We’ve written, with favor, about the use of words such as “reasonable” in agreements of all sorts. Just like the use of the modifier, “material,” the modifier “reasonable” works pretty well in practice. If you are curious about what we’ve written about “material,” click HERE. Today, we’re going to Ruminate about being “reasonable” in another context – negotiations.
First, two anecdotes, the first being about a large retailer, one with over 30,000,000 square feet of leased space, whose general counsel explained the company’s negotiation policy as follows: “It is our corporate policy to be unreasonable.” The second, perhaps not technically an anecdote, is a literary quote from Melville’s character, Bartelby, the scrivener: “At present I would prefer not to be a little reasonable.”
Like it or not, pleasant or not, academics who have studied “negotiation” seem to (virtually) all agree, being unreasonable in your negotiation stances gets you a better outcome. We remember, hopefully faithfully, having read an academic study that went a little further. Our searches came up empty-handed in finding the study we remember, but, with that caveat, here is a short version of its conclusion. As we recall, the researchers reported that the person who makes an outrageous demand gets a result closer to her or his demand than one who is “reasonable” in her or his demand. There was a caveat, an important one. Outrageous demands were only successful if the opposing negotiator believed that the demanding negotiator truly believed her or his position was a valid one. Please note the nuance here. The person making the outrageous demand needn’t believe her or his position was supportable; it was the opposing person who had to hold that belief. That’s called “bluffing.”
As Ruminations sees it, the limitation of these studies we’ve seen over a lot of years is that the subject matter of the observed negotiations was value, be it money or barter. And, the studies were about “single issue” negotiations, and that’s not what we see in commercial real estate transactions.
Where is this going?
We’d venture that very few, if any, readers believe that successful negotiators can be such without ever taking unreasonable positions. Ruminations concurs that the available data supports that generally held belief. But, does that mean that you will be successful if nearly every position you take is an unreasonable one? Taking too many unreasonable positions not only undermines the requestor’s credibility, it constitutes “acting unreasonably.” There’s a big difference. Aside from the general unpleasantness of dealing with someone who bargains in such a fashion, we continue to be influenced by the research that concludes: “Outrageous demands were only successful if the opposing negotiator believed that the demanding negotiator truly believed her or his position was a valid one.” If everything one asks for is unreasonable, it becomes hard for the “other side” to believe in the opposing negotiator’s “good faith belief” in the positions it is putting forth.
Basically, if you are going to negotiate for dozens of outcomes that the market would see as extreme or far to the “left” or “right” of what a typical deal would look like, you risk getting less than you would have liked to get or you might encourage the other side to “walk.” If not to walk, then perhaps not to come back for the next deal. That might not be a factor where one party, such as a small, local tenant has no bargaining power and probably doesn’t even realize that the landlord is being unreasonable. The same can be said when a strong, well-armed tenant overpowers a local, single property investor. But watch out when the “other side” is one you’d like to do business with again and again.
And, here’s another observation: There is a big difference between taking an unreasonable bargaining position and acting unreasonably. Acting unreasonably is bullying; it can be a failure to respect the other side’s articulated, legitimate concerns; it evidences many other “bad” behaviors all readers have seen for themselves.
Again, “where is this going?” Well we’ve gone there. Take unreasonable positions, if you like, in an effort to reach a mutually acceptable agreement (the only kind that count), but don’t act unreasonably in doing so. Each party to an agreement has legitimate interests to be satisfied. The trading process doesn’t have to be unpleasant in satisfying those interests.
Yes, this is a record for shortness in a Ruminations posting.