The Art Of Negotiation
Real estate and negotiation are intrinsically linked, the latter the crucial, final step in hammering out the terms of every deal, hiring decision and partnership. All negotiations have a few things in common, despite each possessing a different set of objectives, power dynamics and participants.
Expert negotiators can handle any talk with ease. What’s their secret? What's the best negotiation prep? Do years of experience, books and classes on negotiation make a significant difference? Is careful, deal-specific research the best strategy?
Baker Tilly firm director Tony Ollmann (above) and senior manager Jim Miller (below) have a formidable number of combined hours at the negotiating table, and an abundance of tips and information to impart. We listened intently while they shared their wealth of knowledge.
Tony says that success in negotiations hinges on knowing three key things before even walking into the room—who is your audience, what are your objectives (in order of importance) and what are you unwilling to compromise on.
Jim adds that it’s also crucial to know how much authority you have, what your leverage is and what your alternatives are, should the deal fall through.
Finally, knowing the intricacies of what you’re negotiating is essential, as the technical details and fine print can trip people up. For example, most people understand the concept of a lump sum, but are less comfortable navigating variable, floating or performance-based remuneration.
And although price, money and compensation are often in the forefront of a negotiator’s mind, maximizing value goes beyond cash, encompassing schedule, scope and quality for properties, or stock options, vacation and perks for jobs.
What resources can guide you on your journey from negotiating novice to pro? Jim says that some of the literature available is decent, but “too many books are written to just sell books,” and are filled with spun fluff.
A good class, he tells us, on the other hand, can teach you how to assess risk, how to prioritize objectives and weigh negotiable items. He encourages people to look for a live classroom experience with mock negotiations, rather than traditional lecture-style courses.
Jim says the seasoned negotiator, like an expert card player, can read his opponent, and that this skill can only be gained through experience (real or simulated).
Personality always factors into negotiation, and individuals need to strike a delicate balance between being too aggressive, alienating those around them, and being too timid, caving in to other people’s terms too easily. Jim says, to the extent possible, “keep emotion out of the negotiation,” as it can cloud judgment.
Tony advises people to bear in mind that convening for a negotiation signifies a mutual need, and both parties typically have other options. This mindset is critical to maintaining a cooperative, rather than adversarial, tone during the negotiation.
Tony tells us that “the best contracts are fair and reasonable to both sides. If, say, a construction company is not making a fair profit, they’re not going to put their best people on the job.”
We asked about the factors that influence the progression and duration of negotiations, whether time to completion depends on deal size, number of parties involved, asset class, etc.
Jim says, “You really can’t generalize based on project size.” Even though it seems intuitive that a bigger one would take longer, think instead about complexity. “Looking from a project standpoint, if you’re negotiating to build a space shuttle, it’ll take longer due to the multitude of service providers you’ll have to enlist.”
Complexities also include compliance with environmental and federal regulations, tax incentives and funding mechanisms.
What are the most common points of contention and friction that can cause a negotiation to falter?
According to Jim, having more knowledge than the other party wants you to have is powerful, but dangerous, and can sometimes scare your partner away from the table. Also, people who come with the mindset that they won’t have to yield on anything are in trouble; the “my way or the highway approach” rarely leads to resolution.
When people abandon their pride, hubris and emotions, the proceedings run smoothly. If this proves impossible, because the parties are too wrapped up in what’s at stake, Tony says engaging a trusted third party to act on your behalf can be a wise choice.
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