“We said we would deliver the components for $1 million,” Verdi said to Tyler Gitou. “They came back and said if we don’t lower our price by $100,000 they will look for another supplier. What do I do now?”
“Did you tell them $1 million was your best price?” Tyler asked.
“Yes, we said it was our best and final offer.” Verdi replied. “We thought that would signal to them we were ready to close the deal.”
“Is it true?” Tyler asked.
“What do you mean?” Verdi asked.
“Is that truly your best and final offer? Or can you do better?”
Verdi thought for a moment. “What difference does it make?”
“Often people will say something is their best and final offer and it really is not; they are willing to go further than that if pushed. The problem is once you break from your so-called ‘best and final offer’, you have destroyed the other party’s trust in your numbers. When are they supposed to believe it really is your best and final offer if you change it when they apply pressure?”
Verdi nodded. “I see what you mean.”
“To maintain trust in your negotiations, never say something that is not true. Trust is the most powerful element you can build into a negotiation and bluffing does not build trust.”
“So what do I do when I have reached my limit but I still want the deal?”
“Explain that to the other party,” Tyler said. “Tell them that you want to find a way to make this work for them, but it has to work for you as well. Is there something in your bid that you could change that would lower the price?”
“Yes,” Verdi said. “We could use different components that would make it cheaper. It may impact the quality of the outcome.”
“Good,” Tyler said. “Offer them that option. Tell them you can provide the components they requested for $1 million or reduce the price if you use different parts. Let them choose. Basically, you are asking them to decide which is more important to them: a lower price or the quality of the outcome. Giving the other party a choice empowers them. They are now in control of the results of the negotiation.”
“But what if they say they want the same components at the lower price or they will go to another provider?” Verdi asked.
“Ah,” Tyler smiled. “That’s a question about their BATNA. Let’s talk about that after your meeting with them. We will sit down and think about all the different ways they might respond.”
Sunday, December 26, 2010
Wednesday, December 15, 2010
When the Process Hurts the Substance
“I’m afraid that’s the end of our hour together,” Peter said to Tyler Gitou. “If you could get back to me on those points by tomorrow, I’d appreciate it.”
“Peter,” Tyler said quietly, “I can certainly get a response to you by tomorrow. But it won’t be a very informed response because there is not enough time to get all the information I need. Can I send you the material on Thursday instead? That way I can give you a better response.”
Peter thought for a moment and then nodded his head. “Yes, that would be OK.”
“Terrific,” Tyler said. “And after you have a chance to review it, could we schedule two hours for our next meeting? I don’t feel we are making enough progress in the hour we meet each week. I am mindful that you are trying to sign this deal before the end of the quarter.”
Peter shrugged. “That sounds fine. Let’s plan on two hours next Tuesday.”
The parties stood, shook hands and left the room. Tyler and Verdi got into the elevator.
“Mr. Gitou, why did you make such a big deal about the time?” Verdi asked. “You know they get very upset when we don’t follow the process.”
“The same process does not work for every deal, Verdi,” Tyler said. “Peter has made it clear that his primary interest is getting this engagement closed by the end of March. I mapped out all that both parties need to do in the next six weeks and we can’t meet that deadline using their process. We will miss something.”
“Miss something?”
“Yes, Verdi,” Tyler said. “This is a complex deal and both parties have a lot of details to review. What will happen is we will discover with two weeks left how much has to get done, we will rush, and we will miss something. The process of a negotiation can be as important as the substance, and poor planning of the process can impact the quality of the deal.”
“I agree, but how do you get a party that says, ‘This is the process to follow” to change?” Verdi asked.
“Talk about the outcomes and options and let the parties choose,” Tyler said. “Map out the process with your own team, reach a conclusion on the expected outcome, and then share it with the other party. Ask them whether they would like to follow the current process for a sub-optimal outcome, or a different process for a better outcome.”
“So you negotiate how to negotiate?” Verdi asked.
“Exactly,” Tyler said. “A Deal Whisperer knows that a good negotiation is a collaborative event. Presumably the parties share a common goal: to get to the best possible deal for both sides. If one side says, ‘I think the process we are following is going to impact our outcome’ then the other party should listen. Ideally, the parties would agree in advance on a jointly-developed process that drives to the best outcome. Establish the process before discussing substance. But if you don’t have the chance to do that up front, look for an opportunity to raise the issue so the process does not hurt the substance.”
“Peter,” Tyler said quietly, “I can certainly get a response to you by tomorrow. But it won’t be a very informed response because there is not enough time to get all the information I need. Can I send you the material on Thursday instead? That way I can give you a better response.”
Peter thought for a moment and then nodded his head. “Yes, that would be OK.”
“Terrific,” Tyler said. “And after you have a chance to review it, could we schedule two hours for our next meeting? I don’t feel we are making enough progress in the hour we meet each week. I am mindful that you are trying to sign this deal before the end of the quarter.”
Peter shrugged. “That sounds fine. Let’s plan on two hours next Tuesday.”
The parties stood, shook hands and left the room. Tyler and Verdi got into the elevator.
“Mr. Gitou, why did you make such a big deal about the time?” Verdi asked. “You know they get very upset when we don’t follow the process.”
“The same process does not work for every deal, Verdi,” Tyler said. “Peter has made it clear that his primary interest is getting this engagement closed by the end of March. I mapped out all that both parties need to do in the next six weeks and we can’t meet that deadline using their process. We will miss something.”
“Miss something?”
“Yes, Verdi,” Tyler said. “This is a complex deal and both parties have a lot of details to review. What will happen is we will discover with two weeks left how much has to get done, we will rush, and we will miss something. The process of a negotiation can be as important as the substance, and poor planning of the process can impact the quality of the deal.”
“I agree, but how do you get a party that says, ‘This is the process to follow” to change?” Verdi asked.
“Talk about the outcomes and options and let the parties choose,” Tyler said. “Map out the process with your own team, reach a conclusion on the expected outcome, and then share it with the other party. Ask them whether they would like to follow the current process for a sub-optimal outcome, or a different process for a better outcome.”
“So you negotiate how to negotiate?” Verdi asked.
“Exactly,” Tyler said. “A Deal Whisperer knows that a good negotiation is a collaborative event. Presumably the parties share a common goal: to get to the best possible deal for both sides. If one side says, ‘I think the process we are following is going to impact our outcome’ then the other party should listen. Ideally, the parties would agree in advance on a jointly-developed process that drives to the best outcome. Establish the process before discussing substance. But if you don’t have the chance to do that up front, look for an opportunity to raise the issue so the process does not hurt the substance.”
Monday, December 6, 2010
Say Something
Tyler Gitou was sitting in his office when Verdi walked in and flopped into a chair.
“How are the negotiations going, Verdi?” Tyler asked.
“Hard,” Verdi sighed. “The other negotiation team seems to be… mad at me!”
Tyler set his glasses on the desk. “Why are they mad?”
“I don’t know!” Verdi said. “But every time I say something, one of their team members snaps at me, then another snaps at me. It’s really tense in there.”
“Why don’t you say something? Ask what the problem is,” Tyler said. “When you go back into the room, open with, ‘Before we get started, I just wanted to ask if there is some problem I need to be aware of. It feels like there’s a lot of tension in the room and your team may be upset with me about something.’”
Verdi jumped up. “Thanks, Mr. Gitou. I will try that.”
Two hours later Tyler saw Verdi getting a cup of coffee. “How did your afternoon session go?” Tyler asked.
“It went great, thanks. I did just as you said. I asked why everyone seemed so tense. Nobody said anything, but it was like watching air come out of a balloon; everyone on the other side of the table exhaled and seemed to relax. There was never an explanation of why they were tense in the first place!”
Tyler nodded. “I’m glad it worked out. There is a concept in psychology called ‘social proof’. It’s the influencing effect we feel when others do something and we feel we have to follow. Like at a performance when the audience rises to give a standing ovation. You may not think the performance warrants a standing ovation, but you feel compelled to stand rather than be the one person sitting down. Sometimes, when you’re in a group for too long, a social proof-type dynamic builds. Pretty soon everyone starts behaving the same way, though they don’t know why.
“Sounds like a ‘pile on’ effect,” Verdi said.
“It was in your case. Someone in the room, probably the lead negotiator or other authority figure, said or did something that was sharply critical of your team. When someone with more information or authority behaves a certain way, others around him or her will follow that behavior because they don’t have enough information to know what they should do. Once the lead person on the other team established ‘This is how we will talk to Verdi’s team’ that behavior continued and compounded.”
“Until I asked the critical question, ‘Why are you all doing this?’ No one had an answer, and it just stopped,” Verdi said.
“Exactly,” Tyler said. “This is why I always say, ‘prepare and aware.’ A lot of people prepare for their negotiations, but once in the room they don’t maintain awareness of how the emotional dynamic is changing. To keep both parties collaborative and unconditionally constructive, a Deal Whisperer stays aware of group mood swings. And if the emotions seem to be headed off-track, don’t be afraid to say something. When the parties share a common goal, everyone appreciates someone who keeps the group focused on achieving the goal. That’s the role of the Deal Whisperer.”
(For an amusing example of social proof in action, watch this video from the old Candid Camera TV show.)
http://www.youtube.com/watch?v=sicoCkUZ-dk
“How are the negotiations going, Verdi?” Tyler asked.
“Hard,” Verdi sighed. “The other negotiation team seems to be… mad at me!”
Tyler set his glasses on the desk. “Why are they mad?”
“I don’t know!” Verdi said. “But every time I say something, one of their team members snaps at me, then another snaps at me. It’s really tense in there.”
“Why don’t you say something? Ask what the problem is,” Tyler said. “When you go back into the room, open with, ‘Before we get started, I just wanted to ask if there is some problem I need to be aware of. It feels like there’s a lot of tension in the room and your team may be upset with me about something.’”
Verdi jumped up. “Thanks, Mr. Gitou. I will try that.”
Two hours later Tyler saw Verdi getting a cup of coffee. “How did your afternoon session go?” Tyler asked.
“It went great, thanks. I did just as you said. I asked why everyone seemed so tense. Nobody said anything, but it was like watching air come out of a balloon; everyone on the other side of the table exhaled and seemed to relax. There was never an explanation of why they were tense in the first place!”
Tyler nodded. “I’m glad it worked out. There is a concept in psychology called ‘social proof’. It’s the influencing effect we feel when others do something and we feel we have to follow. Like at a performance when the audience rises to give a standing ovation. You may not think the performance warrants a standing ovation, but you feel compelled to stand rather than be the one person sitting down. Sometimes, when you’re in a group for too long, a social proof-type dynamic builds. Pretty soon everyone starts behaving the same way, though they don’t know why.
“Sounds like a ‘pile on’ effect,” Verdi said.
“It was in your case. Someone in the room, probably the lead negotiator or other authority figure, said or did something that was sharply critical of your team. When someone with more information or authority behaves a certain way, others around him or her will follow that behavior because they don’t have enough information to know what they should do. Once the lead person on the other team established ‘This is how we will talk to Verdi’s team’ that behavior continued and compounded.”
“Until I asked the critical question, ‘Why are you all doing this?’ No one had an answer, and it just stopped,” Verdi said.
“Exactly,” Tyler said. “This is why I always say, ‘prepare and aware.’ A lot of people prepare for their negotiations, but once in the room they don’t maintain awareness of how the emotional dynamic is changing. To keep both parties collaborative and unconditionally constructive, a Deal Whisperer stays aware of group mood swings. And if the emotions seem to be headed off-track, don’t be afraid to say something. When the parties share a common goal, everyone appreciates someone who keeps the group focused on achieving the goal. That’s the role of the Deal Whisperer.”
(For an amusing example of social proof in action, watch this video from the old Candid Camera TV show.)
http://www.youtube.com/watch?v=sicoCkUZ-dk
Wednesday, December 1, 2010
Can You Be Influenced?
Tyler Gitou was listening to Rose, a member of the other party’s deal team, respond to a proposal Tyler had just made. He asked a question to clarify a point, got the answer, and then nodded his head.
“You’re right, Rose,” he said. “When I look at the issue from your perspective, what you have proposed makes a lot more sense and we can make it work. We will agree to your proposal.”
The teams took a short break. Verdi, a young member of Tyler’s team, approached him in the hall.
“Mr. Gitou,” Verdi said. “I don’t understand it. You are the Deal Whisperer, the master negotiator. Why did you cave in on that point so quickly? You did not get anything in return for that concession!”
“That’s an excellent question, Verdi,” Tyler said. “From the balcony it must have looked like I gave something away. What I was actually doing was allowing myself to be influenced.”
“What?”
“You see Verdi, in negotiations each party is trying to influence the other party to agree with his or her proposal,” Tyler said. “We both will bolster our views with points, presumably legitimate, that should help the other side make a decision. What we want is an environment where the parties agree on which decision is better for both of them, not just better for one.”
“I get that,” Verdi said. “But even if they are right, shouldn’t you always get something in return for agreeing?”
“No,” Tyler said. “When the other side has the better argument on the issue, the best thing to do is concede the weakness of your own position and accept their point of view. In doing so, you build credibility and trust with the other party. More importantly, you demonstrate that you can be influenced. We cannot be so bound to our positions that we won’t change our mind even if logic dictates we should. That is the behavior of a classic positional negotiator. ‘You can’t make me move off my ridiculous position no matter how illegitimate it is unless you make a concession.’”
“Wow,” Verdi said. “That’s some complex psychology going on there.”
“Actually it’s not,” Tyler said. “It’s a pretty fundamental principle: to build a collaborative negotiation environment, have the confidence to admit when the other party is right. If you want to influence someone, you must demonstrate that you yourself can be influenced.”
“You’re right, Rose,” he said. “When I look at the issue from your perspective, what you have proposed makes a lot more sense and we can make it work. We will agree to your proposal.”
The teams took a short break. Verdi, a young member of Tyler’s team, approached him in the hall.
“Mr. Gitou,” Verdi said. “I don’t understand it. You are the Deal Whisperer, the master negotiator. Why did you cave in on that point so quickly? You did not get anything in return for that concession!”
“That’s an excellent question, Verdi,” Tyler said. “From the balcony it must have looked like I gave something away. What I was actually doing was allowing myself to be influenced.”
“What?”
“You see Verdi, in negotiations each party is trying to influence the other party to agree with his or her proposal,” Tyler said. “We both will bolster our views with points, presumably legitimate, that should help the other side make a decision. What we want is an environment where the parties agree on which decision is better for both of them, not just better for one.”
“I get that,” Verdi said. “But even if they are right, shouldn’t you always get something in return for agreeing?”
“No,” Tyler said. “When the other side has the better argument on the issue, the best thing to do is concede the weakness of your own position and accept their point of view. In doing so, you build credibility and trust with the other party. More importantly, you demonstrate that you can be influenced. We cannot be so bound to our positions that we won’t change our mind even if logic dictates we should. That is the behavior of a classic positional negotiator. ‘You can’t make me move off my ridiculous position no matter how illegitimate it is unless you make a concession.’”
“Wow,” Verdi said. “That’s some complex psychology going on there.”
“Actually it’s not,” Tyler said. “It’s a pretty fundamental principle: to build a collaborative negotiation environment, have the confidence to admit when the other party is right. If you want to influence someone, you must demonstrate that you yourself can be influenced.”
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