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“John, you’re going to have to do better than that if you want this company,” said the New York investment banker. “We’ve got a higher offer from one of your competitors.”

“How much better, and who made it?” John responded.

“I can’t say as we have a confidentiality agreement with them. But I can tell you it’s much better than yours.”

John later significantly increased his offer, which was then accepted.

And no wonder. The investment banker had made up the existence of the other buyer. Pure fiction.

Was it worth it? He thought so.

What do you think?

This is not simply an academic question. Negotiators must constantly evaluate their counterparts’ ethical beliefs – what they will or won’t do or say – in order to most effectively achieve their own goals.

How can you evaluate this?

Answer this question: Do you believe the investment banker was right or wrong?

Some of you undoubtedly believe this is an easy call. He lied. It’s morally wrong to lie. Therefore, he should not have done it.

Others will strongly disagree.

“He bluffed,” you might say. “People bluff all the time. Here, the purchaser was a sophisticated businessperson who chose to believe the investment banker. No one forced him to raise his offer. Plus, he probably walked away from the deal pleased with the price.”

Finally, many may not see this in black-and-white terms. Here, you might say, is a borderline issue that rests on practical considerations. You might feel uncomfortable doing it, but you don’t morally condemn it.

Especially if such “bluffing” appears to be the norm in certain settings and most everyone knows it occurs.

Why should we care? Because individuals generally fall into one of what Richard Shell in Bargarining for Advantage calls three camps – and you will be less effective if you don’t know where your counterpart resides.

How can you find out this information?

Research your counterparts’ ethical reputations and analyze their language and actions in your negotiation. And get specific. Ask others who have negotiated with them the following questions and evaluate these issues during your negotiation.

How candid, honest and trusting are they? Did they ever tell you something detrimental to their position just because they felt it was the right thing to do?

The more trusting, candid and honest they are, the more likely they will feel personally betrayed and draw bright moral lines if they perceive you to “lie.” Shell calls this the Idealist Camp.

How did they respond when you asked them direct questions? How “slippery” were they? How much did you trust them? To what extent did you feel they treated the negotiation as a game? How competitive and focused on winning were they? If they played golf, would they be scrupulously honest scorers?

The more your counterparts treat the negotiation as a game and the more slippery they appear, the more likely they will fall into camp two, which Shellcalls the Gamesmanship Camp.

These individuals want to win and feel no qualms about bluffing, especially if it occurs in situations where individuals commonly bluff. And they will walk all the way up to the legal limit. If it’s legal and likely not fraudulent, they’ll do it.

How practical were they? Would you describe their approach as problem solving or competitive? Why? To what extent did you develop a good working relationship with them, even if you were adverse to them?

Those in this camp, Shell’s Practical School, take a practical approach to these issues. If everyone “bluffs” in this industry and everyone knows it, no problem. They will do it, too, with little qualms. And they will be unlikely to share information adverse to their interests, even if they might appear somewhat misleading.

But if there is a legal or ethical question about it, they will err on the side of being forthright. Their long-term view is on their reputation and credibility, and they will avoid doing anything that might tarnish it.

Of course, most have a bit of themselves in all three camps. And for some, it depends on the issue. But overall, most tend toward one camp or the other. And you need to know this to most effectively negotiate.

If you don’t, beware. Beware of the Idealists – who will walk away on principle if they perceive you as untrustworthy.

Beware of those in the Gamesmanship Camp – who will use every tactic in the book as long as it’s legal and, in their minds, likely to be effective.

Finally, beware of the Practical School. They are the toughest to spot. They will draw some bright ethical and moral lines. But they also will bluff and use similar tactics in select situations, especially when the risk/reward payoff appears high enough.

The New York investment banker took a calculated risk and didn’t feel he did anything wrong.

I disagree. To me, his “bluff” smells bad. I don’t believe it will pay off in the end, as he will get a reputation commensurate with these tactics. Then his negotiations will become exponentially more difficult.

Next time, find out in which camp your counterpart resides. Put out your antenna and understand their ethical thought process. The signals you receive will make you a more effective negotiator.

Published March 1, 2002 The Business Journal

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