She's So Emotional!

Peter Pompel stood up and extended a hand to Tyler Gitou.

“Mr. Gitou,” Peter said. “Thanks for coming to visit with us. I hear you are the Deal Whisperer. I hope you can whisper some calm to this deal.”

Tyler shook Peter’s hand and sat down. “It’s my pleasure, Peter. I understand you are having a dispute with the client’s Chief Operating Officer.”

Peter sighed and shook his head. “Every day,” he said. “We have been trying to get this new finance and accounting system up and running and frankly it’s been a struggle.”

“This is something your company does all the time,” Tyler said. “What’s the problem here?”

Peter shrugged. “It’s really our fault. We put the wrong team on the ground and they did not manage the project well. The client had a lot of tasks and our team was not forthcoming enough to keep the client on schedule. Plus, we overestimated the efficiencies of some of our tools in this environment so we had to add more people. That slowed things down as they had to come up to speed on the project.”

“Have you explained all that to the client?”

Peter waived his hand. “All water under the bridge. We explained it, the client understood and we have a new schedule. The client wasn’t happy, but she understood. Mistakes happen. I was brought in to lead a whole new team and we’re laser focused on making this successful.”

“Well it sounds like everything was worked out. What’s the problem?” Tyler asked.

“The client's COO, Frances Forte, has gotten to be very difficult to work with.”

“How so?”

Peter sighed. “She’s so… emotional. Every time we meet to discuss the project schedule, she seems to get upset with us. I go in to tell her what I think is good news and she gets angry.”

“Why do you think she’s angry?”

Peter gave a half smile. “Maybe it’s personality?”

“Ah, I see,” Tyler said. “You mean maybe it’s because she’s a woman?”

Peter quickly backtracked. “I don’t know. That’s probably an overstatement but… you know.”

“Don’t be embarrassed, Peter. Your perception is one that women in business have struggled with for a long time. In my experience, though, I have yet to find a successful woman executive whose business judgment was overshadowed by what men like to view as irrational thinking driven by emotion.”

“Really? Have you dealt with a lot of women executives?” Peter chuckled. “Because I’ve been in this business for 20 years and…”

“And,” Tyler interrupted, “I would suggest you have been a victim of persistent perception for those 20 years. At some point some male manager or executive put it into your head that women in business were more emotional than men. As a result, you project that perception onto every woman executive you meet. You are blinded to their business reasoning because you keep waiting for the emotional reaction to validate your projected perception.”

Peter thought for a moment. “I can see what you’re saying and maybe my perception needs some adjustment. But in this case, trust me. She’s just too emotional.”

Tyler looked at his watch. “Well, I am meeting with Frances now in her office, so why don’t I hear what she has to say.” Tyler stood up. “There are three sides to every story, Peter: your version, her version and the truth. Let’s get together for dinner afterwards and I’ll tell you what I’ve learned and we’ll see if we can get closer to the truth.”

NEXT: See "She's So Logical!"
 http://dealwhisperers.blogspot.com/2012/08/shes-so-logical.html

Send Paper Send People

The Deal Whisperer posted its 50th article in September, all based on my ongoing experiences leading sales teams in pursuit of outsourcing, BPO, SI and consulting engagements. My goal is to help business people drive greater value and stronger relationships in their deal-making. For the next 10 weeks I am offering a retrospective, posting the 10 "Most Widely Read" pieces from the last several years. Here is "Send Paper Send People". As always, your questions and comments are welcome and appreciated.

Verdi ended his phone call and slipped his cell phone into his pocket. He walked into the coffee shop, saw Tyler Gitou, and sighed.

“What is it Verdi?” Tyler asked.

“My client is so difficult.” Verdi sat down. “We have been negotiating this contract for three weeks now and some of the things they are asking for are outrageous.”

“Really? What kinds of things?” asked Tyler.

“Oh it’s too much to explain. Milestones, liquidated damages, guarantees. It’s like they don’t understand the nature of the deal.”

“Maybe they don’t,” Tyler said. “When was the last time you had a conversation about the substance of the deal?”

“Just now. I called to tell them our lawyer had sent our markup of the agreement back to them. This is the fourth version we’ve sent to them. I don’t know how we get this done.”

“So you have exchanged a draft contract four times now. How many times have you sat down in a room to discuss it?” Tyler asked.

“We met when the process started and our lawyer has been talking to their lawyer so we’ve been talking a lot,” Verdi said.

“Have you been understanding?”

“What’s that supposed to mean?” Verdi asked.

“You may be talking but it doesn’t mean you’re hearing each other. It sounds like your deal may be suffering from a business disease called documentum negotiatis.”

Verdi cocked an eyebrow. “You’re kidding right?”

“Yes, I made up that name,” Tyler laughed. “But the actual ailment is real and commonly occurs when parties choose to negotiate by document rather than by discussion. It starts when one party sends a contract to the other party and the other party marks it up and sends it back. What’s missing is a step in the middle where the parties get together and discuss the substance of the contract, ask questions and seek to understand the intent and outcomes the contract is trying to produce.”

“I hear what you’re saying but this is the way we always do it.”

“And what usually happens?”

Verdi paused. “Documentum negotiatis.”

“Exactly. So if you want achieve a better outcome?”

“I need to change the process,” Verdi said.

“Here is my suggestion. Schedule a meeting with both legal teams and all the business stakeholders and walk through the contract changes. Seek to understand what the other side is trying to achieve. Often people mark up an agreement with perceptions or assumptions about the language that completely miss the actual intent. Get everyone re-focused on the goal of the deal and work toward the mutual goal.”

“That’s a good suggestion, thanks.”

“And from now on remember this: Send Paper Send People. A Deal Whisperer never responds to a document with a document. He responds with a meeting request to seek to understand the intent of the document. Only after he understands does he respond, at which point there is another meeting to explain and understand those proposed changes. Meeting like this builds collaboration, allows for transparency and gradually builds trust as two parties who are trying to accomplish something together build a lasting business relationship.”

What is the Client Buying?

“So Verdi, at our last lunch you told me you were struggling with a request from your client for a price cut,” said Tyler Gitou.

“That’s correct, Mr. Gitou,” said Verdi. “We designed a new procurement system for a large manufacturing client. We focused on quality because that was what the client said he wanted. When we were ready to sign, however, the procurement lead suddenly told us we were ten percent too high and had to cut the price.”

“So now the question is how to respond, correct?”

“Yes,” Verdi said. “I am concerned that if we don’t reduce the price the client may offer the deal to our competition. So what do I do?”

“I asked you some questions about why you bought your car,” Tyler said.

http://dealwhisperers.blogspot.com/2012/03/why-did-you-buy-that-car.html

“Yes, and it confused the heck out of me. What was that all about?”

“Let’s go back to that question,” Tyler said. “You said you bought a Dodge Charger and I asked ‘Why did you buy that car?’”

“Because I needed a new car. I have to drive something to get to work.”

“But you didn’t need a Dodge Charger,” Tyler said. “You could have bought a Smart car. Smaller, cheaper and less expensive to maintain.”

“That’s true. But my girlfriend would not be impressed with a Smart car.”

“Aha!” said Tyler. “So your decision was not just about transportation. You also had an interest in the type of car because of the image it bestows on you.”

Verdi looked slightly uncomfortable. “You make it sound silly.”

“I don’t mean to, Verdi. My point is this. Every word of that question highlights a different interest you had in completing that transaction. I asked why you bought the car. Someone else could have bought it for you, right?”

“I guess,” Verdi said. “But I don’t want to have to ask someone to buy a car for me.”

“Fair enough. I also asked why you bought it instead of renting a car or leasing one.”

“Buying was the cheapest route.”

“Good,” Tyler said. “Then I asked why that car and you said you liked the Charger because of its image. Then I asked why you bought that car, as opposed to riding a bike or taking the bus.”

“My job requires a lot of travel. The bus can’t get me where I have to go,” Verdi said.

“I understand. But do you see how many different interests the purchase of this car had to meet for you to close the deal? When our clients engage for a potential transaction they also have interests. Maybe a client wants a flexible system; a more reliable system; a more robust system or a cheaper system. Some of those interests may be mutually exclusive. For example, a client shouldn’t expect to get the most reliable, state-of-the-art procurement system from you and also get the lowest price.”

“That’s fair.”

“Just like when you bought your car,” Tyler said. “Could you get a Cadillac at the price you paid for the Charger?”

“No, but the issue is he is now saying he wants a Cadillac system for the Dodge Charger price.”

“Are you sure? Or is he just testing you. Let me ask you this: how have you done business in the past? When you present a price for a project, what does this client do?” Tyler asked.

“They ask for a discount,” Verdi said.

“And what do you do?”

“We see if there is room to move and we cut what we can.”

Tyler nodded. “So you have trained this client that this is how you do business! ‘I give you a price, you push my buttons, and money comes out of the slot.’”

“You make us sound like we’re being… stupid,” Verdi said.

“I don’t want you to feel that way, Verdi. But if you do that’s a good thing because it is a stupid negotiation strategy! How will you ever build trust with this client if every time you say ‘This is my best price’ you’re not telling the truth and you prove that by reducing the price!”

“I see what you mean. So how would you respond to the request for a price cut?” Verdi asked.

“Go back to the interests. You said the client was focused on a quality system. That dictates a higher price. Give him the option to buy a lower quality system at a lower price, or a high quality system at the price you quoted. His reaction will tell you how important quality is.”

“I know it’s important. That’s all they’ve talked about,” Verdi said.

“Good. Just like I asked you the question, ‘Why did you buy that car?’ you should be asking your client, ‘Why do you want this system?’ Focus on what the client is buying. If he's buying quality, focus on how quality can get hurt. Does the client want ‘this system’ as opposed to a different system that might still be sufficient for its business needs? If he is asking you for the price cut just to make sure he has not left money on the table, he will quickly understand that this is your best price and you can’t reduce the price without changing something else in the offering. If he is asking because of new budget constraints, you can offer to discuss options that might retain the key elements of quality but you can reduce costs in other areas that are not as important to him and provide a lower price. That, Verdi, is what a Deal Whisperer does to take the first step in building trust in your client that you really are providing the best price when you say it’s your best price.”

Why Did You Buy That Car?

“Thanks for meeting me for lunch, Mr. Gitou,” said Verdi. “I have been working on this bid for a new procurement system for one of my clients for six months. Yesterday the director of procurement said his company values the quality of the solution we have offered, but our price is ten percent too high. He said we have to ‘sharpen our pencils.’ I don’t have ten percent; I could move some things around and give him five percent.”

“So tell him ‘No,’” Tyler said.

“I can’t do that,” Verdi said. “He’ll walk away and give the deal to my competition!”

“So tell him ‘Yes,’” Tyler said.

“I can’t do that either. If I cut the price by ten percent I have to reduce a whole bunch of operational costs that we built in to ensure the success of the implementation. We have a whole change management program that’s required to train everyone on the new system. If they’re not trained they won’t use it and the client doesn’t realize the savings.”

“So give him five percent,” Tyler said.

“Really?” Verdi said. “Just like that? I can’t believe you, the Deal Whisperer, would make such a concession so easily!”

“Why not?” Tyler said waving away Verdi’s concerns. “That’s what the client wants, right? So give them what they want.” Tyler paused, a smile creeping onto his face. “What will happen next?”

“If I offer him the five percent? Well I hope he takes it and we sign the deal.”

“OK,” Tyler said. “What if he takes it and then says, ‘Thanks, now give me the OTHER five percent or I am going to walk away and go to your competition?’”

“I guess I’d have to say no,” Verdi said. “I can’t do ten percent.”

“So let me ask you this: if you are ready to say ‘no’ to ten percent and see if he will exercise his BATNA to go to the competition, why would you say ‘yes’ to five percent and ‘no’ later? In other words, why not say ‘no’ now? Isn’t the outcome potentially the same?”

Verdi thought for a moment. “I am getting the feeling that you’re trying to show me that the answer is not ‘yes’ or ‘no’ because neither one produces the ideal outcome for both parties.”

Tyler clapped his hands. “Exactly! The answer to a demand for a price reduction is rarely ‘yes’ or ‘no.’ The challenge for a Deal Whisperer is to figure out what the right answer is.”

“So how do we find the right answer?”

“We ask questions,” Tyler said. “First, why is the procurement director asking for a price cut?”

“He said our price is higher than the competition’s price.”

“Are you ever selected because you have the lowest price?” Tyler asked.

“Not often,” Verdi said. “We really focus on quality. We are typically selected because when looking at the risks of these projects, the scope of the work, and the time to get the system running we provide the greatest value on overall price.”

“So we are struggling because we are trying to answer a demand for a low-cost solution which we cannot provide.”

“Yes,” Verdi said. “So I guess that’s the end of the deal. I can’t be the low-cost provider.”

“Hang on, Verdi,” Tyler said. “Don’t give up so easily. A potential solution is right in front of you!”

“It is?” Verdi asked. “Where?”

“The problem is you don’t have an answer to the question being posed, correct?”

“Yes.”

“But you do have an answer to another question which has not yet been posed, correct?” Tyler asked.

“I guess.”

“So if two parties are trying to reach agreement on a shared goal, namely, getting the best, most reliable solution in place, and one party doesn’t have the right answer to a question, maybe the parties need to change the question to get to the right answer.”

“I feel like I am following you… but not really.”

Tyler laughed. “It’s all about how you sell, Verdi. What kind of car do you drive?”

“I just bought a new Dodge Charger. Have you seen it, by the way? It’s awesome…”

“WHY did you buy that car?” Tyler asked.

“Why? Because I need a car to get to work…”

“Why did YOU buy that car?” Tyler asked.

“Me? Who else would drive it?"

“Why did you BUY that car?” Tyler asked.

“I am getting really confused.”

“Why did you buy THAT car?” Tyler asked.

“Now you’re starting to scare me.”

“Why did you buy that CAR?” Tyler asked.

“What am I supposed to do, ride a bike?”

Tyler looked at his watch. “When you have the answer to all of those questions, you’ll have the answer to your problem. Let’s get together for breakfast tomorrow and see what you come up with.”

The 'Five Hows' of Sales

“Mr. Gitou, my team worked really hard on this proposal,” said Verdi. “It was a huge disappointment when the client chose our competitor. But our team did really well going from last place to second. Do you really think we could have known we were going to lose before we made our proposal?”

“Yes, Verdi, I do,” Tyler Gitou said. “As I mentioned last time, being told you finished in second is meaningless if in the end you don’t get any business. Second place is last.”

http://dealwhisperers.blogspot.com/2012/01/no-prize-for-second-in-sales.html

“I get it,” Verdi said. “So help me understand how I predict in advance the outcome of a selection process involving multiple bidders, multiple decision makers and millions of dollars at stake.”

“It requires detailed analysis, Verdi. But a great way to start that analysis is by asking the ‘Five Hows’. If you don’t know the answers to the ‘Five Hows’ it is not likely you will make a sale.”

Verdi pulled out a pad and a pen. “OK, Deal Whisperer, let’s hear the ‘Five Hows’.”

Tyler laughed. “I appreciate your enthusiasm, Verdi. The ‘Five Hows’ are:
1. How does the client buy?
2. How does the client decide?
3. How else can the client achieve its goals?
4. How can we compete?
5. How can we win?

“Let’s start with the first,” Tyler said. “‘How does the client buy?’ This is a question about the buying and contracting process. Who runs that process? Is it procurement? Do individual executives have the authority to buy directly? Do those individuals have limitations on the sizes of deals they can commit to? These are all important questions because if you do not understand the process, you don’t know the rules of the game.”

Verdi nodded. “That seems pretty logical.”

Tyler continued. “The second is ‘How does the client decide?’ While this is another process question, it is focused on the client’s internal process as to how selection decisions are made. For example, does the client have a culture of consensus? If so, you need to understand who those decision makers are, their relationships and how that consensus decision gets made. If the client has a more entrepreneurial or hierarchical environment, key executives may be the final decision makers without the use of advisory committees. Also, it is important to know whether board approvals are required. You don’t want to hit the end of your sales quarter and discover the board meets in two weeks to approve your deal.”

“Oh, I have lived that nightmare before,” Verdi said.

“The third is ‘How else can the client achieve its goals?’ This is a BATNA question: what alternatives does the client have to signing a contract with you? Can they perform the work you are pitching on their own? Or can a competitor do it just as well as you? This can be a vital question if your solution is unique in its ability to achieve the client’s goals. If the client does not have a strong BATNA, that should influence your negotiation strategy, particularly around legitimacy.

“The fourth is ‘How can we compete?’ This question is tied to BATNA and probes how well we understand the client’s interests or ‘buyer values’. It also asks what levers we can pull to make ourselves more competitive. What are the limits for us on price, scope, risk and time? If we need to move one lever, how will it affect the other levers?”

“That’s a great question,” Verdi said. “Client’s always pull on the ‘price' lever and we often fail to consider the impacts on scope. We are so focused on ‘winning’ that we make price concessions without seeking some form of relief from the client on another lever.”

“Exactly,” Tyler said. “The last one is ‘How can we win?’ This is a complex question that really pulls in the answers to the other four questions and tests the level and quality of relationships with the client. Let’s talk about your last proposal. You said you started in last place and finished in second. Why do you say you were in last place?”

“We really had no track record with this client,” Verdi said. “We were trying to get a foothold against the incumbents.”

“What you’re really saying is you had no relationships with the decision makers,” Tyler said.

“At first,” Verdi said. “But I developed a great relationship with Larry, the head of procurement. In fact, Larry’s sister went to the same college as me and he’s a huge Jets fan like me, so we had a lot in common.”

Tyler nodded. “Building affiliation with a decision maker or influencer is a great way to start. Did Larry trust you? Did he trust your company?”

“I think he trusted me. I mean, I didn’t give him reason to not trust me. But my company? I don’t know.”

“That’s the point when you needed to ask yourself ‘How can we win?’ Not having relationships, not having trust, not knowing the buying process or decision-making process suggests you were destined to lose the bid. Larry may have liked you, but do you think that was enough for Larry to award you with a $5 million project?”

“I see your point,” Verdi said.

“Lesson learned,” Tyler said. “Unless you can use the ‘Five Hows’ to build an aggressive strategy that is going to result in a realistic chance of being chosen, you may be better served spending your sales pursuit budget on other potential clients.”

“Thanks for the advice,” Verdi said. “I never realized how much analysis I should be doing on my sales opportunities.”

“You’re welcome,” Tyler said. “Being a Deal Whisperer means being outcome driven. It’s important to have goals in closing deals with clients. It’s more important to know in advance how those deals will get done.”

No Prize for Second In Sales

Verdi passed by Tyler Gitou’s office looking dejected. Then he passed again. And again. Tyler smiled and got the hint.

“Verdi, is there something you’d like to talk about?” he called out to him.

Verdi came into the office sat down. “I thought you’d never ask. I just needed someone to talk to.”

“What’s the problem?” Tyler asked.

“Well, we lost the deal to a competitor. I just got the call this morning and I’m trying to figure out how to break it to the team. This was a three month process and they all worked so hard on the proposal!”

“That is tough,” Tyler said. “You had a great team too.”

“Oh, the best in the firm!” Verdi said. “In fact, the client even complimented me on their performance. He said when we started we were in last place in a field of five. But our proposal and presentations were so good we jumped the other bids and finished in second.”

“No kidding! What do you get for second place?” Tyler asked.

Verdi was confused. “What do you mean?”

“You said you started in last and finished in second. The bidder who finished in first got the deal. What did you get?”

Verdi was taken aback. “We didn’t get anything.”

“So what’s the difference between finishing in second and finishing last?”

“Well, it shows how well we did.”

“But not well enough to win,” Tyler said. “The only bidder who got anything from the process was the one who finished first. They got the deal. Everyone else got nothing.”

Verdi was getting annoyed. “What’s your point? Our team worked really hard on this.”

“My point is you started in last place and you finished in last place. In sales, there is no such thing as ‘second place’ if the result is no business.”

“But we built our relationship with the client. Before this the client really didn’t know who we were. We had no business. Now we have credibility.”

“Terrific,” Tyler said. “At what cost? How much time and effort did you spend for ‘credibility’ that could have been done with some focused meetings? How many opportunities did you sacrifice elsewhere to focus resources on this deal?”

“You know Mr. Gitou, everything is clearer in hindsight. No disrespect intended but I don’t need a lecture telling me this was a waste of time.”

“I appreciate that, Verdi, and I am sorry if I am being too direct,” Tyler said. “But if you can’t derive some lessons learned from this loss, then it really was a waste of time and money.”

“That’s fair,” Verdi said. “So how do we analyze the loss?”

“Go back to the beginning. How did you make the decision to submit a proposal?”

“I told you,” Verdi said. “This was a new client and we wanted to try and get some business. Our main competitor has been in there for 10 years and controls the infrastructure so we were looking for a way to get into the account.”

“And how else did you qualify the deal?” Tyler asked.

“I don’t understand what you mean.”

“You had a brand new client that your competition owned and you decided to bid? That’s it?”

“We have to start somewhere! Are you saying we should never pursue a deal unless we know we’re going to win?”

“No, I’m saying you shouldn’t pursue a deal unless you know HOW you are going to win. Let’s go over your sales strategy and see if we can figure out what we might do differently next time to get a different outcome.”

I Hate My Client Part 2

“Mr. Gitou, I am dealing with a difficult CIO at a financial services company. What does a red car or green car have to do with that?” Verdi asked.

“Verdi, what color car do most people drive?” Tyler asked.

“What? I don’t know. I guess I’d say blue.”

“Really? And what color car do you drive?”

Verdi shrugged. “Blue.”

“Perfect,” Tyler said. “You are a great example of Self-Affirmation. You drive a blue car. As a result, your perception is oriented to look for other blue cars because it affirms your decision to buy a blue car. I myself never realized how many people have gray cars until I bought my first gray car.”

“That’s interesting but what does it have to do with my client being a jerk?” Verdi asked.

“When people reach conclusions they often seek out data that support those conclusions,” Tyler said. “They want to confirm they were right. You, for example, notice more blue cars than any other color because it confirms for you that blue was a good choice. Likewise, once you decided that your client was a jerk, which is a difficult conclusion to reach about someone you work with every day, you become oriented to look for jerk-like behavior to confirm you are right.”

“I can see how that would happen,” Verdi said. “And as a result, I probably don’t pay attention to the positive behavior.”

“That’s right. You seek the supporting data for your conclusion and disregard data that might indicate you are wrong. Self-rationalization also plays into the problem. We are always hesitant to admit we are wrong or made a mistake. Until you are willing to really question your own performance and behavior, you will always be content to blame the problem on the client.”

“I am willing to try,” Verdi said. “How do I start the process?”

“Go back to what I said: get out of your red car and get into a green car. The ‘red car’ represents a negative mind set and while you drive that red car you see many more red cars, or more negativity. When you get into a ‘green car’ mentality, or a positive state of mind, you will see more positive actions on the part of your client.”

“So this is about changing my frame of reference with regard to my client?”

“Exactly. Instead of thinking negatively about your relationship, start to focus on the positive aspects of the relationship. Every time you have a negative thought, you are back in the red car. A Deal Whisperer knows that if you change your attitude, you’ll change your relationship. Tell me, what do you like about this client as compared to other ones?”

“Well, he does hire us for a lot of consulting work and appreciates our people,” Verdi said. “But he always challenges me on the rates. He’ll ask for a discount every time.”

“Why does he do that?” Tyler asked.

“Either he perceives we are more expensive than other vendors, or he feels like he has to ‘win’ something.”

“Why don’t you ask?”

Verdi paused. “Ask why he wants a discount?”

“No, ask why he is asking for a discount. The answer is bound to be interesting. Maybe he will say, ‘because I think you are overcharging me compared to other vendors’ and then you can show him how you compare. Or maybe he says, ‘because I think you have room to move’ in which case you can share some of your own business challenges with him and why this is the best price you can offer. Either way it is going to start a dialogue where you are trying to understand his point of view rather than thinking of him as a jerk because he asks for a rate cut.”

Verdi nodded. “That’s a good suggestion. Thanks Mr. Gitou.” Verdi stood and was about to leave, and then stopped. “By the way, did you ever think that maybe the reason I see more blue cars is because blue is the most popular color?”

Tyler laughed. “It’s white. Blue is the sixth most popular.”

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’!”