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Explaining the Art of Negotiations

April 2006
Explaining the Art of Negotiations

Eric Hartz kept the audience engrossed during his talk about making deals at the February meeting of TiE-Atlanta

Eric Hartz, president and CEO of RentBureau, used humor to launch his talk at the February meeting of TiE-Atlanta held at the Holiday Inn Select, and he had the hall reverberating with laughter. He, however, got down to serious business with an interactive session about auctions using $20. He helped illustrate lessons in negotiations, which grabbed the attention of the audience.

Hartz, who holds an MBA from Wharton Business School, has a reputation for successfully negotiating some big and tough deals in his 19-year career in management positions in the financial and technology arenas. Hartz is the founding member, president and board director of Security First Network Bank, the world's first Internet bank. Today, the bank is known as S1 Corporation. He has also served as CEO and board director of ZapMedia, a digital entertainment and convergence company.

The lessons unveiled by Hartz's $20 auction exercise were valuable and practical starting with "escalation of commitment." During negotiations, he said, "We forget the core of what's going on ? finally throwing away the goal." Throughout the presentation, Hartz used examples from real life which made it very easy to understand his negotiation principles. "Avoiding overconfidence" was important during negotiations. He said people often think they know better and impose their overconfidence on the other side. "You think they are unreasonable," he said.

Hartz also touched upon "anchoring on numbers." "When we enter a negotiation it is very easy to anchor to the number we were given," he said. "Use that in your favor but don't start with a wrong number in the wrong place." Once the anchor is set the bias is towards that value. He emphasized the importance of using real data and not talking in terms of percentages. With real data "you can negotiate from a point of strength," he said. According to him, framing questions tactfully to elicit the required response is equally important. He also elaborated on the "Winner's Curse," which is summarized in the sentiment, "I don't just want to win; some pain should be involved for that to happen."

Apart from educating the audience on these important principles he also offered advice, which he always follows when he is in negotiations. Hartz said it is important to get the little details such as correcting typographical errors. He said moving a decimal point to the left could spell doom. For him, it is always important to aim for a win-win deal and not a win-lose deal. Among other things, he said negotiations should always be more about handshake deals with lawyers coming in later. He said humor is important as it sets the tone for the negotiations. Hartz also added that it is vital to ask a lot of questions and use creativity.

Hartz acknowledged that this is his style and not everyone would agree with him. But that didn't seem to be the case with Devesh Phadke, a software engineer and an aspiring entrepreneur, "the talk was informative and practical especially because Hartz used real life examples which I could use tomorrow. I am glad I attended this meeting."

On deals gone bad, Hartz had this to say: "Apologize and go back to them. Have patience." Earlier during his address, Chand Akkineni, TiE president, spoke about the organization and its goals. To cited the recent opening of new chapter in Lahore, Pakistan, as an example of the growing influence of TiE. He said four business deals were finalized between TiE members of India and Pakistan. As is customary, a member, a sponsor and a mentor – Ed O'Meara of MediaHound; Tom Fricano and Mani Krishnaswamy of Gwinnett Chamber of Commerce; and Harsh Mamtani of Sys Ventures – spoke about their organizations.

- Shubhangi Pandit

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