You want a new house, and you’re considering whether to hire a real estate agent or go it alone. Or perhaps you’re selling your business, and an investment banker wants to represent you in lining up potential buyers.
You might even manage a sales force, and are uncertain whether to negotiate that potentially huge contract or let your salesperson handle it.
These instances present you, as the principal decision-maker, with a dilemma. Should you use an agent to represent you, or would it be more effective to negotiate for yourself?
Here’s what should you do.
1. Consider your ability to objectively negotiate for yourself and factor in the value of your future relationship with the other side. And don’t let your ego unduly influence your decision.
Let me start by admitting that I’m often a more effective negotiator for others than for myself. It’s true for most.
Why? Because we likely will be more objective, relaxed and even more creative when our own property or interests are not at stake. The more we’re personally at risk and stressed, the less effective our negotiation abilities.
Thus, as your objectivity goes down, the value of using an agent goes up. And as the value of your future relationship with the other side increases, the importance of using an agent decreases.
For instance, many will hire a divorce lawyer to represent them if they know their emotions will cloud their judgment and likely lead to a highly adversarial atmosphere. Objective agents can substantially help ease the tension.
Alternatively, if you’re a successful CEO and negotiator and want a long-term strategic partnership with another company, you should largely avoid using agents – at least in the beginning. This way, you can personally develop the type of working relationship that will lead to a successful partnership.
2. Consider your and your potential agent’s substantive issue-related expertise. The less knowledge you have on the relevant issues, the more likely you should hire an agent. Vice versa, too.
In real estate, many hire agents to help them sell their homes because many agents know how to promote a house to maximize its value to potential buyers. Many agents also intimately know your housing market – a significant negotiation advantage.
Likewise, many sports agents bring a wealth of experience, expertise and contacts in their specialized sports fields. Going this alone, regardless of negotiation ability, is risky.
3. Evaluate your own negotiation ability vis-à-vis your potential agent’s.
Some know they’re ineffective negotiators. In these instances, it’s almost always helpful to hire an agent. Always research your potential agent’s negotiation reputation, too.
How? By getting references from principals they’ve represented and from their opposing parties in negotiations.
Plus, don’t simply equate negotiation experience with effectiveness. Some extremely experienced negotiators consistently leave items on the table.
4. Assess the strategic and structural advantages and disadvantages of the principal-agent relationship.
Strategic and structural advantages also exist to using an agent, including:
* Depersonalizing the negotiation;
* Principals maintaining the ability to avoid sharing important information;
* Principals’ additional strategic flexibility and options with the process;
* Agents’ abilities to float trial balloons without any real commitment; and
* Agent’s tendency — confirmed by studies – to concede less than principals during any given unit of time.
Plus, principals may gain a significant strategic advantage by limiting their agents’ authority — within reason — while the other side negotiates for him/herself or sends out an agent with too much authority. Agents with authority tend to use it up.
Structural disadvantages to using agents, on the other hand, include:
* Possible miscommunication between the principal and agent;
* Agents who may primarily look out for themselves or who may stray from their instructions;
* Principals’ more tenuous control of the process;
* Principals who unnecessarily hamstring their agents by not leveling with them;
* Principals’ comfort level in personally understanding the negotiation dynamic; and
* Principals’ more distant relationship with each other.
The issue – to hire or not to hire an agent – is complex. In most negotiations, there’s no simple answer.
Some feel embarrassed to hire an agent to negotiate for them. Don’t. It doesn’t reflect negatively on your negotiating ability. To the contrary, it often illustrates your sophistication in managing the negotiation process.
Published June 22, 2001 The Business Journal