Practice Management: Gain a Power Position in Negotiation

STS News, Spring 2013

A recent STS Member Needs-Assessment Survey shows that nearly three-quarters of us are employed in some form by a hospital, university, or health system. Negotiation is often necessary for employment; however, our newest members often have minimal to no experience negotiating contracts.

In this column, Dr. Frank Fazzalari of the University of Michigan outlines some general principles on the art of negotiation that hopefully will benefit all members of the Society in our future endeavors.

Vinay Badhwar, MD
Chair, STS Workforce on Practice Management

Gain a Power Position in Negotiation

Frank L. Fazzalari, MD, MBA, FACS
Ann Arbor, MI

“Diplomacy is the art of letting someone else have your way.” --Daniele Vare, Italian diplomat

Many practicing cardiothoracic surgeons have entered into or will be entering into some type of contractual employment model. Whether the arrangement is with a large academic medical center or a community health system, this represents a drastic change from the private practice model that was common in the past. In fact, surgeons just finishing training may only have these types of practice opportunities available to them. 

When entering into contractual agreements, the process often begins with a negotiation. Whether it is a very friendly discussion of terms or a lengthy series of formal meetings, a negotiation is something all of us are familiar with. Negotiation theory is a large discipline, but examining a few basic concepts may help you better achieve your goals.

Creating versus Claiming Value
Business theorists describe the existence of an inherent conflict between creating value and claiming value. Creating value requires openness, joint problem solving, ingenuity, and the management of conflict escalation. Claiming value, in contrast, involves manipulating alternatives as well as shaping the perceptions and aspirations of others, sometimes even exploiting and misleading them. It is easy to see how this inherent conflict may result in disputes over just about anything. Although the skills necessary for creating and claiming value may seem diametrically opposed, one must excel at both to be truly successful.

In practicality, disputes that arise between two or more parties can be resolved by: 1) the use of power by one party over another, 2) litigation, arbitration, or mediation by a neutral third party, 3) negotiation, and 4) avoidance. Although the use of power and avoidance may be most common in our profession, the option that often brings the longest lasting solution is negotiation.

Claiming value is necessary in any negotiation, but when it’s the only thing that occurs during the process, it’s called positional (distributive) bargaining. This is the case when we negotiate over a single issue, such as money. 

Positional bargaining is often a contest of will and determination. It is either a game where one party wins and the other party loses, or they split the difference. The latter outcome is often sub-optimal and neither party is happy. Furthermore, usually only one issue or one position is considered (such as price). 

Positional bargaining does have its place. It often occurs in situations where there is no future relationship between the parties involved. However, this traditional model of positional bargaining has been evolving to focus more on joint problem solving, with a goal of mutual satisfaction and cooperation rather than unilateral victory. This more complex approach can produce better results for both sides, reduce or eliminate posturing, save time and money, and lead to better working relationships and mutual future benefit (ie, creating value).

Prepare Your BATNA
Well before the actual discussions start, a skilled negotiator will gather information, define his/her interests, and identify ways he/she differs from the other party. This is the time to determine your goals, assess the options, remain open, and draw no conclusions. You should also develop your Best Alternative to a Negotiated Agreement (BATNA).

Your BATNA is the standard by which you will evaluate the proposed agreement. Your BATNA should not be confused with your reservation price (RP), which is often the centerpiece in a simple negotiation over the price of an item. The space between the buyer’s RP and the seller’s RP is called the zone of possible agreement (ZOPA). Your RP is not your target or goal, but instead reflects the actual “walk away” point in the deal. Your BATNA, however, represents where you move if no agreement is reached. During these types of negotiations, you will be working in your ZOPA but you should never disclose your reservation price (and rarely your BATNA). 

Power in negotiation revolves around truly understanding your BATNA, as well as assessing the other party’s BATNA. For example, being unemployed or having to relocate may not really be your best alternative to a negotiated agreement. Conversely, the health system that you are negotiating with may not have any other high-quality surgeons that are willing to relocate.  

Focus on Collaboration
In negotiation, one seeks to elicit cooperation without becoming vulnerable. It is important to separate the people and their personalities from their issues and interests. The focus should be on the interests of the parties involved, as opposed to any individual’s specific position. For every possible interest, there are usually several possible positions that could satisfy it. Looking for mutually motivating interests can often uncover solutions that not only meet your goals, but also meet theirs.(1,2) Don’t assume that solving the other party’s issue will only benefit them.

Create a proposal incorporating universally agreed upon standards and objective criteria, such as standards of care, market value, Relative Value Units, outcomes and quality metrics, increasing market share, and so on. If the other party doesn’t accept your proposal, ask them to clarify the problems with it and provide a proposal in response. Be firm on your interests, but remain open to other options.

Above all, during the actual discussion, strive to communicate effectively with the other party. Understand their frustrations and core issues, and attempt to make the process as efficient as possible.

Follow These Five Steps
Barriers to cooperation are frequently encountered. These barriers often revolve around the other party’s positions and your reaction to them, in addition to either party’s emotions and dissatisfaction with their true or perceived lack of power. William Ury synthesized decades of research in game theory and negotiation down to five simple steps that are useful to keep in mind during the heat of a discussion.(1)

1. Go to the balcony. People react to difficult situations by either striking back, giving in, or disengaging. Attempt to unilaterally break this cycle of emotion by not reacting and distancing yourself from the details of the situation, including your own impulses and emotions. Imagine you are looking down on the scene from a balcony. Take time to think and avoid making important decisions on the spot.

2. Step to their side. Listen actively, acknowledging the other party’s point and feelings. Agree whenever you can. Acknowledge their authority and competence. Express your views without provoking, but be sure to stand up for yourself and acknowledge your differences with optimism. 

3. Reframe. Redirect the other side’s attention away from positions and onto shared interests and creative options for mutual satisfaction.

4. Build them a golden bridge. Ask for and build on the other side’s ideas as opposed to dismissing the ideas as irrational. Ask for constructive criticism.  Help the other person save face and back away without appearing to back down. 

5. Use power to educate. Use your power to bring them to their senses, not to their knees. Be nice and forgiving, yet make sure they fully understand the consequences. Be prepared to deploy your BATNA but without provoking. Let them have a choice; give them a way out. 

Be Aware of Pitfalls
Of course, things are not always this simple. In fact, strict adherence to the “win-win” or joint problem solving/cooperative philosophy can often be misleading and risky. This is because the major disadvantage of the cooperative strategy is its vulnerability to exploitation.(3) For example, if a true believer of the cooperative philosophy is up against a tough, non-cooperative opponent, the true believer has a tendency to ignore the lack of cooperation and continue unilaterally with his/her cooperative strategy. This allows the tough negotiator to profit from the offerings of the cooperative side without giving anything in return.

Furthermore, a non-cooperative opponent may make misleading moves that appear to result in joint problem solving and information sharing, but actually create value for their side. Because the cooperative negotiator cannot see through the disguise, most of this newly created value will be claimed by the duplicitous party. 

Experienced negotiators have developed countertactics that are useful when opponents make misleading statements regarding their beliefs and interests. Exaggerated assertions can be countered by polite offers that take the assertions at face value with terms that could only be acceptable to someone whose assertions had been truthful in the first place. For example, a practice manager may insist on an abnormally large amount of funding for the practice because of what he/she claims is a firm belief that the practice will treat a large volume of patients in the upcoming years. If the manager truly believes this claim, then he/she should have no problem accepting an offer that is contingent on future patient volume.

Finally, it is critical to note that educated and experienced negotiators will usually get the best of amateurs nearly every time (often with the more naive party not even realizing it until long after negotiations have ended). While we surgeons have spent years perfecting our skills and abilities, good negotiators have spent years honing their craft as well. Therefore, sometimes the best strategy is simply to ensure that you have an experienced dispassionate negotiator sitting on your side of the table.

1. Ury, W. Getting Past No, Second Edition. Random House; 1993.
2. Shell, G. Bargaining for Advantage, Second Edition. Penguin Group; 2006.
3. Lax, D. A., Sebenius, J. K. The Manager as Negotiator. The Free Press; 1986.