One Word to Becoming a Better Negotiator

You are about to sign a deal after weeks of intense negotiations. The client, before picking up the pen, says to you, “I just got a call from the CEO and he said he wants another 10 percent off the price before I sign.” What do you say?

More importantly, how do you feel? This moment, that was to represent the culmination of months of work, is suddenly spoiled by an 11^th hour demand for a concession. Doesn’t this somehow feel… unfair?

We have all encountered that moment in our professional and personal lives when someone asks for something and we feel like they are taking advantage of us. Most people go through a rapid cycle of emotions: anger and frustration, then analysis and rationalization, so that they talk themselves into saying “yes” to the demand “for the relationship,” “for the good of the deal” or “to keep the peace in the family.”

This is a negotiation ailment called “accommodation” and even senior business executives fall victim to it. But there is one word that can provide the cure: Legitimacy. Among the seven elements in a negotiation, Legitimacy is perhaps the most powerful because it serves as the baseline for whether a deal is good for both parties. Legitimacy is what triggers our “fairness antennae” and makes us pause in our response.

The way to use Legitimacy in our negotiations is simple and, once done a few times, becomes quite empowering. When the other party, whether it’s a CEO or your mother, says “this is what I want,” pause and cycle through your emotions. This time, instead of saying, “Well, OK if that will make you happy,” challenge the Legitimacy of the request. Say something like, “I hear what you’re asking for and please help me understand why that’s fair.”

Introducing the notion of “fairness” into the exchange has a powerful emotional impact on people. The notion of “fairness” is built into us from childhood; to play fair and to treat other people fairly. So when you challenge the Legitimacy of a request by asking someone to justify its fairness, it sends the other party into an emotional cycle of trying to balance the behavior in making the request against the moral compass of “fairness.”

What you now have is an opportunity to work out a solution that both of you will find acceptable. You will feel empowered that you healed yourself of your accommodating behavior and have begun a journey to being a truly disciplined negotiator.

Whadja Get?

“Mr. Gitou, how much do you usually budget for negotiation contingency?”

Tyler Gitou looked up from his computer screen, a quizzical look on his face. “I’m sorry, Verdi,” he said. “I don’t understand the question.”

“Well, when you negotiate a deal, how do you decide how much money to set aside to give to the client as a concession?”

“Oh, I see.” Tyler said. “Zero.”

“Zero?” Verdi said. “You mean to tell me that because you’re the Deal Whisperer you never make a concession on price?”

Tyler laughed. “No, Verdi. I never make a concession on anything. What I make is an exchange.”

“An exchange of what?”

“An exchange of value. Let me give you an example. Last month I was working on a managed services deal for a large pharmaceutical client. They said their primary goal in doing the deal was to reduce their procurement costs by 30 percent. Our proposal reduced those costs by 32 percent, more than any of our competitors. They wanted to sign the deal with us, but they said our price was 10 percent too high. What would you say in response to that?”

“It depends. What did they say will happen if I don’t cut the price?” Verdi asked.

“They said they will give the deal to one of our competitors.”

“OK,” Verdi  said. “I wouldn’t cut the price by the whole 10 percent. Maybe I’d offer them five percent.”

“OK,” Tyler said. “And I would ask you, ‘Whadja get?’”

“Whadja… what does that mean?”

“It means ‘what did you get in return?’”

“I got the deal signed,” Verdi said. “Wasn’t that what I was supposed to do?”

“Sure it was,” Tyler said. “But why did you give the client free money on your way to signing?”

“I… well I had to…” Verdi sighed. “OK, I give up. What did you do?”

“I offered them options,” Tyler said. “I told them I could reduce the price by five percent to get closer to the competitor’s price if they would extend the deal by an additional two years. With an extra two years of revenue, I was able to make some cost reductions and pass the savings on to the client. It also means an extra two years that I keep my competition out of that part of the client’s business.”

“Wow, that’s like a win-win with another win!” Verdi said.

Tyler laughed. “It was a good outcome but the most important part of it was demonstrating to the client that my price was real by asking for an exchange of value. If I had just offered a five percent reduction, the client would have lost trust in our company and thought I was just padding my price.”

“An exchange of value. I like that,” Verdi said.

“Good,” Tyler said. “Remember, Verdi, a Deal Whisperer must always negotiate with respect for his own business. If we don’t show the client the value we put on our services, then the client has little reason to value or respect our services.”

Don't Do It!

“Mr. Gitou, you’re never going to guess who just called,” said Verdi.

Tyler Gitou smiled at Verdi. “You know, Verdi, I can’t ever figure out whether that phrase means I am supposed to guess, or I shouldn’t bother to guess because of the forecasted futility.”

“What?” asked Verdi, looking perplexed.

“Nevermind,” said Tyler. “Who called?”

“That was Sam Gamigan, the head of procurement for National Distributors. I’ve been trying to break into that account for three years.”

“I remember. What did he want?”

“He said they are putting all of the logistics operations up for bid again,” said Verdi. “Sam says they are unhappy with the services from Calax Systems managing their hardware and software so they want a new business partner.”

“Wow,” Tyler said. “That’s a surprise. And a big deal too. Didn’t Calax win that RFP two years ago for about $50 million over five years?”

“Yes,” Verdi said. “We came in second for that bid and now’s our chance to come back and win the work!”

“Hang on, Verdi. Before you start calculating your commission for the deal, let me ask a few questions.”

“Sure,” said Verdi, taking a seat in Tyler’s office.

“First of all, why did Sam say they are putting it up for bid?” Tyler asked.

“I told you. He said they’re unhappy with Calax,” Verdi said.

“What specifically are they unhappy about? Did you ask?”

“I did,” Verdi replied. “And he said he couldn’t get specific.”

“OK. Who is running the bid process?” Tyler asked.

“Sam is. I made some calls to Margaret Fringe, the head of operations, and she knew nothing about it.”

“Gotcha. And lastly, if Calax is in year two of a five-year deal, don’t you think there is a hefty early termination fee for National Distributors if they want to get out of the deal early?”

Verdi thought a moment. “There must be. We had a big fee in our bid because we had to back-load the deal to provide savings up front.”

“That’s what I recalled.” Tyler said. “My advice to you, Verdi? Don’t do it.”

“What? Don’t do what?”

“Don’t bid on the work. Sam is not offering you a legitimate opportunity to win this work. He is offering you and the other service providers a chance to submit competitive pricing so he can re-negotiate the deal with Calax.”

“No,” Verdi said. “Why would he do that? Do you know how much time and money that is going to take? He wouldn’t run an RFP process just to get pricing.”

“Why wouldn’t he? As a good businessman, he knows that if he can get a ten percent reduction in the last three years of the deal he can save the company up to $3 million. You just said Margaret doesn’t know about this and she’s the head of operations. If someone was unhappy with the service, wouldn’t it be her? And he hasn’t hired an advisor to run the bid, has he?”

“No he hasn’t,” Verdi said. “And he doesn’t have a big department to handle responses from five service providers.”

“So it will cost him almost nothing to modify the old RFP, reissue it to five bidders and get back the pricing to use against Calax. We’ve not heard about any problems with Calax’s performance and he’s making vague statements that they are unhappy. There is no way they are going to pay Calax a termination fee to go through the contracting process and transition all that software to a new vendor. Sam is playing a game with you.”

“But Mr. Gitou, it’s a really big deal! Almost $50 million!” Verdi pleaded.

“No it’s not. It’s an opportunity to waste resources submitting a bid for something we will never win. This is a commitment issue, Verdi. Sam has no intention of unseating Calax and he's giving you all the signals of that. A rushed bid. No involvement by the stake-holders. And an incumbent who is so entrenched that changing to a new provider would completely disrupt the business. Calax is in there for the next three years.”

“But if I don’t bid, he won’t hire us.”

Tyler laughed. “He’s not hiring if you do bid! Verdi listen to yourself. Here’s my suggestion. How much would it cost us to respond to this RFP?”

“Probably about $30,000.”

“OK,” Tyler said. “Call Sam back. Tell him you’re sending over our standard rate card as our response. Also, tell him our company is making a donation for what a full response would have cost us to the Canine Rescue Shelter. I know National Distributor is a big sponsor. If he’s as smart as I think he is, he’ll respect you for seeing through his charade and turning it into an opportunity to help others.”

“You don’t think he’ll be mad we didn’t play his game?”

“I don’t care, Verdi,” Tyler said. “I’ll be mad if we do play his game. I’m a shareholder in this company and I don’t want to see our money wasted on what is obviously a pricing negotiation with an incumbent. Trust me, Verdi. Don’t do it.”

How Stupid Can You Be?

“Mr. Gitou? I got blindsided.”

Tyler Gitou waved Verdi into his office. “Tell me what happened, Verdi?”

“Well, remember we closed that deal to replace all the desktops at Macro Assurance, that big insurance firm?”

“Yes, I know Macro Assurance.” Tyler said. “It was about 250,000 PCs if I remember.”

“Correct,” Verdi said. “We’re probably going to lose about $1 million on it.”

Tyler was surprised. “Really? I remember you working on that deal. You were really excited about the solution we put together for Macro.”

“Not any more. We've had to add a lot more people to meet the client’s deadline and it’s costing us a fortune.”

“So what happened?” Tyler asked.

“The plan was to install all of the software on the computers remotely,” Verdi said. “You know, just download everything from the cloud versus having someone sit at the machines. It turns out their corporate firewall won’t let us do it in some locations. So we have to send people, which costs a lot more.”

“Really? Isn't that something we should have known?” Tyler asked.

“Yes and no. There was no reason to think their security would be so different in each country so we never asked the question. We just assumed it would be like every other engagement.”

“Verdi, how stupid can you be?”

“What? Mr. Gitou, that’s a really offensive thing to say!” Verdi said.

“I’m not asking to insult you, Verdi,” Tyler said laughing. “I am asking to see how you can avoid this problem in the future. When we get in front of a client, we often have the urge to be really smart. Know all the answers. Impress them and impress ourselves. But instead of thinking how smart we can be, we should ask how stupid we can be.”

“I don’t get it, Mr. Gitou. How will being stupid help me impress my client?”

“It forces you to ask questions,” Tyler said. “Let me share with you a similar experience I had when I was new in sales. We were proposing a systems integration deal to move a client’s trading platform from an old ‘home grown’ system to a new commercial system. I quoted a price to build the system, end to end, and won the deal with the lower price. Much lower. You know why my price was so low? I assumed their hardware would support the new platform. My competitor was ‘stupid’ and asked for data about their servers and they added in the cost of new hardware. As it turns out, their servers were all out of warranty and lacked the processing capacity we needed. It was a $2 million mistake on my part.”

“What did you do?”

“We installed the system as we committed to do and lost money on the deal,” Tyler said.

“Wow. And you didn't get fired?”

“No,” Tyler smiled. “My sales manager made me the account lead and said I had 24 months to grow the account and make it profitable again. I did it in 12. And I have been stupid in every client discussion since then.”

“That’s a great turnaround story. Who was the client?”

“It was Macro Assurance, the big insurance company where you just got blindsided,” Tyler said. “So my advice to you is get back in there and finish the project as we committed. Don't lose their trust in us. You've learned an expensive lesson. Sell on your experience, but solve from your ignorance. Don't assume one client is like another until you have asked the right questions. Remember, a Deal Whisperer always thinks about how stupid he can be.”

You Are Unbelievable

Tyler Gitou lowered his head and shook it slowly. “And you missed that deadline too,” he said.

“Yes,” Verdi said meekly. “We got the pricing exhibit to them the next day.”

“That’s three missed deadlines. What happened next?” Tyler asked.

“Well, we were down-selected so it was us and one of our major competitors,” Verdi said. “But in the end, we lost.”

“And why do you think you lost?”

“The client said our price was too high,” Verdi said.

“Do you believe that?” Tyler asked.

“Um… yeah,” Verdi said. “They had said we were a little more than the competition all along. But that’s because we had a lot of senior people staffed to make sure we were successful.”

 “Verdi, what was the client’s primary buyer value?” Tyler asked.

“Certainty of execution,” Verdi said. “The client is in a highly regulated business and if we can’t deliver the services and file their reports, the regulatory agencies are all over them.”

“And if you were choosing a business partner for a project that was critical to your business, what would you want to be sure of before you selected that partner?”

“I guess that I thought they would be able to perform.”

“Just ‘thought’? As in, ‘greater than fifty-fifty’?”

“No,” Verdi said. “That I was certain they could perform.”

“Exactly,” Tyler said. “And to have that certainty you would have to believe in their ability to perform. That they can deliver on their promises on time, correct?”

“Absolutely,” Verdi said.

“How did you do?”

“I thought we did well,” Verdi said. “We got a lot of positive feedback on our proposal.”

“You know what Verdi? You are unbelievable.”

“Thank you, Mr. Gitou.”

“It’s not a compliment, Verdi. I mean that you lost the deal not because of price. You lost because you lacked credibility and reliability. The client did not believe you were the right company to trust with such an important program.””

“Just because we were late for a few deadlines? It was a complicated proposal! Plus the client was late on a bunch of stuff too!”

“The client is allowed to be late. They are the client! We build our reputation and trust with the client by being on time,” Tyler said.

“I think you’re overstating this,” Verdi said. “They told me it was price, not trust. In fact, the guy who told me is the head of procurement and I have a long relationship with him.”

“He was being kind, Verdi. How would you have felt if he said, ‘We didn’t choose you because we don’t trust you’?”

“I would have felt terrible,” Verdi said.

“Exactly. But you were not worthy of their trust because you didn't earn it. So you are not trustworthy.”

“That’s pretty harsh, Mr. Gitou.”

“Verdi, let me share with you a secret about how clients buy,” Tyler said. “Clients, just like many businesses, are risk averse because the client is actually made up of people who have a personal interest in being successful in their jobs. And those people worry more about not making the wrong decision than they do about making the right decision.”

“I don’t follow you.”

“When a business person makes a decision about which service provider to hire, they decide on the basis of which one is least likely to screw up. The business person does not want to answer for a failed project because they hired the wrong vendor . So to be viewed as least likely to screw up in delivering the service, you have earn their trust. Make them believe you are the low risk choice. And, frankly, being late three times on a single proposal does not generate credibility and trust. You are unbelievable.”

“I understand now,” Verdi said. “It’s a good lesson from a bad mistake.”

“That’s a positive way to think about it, Verdi,” Tyler said. “Now go look at where your process broke down on the proposal and next time get the client to believe you are unbelievably reliable in responding to the bid.” 

What Will You Do After You Get Punched in the Mouth?

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 "What Will You Do After You Get Punched in the Mouth?". As always, your questions and comments are welcome and appreciated.

What Will You Do After You Get Punched in the Mouth?

"Everybody has a plan 'til they get punched in the mouth." Mike Tyson

Hard to believe a Mike Tyson quote would have relevance to a discussion of negotiation. Yet we often have moments in negotiations when we get "punched" or hit by a sudden act of the other party and we don't know what to do. All the planning and strategy goes out of our heads and we reel about, trying to figure out how to respond.

When we look back on the events that occurred, though, we discover that they should not have come as a shock; we just weren’t ready for it when it happened. Think of it in Mike Tyson’s context: shouldn’t a boxer have a plan that includes getting hit in the mouth? It is likely to happen! So when you prepare for your own meetings and negotiations, make a plan that includes what you will do after you get punched in the mouth.

A Deal Whisperer thinks of this as planning for surprises. Sounds counter-intuitive because a surprise, by its nature, is something we can’t plan for. With a few exceptions, however, there are not a lot of things that happen in negotiations that are real “surprises.” Walking into your house and having 50 people yell “Happy Birthday” is a surprise. You don’t usually expect to find 50 people in your house when you come home. You should expect in the course of trying to close a deal that the other party might say, “I’m withdrawing”; “Your price is too high”; “Your offer is too low”; or “I chose another supplier”.

So how do you plan for surprises? Walk through the “what if”s. After a milestone in your negotiation, take time to consider all the possible ways the other party might respond and what you will do next. If you just submitted a bid, the customer could 1. Reject the bid, 2. Offer a counter-proposal, 3. Not respond, 4. Accept the bid. There are variations on those possibilities but those are, in essence, the broad categories of outcomes to consider.

Make a plan for each. Write the plan down. And then discuss that plan with your team so everyone knows what the next steps will be. To become a Deal Whisperer, you always have to be so well prepared that a punch in the mouth is part of your plan.

The 'Five Hows' of Sales

The Deal Whisperer posted its 50^th 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 "The 'Five Hows' of Sales". As always, your questions and comments are welcome and appreciated.

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.”

Change Your Attitude!

The Deal Whisperer posted its 50^th article last month, 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 will offer a retrospective, posting the 10 "Most Widely Read" pieces from the last several years, beginning with number 10: “Change Your Attitude and You’ll Change Your Relationship.” Your questions and comments are welcome and appreciated.

Change Your Attitude and You'll Change Your Relationship

Want to improve your relationship with a business partner? Try this exercise with your negotiation team:

List five adjectives to describe what it is like to work with the other party. Chances are you will produce a list that includes words such as stubborn, frustrating, confrontational, or one-sided. Then ask the team why, if those words are accurate, they would continue doing business with such a difficult party! Maybe they should focus on building a relationship with someone else.

The truth is that parties in a relationship, whether business or personal, will eventually develop negative perceptions of one another. The problem arises when those perceptions overshadow every interaction with the other party such that we wonder why we are together in the first place.

This is the challenge of “persistent perception”. We reach a point where we perceive another party in such a negative light that no matter what they say or do, we only recognize the negative behavior that is consistent with our perception.

Imagine, for example, you join a team and your colleagues tell you to go meet with Marty. “Good luck,” one says. “Marty is a jerk.” You now have a loaded perception seeking confirmation: when will Marty be a jerk to me? And, despite all of Marty’s efforts to be collaborative and positive, when he makes that one unreasonable request you rejoice internally: “JERK!” You return to your team and share with them Marty’s jerk-like behavior, largely dismissing all of his positive behavior.

Time for a change of attitude.

Put together a list of the adjectives you and your team believe the other party would use to describe working with you. Don’t be surprised if it is not terribly different from the one you created describing the other party. Now make a list of the adjectives you would like the other party to use to describe your relationship. Ask your team what needs to change in how they talk to and work with the other party to achieve those adjectives. If your goal is to get the other party to change their behavior, you must change yours. Model the behavior you desire from others. If your team refuses to change their behavior, how can they expect the other party to change theirs?

Change your attitude and you will change the relationship.

Who is Driving?

“Verdi, haven’t you been working on closing that same deal for months?” asked Tyler Gitou.

“Yes I have, Mr. Gitou,” said Verdi.

“Why has it been so slow to close?”

Verdi sighed. “I have been struggling to get buy-in from the client around the deal. I am meeting with the people who run the client’s logistics department and trying to explain how the new system will function. But they all have different requirements for what they want the system to do.”

“Really? I would have thought those requirements would have been decided when they chose the system.”

“That’s the problem,” Verdi said. “The logistics department didn’t choose the system. The client’s new ‘business optimization’ group picked it.”

“Interesting. So one group in the company has chosen how another group will operate and did not ask their opinion?”

“That’s right,” Verdi said. “The business optimization group was tasked by the CFO with finding a software product that would drive greater efficiency and save as much money as possible. We showed that our product would reduce manual and redundant functions and potentially save the client thirty percent in the first year. So they chose us.”

“I’m glad they recognize the great value of your product,” Tyler said. “So after three months the logistics department is just getting introduced to the product?”

“Yes. The logistics department is now starting to understand what the software does and how this system will change the way they do business.”

“Sounds like you’re still selling, but now to the actual users.”

Verdi sighed. “It feels that way. I don’t understand why it’s taking so long. It’s a great product.”

“The problem is a process issue, Verdi,” Tyler said. “You never ‘sold’ the product. Instead, someone in the company chose a product for another department to use, and now they are just getting familiar with it. To reduce this type of inefficiency, a Deal Whisperer always identifies the key executive in the buying process. Ask yourself: Who is driving?”

“What does that mean?”

“Someone on the client side has to care that the deal is going to go through and the program be successful. That has to be a senior executive high enough to influence what is happening at the negotiation table. Think of it this way: if the client gets up from the negotiations and walks away, do you know who you will call to get them back to the table?”

Verdi thought for a moment. “No. I don’t know who would have that authority.”

“That’s your problem. You have no deal driver on the client side. That’s why you have struggled to drive the deal to closure.”

“So how do I fix that?” Verdi asked.

“For this deal you may not be able to. You need to have some high-level relationships on the client side who will reach out and help.”

“We don’t have any. This is a new client.”

“Fair enough. So let’s talk about some strategies to move more efficiently given your situation. But next time you are scoping out your deal, make sure you think about who is buying and develop a strategy to turn that buyer into your deal driver. To make an engagement successful, both parties need to have a shared interest in that success. With that shared interest there must be a shared passion for getting the deal done. Find out who on the client side is the source of that passion for success and you have your deal driver.”

An Expensive Relationship

“The client asked us to start the work because they had a ‘burning platform’. So we started even though we did not have a signed agreement.” Verdi sighed. “I know that was a mistake.”

Tyler Gitou shrugged it off. “It’s easy to spot our mistakes in hindsight. The key is to learn and not make the same mistake twice. So what’s the problem?”

“Well, the client had budget cuts and had to cancel the project, so they never signed the deal,” Verdi said. “Meanwhile, we already completed phase one and had billed the client $500,000 for it. The client is now challenging the invoice because the project was canceled.”

“So how much has the client offered to pay?”

“Zero,” Verdi said. “They said the work we did has no value to them without the project going forward.”

“Regardless of the value, do they recognize that they asked you to start the work, incur the costs of paying your people all on the basis of trust?”

Verdi nodded. “Yes. They said we should treat this as an investment in the relationship. They have a lot of other projects in the pipeline that they said we will be able to bid on to make up the loss.”

“What do you want to do, Verdi?” Tyler asked.

“My management is saying we should focus on the relationship. This is a client we are trying to grow so they see this as an opportunity to develop that relationship.”

“I see.” Tyler said. He locked his eyes on Verdi and said in a stern voice, “Verdi, give me $20.”

Verdi looked surprised. “Give you… why?”

“Because I asked you to. Verdi, you and I have been friends a long time and if you say ‘no’ to me, that is going to really impact our relationship. It’s just $20. Give it to me.”

Verdi sat back in his chair. “I have to admit, Mr., Gitou, I am confused.”

“What are you confused about?” Tyler asked. “I am asking you to ‘invest’ in our relationship. If you give me $20 it will be a better relationship.” Tyler let the silence overtake them both, and finally he smiled. “It’s awkward, isn’t it?”

Verdi sighed. “Yeah, really.”

“If you give me the $20 what type of relationship will we have? It will be a relationship where I ask you for money and you give it to me and get nothing in return. That’s not a ‘relationship’ that’s called being a sucker. And that’s an expensive way to try and develop a relationship.”

“So you’re saying we should never take anything less than the $500,000?”

“No, I am asking you to think about what you will get in return for the concession. For example, you said they have other projects. What if they awarded those projects to you?” Tyler asked.

“Well, they said we can bid on them.”

“Verdi, I can bid on them too. The janitor can bid on them. That is a valueless option. But if they awarded those projects to you, wouldn't that have value?”

“We’d save a lot of money in sales expense if we don't have to compete for the project,” Verdi said.

“Exactly. Maybe they don’t have $500,000 now to pay you because the budget was cut. But they have other things of value to offset your loss. Ask them to award that work to you and you can reduce the $500,000 to perhaps $200,000. A Deal Whisperer always gives to get. If we make concessions in negotiations for which we do not get value in return, we are training the client that we do not respect our own business and we will give money away because they say the magic word, ‘relationship’. A Deal Whisperer builds relationships on mutual respect and trust. Client’s don’t respect us if we give away money and they are wise to keep asking us to do it until we say ‘no’.”

“Thanks for the advice, Mr. Gitou,” Verdi said. “I am going to sit down with my team and put together some options to address their financial limitations and also make us whole on the sunk costs of the project.”

(See “How to Build a Trust Action Plan”   http://dealwhisperers.blogspot.com/2011/02/how-to-build-trust-action-plan.html.)

What's the Problem?

Verdi was surprised to see Tyler Gitou in his office.

“Mr. Gitou! How nice to see you. You’ve been gone for a while.”

“Hello Verdi,” Tyler said. “I have been. Come in and visit with me for a bit. How have you been?”

Verdi sat down. “I’ve been great. Very busy with a bunch of new deals and I could really use your help. Where have you been?”

“I was away getting some sales and negotiation training,” Tyler said. “The best program I have ever had in my career.”

“Really?” Verdi said. “You go to sales training? But you’re the Deal Whisperer! What would anyone have to teach you? You’re the best in the business!”

Tyler laughed. “Thank you, Verdi. That’s very kind. But do you know why I am so good at sales and negotiation? Because I take training. Refresh myself. Learn new ideas and recall some I had forgotten. Practice.”

“You have to practice?”

“Absolutely,” Tyler said. “What do the best athletes do when they are not competing? What do football teams do in between Sundays or golfers do when they are not on tour? Train. Practice. Get better and be ready for bigger challenges.”

“That’s terrific. Did you learn anything you can share?”

“I learned a great deal, Verdi, and over the next few weeks I will share as much as I can with you. Why don’t you tell me about your deals?”

“OK,” Verdi said. “The biggest one I have is with a client that wants us to build a new software platform to run its retail operations.”

“Why do they want the new platform?” Tyler asked.

“The one they are using is old technology and getting expensive to maintain. The client has asked us to build something that is easier to upgrade in the future, so they want us to use all off-the-shelf software.”

Tyler nodded. “That sounds like an exciting program.”

“Well, it gets better. We figured out that if we build this we can actually turn it into an offering that we would sell to other clients. There are lots of retail operations out there that could benefit from this. This could develop into a billion dollar business for us. Our senior management is really excited.”

“It sounds like you have identified a problem that the client needs our help with and a solution for that problem. What’s the issue?” Tyler asked.

“It’s the revenue sharing.”

Tyler cocked his head to one side. “Revenue sharing? Where?”

“In the new business,” Verdi said. “We are trying to figure out how to share the revenue from the new offering. The client is asking for a large sum up front because, they say, they will have helped us build the business. We are proposing a revenue model that tracks to the growth of the business.”

“This is a very interesting discussion,” Tyler said.

“Interesting but a little contentious. The client’s leadership is starting to get involved and feels we are not moving enough to make the deal happen.”

“Which deal?” Tyler asked.

“The deal for the new business.”

“What business?” Tyler asked.

“The one that leverages the new software offering.”

“What software offering?” Tyler asked.

Verdi sighed. “Come on, Mr. Gitou! I just told you. The software offering we are going to build for the client.”

“Going to build?” Tyler asked. “So let me ask you this: how is it you are negotiating for what revenue the parties will share for a business that doesn’t exist that is to be built on a solution that has not been designed, developed or delivered?”

Verdi was silent for a moment. “You are suggesting we are putting the cart before the horse?”

“No,” Tyler said. “I am saying we don’t even have a cart OR a horse. We have an idea of what a cart and a horse might look like someday and we have described it to the client and gotten them all excited about something that could happen in the future. What about solving the client's problem?”

Verdi shrugged. “What problem?”

“The problem that the client asked us to help solve. Replace their legacy environment with a lower-cost and easy to upgrade system.”

“Yes,” Verdi said. “We’re still going to do that.”

“I know, but my point is you haven’t done it yet. And now the notion of creating a billion dollar business has everyone so excited that our team has lost sight of the underlying problem.”

“But Mr. Gitou, this is a really big deal.”

“No it’s not, Verdi. Right now it’s a thought. You have a deal on the table to help the client. Focus on the deal that the client needs, not the deal we want. Otherwise, your conversations about how to split non-existent revenue from a business that hasn’t been created will destroy the potential to really help our client.”

Verdi nodded. “I see what you mean. So what do I do next?”

“We need to change the conversation. Let’s strategize about who we need to speak with at the client and what we need to say. You are in a very precarious situation now having built expectations. We need to reset those expectations and re-frame the outcomes that we can achieve. As Deal Whisperers, our goal is always to focus on what we can legitimately achieve for our clients right now and bring them into a spirit of collaboration. As we develop the relationship, and we discover we can find more value in our work together, then we can decide how to optimize that value and the appropriate way to share it. But before we do that we have to demonstrate that we can both solve the critical problem that we all identified in the first place.”

Who Cares?

 “Verdi, this is the second time you have delayed closing this deal for another quarter,” said Tyler Gitou. “What seems to be the problem?”

“I don’t know,” Verdi said. “The client shows all the indications that they are ready to buy. They need the software, like, yesterday, to replace their old system. The system is out of compliance and the regulators are getting antsy. I guess it’s just caught up in the purchasing bureaucracy.”

“The ‘bureaucracy’?” Tyler laughed. “If their building was on fire, how much bureaucracy would they wade through before they called the fire department?”

Verdi shrugged. “None. They’d make a call.”

“Yes, because if they had to save the business they would act. It sounds like they need to save the business here as well. So let me ask you a simple question. Who cares?”

Verdi furrowed his brow. “I don’t understand.”

“This is a question that is core to your ability to achieve a commitment and make a sale. Who in the client organization cares most about solving the problem that has been identified? If this software does not get installed, who gets fired?”

“That’s probably Jenna Connell, the CIO.”

“And who is your key contact at the client?” Tyler asked.

“I am working with Tim Luizza, the procurement lead.”

“How often have you met with Jenna Connell?”

Verdi thought for a moment. “Never.”

“So what I am hearing is you have spent the last six months talking to procurement and all you have to show for it are a bunch of ‘what-if’ scenarios and specifications and modifications, but you don’t have a deal.”

“That’s… accurate. But I don’t think it’s fair.”

“Why isn’t it fair?” Tyler asked.

“Because I have also built a good relationship with Tim in that time. And he tells me we are the leading contender for the business.”

Tyler nodded. “Building a strong trusted relationship is a positive outcome. But how much have you spent in your budget to get that relationship? And has Tim committed that your investment will pay off?”

“No, he can’t.”

“Why not?” Tyler asked.

“Because… he’s not the one making the decision.” Verdi sighed. “OK, I get it now. I need to develop a strategy to speak with the decision-maker, and not the facilitator.”

“Exactly,” Tyler said. “One of the key elements in a healthy negotiation is a commitment. A Deal Whisperer knows how to tell the difference between learn, churn and earn. The parties first must go through a process to learn about each other and the issues. From there, one has to be careful to control the amount of churn as the client comes to a decision. If not managed, churn can burn your budget! But if done well, you’ll have just enough churn to earn the client’s trust and their commitment. The three have to be balanced so don’t rush one and don’t waste time on another. Balance your ‘learn and churn’ and you’ll have a much more efficient ‘earn’.”

He's So Wrong!

 “So was I right or was I right?”

Peter Pompel gestured to a chair for Tyler Gitou to sit down. “Isn’t Frances Forte the most emotional and challenging executive you’ve ever encountered?” Peter asked.

Tyler paused for a moment to gather his thoughts.

Tyler had met with Frances Forte, the COO of a large manufacturing company, at Peter’s request. Peter and his Tech Team colleagues had been hired by Frances to install a new finance and accounting system. Peter called Tyler for advice because Peter thought Frances was overly emotional, which made communication difficult. (See: “She’s So Emotional!”) http://dealwhisperers.blogspot.com/2012/07/shes-so-emotional.html

Tyler met with Frances and found her to be a calm and reasonable businesswoman. The problem was with Peter: he did not understand how his own communication strategy was actually frustrating Frances and causing her to seem “emotional”.  (See: “She’s So Logical!”)   http://dealwhisperers.blogspot.com/2012/08/shes-so-logical.html

Tyler now had the challenge of telling Peter that he needed to adjust his behavior, not Frances.

“Actually, Peter, Frances is a pretty direct and balanced businesswoman. From my conversation with her I think you are the victim of a misperception.”

Peter sat back in his chair. “Really?” he asked. “Are we talking about the same person? This is the woman who I told you gets upset when I tell her everything is going well. She accuses me of hiding information. Sometimes it borders on her questioning my ethics!”

Tyler raised a hand to calm him. “Peter let me ask you a question. Is everything going perfectly?”

Peter shrugged. “Well, no, of course not. There are always issues in these types of projects. But we get them resolved.”

“I understand. Do you convey those issues to Frances? Tell her where you are facing challenges and solving the problems?”

Peter laughed. “Oh goodness no! The last team we had in here struggled and Frances ordered them off the premises! That’s when they brought me in here. I’m not going to let her think that we aren’t doing our job well. She’ll get all riled up and get me fired.”

“So you are concerned that if she knew there were delivery problems, even though you solve them, she would perceive you as failing in the engagement?” Tyler asked.

“All I know is the last team got thrown out for poor performance. I am not going to let that happen to me.” Peter folded his arms across his chest.

“Did you know that Frances championed Tech Team in the bidding process because she thought you were the right company for the job and she basically put her career on the line for you?”

Peter relaxed. “Really? No I didn’t. Frankly I had wondered how we won a deal of this size.”

“So she has a vested interest in making sure you succeed,” Tyler said. “If she throws out your team, she’s finished. Your destiny and hers are tied together.”

“That explains why she is so focused on what we are doing,” Peter said.

“When you do run into problems, who on her team do you work with?” Tyler asked.

“Our direct contact is Michael, who reports into Frances.”

“So Michael knows there have been issues which are getting resolved?”

Peter nodded. “Absolutely.”

“Don’t you think Michael tells Frances about those issues? Or do you think he is telling her everything is going off without a hitch?” Tyler asked.

“No. He understands that we are ultimately going to succeed here, but I guess he probably keeps her up to speed on how we are progressing.”

“So put yourself in Frances’s shoes,” Tyler said. “You advocated for a company that failed on the first try. Your career is at stake. The new team keeps telling you everything is going well, but your own people are reporting issues every week, though they eventually get resolved. What would you think of a team that is not being open about the challenges on the program?”

Peter thought for a moment. “I suppose I would not trust that team because it feels like they are hiding something.”

“And as the deadline for completion draws near?”

“I probably would get frustrated every time I heard that ‘all was well’ because I knew it was not,” Peter said.

“Exactly,” Tyler said. “Your perception of Frances as an emotional executive came from her frustration with your behavior. While trying to protect your company by trying to make her think you were not encountering any problems, you actually created an environment of distrust with her because she thought you were hiding something. Couple that with her stress because of her personal interest in the success of the program, which you did not know about, it’s no wonder you had a misconception about her.”

Peter shook his head. “That’s great insight, Tyler. Thanks. So what do I do now?”

“Open up to her about the program. Have a meeting with her and Michael every Tuesday and Thursday and provide her updates, warts and all, and what the plans are to resolve the warts. She knows there will be problems. What you need to do is demonstrate to her you are anticipating and remedying those problems to limit the risks to the program’s success. You will find her demeanor will change. A Deal Whisperer tries to be open and transparent with the other party so that both sides will share challenges and collaborate to solve them. That builds trust and lasting relationships.”