Negotiations Within Ongoing Relationships

by Mr. Cheap

Welcome to Money Smarts! If you're new here, please read the "About" page to find out more about this site. If you would like to receive updates by email then sign up here or you can subscribe to the RSS feed. Thanks for visiting!

As a quick clarification, the “relationships” in this title refers to any people who have an ongoing association with each other, not exclusively romantic relationships.

Thicken My Wallet recently wrote a great post on negotiation which addresses negotiation where you have an ongoing relationship with the other party.  Most of my negotiation posts have dealt with “one off” transactions where you never expect to do business with the person again.  It’s definitely a different game when you keep interacting after the deal is done.

In game theory, they take a mathematical approach to strategic situations (where your best action depends on the actions of others).  The answer changes dramatically whether it’s a single iteration game, or a multiple iteration game.

Years ago I got working at a software consulting company (other companies would hire them to develop software).  During the negotiations the owner played all sorts of games with me.  One that he managed to pull off was he described the position as a “Java developer” role, and twice said “there are a couple projects in the works, so we don’t know EXACTLY which you’ll be working on when you first start”.  At the time, I didn’t pay much attention to this, but it turned out (once I’d signed the contract) that rather than doing development, they were going to have me doing application work for 6 months.  This is fine for what it is, but the consequence for me is that I would lose 6 months of skill development (I would be learning completely non-transferable skills for using that specific software application:  something I had no interest in, which he realized and why he downplayed it).  Before me they’d had a high school student working on it, so that gives an idea of how “challenging” the work was (but they needed it done, which is fair from a business perspective).

Tricking me into working on something other than what I’d expected turned out to be a very costly mistake for both of us.  I *MAY* have still accepted the job if they’d been upfront about what I’d be doing, told me that was what the business needed at that time, and given me a firm commitment WHEN I’d get back to doing the work I actually wanted to do.  As it played out, I couldn’t get over the fact that they’d pulled a bait-and-switch on me, and they remained unrepentant (with the owner repeatedly telling me he’s a sales guy so he naturally “puts the best spin on things”).  By the time we went our separate ways, they’d wasted a lot of money bringing me on board, and I’d wasted a lot of time finding and getting up to speed in a position which wasn’t a good fit for me.  Since then I won’t take a job if they can’t tell me EXACTLY what I’ll be working on day-one (and most companies have been able to tell me this – why would they be hiring someone if they don’t know what for?).

I’m constantly amazed how hard organizations haggle with employees over hirings and raises, and they don’t seem to factor in that they will have to work with this person for the period of their employement.  I’ve been treated rudely by people involved in the hiring at a number of organizations, and it blows my mind that they’d jeopardize me as a potential employee over something as silly as bad manners.  One interview I went to there were three men and two of them kept surfing on a notebook and whispering back and forth during the interview.  They asked me back for another round, and I declined, telling them if they couldn’t be bothered to give me their attention during an interview, I didn’t want to work with them.

People who are really strong hagglers / negotiators can get themselves in trouble if they keep getting good deals off of friends and family.  You might be able to convince the wife to do the dishes 4 nights in a row, but the fact that she agrees doesn’t mean she’s going to be happy about it.  It saddens me to see marriages degenerate into a state of war, where each disagreement becomes a battle, and winning the battle just causes more problems down the road.  Eventually both sides lose when the relationship can’t handle any more strain and is dissolved.

Recently I was talking to a friend-of-a-friend who is involved locally in real estate.  I’d asked him for a copy of the “offer to purchase” he’d last used when he bought a property without an agent.  He was willing to give me a copy, but wanted me to take him out to a fancy restaurant in exchange (with $35 entrees and $50 bottles of wine).  Rather than going out for a $150+ dinner, I just bought an offer to purchase at the book store for $15.  A month later, he told me he was going to be out of town and asked if I could show one of his properties for him.  Unsurprisingly, I wasn’t able to make the time to help him out.  He tried to get a killer good deal out of me for a copy of an offer to purchase, and burned the relationship with someone local who was familiar with real estate investing.

Some salespeople (real estate agents particularly like to do this) will try to sell themselves as focusing on the long term relationship (with the implicit commitment that they’ll give you a fair deal because they want to do business in the future and get referrals from you).  My experience has been that they realize they aren’t guaranteed future business or referrals and will (rationally) push to get the best deal for themselves in each transaction.  I don’t blame them for this, but it irks me when they pretend that they’re advisers (instead of salespeople) and are investing in the relationship (when they’re maximizing their short term benefit).

As Thicken My Wallet suggests in his posts, there are times when a negotiation is a one-off deal.  Other times you’re going to keep interacting with the person in the future.  When you’re going to have future interactions, it doesn’t mean you have to give them everything they want.  Instead, factor that value of these future interactions into the negotiations, and make sure that you aren’t pushing for a good short term benefit (that will cost you over the long term).

Have you had any experiences where people pushed hard for the best immediate deal and it hurt them long term?

Be Sociable, Share!

Want to learn more about RESPs? Buy The Book:

Resp-Book

The RESP Book: The Simple Guide to Registered Education Savings Plans

Everything you need to know about RESPs.

See it on Amazon now

Welcome to Money Smarts! If you're new here, please read the "About" page to find out more about this site. If you would like to receive updates by email then sign up here or you can subscribe to the RSS feed. Thanks for visiting!

{ 6 comments… read them below or add one }

1 Dividend Growth Investor

I had an interview several months ago where I was asked about what salary I was expecting to receive. I had done some research and presented the interviewers with a number. They seemed to agree on my number and then the interviewers started talking about how many firms have not only stopped hiring in my field but also given pink slips. I listened to that and then answered that I had actually seen many opportunities present and had other interviews as well ( which is true and the case). It irritated me that they were trying to talk BS to me on the final interview. After that they gave me a job offer, but I told them I had to think about it. I eventually declined to work for them.

I didn’t like
1) No work life balance at the company. Employees were supposed to work more than 5 days/week, and more than 10 hours/day almost every day.
2) The fact that they tried to present the job market in my field in a “gloomy” way, when in fact it was pretty rosy, in an effort to probably offer me less $$$.
3) The fact that they asked me what salary I expected ( which is a lose lose for me, anyway you look at it).
4) Yet another thing was that they offered me a position really quickly. In my work and interview experience, anytime someone gives me an “easy” offer, the work was always something others didn’t want to do. ( work 50 hour weeks at minimum etc)
5) The last factor that turned me off was the fact that I had somehow managed to speak to several employees at the firm as I had somehow arrived at the interview site 30 mins earlier. Based off my conversation with them, they weren’t satisfied with the work load, and a lot of them were in the process of quitting and moving onto better things..

2 Thicken My Wallet

Thanks for the link and mention. I am often surprised how dishonest potential employers and employers are with their candidates or employees. If the company is in financial trouble, tell them that the business needs to make some adjustments and some cut-backs are part of a larger plan to get back to profitability. In your particular situation, they should have just told you they needed an applications person for a while.

The end result, not that I support this at all, is suddenly employees are stealing, taking off work, going on 2 hour lunches to “get back” at their employers. Payback- its a bitch.

3 jesse

Great food for thought post. Friendships are a lot like business relationships — if both parties don’t benefit in a manner that’s at least fair, the relationship is doomed to failure.

4 Mr. Cheap

DGI: Everyone has heard the old chestnut “the first person to name an amount is at a disadvantage” and I agree with you, some people play the game too far and undermine the ability to do a deal at all (as happened in your job situation).

I’ve also had companies try to low-ball me, and like you I’ve walked away. It shows you that they’re going to try anything they can to take advantage of you… I’ve also never had a business deal work out when they tried to super low ball me.

TMW: Yes, employees have countless ways to sabotage employers, which makes it surprising that more effort isn’t put into maintaining a constructive relationship.

5 Gates VP

@Cheap: you know, it’s funny, I was in a “high-ball” situation last year. The seller of software wanted a large sum for a web site he was selling. The boss basically cut the call short and told him we weren’t interested. Ironically, had he quoted a number even close to reality, we were prepared to buy his web site and pay him for his time to build it out for us.

But by failing to be even mildly reasonable, he lost on $10s of thousands of possible work.

6 sconosciuto

I wish I could send this post to my biological father, but after nearly 40 years of him pursuing an aggressive, short-term win strategy at all (and I do mean ALL) costs in the smallest matters as well as the largest matters and everything in between, I refuse to have any contact with him. If he was drowning in a puddle, I’d walk on by. Actually, I’d step on his head to finish the job.

When it comes to ongoing relationships, just because you can put someone over the barrel, it doesn’t mean you should. In the end, the other person WILL find a way to even the score.

Leave a Comment

Current ye@r *

Previous post:

Next post: