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A Negotiation Tip

The common-sense approach to negotiation suggests that you begin with an extreme, almost fanciful demand or offer. The final compromise will therefore be closer to your true demand or offer than if you opened the negotiations more realistically. Yet there is a substantial disadvantage to the common-sense approach to bargaining. To begin with, an unreasonable and potentially destructive demand will often be interpreted by the other side as bargaining in poor faith. Serious negotiations may therefore be delayed or canceled. Also, many people in our society are tired of gluttony and greed on the part of others.

Al Herman, a vice president of acquisitions at a Fortune 500 company, was well paid and quite content. His most recent compensation package was $350,000, composed of a $250,000 salary and a $100,000 performance bonus. Equally important, AI's job was filled with excitement, and he en?joyed working with the executive team. AI's exceptional intuition in choosing the right acquisitions for his company had become well known in the industry. With his reputation established, Al attracted the attention of a headhunter whose client needed a star acquisitions executive.
When the headhunter called, Al insisted that he was happy where he was but would at least have dinner with him. The headhunter described the vacancy in glowing terms. Among the pluses of the position in question were a much bigger staff and an emphasis on global acquisitions. After the dinner, Al casually mentioned that he was en?trenched in his present position but he was curious enough to explore the position at least one step further.
Al met the president and the chairman of the board of the firm for a three-hour session. Both were interested in Al and authorized the headhunter to talk in terms of a total compensation package of a maximum of $425,000 for the first year. AI's interest was piqued when he learned of what the client was willing to pay, especially because he would be running a bigger operation. Al responded, "Four hundred and twenty-five thousand dollars is very fair. But for me to give up a wonderful job at a fine company, I would need $500,000. Besides that, I can more than earn back my compensation on the first good deal I complete for the company."
"It sounds as if you might be pushing things to the outer limit, but let me get back with my client," said the head?hunter. When the headhunter talked to the president and chairman, both agreed that Al was not being unreasonable. He was asking for less than 20 percent beyond their initial offer. They also thought that the board of directors would go along with a $500,000 compensation package for an executive with such a fine reputation. The president and chairman arranged to have another meeting with Al to discuss the job further and get to know more about his mode of operation. After this successful meeting, Al then had the opportunity to tour a few of the company facilities the following week.
After getting to know Al better, the company was pre?pared to make Al an offer. They offered Al a salary of $400,000 plus a first year guaranteed bonus of $100,000. In addition they threw in a $15,000 signing bonus "just to make things interesting."
Al surprised himself by accepting the offer and resign?ing his current position. Al left his old firm on good terms and was told to reapply should his new situation sour. AI's sensible negotiating strategy of making a demand ofless than 20 percent beyond the initial offer paid off handsomely. He had established such good faith that he was finally offered more than he requested.

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