You’re the CEO of a company employing a quarter of the city’s employees. Your company provides a significant portion of the city’s tax revenue but neither you nor your company is active in the community’s political affairs.
Recently, you decided to expand your physical plant. You thus need the city council to approve a zoning change.
Unfortunately, you have met with resistance from a 23-year-old neighborhood activist with political ambitions. This activist appears to have stirred up enough concern about your expansion to deny you the permit.
Who has more leverage – the powerful CEO or the 23-year-old wet-behind-the-ears activist? The 23-year-old.
Why? Negotiation leverage often is not about conventional social or economic power. It’s about who has, or can gain, a situational advantage in a particular circumstance. At this point, the 23-year-old doesn’t have much to lose. The CEO does.
How should we analyze and use leverage to help us succeed in negotiations?
First, evaluate how much leverage each party has and might exercise. Leverage largely depends on the extent to which each party truly needs, wants or fears an agreement; and the consequences to each side if no agreement is reached – each side’s alternative to a negotiated agreement.
Knowing how much a party needs an agreement is a critical element in any negotiation and fundamentally underlies negotiation leverage.
Leverage also is about what will happen – to each party – if no agreement is reached. If you’ve sold your house, must be out by the end of the week, have teen-agers in public school, have no place to live next week and are negotiating to purchase a vacant house nearby owned by Bill Gates, your leverage is low.
Likewise, if you’re negotiating for a raise, have a unique expertise and just got an attractive job offer from a competitor, your leverage vis-à-vis your boss’ leverage is pretty high.
How to improve your leverage.
• Get information about the other side’s true needs, wants and fears. If you’re negotiating to purchase some customized computer software for your company and find out the seller really wants a foothold in your industry, you’ve increased your leverage.
• Improve the value of your alternative. If you’re the CEO described above, explore other places or cities in which to expand. Then take some practical steps to make the best alternative a viable option. The better your alternative, the higher your leverage.
• Consider how you might limit the attractiveness of the other side’s alternatives. “I made him an offer he couldn’t refuse,” said Marlon Brando in The Godfather. What was the recipient’s likely alternative to accepting the offer? Death. Because the recipient valued his life, the godfather had a lot of leverage.
• Finally, after you’ve evaluated the leverage and improved your own, determine how to effectively use it. Threatening your boss with a competitor’s offer likely will be counterproductive if you really don’t want to leave and your boss generally responds negatively to threats.
Instead, it will be more helpful to simply share the information with your boss that you recently received a call from a competitor about a job. Subtly pointing out or hinting at the negative consequences to the other side if no agreement is reached often will be more effective than threats – especially if you value the relationship.
Leverage is a crucial aspect in any negotiation. If you can improve it and use it wisely, you will substantially increase the likelihood that you can get what you want. Used unwisely, you may inadvertently destroy a potentially great deal.
So if you’re the CEO of that company with a dominant community presence, don’t just dismiss a 23-year-old activist. He may just leverage you out of your ideal expansion.
Published August 25, 2000 The Business Journal