I Hate My Client

Verdi burst into Tyler Gitou’s office and blurted, “That man is going to drive me crazy!”

Tyler was taken aback for a moment. “Verdi, you seem quite upset. What’s the problem?”

“The problem is Chuck Verstehen. He just says these things to me because he knows he’ll tick me off. I can’t stand him.”

“What did he say that was so terrible?” Tyler asked.

“He said I have to reduce the price by five percent.” Verdi sat down and tried to catch his breath. “Then he asked to see the staffing plan I have for the project. I swear he wants to manage everything.”

“Is that it?” Tyler asked.

“No, that’s just the beginning. I have been working with this guy for three years and it has been hell. I hate my client.”

Tyler was shocked. “Your client?” he asked. “This is how you feel about your client?”

“Don’t tell me you’ve never had a difficult client before,” Verdi said.

“I’ve started out with many difficult clients Verdi. And I am proud to say that over time I have turned each one into a collaborative client.”

“How?” Verdi’s frustration was obvious. “What is the secret to working with a difficult client?”

“For a Deal Whisperer there is no secret. It is all about managing your behavior and emotion.”

“My behavior?” Verdi said. “But this guy is a jerk.”

“Then why do you do business with him?”

“Because he buys a lot of services from us,” Verdi said.

“So you have a client who spends a lot of money with you, is demanding in what he wants and you call him a jerk? Verdi, you need to leave this account.”

“Leave? I can’t leave. Managing this client is my job.”

“Well, you’re not doing a very good job of it. Let’s focus on what you can change. Start with an easy question. When you go to see a new client, how do you feel?”

Verdi brightened. “Excited. It’s an opportunity to build a relationship and help another business solve their problems and improve their performance.”

“Do you treat a new client differently than you treat Mr. Verstehen?” Tyler asked.

“Oh sure. His company has been a client for five years.”

“What would happen if your competitor got some work with Mr. Verstehen so that he became their new client. Do you think Mr. Verstehen would feel like he is treated better by your competitor than he is treated by you?”

Verdi thought for a moment. “I never thought of that before.”

“Remember, Verdi, if you don’t treat every client like a new client, they’ll soon be an old client. Now get out your pad and let’s develop a strategy for you to turn your emotions and behavior around, which will turn your entire relationship around. Step one: get out of your red car.”

Verdi stopped writing. “My what?”

“Your red car. Get out of your red car and get into your green car,” Tyler said.

“I don’t understand.”

“Then why don’t you stop talking and start listening so I can explain!”

SEE: "I Hate My Client Part 2."
  http://dealwhisperers.blogspot.com/2012/01/i-hate-my-client-part-2.html

Women in Negotiation Part 2

“Mr. Gitou, the last time we spoke you said one of the problems women have in negotiating is they focus too much on the relationship,” said Janice Lumere. “But when I joined the sales group I read some of your Deal Whisperer articles and it seems to me that you focus a great deal on relationship building. Isn’t that inconsistent?”

(See "Women in Negotiation Part 1" at http://dealwhisperers.blogspot.com/2011/10/women-in-negotiation.html)

Tyler Gitou leaned back in his chair and smiled. “That’s an excellent observation,” he said. “The difference is in the balancing.”

“Balancing of what?”

“Here’s an example. Imagine you are trying to close your first deal as a new sales rep for an existing client. It’s a big deal. You get down to the day of signing and the client says, ‘You know Janice, we looked over the pricing and we feel you guys still have room to move. We do a lot of business with your company and we think we’re entitled to a two percent cut.’ What do you say?”

Janice straightened up in her seat. “Well, that’s a tough one. I mean, if I say no to a long-term client, what will that do to…” Janice couldn’t bring herself to finish the sentence.

“The relationship?” Tyler said. “Suppose you say, ‘We really don’t have any room to move. That’s the price.’ Then the client replies, ‘Wow, you’re a lot less friendly than the last rep we had. We were able to work with Mike. I didn’t know the company was sending in a hardliner.’ What do you think of that comment?”

Janice thought for a moment. “Like I did something wrong and maybe I should soften my approach.”

“Why?”

“To preserve the…” Again, Janice was stuck on the last word.

“Relationship,” Tyler said. “How did the comment make you feel?”

“It felt unfair.”

“Unfair how?” Tyler asked.

“Like I was being played.”

“Exactly,” Tyler said. “It was a tactic and what you were feeling was the tension of ‘legitimacy.’ His last-minute request for a price cut lacked legitimacy and triggered your ‘fairness’ antenna. In order to maintain a disciplined and balanced approach in negotiations, each party needs to test the legitimacy of the other party’s requests. When a negotiator lacks legitimacy, he will use tactics to leverage two other elements: relationship and BATNA. Either you’re hurting the relationship by not saying ‘yes’ or if you don’t say ‘yes’ he will go to the competition.”

“So how do I respond to that?”

“Ask him to explain the need for the ask. I would say, ‘My first concern is your perception of our price. We have been working over these numbers for the last three months and I have provided complete transparency into what’s required to do this project well. What has created a perception that we have room to move’?”

“That’s good,” Janice said.

“Keep going. You play the client. What does he say back?”

“He says, ‘Come on, Janice. You guys are always holding something back. I know how this game is played. We’re just looking to get the lowest price possible.”

“The lowest price?” Tyler asked. “Or the best price? Because we can provide a lower price but it will mean putting more risk back into the deal. My goal was to balance your interests around price, risk and quality. We can move those levers around to reduce price if you want to take more risk or reduce scope.”

“Just take it out of your margin,” Janice said. “Do it for the relationship.” She smiled.

“Believe it or not, I am doing this because I am focused on the relationship,” Tyler said. “I want the kind of business relationship that is built on mutual trust to drive mutual success. You have been a great client for many years and you deserve the type of relationship where we provide our best price and then the transparency to show you how we got there. If you want us to quote a price with ‘room to move’ so we can do some positional back and forth, I can do that too. But that adds transactional friction and inefficiency into the negotiations.”

“Wow,” Janice said. “That was like negotiation judo. Now I feel like I’ve hurt the relationship by asking for the price cut!”

“That’s the power of understanding a party’s perceptions and testing legitimacy,” Tyler said. “When a Deal Whisperer feels the tingle of the fairness antenna, the question to ask is ‘Why? Why this? Why now?’ Seek to understand the legitimacy of the other party’s ask in an unconditionally constructive way and you may end up helping them see the unfairness of the ask and the impact on the relationship with that type of behavior.”

Janice stood up. “Thanks, this has been very helpful. Can I come see you again?”

Tyler shook her hand. “Please do. This is to be continued. There are many more nuances and hurdles women have to deal with in negotiation and I’d enjoy exploring those with you.”

Women in Negotiation

“Ty Gitou?”

A young woman stood in the doorway of Tyler’s office. Tyler came out from behind his desk to greet her.

“Yes, hello. I am Tyler Gitou. How can I help you?”

“My name is Janice Lumere. My friend Kevin Delclinchy is in sales with the company. He said you were the Deal Whisperer and you might be able to give me some advice on how to become a better negotiator.”

“I’d be delighted to speak with you,” Tyler said. “Please sit down. What are the issues you are dealing with?”

Janice sat in one of two chairs in front of Tyler’s desk. Tyler sat in the one next to her.

“Well, nothing just yet. I just got a job in the sales group and wondered if you had any advice on how to talk with potential clients. Most of the people I am working with are older and usually they are…”

“Male.” Tyler said. He smiled. “Let me compliment you on two points. First, your ability to recognize the fact that there is a difference between men and women in how they sell and negotiate. As much as we try to convince ourselves that we are all equal, women truly do have more hurdles to overcome when negotiating with men and other women. Second, your desire to address and overcome the problem. For someone so early in her career you are showing great maturity in taking action to resolve issues that might limit your success. Many young professionals believe that when they ask for help it is a sign of weakness. In fact, it is a sign of strength when you leverage others’ skills and knowledge to make an organization more successful.”

“Thank you,” Janice said. “Kevin spoke highly of you and I can already see why. So what are the differences and what can I do to address them?”

“There are many and we can’t cover them all in one conversation. But let me give you a start. First, when I say the word ‘negotiation’ what adjectives pop into your head?”

Janice thought a moment. “Difficult; confrontational; demanding…”

“And why do you have that perception when you think about negotiation?”

“Because I need to win and the other side wants to win and I have to overcome some overly aggressive male in order to succeed.”

“And what if you can’t overcome this challenging man?”

“I guess I have to hold my ground as long as I can and then in the end give in for the relationship.”

Tyler laughed. “That’s perfect. You have articulated a universal perception many young women and men have about negotiation. The difference is in what women and men typically view as the ideal outcome of that ‘competition’. The studies I have read on this topic say that women are challenged by a cultural barrier that causes them to believe that negotiation is confrontational. Because women generally focus more on relationship they often won’t counter an offer or ask for more because it might create a negative perception of them as ‘difficult” or ‘pushy’ thereby hurting the relationship. Their negotiation style then often runs from ‘compete’ to ‘accommodate’. Make a demand to get some movement but stop and concede before it might hurt the relationship.”

“That all resonates with me. I feel like I have been through that scenario. So what do I do about it?”

“Come see me next week and we will discuss two elements a Deal Whisperer uses to build a collaborative sales and negotiation environment: legitimacy and perceptions. If we focus on those two first, you will soon find yourself a more confident salesperson and negotiator.”

(See "Women in Negotiation Part 2.")
 http://dealwhisperers.blogspot.com/2011/11/women-in-negotiation-part-2.html

Transactional Trust Part 2

Tyler Gitou drew three interlocking circles on a sheet of paper. In one he wrote “Credibility” in another he wrote “Reliability” and in the third he wrote “Mutuality”. Where the three circles overlapped in the center he wrote “Trust.”

“You may recall from an earlier conversation that a Deal Whisperer builds a trusting relationship on these three elements: Credibility, Reliability and Mutuality.“ (See “How to Build a Trust Action Plan” http://dealwhisperers.blogspot.com/2011/02/how-to-build-trust-action-plan.html.) “The key to a successful, collaborative business relationship is a strong bond of Trust which you have built over time.”

“That’s great,” Verdi said. “But I don’t have time. I am currently in negotiations and I need Trust now.”

“OK,” Tyler said. “The model is scalable.”

“What do you mean?”

“I mean it is not absolute. You don’t go from zero Trust to full Trust. You can build a little bit of Trust in a short period of time. For example: Why does the client keep asking you to lower the price?”

“Because he thinks I have ‘room to move’,” Verdi said.

“Do you?”

“No.”

“Have you told him that?” Tyler asked.

“Yes, several times.”

“So let me ask you again: the client keeps asking for price concessions and you keep saying you don’t have room to move. Why does the client keep asking?”

Verdi thought for a moment. “Maybe he thinks I’m not telling the truth?”

“Exactly!” Tyler said. “He doesn’t believe you when you say you don’t have room to move! You lack Credibility and therefore you have no Trust. And is there any reason why he should believe you? Haven’t you said in the past ‘I can’t do any better’ and then you lowered the price when he threatened to walk away?”

“I guess I did.”

“So you have trained the client that you are not Credible; that he is in a game where he needs to keep asking until he believes you are done. You need to move that point of belief further up in the discussion so he stops asking.”

“How do I do that?”

“Transparency,” Tyler said. “Show, don’t tell. If your back is up against the wall, show the client the wall. Open up the ‘black box’ of your proposal and share with him the cost elements and effort involved in delivering the project successfully. If he can see your problem, he will believe you when you say, ‘I have a problem meeting that request.’ In fact, he may have a potential solution. You may have put something into the proposal that he doesn’t need. Maybe you misunderstood a business requirement or maybe he didn’t realize how much cost a certain request would drive. Invite the client into your deal shape. If the client can help solve the problem, he becomes more engaged because he has ownership in the solution. He helped build it.”

“Is that all I need to build Trust?”

“No,” Tyler said. “It’s what you need to build Credibility, one of the three elements of Trust. Presumably you have Reliability. He would not still be talking to you if he did not think you capable of doing the work. But by having Credibility and Reliability, you can also communicate Mutuality. When you have the discussion around transparency, make sure you communicate to the client that you are trying to find the option that will make him successful, as well as yourself. As long as he can see the elements of the deal, he will start to feel that you really do care as much about his interests as your own. Remember that self-interest is the silver bullet of Trust: it will kill Trust in an instant. But you can start building some Mutuality, even in a single conversation, and that’s what you need to generate Transactional Trust to negotiate a good deal for both of you right now.”

Transactional Trust

“Five, six, seven…” Verdi was counting as he looked over a list. Tyler Gitou stopped in the hall as he passed Verdi’s office.

“What are you doing, Verdi?” Tyler asked.

“I’m counting my concessions,” Verdi said. “I want to make sure I haven’t given the other party more than he has given me in this negotiation.”

Tyler laughed. “You’re kidding, right?”

Verdi appeared annoyed. “What else am I supposed to do? This guy is a classic positional negotiator. The only way I can get him to move is if I move. But I don’t want to move too much and find out in the end I lost by giving more than I got.”

“And how is your deal coming along? Are you happy with the outcomes from all these moves and concessions?” Tyler asked.

“Gosh, I have no idea. I’ve been so focused on making sure I don’t give too much that I don’t even know what we’re delivering anymore.”

“That’s what I was afraid of, Verdi. The problem with positional negotiators is they get so focused on tactics and ‘winning’ that they don’t realize until the contract is signed what a lousy deal they negotiated. Issues are handled in isolation rather than taking an integrated approach.”

“That’s what’s happened to us,” Verdi said. “He takes an extreme position, I take an extreme position and we focus on how we’re going to get to the middle.”

“Is the middle the answer?” Tyler asked.

“Not necessarily. But he’s a veteran negotiator and he keeps telling me we have to compromise and we’ll both walk away equally dissatisfied. That’s how deals get done.”

“Simply put, Verdi, he’s wrong. He may be a veteran negotiator, but that doesn’t mean he’s a good one. In fact, he sounds like he has no idea what he is doing.”

Verdi looked dejected. “Have you ever dealt with someone like this?”

“Yes,” Tyler said. “Hundreds of times. Dealing with positional negotiators and producing a mutually beneficial outcome is what being a Deal Whisperer is all about.”

Verdi crumpled up his list. “So how does the Deal Whisperer handle this?”

Tyler sat down. “Go back to the basics. What have I told you is the basis for every decision in a negotiation?”

“Trust,” Verdi said. “You told me that people make decisions when they trust they are making the right decision.”

Tyler waved his hand. “No no, I said they make decisions when they trust they are not making the wrong decision.”

“What’s the difference?” Verdi asked.

“All the difference in the world,” Tyler said. “Most business people fear criticism of their decisions more than anything else. Making the wrong decision can end a career. So the process most people follow when making a decision is to look for signs that it won’t be the wrong decision. Even a positional negotiator won’t make a decision until they trust it is not the wrong decision.”

“So how do I build a trusting relationship with a positional negotiator I just met to try and close a good deal.”

“You don’t need a trusting relationship,” Tyler said. “You need transactional trust.”

“Transactional trust? OK, you’re going to have to walk me through this one.”

“I’d be delighted,” Tyler said. “Give me that pad so I can draw you some pictures.”

SEE: "Transactional Trust Part 2."
 http://dealwhisperers.blogspot.com/2011/10/transactional-trust-part-2.html

Negotiation in Crisis, Part 2

“OK,” Verdi said. “I understand. One of the big mistakes around the negotiation our government just had over the national debt was the failure to understand who the parties in the negotiation were.”

“That’s correct,” Tyler Gitou said as he laid his menu on the table. “The very first thing a Deal Whisperer does when working on a deal is map out all of the parties and make sure he or she understands the interests of each of those parties.”


Verdi scowled. “Each of the parties? What do you mean?”


“Let’s go down the list. President Obama: what were his interests?”


Verdi thought for a moment. “I think it was to raise the debt ceiling.”


“That’s not an interest,” Tyler said. “That is an option to meet his interest. Think again.”


“To not cut too much from spending on social programs?”


“Nope. Again, an option to meet his interest. Look at it another way: what was going to happen in the event of no deal? What was President Obama and John Boehner’s BATNA?” Tyler asked.


“Not a very good one,” Verdi said. “Basically a meltdown of the economy!”


“Correct. So it would be fair to say that President Obama’s and John Boehner’s interest was to prevent a financial meltdown. Why?”


“Why? Well, because we’d be in ruin!” Verdi said.


“Maybe. But what would happen to them, as individuals.”


“They’d get thrown out of office in the next election.”


“Exactly,” Tyler said. “Any time you are dealing with politicians you must consider that their primary interest might be self-preservation: what do I need to do to make sure I get elected again? That means producing an outcome that both meets the interest of avoiding a financial meltdown and not damaging their political record for re-election. Each party also has an interest to try and end the negotiation in a way that the other party is hurt to give them an advantage in the next election.”


“Wow,” Verdi said. “There’s a lot going on there! Save the country, save yourself and kill the other guy all at the same time. It’s a shame that all of those interests are treated equally by the parties rather than them getting together and saying, ‘the financial health of the nation trumps any personal interests. Let’s work together as joint problem solvers.’”


“That’s because they are not the only parties to the negotiation.” Tyler said. “President Obama and John Boehner are members of political parties. The members of those parties have interests. The Tea Party has interests. Foreign governments, such as China, which hold a lot of U.S. debt, also have interests. Financial institutions worldwide have interests and finally, the media has an interest: get a good story out of this. All of those parties are influencing the tone and substance of the discussions between Obama and Boehner.”


“So you’re saying it was inevitable that the outcome would end poorly for everyone?”


“Not at all. I’m saying it ended poorly because no one did a strategic analysis of the situation. The Democrats and Republicans viewed it as a fight to have in the media instead of an issue of national interest that required masterful diplomacy and negotiation skills.”


“So what’s the answer, Mr. Deal Whisperer?”


“The same as in any other deal,” Tyler said. “First, establish a shared goal, an outcome, that both parties agree on.”


“Get the Democrats and Republicans to agree on a common goal? That’s asking a lot, isn’t it?”


“No, you can always find an agreed-to outcome at some level. But one party has to have the communication skills and emotional discipline to find that outcome with the other party. Unfortunately, in this negotiation, it was every man for himself. In fact, if not for the deadline and the terrible BATNA if they did not agree, they probably would still be fighting over it today.”

Negotiation in Crisis

Verdi had never looked worse.

Tyler Gitou found him cowering in a corner booth of a restaurant hanging onto a cocktail. His hands were shaking.

“Verdi,” Tyler said. “I haven’t seen you in weeks! Where have you been?”

“Washington,” Verdi whispered. “Please, don’t make me live through it again.”

“Oh dear,” Tyler said as he slid into the booth. “You tried to help with the debt crisis didn’t you?”

“Don’t say that word!” Verdi whimpered.

“Which word? Debt? Crisis?”

“No,” Verdi trembled. “’Help’. There was no way to help that group.”

“Verdi you should have called me,” Tyler said, shaking his head. “Any Deal Whisperer could see that was a Hydra; too many heads for one person to manage. You may recall that not even Hercules could kill the Hydra alone. He called in a backup!”

“I see that now,” Verdi said. “Between all the Democrats and Republicans it was hard to keep track of all the parties.”

“Ah, there’s the first challenge,” Tyler said. “That was not a deal between the Democrats and Republicans. They were just a part of the negotiation.”

“What do you mean?” Verdi said. “They were the decision makers. They cut the deal!”

“Oh Verdi, Verdi,” Tyler sighed. “You fell into a classic trap by assuming the only parties in the negotiation were the ones at the table. Let’s go back to our fundamentals and see if we can figure out what went wrong using the seven elements of a negotiation. First, who were the parties?” Tyler pulled a pad out of his bag.

Verdi tried to focus. Then he shrugged. “Like I said, the Democrats and the Republicans.”

“That’s it? Come on, think deeply. Who else had a stake in the outcome? Remember the relevant parties are a combination of who must say ‘yes’; who can say ‘no’; and who is impacted by the outcome. Those are three different groups of people. Let’s focus on the outcome. Who else was influencing the negotiations because of the impact it would have on them?”

“Influencing? Well, certainly the media,” Verdi said.

“Now you’re thinking. Who else?”

“The American public. Financial institutions. China. In fact, just about every other country in the world.”

“Exactly, Tyler said. “This list goes on and on. The reason you create this list is because, at the end of the day, negotiation is what?”

“Negotiation is a label for influence and decision making.”

“Good,” Tyler said. “And this negotiation over the debt ceiling and what spending to cut was all about influence and decision making. There was no easy answer for this so the parties were all going to have to collaborate and brainstorm the best potential outcome. They didn’t do that. Instead, they took firm positions, grandstanded in front of the cameras and finally made a poor compromise in the face of a mutually terrible BATNA.”

Verdi’s eyes lit up. “Tyler,” he said. “Do you know the answer to the debt crisis?”

“No,” Tyler said. “I know the process by which the parties should have negotiated to reach a mutually agreeable outcome instead of a solution that nobody liked. Let’s get some menus and order dinner and we can walk through the fundamentals that a Deal Whisperer would have used. These will be a good refresher for you because they apply to every negotiation you will have.”

I'm Not Negotiating, I'm Selling

Tyler Gitou was having lunch with Kevin Del Clinchy, a salesman for a large software company.

“How is your deal with Great Works going so far?” Tyler asked. “Need any help with the negotiation strategy?”

Kevin shook his head. “No, we’re not there yet. We’re still in sales mode.”

Tyler laughed. “Wait, you’re engaged in the sales process but you’re not negotiating? How is that possible?”

Kevin shrugged. “Easy. I’m still selling right now, not negotiating. Once they say they want to go forward with the deal, then we’ll start negotiating.”

“I see,” Tyler said. “And how will they decide if they want to go forward?”

“Well, we have to show we can design the software to the specs they requested on their time table at a price that works for them,” Kevin said.

“So they say, ‘We want an enterprise license and all modules running six months from contract signing for no more than $1 million’ and you say ‘yes’ and you’re done?”

Kevin set down his fork. “No, of course not. We can’t just say ‘yes’ to everything they’ve asked for. We have to see what modules, how many sites can go live in six months and then set a price.”

Tyler smiled. “And then they say, ‘OK’?”

Kevin glared at Tyler. “Ty, you know how this works. We go back and forth on what we can do versus what the competitor can do and then they choose which software company they want. That’s selling.”

“Sounds to me like you’re negotiating,” Tyler said.

“OK, technically you could call it negotiating. But it’s really selling. I’m a sales guy, not a negotiator.”

“Not quite. You’re a negotiator who specializes in the sales process. Negotiation is just a label for many different processes and activities such as sales, diplomacy, collective bargaining or dispute resolution. Any activity that involves trying to influence a decision another person is going to make is a negotiation.”

“I think you’re taking this too far,” Kevin said. “Sales people are in sales. Our job is to get the customer to choose us instead of the competition because we have a better product or a cheaper price.”

“You mean that deciding to choose you will better meet their interests than choosing another product?”

“Exactly,” Kevin said.

“How do you get them to decide?”

“Share the data with them and see if we can… influence them to choose us.” Kevin smiled. “OK, I concede the point. I get it. Any process which requires one party to try and shape the other party’s decision making is a negotiation.”

“That’s right,” Tyler said. “Interestingly enough, the root of the word ‘negotiate’ is the Latin word for ‘business.’ The Romans knew that conducting business is just one big negotiation.”

The waitress laid the check for lunch on the table.

“So can I help you with the negotiation strategy?” Tyler asked.

Kevin picked up the check. “I hope you will. And I will pay for lunch as a small price for a valuable lesson about sales.”

“Great,” Tyler said. “That may be the most successful negotiation I have today!”

Who Is That?

“So you mentioned that a new executive unexpectedly joined the other party’s negotiation team,” Tyler Gitou said to Verdi. “How did that happen?”

Verdi shrugged. “What do you mean how did it happen? It was the corporate controller. He showed up! I can’t stop the other side from bringing new people into the room, can I?”

Tyler smiled. “No, you can’t stop that behavior. But there is no excuse for it being a surprise.”

Verdi defiantly folded his arms across his chest. “But the other party’s team lead, Marissa, didn’t tell me someone new was coming.”

“Exactly,” Tyler said. “Why didn’t she tell you?”

Verdi thought for a moment. “I don’t know,” he said. “I guess it would have been nice if she had given me a warning.”

“It would indeed. The issue here is that you did not have a good enough relationship with Marissa for her to call and warn you,” Tyler said. “If you don’t have a strong relationship with the other party, you need to be prepared for surprises because chances are they will start using tactics and tricks at some point. Ideally, you would have established a foundation of trust to build a collaborative way of working. That way when the controller decided to come to the meeting, Marissa would contact you to coach you on how to work with him in the meeting.”

“But why would she do that?” Verdi asked. “Bringing in a new party is a great way to create a new set of demands.”

“It is, but it also slows the process, impacts trust and potentially lacks legitimacy.”

“I can see how it would hurt the process and trust,” Verdi said. “But why does it lack legitimacy?”

“Because you have been working with Marissa all this time shaping and balancing the deal,” Tyler said. “Suddenly there are new demands that affect that balance. What is the basis for those demands? If you gave them a deal that you believe met their interests, what are the new interests that are driving these requests? Some may be legitimate and you can discuss options to meet them. Others might be someone trying to get your necktie.” (see “Don’t Give Away Your Necktie!” http://dealwhisperers.blogspot.com/2010/10/dont-give-away-your-necktie.html)

“I see your point,” Verdi said. “If she is committed to a collaborative way of working to drive the greatest value out of the deal for both of us, she will share with me any coming issues that might affect that outcome.”

“Exactly,” Tyler said. “A Deal Whisperer always focuses on building trust and a strong working relationship with the other side. That way both parties are committed to a shared outcome and will work with and coach one another if anything arises that might alter that outcome.”

Stop It!

“I can’t believe what just happened!” Verdi sputtered, red-faced. “We were meeting with the client to close out some of these tough issues. They brought in their corporate controller, who started negotiating for them.”

“That’s interesting but not unusual,” said Tyler Gitou. “Parties will often introduce new players when their interests are impacted by the deal.”

“Wait, that wasn’t the problem. This controller, Greg, starts talking ultimatums: ‘If you don’t agree now then we’re going walk away.’ That sort of stuff. I had my boss in the meeting for the first time as well. Before I know it, he’s making concessions left and right.”

“Oh boy,” Tyler shook his head. “I think I know the answer, but tell me this: was your boss in the prep sessions you had before this meeting today?”

“No!” Verdi said. “He showed up this morning and said he had come to help us get the deal ‘over the goal line’. We said that’s fine, but we have a strategy we’ve been working so please observe and don’t respond. What does he do? Responds and gives everything away! Now I have to deliver this work with one hand tied behind my back!”

“That’s too bad, Verdi. I always tell my teams, in negotiation and sports, ‘if you don’t practice you can’t play.’ We don’t want to bring people into the meetings who have not been part of our preparation for the negotiation. They don’t know the playing field.”

“So what should I have done?” Verdi asked.

“Stop the meeting,” Tyler replied. “Anytime something happens that takes you away from your game plan, call for a timeout.”

Verdi shrugged. “Won’t that seem kind of silly? We were just 45 minutes into the meeting. How do I ask for a break?”

“Make it very clear that you need a moment to talk to your team,” Tyler said. “You should give a legitimate reason but you don’t need to reveal exactly what the problem is. In your case, you could have said, ‘I’m sorry I just heard something in this exchange that I had not thought through. Can I just talk to my team outside for five minutes to get some clarification?’ Then you get outside the room and talk to your boss about what is happening, namely, he’s making undisciplined concessions because of pressure from a new executive.”

“I guess I never thought about stopping a meeting so soon after it started.”

“For a Deal Whisperer, the goal is to manage the process and the substance of the negotiation as best as possible to produce a mutually successful outcome. There are no rules that say when you can or can’t ask for a sidebar discussion with your team. If you need to clarify something, stop the meeting and clarify. Better to make sure your own team is communicating well than to stay glued to a chair and watch the deal go down the drain. When the negotiations start to feel like a runaway train, stop it! Reset. Then start again.”

“I will remember that,” Verdi said.

“When you have a moment I also want to talk to you about this new executive in the negotiation,” Tyler said. “Frankly, you should have stopped the meeting as soon as you found out you had an unexpected attendee. Let’s discuss that tomorrow.”

How to Swing a BATNA

“Now that I understand how to think about my BATNA and the client’s BATNA, what do I do with the analysis?” Verdi asked Tyler Gitou.

“Be careful with it!” Tyler said with a laugh. “Bad things can happen when you swing a BATNA in a negotiation room! Seriously, you do need to be very strategic about how you communicate a BATNA. Let’s review the deal you just closed.”

“Well,” Verdi said, “We were chosen to be the supplier of these custom components for the client’s manufacturing process. Our price was $1 million. The client demanded a 10% discount at the last minute or else they’d go to another supplier.”

“Stop there,” Tyler said. “What was the client doing?”

“The client was telling me its BATNA: do what I ask or I will do the deal with someone else.”

“Correct. So that’s when you came to me, and we analyzed the strength of the client’s BATNA, asking how real was the risk of them going to someone else.” (http://dealwhisperers.blogspot.com/2011/03/truly-best-part-ii)

“Yes,” Verdi said, “and we concluded that the client’s BATNA was weak. We were the only company with components that met their quality requirements.”

“And how was your BATNA? What if you said, ‘no deal’?”

Verdi shrugged. “Not great. I would just not get the deal. I don’t have a ‘replacement client’ to sell to.”

“So you had a situation where your BATNA was weak, but so was the client’s. That’s not a bad place to be. The key is to develop a communication strategy based around making the client aware of the weakness of its own BATNA. Then offer options that might meet the interest behind the request for the lower price. Why did the client negotiator suddenly need a lower price?”

“I asked him,” Verdi said. “And he said because the competitor’s price is lower. That is true, but it’s lower quality. I knew they were trying to cut costs and his bonus is based on how much he can reduce the prices charged by their suppliers.”

“Good to know,” Tyler said. “He has a personal interest to meet but no legitimacy on a price reduction. But if you can meet his interest in a way that does not reduce the value of the deal for you, you will go a long way toward building on the relationship. You could beat him over the head with his bad BATNA and say, ‘Hey I don’t have to give you a discount! Your back is against the wall. You have no one else to buy from and if this deal doesn’t close in two weeks you miss your manufacturing cycle. So shutup and sign the deal.’ How would that response work?”

Verdi laughed. “Not very well. He probably would get mad, throw me out, have his executives call my manager and pressure them to cut the price because of my bad behavior.”

“Exactly. Overplaying a BATNA or shoving it in the face of the other party can generate an emotional response where they will, in essence, kill the deal to spite you. You often don’t want to let the other side know that you’re aware that they have a weak BATNA. They know they have to do the deal with you. So offer them options that are balanced exchanges of value and demonstrate collaboration toward finding something they will say ‘yes’ to. Doing that helps build them a golden bridge so they can accept the deal.”

“A ‘golden bridge’?” Verdi said. “What’s that?”

“That,” Tyler said closing his notebook, “is the topic of our next conversation.”

Want Leverage? Pick Up a BATNA

“I am very intrigued by this concept of BATNA you raised the other day,” Verdi said to Tyler Gitou. “Can you explain to me how I would use it in a negotiation?”

“Before we go there let’s make sure we understand what a BATNA is,” Tyler said. “Let me explain it to you in a real life example: You can’t walk to work. It’s too far. So you have an interest in getting some form of transportation. You decide you want to look at cars. You go to the Ford dealership and negotiate to buy a new car. You can’t reach agreement. What do you do?”

“What do you mean?” Verdi asked.

“You are about to walk away from the negotiation table with the Ford salesman. What is your alternative to meet your interest? Where will you go now?

“Well,” Verdi said, “I could go to another Ford dealership.”

“Good. That is one alternative. What else? Is Ford the only company that makes cars?”

Verdi started to get it. “Oh, no. I could go to a Chevy dealer or some other car dealer.”

“What else? Does the car have to be new to meet your interest? Does it have to be a car? Could it be a scooter? Could it be a bicycle? Could it be the bus? Or carpool? Or could you get a job close enough to walk?”

“I see,” Verdi said. “I need to list every possible alternative and then measure it against my interests. So a bicycle would not work because I have to get on a highway. There is a bus but it takes longer, and so on.”

“Exactly. And when you look at all of those alternatives, one will emerge as the Best Alternative to a Negotiated Agreement or BATNA. Having a strong BATNA is what gives a negotiator a sense of confidence at the table. People use the terms “power” or “leverage” but what they really mean is the ability to walk away. The party who cares less about the deal on the table has the stronger position because the deal on the table has to get better and better to make him care more than he cares about his BATNA.”

“That makes good sense except what do I do if I don’t have a BATNA?”

Tyler laughed. “You always have a BATNA. Do nothing! Walk away from the deal. Some deals are so bad that you are better off not signing them because of the harm they might cause your company’s finances or reputation. What if a client pushes you to sign a deal that doesn’t make money or on which you won’t be able to deliver the product? Isn’t doing nothing better than a business loss or a breach of contract lawsuit? So your BATNA may not be great, but there is a point when doing nothing is better than doing harm.”

“I understand. So back to my question: how and when do I use my BATNA in a negotiation?"

“Now that we understand BATNA, let's talk about that after lunch."

Truly the Best Part II

Verdi was having a cup of coffee with Tyler Gitou. “You may recall we had a meeting with my client where we proposed a best and final price for the components they wanted?” Verdi asked.

Tyler nodded. “I do. You had offered the components for $1 million and the client said you had to reduce the price by 10 percent or they would go to another supplier.”

http://dealwhisperers.blogspot.com/2010/12/truly-best.html

“That’s right,” Verdi said. “The only way we could reduce the price by 10 percent was to use lower-quality parts. So we told the client that and their negotiation lead said, ‘Well, you have to make it work.’ So what do I do now?”

“That’s the response I expected, Verdi. What the client is asking you to do is bid against yourself. You offered two options: quality for $1 million or less quality for $900,000 and the client has summarily rejected both and said, ‘come back with another answer.’ What do you think they are expecting to hear?”

Verdi thought for a moment. “I know this guy pretty well and have played his game on other deals. He is looking for me to say same quality, split the difference at $950,000.”

“Why do you think he’ll say that?”

“Because that’s how we’ve done business before.” Verdi said.

“So you’ve trained him that the way you negotiate is to say ‘no no no … yes’. And now you can’t afford to say ‘yes’ this time because you can’t deliver the components at the quality they want for $950,000.”

“I guess that’s right.”

“Let’s talk about their interests for a moment. Who is focused on quality? Is it the lead negotiator or someone in the business who actually needs the components?”

“It’s the vice president of manufacturing.”

“And what happens if you deliver components of a lesser quality?”

Verdi thought for a moment. “Well, his concern is that the failure rate for the product will go up. They pride themselves on the quality of what they sell. So if we provide lower quality parts in these machine components, he risks his company’s reputation because the product fails more often. That will have a big impact on his whole product line.”

“Do you think the lead negotiator knows that?” Tyler asked.

“Absolutely. He is the buyer for all the components for this line of products.”

“OK,” Tyler said. “So what’s the client’s BATNA?”

“Their what?”

“Their best alternative to a negotiated agreement. It’s a term that means where the other party will go when they walk away from you. If you can’t reach agreement on the price for the components, what alternative does the client have for filling the need for these components?”

“Gosh,” Verdi said. “They don’t have one. Our components are the only ones that meet this spec. They have to buy these from us.”

“So they are up against a wall. Why is the lead negotiator asking for the discount then?”

Verdi looked sheepish. “Because in the past I’ve always said ‘yes” after he asks enough times.”

“So you could go in and say, ‘No discount! Pay me $1 million’. But that would hurt your relationship. So you need a couple of options. First, you need to find a way to say you have no room to move on the $1 million. But it sounds like he’s put himself out on a limb by demanding the cut, so you need to find a ‘golden bridge’ for him to retreat over; some counterproposal he can say ‘yes’ to so he can save face.”

“Well,” Verdi said, “if he increases the order I can give him a volume discount of 3 percent.”

“Good!” Tyler said. “What else?”

“If we change the production cycle by two weeks I can produce the components more efficiently. That may drive another 2 percent.”

“Now you’re thinking. So what you need to do now is put together your most creative counterproposal to offer as another option for the $1 million deal. Your goal is to demonstrate your efforts to try and meet his interests of high quality at the best price you can offer. Providing transparency into the levers he can pull to change the price and provide discounts will help him understand you have done all you can and give him options for a better deal. This way you can build trust by showing your commitment to make him successful and begin to retrain the client to your new collaborative negotiation style. This is the end of ‘no no no … yes’!”

How to Build a "Trust Action Plan"

“Last time we met I agreed to work with you on a Trust Action Plan,” Tyler Gitou said to Verdi. “Sit down and let’s talk.”

Tyler took out a pad of paper and drew on the page three circles that overlapped in the center. He labeled one “RELIABILITY”, the next “CREDIBILITY” and the third “MUTUALITY”. In the area where the three circles intersected he wrote “TRUST”.

“Unlike any other element in a negotiation, trust is something you can’t ‘create’. You have to grow trust, slowly, block by block, to create a firm foundation for your relationship. I like to think of trust as ‘the long pole in the tent’ of a relationship. The long pole must be strong and true to raise everything else up as high as possible. The more elevated your relationship is, the higher all of the other elements of your negotiation will rise.

“So before you can undertake your Trust Action Plan, you have to understand the components that make up trust because those are what you will have to improve. There are three large components to focus on when putting together your action plan: Reliability, Credibility and Mutuality.

“Reliability is a measure of how much the other party trusts you CAN do what you say you can do. It’s a competence measure. You build Reliability by maintaining the quality of what you do in everything you do.

“Credibility measures how much the other party trusts you WILL do what you promise. This is a believability measure. You build Credibility by keeping your commitments. Don’t say, ‘I’ll call you back later.’ Say, ‘I’ll call you with an answer at 2 pm’ and then do it! Start with small commitments and build a discipline into your relationship with the other party and get your team focused on it as well.

“Mutuality measures how much the other party trusts that you care about THEIR interests as well as your own. Mutuality is a complex pillar in the trust foundation because it involves: communication (how and what you talk about), affiliation (building a shared sense of commonality) and emotion (whether the parties will ‘open up’ as to their underlying interests). You build Mutuality by focusing on what outcome is best for the other party that also works well for you. Your engagements cannot have any suggestion of self-interest or else you will destroy the entire trust plan. A party may trust you are reliable and credible; but if your goals are self-serving they will not engage with you.

“Sit down with your team and put these three words on the board and discuss how you behave today with the other party. Tell stories about your interactions with the other party where Reliability, Credibility and Mutuality have played a part. What actions need to be taken to improve the quality of these elements? How does the other party view you and the team with regard to them? Who are the people in the other party’s organization we need to focus on? Who has the most influence and authority such that improving their perception is critical to the plan’s success? Who on our team should work with them? If the situation is really bad, maybe have an open discussion about trust with the other party and what changes we are making to earn the other party’s trust. This is not a plan you will execute in a week. You’re a Deal Whisperer, not a shouter! This is something that is going to take time: months, maybe a year, before you start to see the value it brings to your relationship. But along the journey, you will see and feel the improvements as working together becomes more collaborative.”

But Do They Trust You?

Tyler Gitou stood at the front of the conference room pointing to a list of the client’s executives.

“Does this list accurately reflect all of the people within the client that you work with daily?” he asked.

Verdi and Virginia, the two executives sitting at the conference table, nodded.

“Yes, and most of the time we are working with Carol, the chief procurement officer,” said Verdi. “She negotiates most of the deals for the client. We have tried to be more collaborative and less positional with her, but so far it has not worked.”

“How good is your relationship with Carol?” Tyler asked.

Virginia answered first. “It’s very good. We do a lot of work for their company and have been a materials supplier for about 10 years,” she said. “Carol always calls me when there is a bid open for more work.”

“That’s good,” Tyler said. “But the fact that you have had a lot of business transactions with a client does not define the relationship. It simply means they have found your services satisfactory. Separate the transactions from the relationship. How would you describe the relationship?”

“Very positive,” said Verdi. “We talk a lot about our families and how things are going. I feel we’re on the same page with her.”

“Being able to have a friendly conversation is always a good thing,” Tyler said. “But I can have those types of conversations with the guy at the coffee shop. Let me put it a different way: do you trust her?”

“Trust?” Virginia asked. “Well, I don’t know if I’d use that strong a word. She has integrity but she has to look out for her company’s interests first.”

“Fair enough.” Tyler said. “Does she trust you?”

Virginia and Verdi paused. “I think she does…” Verdi started.

“What have you done to earn her trust?” Tyler asked.

Another pause. “What do you mean?” Virginia asked.

“A Deal Whisperer builds a collaborative relationship with another party by first building a foundation of trust.” Tyler said. “Collaboration requires the parties to open up and provide transparency into their businesses so the other party can see what options might improve the value of the deal. Without trust, the parties will never get to the level of candid and open discussion required to maximize the value of a deal.”

“So how do we build trust?” Verdi asked.

“Develop a trust action plan,” Tyler said. “Bring your team together and coach them on behavior that focuses on mutual success, not just success for you. When you make commitments, keep them. When you make mistakes, acknowledge them. Build a track record that demonstrates you are striving to be a trusted business partner, not just another supplier. The higher the level of trust you have with those with whom you negotiate, the higher the level of collaboration and return you will both get from the deal.”

It's Not Fair!

Verdi’s face was bright red as he walked into Tyler Gitou’s office.

Tyler suppressed a smile and calmly said, “You look a little upset.”

“Ahhh,” Verdi exhaled loudly. “I am so frustrated by the other party’s demands! I don’t know how to respond.”

“Demands?” Tyler said. “Sounds like you’re in a very positional negotiation environment. What’s going on?”

“Well, we have worked for the last three weeks on the specs for some materials the client needs. They are a high-quality manufacturer of consumer goods and they take great care in choosing suppliers.”

“That's a good business practice,” Tyler said.

“They are good business people and have been very successful. But now that we are close to signing the deal, they have suddenly raised issues around delivery. They are requiring that for every day we are late on delivery we pay a penalty of 25% of the value of the purchase order. That means a one-day delay could wipe out all the profits for the deal. And the challenge is the client controls some parts of the supply chain so we can’t manage all the risk. The delay may not be our fault but we pay the penalty! It feels like what they’re asking for is not… fair!”

“That’s the sign of a legitimacy problem,” Tyler said. “When your instincts say, ‘something in what they’ve asked for is not fair’ it means you are struggling to understand what makes the request legitimate.”

“What do you mean by ‘legitimate’?” Verdi asked.

“Legitimate as in where else has this been done before? Who else has agreed to this term?” Tyler said. “Is this an industry practice? Have we done it with this client on other deals? Are we getting something of equal value in exchange? Ask the client to help you understand the legitimacy of the request. Try something like, ‘I understand your interest in making sure we deliver on time. But I am struggling with a model that has us bearing so much of the risk. Our practice, and what I’ve seen in the industry, is to accept risk where we have control.’”

Verdi laughed. “I was thinking of something like, ‘Are you guys nuts?’. Yours is definitely a better response!”

“A Deal Whisperer knows that the other party is always entitled to ask for anything. The challenge is in saying ‘no’ in a way that maintains a constructive atmosphere and builds collaboration. Just as you need to first understand why they believe this is legitimate, you then need to share your point of view as to why it’s not. Don’t be afraid to explain how unbalanced risk will hurt your business and the outcome of the deal. To maximize the potential value of a deal, both parties should understand what the path to mutual success looks like and be ready to help the other down that path.”

Waiting for "No"

“We had our meeting with the client,” Verdi said to Tyler Gitou. “As you suggested, I provided him the two options.”

“Let me make sure I understand the situation,” said Tyler. “You offered to deliver the equipment for $1 million with a certain level of quality. The client then asked for a $100,000 reduction in price or else he would go to your competitor.”

Verdi nodded. “That’s right. We spoke and you suggested I offer him two options: either paying $1 million for the equipment with the higher quality components, or paying $900,000 for lower quality components.”

“Good,” said Tyler. “Now let’s think about how he might respond.”

“He will either accept one of the two options,” said Verdi, “or he may come back and say he wants both higher quality components and a lower price. If that happens, what do I do? We can’t provide the better quality for the lower price. It’s a bad deal for us. I can’t agree to it.”

"What will he do if you can’t reach agreement?” Tyler asked. “What’s his BATNA?”

“His what?”

“His best alternative to a negotiated agreement, or BATNA. What will he do if he can’t reach a deal with you and he walks away? Will he do a deal with someone else? Not do a deal at all? We need to think of all of his potential alternatives and decide which alternative is best for him. That’s his BATNA.”

“He could delay doing a deal,” Verdi said. “Or he could go to my competitor for the lesser price.”

“Is he likely to do either of those things?” Tyler asked. “Is your competitor’s offering as good as yours? Or will his old equipment provide the quality he needs?”

Verdi thought for a moment. “No and no,” he said. “The competitor’s product is not even close to ours in terms of quality and reliability. And he has to do a deal to upgrade the equipment because he has regulatory compliance issues to address.”

“What I am hearing, then, is that your client really has no alternative which will better meet his interests than your product, and that the deal you have put on the table is your best and final offer. Is that correct?”

Verdi nodded. “That’s sounds right,” Verdi said. “So what do I say if he requests the same quality at the lower price?”

“Verdi, the answer is right there in front of you!” Tyler laughed. “You’re just afraid to say it.”

Verdi swallowed hard. “I say, ‘no’.”

“Exactly,” Tyler said. “You have to say ‘no’ because you just told me you won’t say ‘yes’! But you’re afraid to say ‘no’ because you perceive that is the end of the deal. It’s not. A Deal Whisperer knows that ‘no’ is often the beginning of the deal. What you don’t see is that your client is waiting for you to say ‘no’. Like any good negotiator, he is going to keep asking you for changes until you say ‘no’. Why shouldn’t he keep asking as long as there is a chance you might say ‘yes’?”

“You’re right, of course. I was afraid of what he would do if I said ‘no’. Analyzing his BATNA with you makes me less concerned. But how do I actually say ‘no’?”

Tyler smiled. “Explain the situation. This is your best deal. You can reduce the price if you reduce the quality, otherwise your hands are tied. Let him know this is it. You don’t have to say ‘no’ so much as you need to let him know these are the final options.”

Verdi stood up. “OK, I’ll give him a call. Let’s hope the next time we meet it’s to say the deal is done!”

“I’m confident it will be,” Tyler said.