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.”

"What Are We Doing?" Setting Goals in Negotiation

One of the most fundamental errors negotiators make when trying to address a new issue or solve a problem is failing to establish with the other party the goal of the negotiation. On its face it sounds ridiculous. After all, how could two parties come together and never share with each other what they are trying to accomplish? Would two people get into a car to begin a trip without discussing where they are going? Of course not. Imagine the driver heading south to Philadelphia while the passenger is holding a map of Boston! Would the passenger wait until she was standing in front of the Liberty Bell to say, "I thought we were going to Boston!"? Or would the topic come up when she saw signs for Philadelphia?

Parties in a negotiation can be going in different directions and never even realize it. The outcome is they negotiate their way to a compromise, halfway to their respective goals: New York! Neither one is satisfied because neither ended up where they hoped to be.

Consider the story of the entrepreneur and the investor. The negotiations appear to be about the investor trying to buy one of the entrepreneur's businesses. But for some reason the entrepreneur doesn't seem willing to agree to any of the multiple options on valuation, compensation or transition. In fact it feels like the entrepreneur doesn't even want to sell!

Maybe it's time for the parties to discuss whether or not they understand each other's goals.

Investor: "We seem to be struggling to close out some of these issues and I thought maybe we should stop and spend a moment to make sure we both still want to do this deal. Could you share with me what this deal means for you and why you are interested in doing it?"

Entrepreneur: "Well, frankly, when I told people I was interested in selling the company I hadn't expected things to move so quickly. My real goal was to raise money by the sale of this company to fund some of the other companies I am trying to grow."

Investor: "I don't get the sense you want to sell this company."

Entrepreneur: "As we've gone along, I have to say I am having second thoughts. This was my first company and it's kind of my baby."

Investor: "Well what if we shaped the deal differently? My goal was to purchase your company to get access to your technology for the industries I am focused on. What if we did a licensing deal instead? License me the technology so I can go after those markets that you don't seem interested in."

Entrepreneur: "Now that is interesting because I would be able to raise the money I need without selling the business or creating a competitor in my space."

Maybe the parties had started their journey with a common goal. But the investor, staying focused on what the entrepreneur was saying and how he was reacting to the brainstorming, recognized something had changed. The delicate part was finding the right way to ask the entrepreneur to share his goals. Once they started that dialogue, it became clear quickly that the goal was no longer a shared one and the parties needed a new plan: let's go to Chicago!

Poor communication is the single leading cause of issues that arise in a negotiation because the parties are often afraid to talk openly with one another. Positional negotiators are especially prone to this behavior because they fear that sharing information might give the other party some advantage, like finding out what they really want. Ask yourself how one party is supposed to help the other party get what they want if that party won't share what it wants! Positional negotiators simply state that they want X without any explanation of why they want X or how X will help their business.

As a Deal Whisperer, start your negotiations by trying to understand the outcomes of the other party and what you hope to accomplish. Brainstorm on other options that might achieve those objectives. Be open about your own goals as a way of modeling the type of dialogue you'd like to have. Once the parties have articulated their respective goals and see where their interests overlap, the journey to "done" becomes clear.