Chapter 7

Middle Negotiating Gambits: Handling the Person Who Has No Authority to Decide

One of the most frustrating situations you can experience in Power Negotiating is trying to negotiate with the person who claims that he or she does not have the authority to make a final decision. Unless you realize that this is simply a negotiating tactic that is being used, you have the feeling that you will never get to talk to the real decision-maker.

When I was president of the real estate company in California, I used to have salespeople visiting the office all the time in hopes of selling me things, including advertising, photocopy machines, computer equipment, and so on. I would always negotiate the very lowest price that I could, using all of these Gambits. Then I would say to them, “This looks fine. I do just have to run it by my board of directors, but I’ll get back to you tomorrow with the final okay.”

The very next day I would get back to them and say, “Boy, are my directors tough to deal with right now. I felt so positive that I could sell it to them, but they just won’t go along with it unless you can shave another couple of hundred dollars off the price.” Of course I would get it. There was no approval needed by the board of directors, and it never occurred to me that this deception was underhanded. The people with whom you deal see it as well within the rules by which one plays the game of negotiating.

So in the future, when the other person says to you that they have to take it to some committee, director, or the legal department, it’s probably not true; however, it is a very effective negotiating tactic that they’re using on you. Let’s first look at why this is such an effective tactic, and then I’ll tell you how to handle it when the other side decides to use it on you.

The Other Side Loves to Use Higher Authority

You would think that if you were going out to negotiate something, you would want to have the authority to make a decision. At first glance it would seem you would have more power if you were to say to the other person, “I have the power to make a deal with you.”

You have a tendency to say to your manager, “Let me handle this. Give me the authority to cut the best possible deal.” Power Negotiators know that you put yourself in a negotiating position when you do that. You should always have a higher authority with whom you have to check before you can change your proposal or make a decision. Any negotiator who presents himself as the decision-maker has put himself at a severe bargaining disadvantage. You have to put your ego on the back burner to do this, but you’ll find it very effective.

The reason that this is so effective is simple. When the other person knows that you have the final authority to make a deal, he knows that he has only to convince you. He doesn’t have to work quite as hard to give you the benefits of his proposal if you’re the final authority. Once you’ve given your approval, he knows that he has consummated the deal. Not so if you are telling him that you have to answer to a higher authority. Whether you have to get approval from a region, head office, management, partners, or board of directors, the other person has to do more to convince you. He must make an offer that you can take to your higher authority and get approved. He knows that he must completely win you to his side so that you will want to persuade your higher authority to agree to his proposal.

Higher Authority works much better when the higher authority is a vague entity such as a committee or a board of directors. For example, have you ever actually met a loan committee at a bank? I never have. Bankers at my seminars have consistently told me that for loans of $500,000 or less, somebody at that bank can make a decision without having to go to a loan committee. However, the loan officer knows that if she said to you, “Your package is on the president’s desk,” you would say, “Well, let’s go talk to the president right now. Let’s get it resolved.” You can’t do that with the vague entity.

If you use the Higher Authority Gambit, be sure that your higher authority is a vague entity, such as a pricing committee, the people back at corporate, or the marketing committee. If you tell the other person that your manager would have to approve it, what’s the first thought that they are going to have? Right. “Then why am I wasting time talking to you? If your manager is the only one who can make a decision, get your manager down here.” When your higher authority is a vague entity, it appears to be unapproachable. In all the years I told salespeople I had to run it by my board of directors, I only once had a salesperson say to me, “When does your board of directors meet? When can I make a presentation to them?” The use of Higher Authority puts pressure on people without confrontation.

A Real Estate Investor Uses Higher Authority

Back when I had the time to do it, I invested in apartment buildings and houses. When I first bought the buildings, it felt great to tell the tenants that I owned the property. It was an ego trip for me. However, when my portfolio became substantial I realized that it wasn’t that much fun anymore, because the tenants assumed that the owner of the property was made of money. Therefore, why would it be a problem to replace the carpeting in their unit because of a small cigarette burn, or to replace the drapes because of a small tear? Why would it be a problem if the rent was late that month? In their eyes, I was rich. I must be because I had all that property. Why was this upsetting me?

The moment I learned the power of the Higher Authority Gambit and started a company that I called Plaza Properties, many of these problems went away. I became the president of that company which was, to the tenants, a property management company handling their building for a vague group of investors out there somewhere.

Then when they said, “We’ve got this cigarette burn in the carpet, and it needs to be replaced,” I’d say, “I don’t think I can get the owners to do that for you just yet. I’ll tell you what though, you keep the rent coming in on the first of the month, and in about six months, I’ll go to bat for you with the owners.

Let me see what I can do for you with them at that time.” (That’s Good Guy/Bad Guy, an Ending Gambit I’ll teach you later.) If they would say, “Roger, we’re not going to have the rent until the 15th of the month,” I would say, “Wow, I know exactly how it goes. Sometimes it can get difficult, but on this property, I just don’t have any leeway. The owners of this property told me that if the rent is not in by the fifth of the month, I just have to file an eviction notice. So, what can we do to get the rent in on time?”

The Higher Authority Gambit is a very effective way of pressuring people without any confrontation on either side’s part. I’m sure that you can see why the other person loves using it on you. Let’s look at the benefits to the other side when they tell you that they have to get your proposal approved by a committee, director, or boss. This allows them to put pressure on you without confrontation. “We’d be wasting our time taking a proposal that high to the committee.” It unbalances you as a negotiator because it’s so frustrating to feel that you’re not able to present to the real decision-maker.

By inventing a higher authority with whom they must first seek approval, they can set aside the pressure of making a decision for as long as it takes to review the negotiations. When I was a real estate broker I would teach our agents that before they put buyers into their cars in order to show them any property, they should say to them, “Just to be certain that I understand, if we find exactly the right home for you today, is there any reason whatsoever why you wouldn’t make a decision today?”

The buyer may have interpreted this action as putting pressure on them to decide quickly. What it really accomplished here was that it eliminated their right, under the pressure of the closing situation, to delay by inventing a higher authority. If the agent did not do this, they would very often defer the decision by saying, “We can’t decide today because Uncle Harry is helping us with the down payment, and we have to run it by him.”

It sets them up for using the Vise technique. “You’ll have to do better than that if you want to get it past committee.” It puts you in the position of needing the other person to be on your side if it’s to be approved by the committee. They can make suggestions to you without implying it’s something to which they’d agree: “If you can come down another 10 percent, you may have a chance of the committee approving it.”

Higher Authority can be used to force you into a bidding war. “The committee has asked me to get five bids, and they’ll take the lowest one.” Also, the other person can squeeze your price without revealing what you’re up against: “The committee is meeting tomorrow to make a final decision. I know they’ve already gotten some really low bids, so there may not be any point in your submitting one, but there’s always a chance if you can come in with a super-low proposal.”

It sets the other person up to use Good Guy/Bad Guy: “If it were up to me, I’d love to keep on doing business with you, but the bean counters on the committee care only about the lowest price.” At this point you may be thinking, “Roger, I can’t use this. I own a small company that manufactures patio furniture, and everybody knows that I own it. They know that I don’t have anybody above me with whom I have to check.”

Sure you can use it. I own my own company too, but there are decisions that I won’t make unless I’ve checked with the people to whom I’ve delegated that area of responsibility. If somebody asks me about doing a seminar for their company, I’ll say, “Sounds good to me, but I have to check with my marketing people first, fair enough?” So, if you own your own company, your higher authority becomes the people in your organization to whom you’ve delegated authority.

In international negotiations, the president is careful to protect himself by maintaining the position that he cannot make a decision until he has gotten the approval of his negotiators and the Senate. During the Cold War, the Soviets would go to great lengths to trick our presidents into waiving their resort to higher authority.

The Soviets Try to Evade Higher Authority

Soviet leader Leonid Brezhnev, knew that Richard Nixon had a powerful ego and appealing to it could cause him to waive aside his previously stated need to get the approval of his negotiating team. During the 1976 summit meetings, Brezhnev suggested that they stop the meetings early one day because he was tired and wanted to get some sleep. At 10 p.m. that night he called the White House and insisted on meeting with Nixon to discuss something urgent that had come up. Henry Kissinger wrote about it in his book, Years of Upheaval, saying, “It was gross breach of protocol. It was also a transparent attempt to catch Nixon off guard, and with luck separate him from his advisors.”

At the Reagan and Gorbachev summit in November 1986 at Reykjavik, Iceland, the balance of world power teetered on the brink of an abyss when the two world leaders met alone in the ancient city’s meeting hall down by the bay. With our State Department officials anxiously gnashing their teeth outside, Ronald Reagan came within a hair’s width of agreeing to dismantle all of our nuclear weapons. It was something that would have played right into Soviet hands and would have given them the economic relief that they needed. It may even have been enough to avoid the eventual break up of the Soviet Union. Fortunately, Reagan felt obligated to refer to his advisors and thus averted disaster. So, don’t worry about the people knowing that you own the company. Even the president of the United States uses the Higher Authority Gambit.

The Counter Gambits to Higher Authority

So, you can see why people love to use the Higher Authority Gambit on you. Fortunately, Power Negotiators know how to handle this challenge smoothly and effectively. Your first approach should be trying to remove the other person’s resort to higher authority before the negotiations even start, by getting him to admit that he could make a decision if the proposal was irresistible.

It’s exactly the same thing that the car dealer will do to you when, before he lets you take it for a test drive, he says, “Let me be sure I understand, if you like this car as much as I know you’re going to like it, is there any reason why you wouldn’t make a decision today?” Because they know that if they don’t remove the resort to higher authority up front, then there’s a danger that under the pressure of asking for a decision, the other person will invent a higher authority as a delaying tactic. Such as, “Look, I’d love to give you a decision today, but I can’t because my father-in-law has to look at the property (or the car), or Uncle Joe is helping us with the down payment and we need to talk to him first.”

One of the most frustrating things that you encounter is taking your proposal to the other person and having her say to you, “Well, that’s fine. Thanks for bringing me the proposal. I’ll talk to our committee (or our attorney or the owners) about it and if it interests us we’ll get back to you.” Where do you go from there? If you’re smart enough to counter the Higher Authority Gambit before you start, you can remove yourself from that dangerous situation.

So, before you present your proposal to the other person, before you even get it out of your briefcase, you should casually say, “Let me be sure I understand. If this proposal meets all of your needs (That’s as broad as any statement can be, isn’t it?), is there any reason why you wouldn’t give me a decision today?”

It’s a harmless thing for the other person to agree to because the other person is thinking, “If it meets all of my needs? No problem, there’s loads of wriggle room there.” However, look at what you’ve accomplished if you can get them to respond with, “Well, sure if it meets all of my needs, I’ll give you an okay right now.”

You’ve eliminated their right to tell you that they want to think it over. If they say that, you say, “Well, let me go over it one more time. There must be something I didn’t cover clearly enough because you did indicate to me earlier that you were willing to make a decision today.”

You’ve eliminated their right to refer it to a higher authority. You’ve eliminated their right to say, “I want our legal department to see it, or the purchasing committee to take a look at it.”

What if you’re not able to remove their resort to higher authority? I’m sure that many times you’ll say, “If this proposal meets all of your needs, is there any reason why you wouldn’t give me a decision today?” The other person will reply, “I’m sorry, but on a project of this size, everything has to get approved by the specifications committee. I’ll have to refer it to them for a final decision.” Here are the three steps that Power Negotiators take when they’re not able to remove the other side’s resort to higher authority:

Step one—Appeal to their ego. With a smile on your face you say, “They always follow your recommendations, don’t they?” With some personality styles that’s enough of an appeal to his ego, that he’ll say, “Well, I guess you’re right. If I like it, then you can count on it.” Often they’ll still say, “Yes, they usually follow my recommendations, but I can’t give you a decision until I’ve taken it to the committee.” If you realize that you’re dealing with egotistical people, try preempting their resort to higher authority early in your presentation by saying, “Do you think that if you took this to your supervisor, she’d approve it?” Often an ego-driven person will make the mistake of proudly telling you that he doesn’t have to get anybody’s approval.

Step two—Get their commitment that they’ll take it to the committee with a positive recommendation. You say, “You will recommend it to them—won’t you?” Hopefully, you’ll get a response similar to, “Yes, it looks good to me. I’ll go to bat for you with them.” Getting the other side’s commitment that they’re going to recommend it to the higher authority is very important because it’s at this point that they may reveal that there really isn’t a committee. They really do have the authority to make a decision and saying they had to check with someone else was just a negotiating gambit they were using on you.

How Higher Authority Was Used Against Me

I remember when I first came to this country in 1962; I went to work for Bank of America in Menlo Park, California. After nine months I found that I couldn’t stand the excitement of working in the banking industry, so I looked around for something else. I applied for a position as a management trainee at Montgomery Ward, the department store chain.

Before I could go to work for them, the manager to whom they would assign me for training had to approve. So, they sent me up to Napa, California, to interview with the local store manager, Lou Johnson. For whatever reason, the interview didn’t go well. I knew that I wasn’t going to get the job—probably because I was so new in the country that Lou didn’t believe that I was here to stay. I had no intention of going back to England, but I could understand his concern. Finally, he said to me, “Roger, thank you for coming in for the interview. I’ll report back to the committee at head office, and you’ll be hearing from them.”

I said to him, “You will recommend me to them, won’t you?” That’s step number two, asking for a commitment that they’ll go in with a positive recommendation. I saw his mind swinging from one side to the other. He apparently didn’t want to recommend me to his committee. On the other hand, he didn’t want the confrontation of telling me that he wasn’t going to recommend me. His mind went from one side to the other for a few minutes, and finally he said, “Well, yes, I guess I’m willing to give you a try.” With this, he immediately revealed that there was no higher authority. There was no committee. He was the one making the decision.

So, in stage two, Power Negotiators get the other person’s commitment that she will go to the higher authority with a positive recommendation. There are only two things that can happen now. Either she’ll say yes, she will recommend it to them, or she’ll say no, she won’t, because… Either way you’ve won. Her endorsement would be preferable, of course, but any time you can draw out an objection you should say, “Hallelujah,” because objections are buying signals. People are not going to object to your price unless buying from you interests them. If buying from you doesn’t interest them, they don’t care how high you price your product or service.

When You Don’t Care What They Charge

For a while I dated a woman who was really into interior decorating. One day she excitedly dragged me down to the Orange County Design Center to show me a couch covered in kidskin. The leather was as soft and as supple as anything I’d ever felt. As I sat there, she said, “Isn’t that a wonderful couch?”

I said, “No question about it, this is a wonderful couch.”

She said, “And it’s only $12,000.”

I said, “Isn’t that amazing? How can they do it for only $12,000?”

She said, “You don’t have a problem with the price?”

“I don’t have a problem with the price at all.” Why didn’t I have a problem with the price? Right. Because I had no intention of paying $12,000 for a couch, regardless of what they covered it with. Let me ask you this: If buying the couch interested me, would I have a problem with the price? Oh, you had better believe I’d have a problem with the price!

Objections are buying signals. We knew in real estate that if we were showing property, and the people were “Ooooing and aaahing” all over as if they loved everything about it, they weren’t going to buy. The serious buyers were the ones who were saying, “Well the kitchen’s not as big as we like. Hate that wallpaper. We’d probably end up knocking out that wall.” Those were the people who buy.

If you’re in sales, think about it. Have you ever in your life made a big sale where the person loved your price up front? Of course not. All serious buyers complain about the price. Your biggest problem is not an objection, it’s indifference. I would rather they said to you, “I wouldn’t buy widgets from your company if you were the last widget vendor in the world, because…” than have them say to you, “I’ve been using the same source of widgets for the past 10 years, and he or she does a fine job. I am just not interested in taking the time to talk to anyone else about making a change.” Indifference is your problem, not objections, because there is always a reason for objections and people just may change their minds.

Let me prove this to you. Give me the opposite of the word love. If you said hate, think again. As long as they are throwing plates at you, you have something there you can work with. It is indifference that’s the opposite of love. When they’re saying to you, like Rhett Butler in Gone with the Wind, “Quite frankly, my dear, I don’t give a damn”—that’s when you know the movie is about over. Indifference is your problem, not objections. Objections are buying signals.

So when you say to them, “You will recommend it to them, won’t you?” they can either say yes, they will or no, they won’t. Either way you’ve won. Then you can move to the next step.

Step three—The qualified “subject to” close. The “subject to” close is the same one that your life insurance agent uses on you when he or she says, “Quite frankly, I don’t know if we can get this much insurance on someone your age. It would be ‘subject to’ you passing the physical anyway, so why don’t we just write up the paperwork ‘subject to’ you passing the physical?” The life insurance agent knows that if you can fog a mirror during that physical, he or she can get you that insurance. Then it doesn’t sound as though you’re making as important a decision as you really are.

The qualified “subject to” close in this instance would be: “Let’s just write up the paperwork ‘subject to’ the right of your specifications committee to reject the proposal within a 24-hour period for any specifications reason.” Or, “Let’s just write up the paperwork ‘subject to’ the right of your legal department to reject the proposal within a 24-hour period for any legal reasons.” Notice now that you’re not saying subject to their acceptance. You are saying subject to their right to decline it for a specific reason. If they are going to refer it to an attorney, it would then be a legal reason. If they’re going to refer it to their CPA, it would be a tax reason and so on and so forth. Try to get it nailed down to a specific reason.

So, the three steps to take if you are not able to get the other person to waive his or her resort to higher authority are:

1. Appeal to the other person’s ego.

2. Get the other person’s commitment that he’ll recommend it to the higher authority.

3. Use the qualified ‘subject to’ close.

What’s the counter to the Counter-Gambit? What if someone was trying to remove your resort to higher authority like that? If the other person says to you, “You do have the authority to make a decision, don’t you?” you should say, in so many words, “It depends on what you’re asking. There’s a point at which I have to go to my marketing committee.”

Let’s say you’re selling aluminum garden sheds to a chain of warehouse hardware centers, and they’re asking you to participate in their holiday weekend mailer. Your sales manager has set aside $30,000 for this, but the buyer at the chain is asking you to commit to $35,000. You should shake your head and say, “Wow. That’s a lot more than I expected. I’d have to take that to the advertising committee. I’d feel comfortable giving you the go ahead at $25,000, but anything above that I’d have to hold off until I find out what the committee has to say.”

Without creating a confrontation, you’ve put the other person in a position in which he might prefer to go with the $25,000, rather than have the entire mailer on hold until you can get back to him. Note you’ve also bracketed his proposal. Assuming you end up splitting the difference, then you’ll still be within budget.

One more thing about the Higher Authority Gambit. What if you have somebody trying to force you to a decision before you’re ready to make it? Let’s say you’re an electrical subcontractor, and you’re negotiating a shopping center bid. The general contractor is pressuring you to commit to a price and start date and wants a decision right now. He’s saying, “Harry, I love you like a brother, but I’m running a business, not a religion. Give me what I need on this one right now, or I’ll have to go with your competitor.” (I’ll show you later how a person under time pressure tends to become much more flexible.)

How do you handle it? Very simple. You say, “Joe, I’m happy to give you a decision. In fact, I’ll give you an answer right now if you-want it. But I have to tell you—if you force me to a decision now, the answer has to be no. Tomorrow, after I’ve had a chance to talk to my estimating people, the answer might be yes. So why don’t you wait until tomorrow and see what happens, fair enough?”

You may find yourself in a situation in which escalating authority is being used on you. You think you have cut a deal, only to find that the head buyer has to approve it and won’t. So, you sweeten the deal only to find the vice president won’t give approval. Escalating authority is in my mind outrageously unethical, but you do run into it. I’m sure that you’ve experienced it when trying to buy a car. After some preliminary negotiation, the salesperson surprises you by immediately accepting your low offer. After getting you to commit to a price (which sets you up psychologically to accept the idea that you will buy that car), the salesperson will say something like, “Well, this looks good. All I have to do is run this by my manager and the car is yours.”

You can feel the car keys and ownership certificate in your hands already, and you are sitting there in the closing room congratulating yourself on getting such a good deal, when the salesperson returns with the sales manager. The manager sits down and reviews the price with you. He says, “You know, Fred was a little out of line here.” Fred looks properly embarrassed. “This price is almost $500 under our factory invoice cost.” He produces an official-looking factory invoice. “Of course, you can’t possibly ask us to take a loss on the sale, can you?”

Now, you feel embarrassed yourself. You’re not sure how to respond. You thought you had a deal, and Fred’s higher authority just shot it down. Unaware that the dealer could sell you the car for 5 percent under invoice and still make money because of factory incentives, you fall for the sales manager’s appeal to your being a reasonable person and nudge your offer up by $200.

Again you think you’ve bought the car, until the sales manager explains that at this incredibly low price, he needs to get his manager’s approval. And so it goes. You find yourself working your way through a battalion of managers, each one able to get you to raise your offer by a small amount. If you find the other side using escalating authority on you, remember the Counter Gambits. You can play this game also, by bringing in your escalating levels of authority. The other person will quickly catch on to what you’re doing and call a truce. At each escalating level of authority you should go back to your opening negotiating position. Don’t let them salami close you by letting each level of authority cut off another slice of your markup.

Don’t think of it as a firm deal until you have final approval and the ink is dry on the contract. If you start mentally spending the profits or driving the car, you’ll be too emotionally involved in the sale to walk away. Don’t get so frustrated that you lose your temper with them and walk away from what could be a profitable transaction for everybody. Sure the tactic is unfair and unethical, but this is a business and not a religion. You’re there to grease the wheels of commerce, not to convert the sinners. Being able to use and handle the resort to higher authority is critical to you when you’re Power Negotiating. Always maintain your own resort to higher authority. Always try to remove the other person’s resort to a higher authority.

Key Points to Remember

1. Don’t let the other side know you have the authority to make a decision.

2. Your higher authority should be a vague entity and not an individual.

3. Even if you own your company, you can still use this by referring down through your organization.

4. Leave your ego at home when you’re negotiating. Don’t let the other person trick you into admitting that you have authority.

5. Attempt to get the other person to admit that he could approve your proposal if it meets all of his needs. If that fails, go through the three Counter Gambits: Appeal to his ego, get his commitment that he’ll recommend to his higher authority, go to a qualified ‘subject-to’ close.

6. If they are forcing you to make a decision before you’re ready to do so, offer to decide but let them know that the answer will be no, unless they give you time to check with your people, and if they’re using escalating authority on you, revert to your opening position at each level, and introduce your own levels of escalating authority.