Posted in practice
on June 2, 2016 12:58 pm EDT
Doing the Smart Deal
How to negotiate wisely and cultivate stronger customer relationships in the process.
In the heat of the negotiating process, keep a cool head and apply emotional intelligence. Observe body language, tone of voice and choice of words.
At some point, every customer relationship becomes a negotiation.
Like most processes, negotiations have three stages. There are preliminaries and preparations to be made: some of these may involve mini-negotiations of their own. There’s the outcome: hopefully a deal that creates value for both parties, that makes the pie bigger through cooperation rather than competing over slices of a fixed pie. In between lies a long and winding road. How you manage both objective and subjective dimensions at each of these stages will shape both the deal and whatever comes next.
Typically, negotiations happen at many points, including approaching the sale, the sales contract, during execution (when even the most formal and carefully written contract language can be subject to differing interpretations), on project delivery and afterwards (if there are problems that could result in a claim for damages of some sort). That’s a lot of negotiating, so it makes sense that most of us evaluate client relationships largely on how easy it is to negotiate with each other. That’s one of the questions you should ask: Is this a one-off deal that’s mainly about a price? Or is it part of an ongoing working relationship where we should be looking for ways to create value for both parties?Artful Dealings & Alternatives
In their classic, “Getting To Yes,” Roger Fisher, William Ury and Bruce Patton advise negotiators to determine the Best Alternative To A Negotiated Agreement, the BATNA, before they sit down at the table. Clumsy acronym, but a very useful concept. Once you know your own BATNA, and have at least an educated guess about the other side’s, you know the balance of power. If your BATNA is truly dismal, it can be worth almost any concession to avoid walking away. But the other side’s BATNA may be even worse. Focusing on the consequences to the other side if you don’t reach agreement can make it easier to communicate the value you bring to the table.
Knowing the other side’s BATNA tells you about how far you can push them, and it can help spot value-creation opportunities. If you can get something you value highly by offering something that’s not important to you but vital to the other side’s interests, you have found a classic win-win.
Along with BATNAs, you should also consider the wider world outside your meetings. There may be other interested parties who are not part of this negotiation. How would a deal affect them? How might they influence your interests, and those of the other side? What about timing? Will you gain leverage by coming to an agreement now, or might you be able to build a better BATNA in the future?
Preliminary preparations are the best time to understand and negotiate process issues. It’s important to be clear about the milestones along your road to “yes,” who the gatekeepers really are, and how much authority resides in the people sitting at this conference table today. You need to establish criteria for a fair process so that both sides can buy in to the deal.First Things First
Controlling the frame may be the best way to control the outcome, and this has to be done at the beginning. Are we at a meeting of equals, or does one side have more status? Are we discussing value creating opportunities or haggling over price? The typical response to a complaint about price is to apologize and offer a concession. After that, it’s all about numbers. But your price seemed fair to both parties when you set it. If the client doesn’t see some of the value behind that price, by all means discuss it. But don’t let the negotiation degenerate into a win-lose contest. In the long term, these are more likely to be lose-lose: you eventually lose a client, no matter how much you concede on price this time, and the client loses a motivated, cooperative partner looking out for the best interests of both parties.
Many people become anxious (the “flight” part of fight-or-flight) just thinking about an upcoming negotiation, and even more so as they’re walking into the meeting. Practice sessions can help alleviate this unpleasant and often expensive emotion. Anxiety needs to be controlled and concealed: if the other side knows you’re nervous, they’re more likely to take advantage via a contentious, competitive approach.
Another vital preliminary step is agreeing on the meeting agenda. A large, complex project involves negotiating many separate terms and everyone should be clear beforehand what’s on the table at any given time.
Along with the agenda, you need to know your counterparties, especially if they’re coming from different cultures or styles. Some cultures want to feel that they can trust you, and vice versa. Others want to know that your word is your bond, as theirs is. “Red” style negotiators love confrontation, see conflict as a battle over a fixed pie, and define victory as your loss, which to them means it must be their gain. “Blue” style dealmakers see conflict as a problem to be solved, or at least resolved by appeal to disinterested external authorities. They view agreements as building blocks to lasting relationships. In the “blue” world, value can be created by creative approaches to deal-making, so “blue” negotiators look for ways to enlarge the pie rather than just carving out a larger piece for themselves.
And some people just want to make everyone happy, and are doomed to failure, because that’s not possible. So they fall back on trying to make others happy by making themselves unhappy—also impossible. Don’t be that guy, or girl.