Improve Your Negotiations With The 5 Golden Rules.   LEARN THEM

Walkouts Present Risk in Negotiation Strategies

Trump Walk Out

Donald Trump has walked out of so many negotiations near the end – purely as a negotiation strategy – that the “Trump walkout” has become one of his trademarks.

Editor’s Note: this article was published November 24, 2000 but is still relevant today.

Recently, U.S. Secretary of State Madeleine Albright literally ran after Palestinian Authority President Yasser Arafat when he up and walked out of a negotiation session.

And who hasn’t experienced butterflies in the stomach near the end of a long, drawn-out negotiation when the other side walks or signals serious doubts about the deal?

I’m often asked – what should I do if the other side walks near the end? Or, when should I – as a negotiation strategy – walk from a negotiation, even when I want the deal? Here’s my advice.

First, understand that a walkout can be: (a) the party’s sincere and true signal that they have reached the end of the line; (b) a theatrical effort designed purely to extract a concession and play off a party’s fear of not reaching agreement; or (c) a sophisticated negotiation signal that the issue under discussion is especially important to that party.

Knowing this, initially evaluate which of these is likely happening. Or, if you’re considering walking, determine which of these you want to accomplish. How should you do this?

At the least, find out what negotiation styles and strategies your counterpart has used in previous negotiations. Then, evaluate the sincerity of your counterpart’s promises and actions on other items in your negotiation. Like in poker, determine who has a history of bluffing.

Then analyze each party’s relative leverage at the time of the walkout. Wayne Huizenga, the founder of Blockbuster, was once negotiating to buy a company owned by a New Orleans family for around $4 million.

The last issue? $100,000 in cash in the company account. Both sides emphatically stated they wanted the cash.

So Huizenga closed his briefcase, told his lawyers to pack up, and walked out of the room. His partner grabbed him in the hall, and said, “Wayne, are you crazy? Over $100,000?”

 Huizenga replied, “They’re never going to let us get to the elevator.” He was right, and he got the $100,000. Why? His leverage was better. The New Orleans family had more to lose from a “no-deal” than Huizenga. Huizenga knew it.

Parties also psychologically become more committed to a result the longer negotiations last. Being relatively firm on points right near the end of negotiations – if you can sweat it out and appear patient – oftentimes will be successful. Of course, this requires a certain comfort level with the risk of an exploding deal.

The leverage tables were different when Huizenga sold Blockbuster to Viacom for billions.

In late 1993, Huizenga walked from those negotiations, and even checked out of his New York hotel. He then, however, checked into another New York hotel. Knowing he really wanted that deal, and his leverage thus wasn’t that great, he then called to restart the bargaining.

Why’d he walk? One, to send a signal about the importance of the issue on the table. And two, to gauge his counterparts’ reaction.

Finally, understand the normal human tendency to want things more when its supply appears to be diminishing. The scarcer something becomes, the more we want it. And the more we communicate we want it, the less leverage we have.

Know also, this effect operates on an emotional, not rational, level. In many instances, the item’s objective value has not changed – yet you still want it more.

Ever played ‘hard to get’ in a budding relationship? You’re using this scarcity principle. Walking out of a negotiation – or convincing your partner you’re relatively unavailable – is likely to make them want it, or you, more.

So next time your counterpart walks, take some time to analyze the situation. You never know, they may just come back on their own. If they do, you’re probably better off.

And if they don’t, and your alternative doesn’t look good vis-à-vis their last offer, consider a concession. While you may lose face, it’ll be better than flushing the deal down the drain.

Published November 24, 2000 The Business Journal


Share This