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What Trump doesn’t know about the art of negotiation

Susan Caminiti, special to CNBC.com
Andrew Harrer | Bloomberg | Getty Images

Ultimatums, threats and escalating rhetoric might have worked for President Donald Trump in the rough-and-tumble world of high-end real estate. But it's not a very effective strategy for the leader of the free world, or anyone else involved in negotiating a business deal, job offer or even a relationship. We recently spoke with Deepak Malhotra, the Eli Goldston professor of business administration at Harvard Business School and author of Negotiating the Impossible: How to Break Deadlocks and Resolve Ugly Conflicts (without Money or Muscle).

Malhotra has taught thousands of business owners, executives and sales professionals how to be better negotiators and has consulted on scores of business deals and conflicts between governments. Malhotra recently revealed to CNBC some top negotiating strategies, the important role that empathy plays and why President Trump is probably not the master negotiator he believes himself to be.

CNBC: Can you give us the broad definition of successful negotiating?

Negotiation isn't about dollars and cents or emotions or deal terms. When you come down to it, negotiation is about human interaction. The question we're always trying to answer is, How do I engage with other human beings to achieve a better outcome and better agreements? And it doesn't matter whether we're negotiating a business deal, an arms deal or a family conflict. At the core, it's the same.

CNBC: So negotiating in business is the same as negotiating an agreement with another country? That's one of the things that people criticize President Trump for believing.

In both scenarios, you need to have an endpoint that everybody can live with, so in that way they're the same. But there are two crucial differences when you go from one domain to the next. First, you need to understand the institutional context. If you've done real estate deals and branding deals your whole life, as President Trump has, you're not going to be an effective negotiator if you don't really understand domestic or international context.

Deepak Malhotra, a Harvard Business School professor and expert on the art of negotiation.
Source: Deepak Malhotra

The second point is more subtle but no less important. With a typical business negotiation, the image is that you walk into a room and there is a pile of money on the table. Your job is to figure out how much money is there and then try to structure a deal so that you get as much of that money for yourself as possible. But that model is not a good one if you're walking into a really complex negotiation. In that environment, the image you should have is, How do I get to the one deal that everyone can live with? Thinking of it that way forces you to rely on a different set of principles and tactics.

CNBC: Let's talk about some of those. You write a lot in your book about the power of empathy. Can you explain the role it plays in negotiating?

In a negotiation, your goal is to try to understand how other people are looking at the situation. What's driving them? What happens to them if this deal falls apart? This is the element of empathy, and it's not to be confused with sympathy. Sympathy is saying that you feel bad for the other side. Empathy is the ability to take the perspective of the other party. The better you do this, the better you are able to navigate the negotiation in such a way as to achieve the outcome you want. It lets you address the concerns and constraints of the other side.

Without empathy, you can't be an effective negotiator. It's the desire to understand how other people see a situation.

CNBC: Do most people understand how to use empathy during a negotiation?

Most people do have empathy, but what I've found is that it is missing in precisely the situations where it's needed most, like when we're dealing with people who we see as aggressive or unreasonable. In those situations empathy pays the biggest dividends. That's why I always caution clients not to assume bad intentions, incompetence or irrationality by the other side in a negotiation. Don't assume starting out that this person is evil or crazy. Rather, ask yourself: How does this person see the world? If you can understand the story this person tells himself or herself, then you have more ways of dealing with them.

CNBC: But isn't this another way of telling someone in a negotiation to be nice?

Empathy isn't really related to being nice. The reason you need to be more empathetic as a negotiator is that it gives you more options to solve the problem. You don't even have to be nice to be empathetic.

CNBC: You say process is important in a negotiation, too. How so?

When people negotiate, they often focus too exclusively on the substance. These are the terms of the deal and the offers and counteroffers. And, of course, this is crucial. But really effective negotiators are also focused on the process. Process is what gets us from where we are today to the endpoint.

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I advise all of my students and clients to get into the habit of negotiating process before substance. Imagine you've been negotiating a deal and it's been going on for nine months and you think you're at the end. You have a couple of concessions saved up in your back pocket precisely for a day like today and you throw those out there hoping that this will seal the deal. And the person on the other side says this is great, but let me talk to my boss and see what she thinks about it. You had no idea there was anyone else that needed to be involved. That's an example of the kind of problems you can run into when you don't focus enough on process before you dive into substance.

CNBC: So what should you do instead?

Negotiate the process. For example, ask the other side, 'How long does it take an organization like yours to make a decision like this?' 'Who else needs to be on board?' 'What are some factors that might speed things up or slow down the process?' The more you focus on process up front, the less likely you are to make substance mistakes later on.

CNBC: Do you see process missing in the negotiations of President Trump?

We saw this during the first round of the health-care negotiations. They not only mismanaged the process, I don't think they gave enough thought to having a process strategy in the first place. It was too ad hoc. Everything from the amount of time they gave themselves to get it done, to who was going to manage the process, to when the president would or would not get involved — none of this seemed to be part of a coherent strategy. It was as if there was a new plan or approach every day. It's not something I would ever advise a client of mine to do, especially when the stakes are so high and the negotiation is so complex.

CNBC: Are there other aspects of President Trump's negotiating skills that you view as lacking?

What strikes me is how little preparation there seems to be for the negotiations he walks into. I don't know whether that's from a lack of humility, or that he doesn't like reading, or that he thinks the problems he confronts are simpler than they really are. You want someone who is going to try to understand the situation and have a strategy rather than thinking they can wing it.

The one thing I always stress with my students and clients is that as much as you might trust your intuition and gut instinct, these aren't a substitute for careful analysis or planning when the stakes are high. It's one thing when you're negotiating a real estate deal and the parameters are limited in number. It's quite another when you're representing the United States in complex, high-stakes relationships. I think the president owes it to people to be a little more prepared.

— By Susan Caminiti, special to CNBC.com