Don’t Split the Difference

I remember friend once haggling over personal services arrangement between celebrated mogul/philanthropist and sculptor seeking the commission to create bust of the mogul for the foyer of the hospital wing bearing the mogul’s name.
I recall it for two reasons: the sculptor’s fee was minuscule compared to the cost of the building – he wanted $125,000; the mogul thought this was lot of money for piece of metal on pedestal and considered $75,000 was fair price.
With my friend acting as agent-facilitator, the negotiation went on for weeks. The sculptor insisted he needed the $125,000 to cover his costs, feed his family, and earn tiny profit. The mogul, who achieved success precisely because of his firm, ultra-competitive grip on his wallet, stuck to his $75,000 offer. The mogul could not believe the sculptor would walk away from $75,000 fee for month or so of work. The sculptor had his pride and perhaps some other issues supporting his position.
In the end, they met halfway. The mogul relented slightly, increasing his offer to $100,000. Take it or leave it. The sculptor, of course, accepted on the spot. Why do I say “of course”? Just look at the numbers. Like most negotiations, the two sides ended up precisely at the midpoint between their original numbers. In other words, they agreed to split the difference.
I could have told them the outcome of this “negotiation” (and I use that term lightly here) the moment both sides put numbers in the pot. They didn’t have to waste so much time. It was inevitable they’d end up meeting in the middle.
I asked my friend, the go-between in this episode, if he had an opinion about who had gotten the better of the negotiation. He thought carefully for moment: “I guess I’m thinking the sculptor did as well as he could. He got the mogul to budge. Anyway, what’s wrong with splitting the difference?”
I’m not proponent of philosophies that encourage lazy habits, and the overly simplistic: “win-win” school of negotiating is chief offender. While there’s nothing wrong with each side coming away with most of what they want, there’s no excuse for “scorched earth” tactics or boorish behaviour. When negotiating becomes ritual that produces 50-50 split it tells me that neither side is doing their job.
It’s hard to avoid the 50-50 syndrome. As soon as number is mentioned, the other side raises or lowers it by half. Then, just as in an amateur poker game, there’s one more round of halving the difference, and then somebody loses nerve and calls. Hand over.
Split the difference places the entire outcome of the negotiation on one decision: how well you’ve chosen your initial number. In the 50-50 syndrome, everything stems from that number – unless you’re willing to immerse yourself in the details and turn the dance into true negotiation.
It’s not easy to go against the grain in our culture. Some assume negotiators who refuse to back down and settle up nicely are hostile; to dispel this preconception, you must be on your best behaviour, be cool and persuasive. Even so, you can expect knee-jerk resistance, some of it verging on the ludicrous.
There will always be stronger and weaker parties in negotiation. Differences must be acknowledged before clear understanding of value can be obtained. Getting to that point of recognition is the negotiator’s job.
In the case of the mogul and sculptor above, the thing that apparently stuck in the sculptor’s craw (and that underpinned his obstinate position) was the paradoxical juxtaposition of the hospital wing’s enormous cost (tens of millions of dollars, most of it paid for by the mogul) and the great man’s meanness over $50,000. What’s $50,000 when you’ve already shelled out $20 million? The sculptor had number in his head – no less arbitrary than the mogul’s – and was determined to get it, even if it meant walking away from prestige commission.
You could call it Mogul Envy, and it’s not necessarily strong negotiating position – or smart business.
By my calculation the $25,000 the sculptor eventually got by splitting the difference was already lost in wasted energy and lost opportunities elsewhere by the time the terms were locked in. And all because both sides clung to paradigm of what was “fair”.
“Fair” doesn’t mean “equal” in deal. When I go into negotiation, I have number in my head. But while it may allow some room for movement, that number is no chimera of my ego. It’s hard calculation of the deal’s value, the various strengths and weaknesses of each side.
Most of all, it’s calculation of the precise advantage I intend to gain through doing my job: negotiating. And that doesn’t necessarily mean splitting the difference. I hope to do little better than that for my side.

Mark McCormack is the founder of International Management

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