The Good and the Bad of YAHOO [ Microsoft ]

Microsoft CEO Steve Ballmer in his negotiations with Yahoo! earlier this year effectively used one negotiation technique and ineffectively used another.

Let’s start with what he did effectively.

Ballmer apparently set a very specific goal regarding what he wanted to pay for Yahoo! and stuck with it. As he told Microsoft employees in the midst of the very public negotiation, “I know exactly what I think Yahoo is worth to me, exactly. I won’t go a dime above, and I will go to what I think it’s worth if that gets the deal done.”

The value of goal-setting – especially setting specific, aggressive goals – is well supported. In fact, research in a variety of disciplines supports the value of goal-setting. You see it in the field of sports psychology, where studies have shown that setting goals improves performance. You see it in the political field, where some politicians set their sights from grade school on. And you see it in business and negotiation.

In each area, research shows that you increase the likelihood of achieving your goals if you start by systematically setting them.

Some online have given Ballmer flack for specifically setting his goals and apparently being unwilling to budge. They say Microsoft has billions and if a few more would get this major strategic acquisition done, do it. From a negotiation standpoint, this is bad advice. Ballmer had decided what Yahoo! was worth to him and Microsoft and stuck with it. Well done.

Next week I will discuss what Ballmer did ineffectively.