- 30 Oct 2023
- The Parlor Room
Mike Wheeler on the Jazz of Negotiation
In this episode of The Parlor Room, Harvard Business School Professor Mike Wheeler speaks with host Chris Linnane about how negotiation's improvisational nature makes it much like jazz. He also shares stories about a former president's photo and the acquisition of a television system to illustrate strategies for succeeding at the bargaining table.
Guest
Mike Wheeler, MBA Class of 1952 Professor of Management Practice, Retired
Resources
Professor Wheeler's HBS Online course: Negotiation Mastery
Professor Wheeler's books:
- The Art of Negotiation: How to Improvise Agreement in a Chaotic World
- What's Fair? Ethics for Negotiators
Related HBS Online blog posts:
- How to Become a Good Negotiator
- 4 Examples of Business Negotiation Strategies
- How to Prepare for a Negotiation
- 3 Ways to Create Value in a Negotiation
- 6 Strategies to Improve Your Negotiation Skills
Follow HBS Online
Transcript
Chris Linnane:
The Parlor Room is an official podcast of Harvard Business School Online.
Mike Wheeler:
The owner of that second system said, listen, we're going around in circles. It's nice to meet you and so forth. We're in the same business. We can keep in touch and so forth. But if you were to put—this was almost a direct quote—if you were to put $15 million in cash on the table, I'll admit I'd be tempted to take it. And if I took it, I'd kick myself.
Chris Linnane:
Welcome to The Parlor Room, where business concepts come to life. My name is Chris Linnane. I'm the creative director of Harvard Business School Online. Today, I'm joined by HBS Professor Mike Wheeler. I got to know Professor Wheeler while making his HBS Online course, Negotiation Mastery. He is an outstanding storyteller and the definition of down to Earth. Every time I've ever talked to Mike, I've not only learned something, I've been able to apply what I learned to my career.
This is going to be a fun episode. So, let's get started. Welcome to The Parlor Room.
Chris Linnane:
Whenever you're ready, I'd like to hear this Teddy Roosevelt story.
Mike Wheeler:
He was running for re-election. He had not run for re-election in '08. But in 1912, he wanted to run again. And he decided to run as an independent, not a Democrat or Republican, but on the, quote, "Bull Moose" Party. Odd name.
His publicity committee had a good photograph of him and created a pamphlet. And they were on the verge of distributing it nationwide. This was in October of 1912. I'm obviously living a century later here. 1912. That had a picture that they had not secured the rights to use. The credit was on it, Moffett Studios, Chicago, Illinois.
So, they were in a position where, well, we could distribute this thing and we would be violating the law, which is not a good thing to do and not a good thing at all for a president to do. So, we've got to go and talk to them and see if we can get the rights for it. And they were prepared to pay heavily. But their campaign manager had an idea. Telegrammed the Moffett Studio and said, “We are interested in using a photograph of President Roosevelt taken by you. It will be seen by potential customers of yours from coast to coast. How much are you prepared to pay us to use it?”
Chris Linnane:
Whoa. And that worked?
Mike Wheeler:
And that worked.
Chris Linnane:
Wow.
Mike Wheeler:
Right? But there's a lesson to that. We're not dealing with that kind of stuff, most of us at least. But even when we're in a bad position, when we may think that we have poor alternatives, don't forget that we may have something to value that the other side is willing to pay for.
Chris Linnane:
It's such a valuable way to look at things too, to always think of the perspectives from different angles.
Mike Wheeler:
Absolutely. Got to get in their shoes.
Chris Linnane:
Geez. I feel like there's 20 things that have happened already to me today that I could have had a better outcome if I'd just thought about it differently.
Mike Wheeler:
Well, here's the good news. Tomorrow is on stage. You'll see it tomorrow.
Chris Linnane:
And I'll make the same mistakes again, Mike.
People always want to know this. What's the best way to plan for a successful negotiation?
Mike Wheeler:
You know what Dwight Eisenhower said about plans? He said, “Chris, plans are worthless.” Plans are worthless, but planning is everything.
So, you need to have some sort of general approach and you've tested it best case, worst case. We hope there's a lot of room for agreement. Is there a lot or only a little? We hope the person that we're going to be engaging is going to be truthful. We hope they understand that we're going to be candid with them, all those kinds of things. But there are uncertainties in negotiation.
Also, in terms of the circumstances. I think it was Jeff Bezos who said when we make decisions, we usually have maybe 70 percent of the information we wish we had. If we wait for 90 percent, it's too late. And in negotiation, I see it as a learning process. We're exploring. We're trying to find out where the room for agreement is, how we can take a good deal and make it even better if we're creative.
Chris Linnane:
Can I tell you a story?
Mike Wheeler:
Please.
Chris Linnane:
Of my first negotiation I ever remember doing in my life. And you can maybe give me a grade; tell me what you think it is.
So, when I was maybe 11 years old, I lived in a neighborhood with tons of kids. So, we were always outside playing basketball, playing baseball, flashlight tag, all that stuff. And one day after school, I was playing street hockey with these two twins, Tom and Abe. They're really small but surprisingly good at sports. Something was bothering them. I could tell. And after some questions, I figured out that the day before, they had thrown a water balloon at a girl named Celeste as she got off the bus. Celeste's older brother Blake had found out about this, and word had got out that Blake was coming for Tom and Abe. So that's why they were stressed.
Mike Wheeler:
Yeah. Are these identical twins?
Chris Linnane:
Yes.
Mike Wheeler:
So the innocent twin could have been hammered.
Chris Linnane:
Could have been, but I have a feeling they both were involved. They got word that Blake was looking for them. And a few weeks before, there was another confrontation between Blake—who was a big kid—and another kid in the neighborhood over a stolen baseball bat. And when they came head to head, that other kid pretended to pass out. Just fell on the ground. Even Blake wasn't going to kick or punch that kid. And he was so committed that that kid stayed on the ground for three hours behind the pitcher's mound while we just played baseball.
So, Tom and Abe said, “Maybe we'll pass out when Blake finds us.” That's when I got involved and I said, “I don't think Blake's going to fall for that twice. And even though you're twins, you're probably not going to pass out at the same time.”
Long story short, Blake put one of the twins, Tom, in one of those old metal trash cans with the metal cap and rolled him around the neighborhood for like an hour.
And I could hear Tom yelling and I could hear the thumping and stuff and I felt bad. But at the same time, I thought, “If it wasn't for me, they'd both be in that trash can.” Because I had negotiated one twin in the trash can and no hills.
Is that like A-minus, B-plus negotiation?
Mike Wheeler:
Well, you set the bar pretty high on this. I’ve got to be an easy grader.
In all seriousness: Do you think you saved the second twin that experience?
Chris Linnane:
I totally did.
Mike Wheeler:
- So, one of the challenges in negotiation is assessing your performance because you don't know what would have been if you'd taken another route. And that’s true.
I mean, let's say you buy something at a good price. “I feel good. I wonder if I could have gotten it even better.” You will never know.
So, you've thought about this clearly a lot.
Chris Linnane:
A lot.
Mike Wheeler:
And you've developed a standard. You wanted to minimize the harm.
It's too bad that somebody had a really rough hour, but perhaps they're not going to throw water balloons at people getting off a bus anymore.
Chris Linnane:
They deserved something, it seemed.
Mike Wheeler:
Yeah, OK. I just booted you up from B-plus to A-minus.
Chris Linnane:
Really?
Mike Wheeler:
Yeah, absolutely.
Chris Linnane:
Thank you.
Mike Wheeler:
Absolutely.
Chris Linnane:
Everyone won a little bit except for the one kid in the trash can.
Mike Wheeler:
My interest, particularly in the last 10 years or so, I guess it goes back even further, is basically how you can improvise in a disciplined way. So, I'm not saying we'll go in to see what happens. That's not at all. You've got to have something that you can—a jazz musician that you can riff off of.
But in jazz, it happens in real time. The people—you do some music I know, Chris.
Chris Linnane:
Not jazz. It's all very planned out, Mike.
Mike Wheeler:
But the jazz musicians have something that they're starting with, a structure, and then they riff off. They try this, try that. They're great listeners.
And one thing that negotiators have to do if they're trying to learn in real time is listen. And the thing that gets in the way is all the chatter in our head. Well, “What if he says this?” Put that away.
I'll give you an example. I wrote a book called The Art of Negotiation: How to Improvise Agreement in a Chaotic World. I should have called it The Jazz of Negotiation. I realized that two years later, which is a little late. It leads with a story.
A friend of mine, we'll call him Jay, who was teaching with me at the time. And he took a leave of absence. He knew he was going to come back, but he just wanted to be out in the business world for a while. And this was when cable television was just coming in, and municipalities or counties would have a cable company that would do the wiring, essentially. And they wanted to put their foot in the water.
So, they acquired in the Midwest a small city's cable television thing. They paid something like $8 million for it. Some of that was their money. Some of it was borrowed. They got the company into the black pretty quickly. And it was clear that the business was growing. And they thought, “OK, the next step is let's see if we can get some adjoining communities under our umbrella.”
And there was a city just adjacent that had a system. It was a little bit bigger but quite comparable to the one that they had bought. They actually proactively went out to the owner and said, “We'd be interested in buying your system.”
And over a period of months, they went back and forth. Perfectly amiable conversation. They had figured they could pay 11 million for this. 12 if they had to, but that really would be pushing it.
And finally, they got to a point where the owner of that second system said, “Listen, we're going around in circles. It's nice to meet you and so forth. We're on the same business. We can keep in touch and so forth. But if you were to put, this was almost a direct quote, if you were to put $15 million in cash on the table, I'll admit I'd be tempted to take it. And if I took it, I'd kick myself.”
Well, now my friend Jay was thinking 11, maybe 12. You want an overlap. You want a situation where the buyer values the service or product more than the person who has it. This is the inverse. They are off by $3 million, and Jay took it that that was a real number. That if he were in a good mood, he might say yes to 15. But it wasn't going to be a penny less. And he was at 11, maybe 12. He started to get up, and then he sat down again and made a proposal. Five minutes later, they were shaking hands and smiling on a deal. What did they do, Chris?
Chris Linnane:
Oh my gosh. I mean, I would think that they had some kind of deal where they met in the middle, and maybe there were incentives or some extra kicker to make things.
Mike Wheeler:
If they had met in the middle, they would have had a deal that was no good for either one of them.
Chris Linnane:
Yeah. So came to an agreement. Maybe the owner is still somehow involved in the company.
Mike Wheeler:
You want an answer?
Chris Linnane:
Yes, please.
Mike Wheeler:
So, my friend Jay said, “If you think your system is worth 15 million, how much do you think ours is?”
And the guy said, “Oh, a little less. 14.5.”
So, he went into that room thinking that he was going to buy a cable system. He left with a big smile on his face because something they had bought for $8 million—some of which wasn't there—they had tripled their money basically in 18 months. Because he had the agility to see in what most of us would see as an impasse the opportunity just to flip the deal.
Chris Linnane:
Wow. So in real time, it just dawned on him; that I could flip this around.
Mike Wheeler:
That's right. Because I mean, maybe that's partly optimism on his part.
But also if you think about it, we have opportunities to negotiate when we have different points of view.
If we see everything as worth exactly the same thing, there's no need to make a trade. There's no incentive to. I'd like to have Issue B, if you really need it, you can help me out on Issue A. So here was an instance where the guy valued at a much higher figure what he owned and, “OK, we'll sell you ours.”
Chris Linnane:
I've got some questions for you.
Mike Wheeler:
Please.
Chris Linnane:
First question. Elise in Manchester: What are some common pitfalls to avoid during negotiations, especially as a young professional?
Mike Wheeler:
One is making the mistake of assuming that negotiation is a win-lose proposition. I also think some people have big egos and so forth. But if you're not confident about negotiating, we have courses on that. People have written books about it and so forth. It can be the difference between making a deal and not making a deal. It can be the difference between making a deal that kind of works versus one that really has a creative aspect of it. But like anything, it's worthy of some study. I think a person who is young can get up to speed fairly quickly if she or he put a little study into it.
Chris Linnane:
This one's from Min in Seoul: How can negotiators effectively manage conflicts during the negotiation process?
Mike Wheeler:
Well, one thing that's tricky about that is that there are conflicts where there are honest, there's real anger going back and forth.
Chris Linnane:
Now, I remember in your course, we had, in your negotiation mastery course, we had the automotive union. That old footage in Canada. Was it GM or was it Ford?
Mike Wheeler:
GM.
Chris Linnane:
- We have the footage of that negotiation going haywire.
Mike Wheeler:
Absolutely.
Chris Linnane:
And people getting really upset with each other. It's amazing.
Mike Wheeler:
It's very rare to have real-time, unedited video. And this was a strike in Canada between the Canadian auto workers and the factories that were there. And the biggest problems were within the union where there was a battle for leadership and a lot of X-rated language involved. And the person who was the head of the union was very adept in terms of knowing whom he could be courteous to even though they weren't necessarily supporting him and then his biggest rival. And the time came, as you recall, for him to go toe to toe. And it's fascinating.
In those instances, you don't want to be surprised by that. If you're preparing for negotiation, what could go wrong here? What would I do if it did go wrong? Can you anticipate everything that could go off the tracks? No. But you could in a general way say, I hope we're going to have a good relationship. But sometimes people yell at each other. What am I going to do then? There are some options. Yell back isn't necessarily the right one. Sometimes letting it pass. Sometimes saying, I think we need to take a breather here. You need to come back at another point. But we want to be optimistic. I think that we need to say what's the best case? What's the worst case? Not merely about the deal, about the terms we're going to be, but what the relationship is going to be.
Chris Linnane:
Our last question is from Damien in Toronto: What are the key skills or qualities that differentiate successful negotiators from the rest?
Mike Wheeler:
I'm not alone in preaching to the students that they've got to be prepared. What I also preach and don't get much progress on is after-action review. So I think you need to scribble a strategy. If it's really important, more than scribble one. Really lay it out. Have somebody who is a colleague of yours, a friend stress test it. Yeah, but what happens if? This sort of thing. And when it's over, review what went on.
Chris Linnane:
Now, how would someone do that in an effective way?
Mike Wheeler:
Write down a plan. Have somebody else look at it. They'll ask you questions about why you believe this or that or raise things that you hadn't occurred to. That's pre. Post, pull that piece of paper out with the annotations on it and say, “OK, where were the surprises? Specifically, what worked well? What did not?” And if you're really disciplined, maybe a little obsessive, but it's a good thing to be obsessive about, if you're really obsessive, curate those. And then you develop a list of good practices that you've got. And that's a platform on which you can address the other things that maybe you're not so good at.
Chris Linnane:
So, we covered a lot of ground, Mike. Thank you again for doing this with me. I really appreciate it. I hope you had a good time. I had a great time.
Mike Wheeler:
I had a great time.
Chris Linnane:
Maybe I can have you back in the future?
Mike Wheeler:
We would love to do that.
Chris Linnane:
If you'd like to learn more about negotiation or Professor Wheeler, you can pick up his book, The Art of Negotiation: How to Improvise Agreement in a Chaotic World, or check out his HBS Online course, Negotiation Mastery, at theparlorroompodcast.com. Don't forget to follow us on LinkedIn, Facebook, Instagram, TikTok, and X for more exclusive content. I'm Chris Linnane. Thank you for listening.
If you're enjoying The Parlor Room, please share the show with your friends and subscribe, rate, and review it wherever you get your podcasts. Thank you.
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