game.

Daniel and the police listened to the tape of the first call over and over again. "This is good," said the head detective. "We know this guy. He's done at least eight kidnappings this year." Daniel stifled the urge to ask why the police still hadn't made an arrest. Instead, he merely asked, "It's good?"

"Oh yes," said the detective. "He's very professional. He knows what he's doing. Now, if it were some amateur, someone who doesn't know how to play the game, it would be very different." To Daniel, the situation was by no means a game, yet he was thinking like a chess player himself. There would be further moves, he told himself, trying to draw some comfort from the kidnapper's closing words. This was the beginning of the bargaining, not the end.

Act Three

The second phone call came the next evening. "You have a prosperous business, Mr. Yin," the kidnapper said. "Don't insult me with any more low offers. You can easily pay many times what you said."

Stop for a moment and think about how Daniel might respond at the point. Bear in mind that the kidnapper had to know that the Yin family was prosperous. That's why his team had grabbed his brother. Claiming to be poor would not be credible. Nevertheless, what might Daniel say to support his patient strategy? After giving that some thought, click the hidden comments button to see his response.

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"Sir," replied Daniel. "You know what is happening in the economy. Things are bad, our credit line is gone. It's not our fault. It's happening to everyone."

"Well, sell your big Mercedes, then," said the kidnapper. Daniel thought he heard a trace of exasperation.

"It's not mine to sell," Daniel answered. "The bank is about to repossess it."

"Make me another offer," the caller said over the crackle of the car phone.

"I can find sixty thousand dollars," said Daniel."Maybe sixty-five."

"That's not enough," said the kidnapper, hanging up.

Once Daniel had committed to his approach, he didn't falter. He focused on influencing the kidnapper's perceptions. "I wanted to keep him interested but at the same time really anchor his expectations," Daniel said. "I was very careful to be consistent, increasing my offers only a little at a time."

The negotiations dragged on for three weeks. In each of the daily calls, Daniel would pose a personal question that only his brother could answer. Next time, the kidnapper would need to have the appropriate answer to prove that Steven was still alive. It was an arduous process. Something needed to be done to bring it to a close. By day twenty-five, Daniel had offered $78,000, and still the kidnapper insisted on more.

"Call me back tomorrow," said Daniel."I may have another option." This time he was the one to hang up.

Now let's see what you would recommend at this point in the negotiation by completing the following activity.

When Daniel got the call the next evening, he told the kidnapper that he had contacted a loan shark, an underworld figure who could provide another $20,000. "That gets us into the nineties," the kidnapper said. "That's better, but it's still not enough."

"You don’t understand," said Daniel. "I haven't borrowed the money from him yet. The moment that I do, we owe interest of one percent per day."

"That's your problem," said the kidnapper.

"Actually, it's a problem for both of us," Daniel said. "If I've got to pay interest, it will come out of any money I borrow. So if we keep negotiating, the loan shark is going to cut into the amount that you get. There's no way around it."

"Let me think about it," said the caller.

"Of course," said Daniel, "but the commitment he gave me is good only until noon tomorrow. I either have to take the money then, or he'll lend it to other people."

The kidnapper hung up but called back in five minutes with a counteroffer. "Make the amount an even one hundred thousand, and we have a deal," he said.

"I can do that," said Daniel after a deliberate pause.

Daniel got instructions to make the transfer for his brother. The money would be in cash, of course, small bills. The police promised not to interfere. They also assured Daniel that if the family paid the ransom, the kidnapper would keep his word. "Don't worry about that," said the detective. "He knows that if he doesn't deliver, we'll tell anyone dealing with him in the future not to pay."

Thirty minutes after Daniel passed a duffle bag to a stranger, a gray van drove past the Yins's downtown office and Steven was pushed out onto the street, blindfolded. The public was told that he had managed to escape—the authorities didn't want to encourage more kidnappings. Even though the whole negotiation took almost a month, Daniel felt that time was on his side. He increased his offers, though only a little each time. There was enough on the table to protect Steven from harm, but not enough for the kidnapper to keep this game with the Yins going. Maybe he could find someone else to grab whose family wouldn't be so patient and disciplined.

That's not how Daniel felt privately, of course. "It was so stressful, so emotional," he says. "I had to dedicate myself to being very focused on our strategy." The kidnapper initially controlled the pace of the negotiations and communication, but Daniel's bold action was what brought the process to a successful close. He knew he couldn't make a take-it-or-leave-it offer. There was too much at stake. So he concocted the loan shark story as a way to dangle an attractive offer, but only for a short time. "I wanted to create a deadline," he said, "but one that would just be arbitrary, because he could call my bluff."

It wasn't a card that he could have easily played again if the gambit didn't work the first time. The mythical loan brought the package to a little less than $100,000. Without it, they were still in the high seventies. Psychologically, it could be hard for the kidnapper to take a big step backward. As Daniel expected, the kidnapper came back for a small sweetener to make it a six-figure deal. If satisfying the kidnapper's ego was necessary, that was okay with Daniel.

Many moments in this negotiation were important, but two especially. The first was imposed on Daniel when the kidnapper insisted that he make the first offer. But at the close, it was Daniel who forced the issue and restored Steven to the family. "Emotionally, I wanted to resolve this right away," he told us, "but rationally, I knew that if I tried to rush things, panicking would only make things worse."

Summary

Few of us will face the situation that Daniel confronted, but his experience illustrates principles that apply to critical moments in negotiation across the board:

1. Use tactical moves to execute strategy. Daniel's low first offer established a slow but steady path to agreement.

2. Be decisive in the face of risk. All of Daniel's alternatives entailed risk. He believed that the prospect of getting some money would keep the kidnapper from acting rashly.

3. Focus on your ultimate objective (not necessarily the immediate consequences of your decision). Daniel realized that his first offer would not be accepted.

4. Be consistent. Once Daniel committed to this approach, he had to stay with it. If he had doubled his offer midway in the talks, the kidnapper might have held out for even more.

5. Be prepared to force agreement, but take care to time your moves well.

For related issues, be sure to visit the Ultimatums and Brinksmanship modules in this unit.

Next Module: Powerplays [25 min.]
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