The Negotiating Trust Discount Factor

by drjim on January 17, 2014

You'll pay the price if the other side doesn't trust you

You’ll pay the price if the other side doesn’t trust you
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Can you negotiate with the other side of the table if they don’t trust you? It’s an interesting question and more than once I’ve run into negotiators who have told me that the answer is “no”. I believe that they are wrong, yes you can negotiate with just about anybody no matter if they trust you or not. However, if they don’t trust you, then you’re going to pay the price…

The Trust Discount Factor

Have you ever bought a car? If like most of us, when you bought the car you didn’t have enough money to pay for the car. This meant that you needed a car loan. When you went to apply for the car loan, the bank asked you a lot of questions in order to determine if you were a good risk – would you pay them the money back. If you were trustworthy, then they’d make you the loan and give you a lower interest rate because they trusted you. If you were a poor risk (had not paid back other loans, didn’t make a lot of money, etc.) then they would probably still loan you the money, but you would pay for being untrustworthy in the form of a much higher interest rate.

When it comes to negotiating, the same dynamic is in play. No matter what negotiation styles or negotiating techniques are being used, the other side of the table wants what you have to give so they’ll still negotiate with you even if you are not trustworthy. However, because they don’t trust you, they are going to make you pay. This is what we call the trust “discount factor” in negotiating.

I’m sorry to have to tell you this, but the trust discount factor is not going to be something that you’ll be able to see. Instead, it’s going to show up in a number of different places when you least expect to see it. You can well be assured that the discount factor is going to negatively affect the outcome of your negotiations. It’s going to be there, but you won’t be able to measure it.

Trust Really Does Have A Value

As bad as this may sound, I actually do have some good news for you. As with all such things in life, there is a flip side to the no-trust discount factor that gets applied to a negotiation. This good news is that if you come into a negotiation with a reputation as a person that the other side of the table can trust, then you’ll be arriving with a trust premium.

What this means is that if the other side knows that you’ll do what you promise to do during the negotiations, then they will be more willing to reach a deal with you. In fact, they’ll be willing to pay a premium to do a deal with you. This is because they are basically buying an insurance policy when they sign the deal with you – they know that it will be done.

As hard as it may be to create and cultivate a reputation of being honest in this world of negotiating that we all live in, it turns out that it is well worth the effort. The reason is because if you are known to the other side as being a person that they can trust, then you’ll have an advantage over anyone else that they might be thinking about striking a deal with. The reason is very simple: they trust you and they may not trust any of your competition.

What All Of This Means For You

Every negotiator knows that trust is an important part of any principled negotiation. However, as important as it is, the other side does not necessarily have to trust you in order to negotiate with you. However, if they don’t trust you, then things are quickly going to become more expensive for you…

If the other side of the table does not trust you, then they are going to make you pay for not being trustworthy. How they make you pay can take on many different forms, but you will end up paying. The flip side to this is that if the other side of the table does trust you, then they’ll be willing to pay a premium to do business with you.

Trust is not something that you can turn on and off at will. Instead, it is earned over time, deal by deal. If you are known as a person who always lives up to their word and who can be relied on to do what they said that they would do, then you’re going to be able to negotiate better deals then the negotiator that nobody trusts.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: If the other side doesn’t trust you, then how can you go about changing this?

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What We’ll Be Talking About Next Time

Hey hard-charging negotiator, when your next negotiation starts will you have a plan mapped out for how you are going to be able to get to a deal with the other side? If so, how committed to that plan are you going to be – are you going to follow that plan no matter what happens? If so, then there is a very good chance that you’ll walk away from your next negotiation without a deal.

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