(yes, quoting Sun Tsu, but the Godfather only cribs from the best...)
One of the great strengths of both Dons Corleone (Vito and Michael) was that they were great students of human behavior. They not only understood what was being asked of them, but also why. And, as much as it would help if all parties to a negotiation behaved like “rational economic actors”, the fact is there are myriad reasons for human behavior, and not all of them have to do with getting the best deal by the numbers. So, if you find your counter-party doing things that don’t make sense from a purely business perspective, understand that there’s something more going on there--it’s time to re-start your research engine. I’ll bet you find some non-monetary factors affecting the deal--your counter-party’s status within their organization? personal relationships? prior dealings between your organizations that didn’t work out? biases? Get to the bottom of these, and take them into account when finalizing your agreement. Otherwise, you may discover down the road that that seemingly odd but innocuous demand you accepted has unintended negative consequences.
A Linkedin user asks: Would you sign a major business contract with a company represented by an individual that you have only interacted with on a social networking site or via email or phone?
The Freelance Consigliere answers: Your concerns are justified: there is no substitute for an in-person meeting. If the agreement really is a big deal, then invest resources (time, money) in checking out the bona fides of the person with whom you’re contracting by scheduling an in-person meeting. In addition, structure your deal to make your obligations contingent upon some or all of the following: requiring completion of a credit app (including bank, vendor, and/or customer references--which you should then call, not just email), progress payments, posting a letter of credit, funding an escrow account with draw-downs based on milestones, etc.
Much of the agita that arises in closing deals would be eliminated if more negotiators could manage to maintain this perspective. Even when negotiating in the personal realm (parents know trying to enforce a bed time turns any 4 (or 14) year-old into a Junior Business Affairs Executive), if you arm yourself with a certain level of detachment, you’l discover one of the greatest--and free--negotiating advantages. When you find yourself struggling to retain the composure that comes from this approach, remember that any heated exchanges or forceful demands coming at you from the other side derive from your counter-party’s negotiating posture; they’re not really about you. What you’re hearing is mostly an expression of their needs, where they are in the deal; it’s not usually a reflection of what you’re bringing to the negotiation. And if the other side insists on personalizing things? Check back here for tactics to get around that roadblock.
"He must let us draw the water from the well. Certainly he can present a bill for such services. After all, we are not Communists."
If you hit a snag on one part of your deal, where--for the moment--the parties need to draw firm lines, it’s a good idea to try to keep the lines of communication open, maybe in another area. To accomplish this, ask yourself if there are resources you control that are that are cost-less (or low-cost) to you but valued by your counter-party. If so, you can offer to share them in order to create good will and continue the dialog between you and the other side. This can also take the form of engaging in on-going conversations about a separate deal or another area of engagement. Any such effort can support the relationship between the two sides while you get your main deal back on track. The idea here is to bring what are more personal skills to business relationship-building. Because, after all, this is business, no? Our next concept…..
I once worked on a frustrating deal that, try as I might, I couldn’t seem to close. Complaining to a colleague who’d also done business with this counter-party, he said “oh he’s the kind of guy where if you’ve got 2 open points and think you’ve closed on 8, you still have 10 open points.” So how do you deal with a party who takes advantage of unresolved issues to go back and re-renegotiate earlier ones you thought you’d closed out on? Who won’t, in effect, stop negotiating? Unfortunately, the best defense here is a good offense. What this sounds like: “Gee, I thought we’d been making great progress here, having agreed on how to deal with [closed point(s) on which you’d made concessions]. If we need to have those conversations again, I’ll be forced to re-consider those concessions I made for you. And that’ll of course be a set-back for everyone involved.” Such an approach usually works to ensure forward momentum, which is important to maintain, even when one part of your deal isn’t closing as quickly as you’d like. Check back tomorrow for another suggestion on this front.
One of the most fun things about deal-making is the creativity involved. You can tap into your power for innovative thought if you sense that making a disruptive proposal can move your deal forward more than continuing with an approach that’s causing it to stall. If you move in the direction of making a substantially different counter-offer, however, be prepared for added time that may be needed to explain how it’s mutually beneficial. If you conclude that this additional effort is offset by the benefit of kick-starting the deal’s momentum, go ahead and shake things up. But make sure you look at it from the perspective of your counter-party: they’re not expecting these radically different terms from you, so present them as constructive new ideas that have occurred to you as a way out of a current stalemate, not an aggressive land-grab. The last thing you want is to be viewed as one of those annoying negotiators who constantly try to re-start the entire process each time they don’t win a requested concession. How to handle those types, next time….
It may seem like an obvious point, but if you’re dealing with a counter-party who brings a lot of bluster to the table--not an uncommon situation--don’t allow yourself to be bullied into thinking you have less leverage than you really do. As we talked about in the last post, in order to close the best deal, you need to maintain a proper perspective on the relative strengths of each side, and that includes yours. In the heat of meetings, conference calls, especially when you’re dealing with someone who’s got a combative negotiating style, you can lose sight of your actual competitive advantages. So prepare well for each negotiating session (have those pre-calls and pre-meetings suggested earlier), master the facts, and keep them top of mind--and in writing in front of you if necessary. Most importantly, don’t hesitate to calmly contradict any mis-statements by your counter-party that can, if left uncorrected, cloud the reality of the situation, or diminish your will to push for your best outcome. The next question is: can you be a disrupter?
"If you had come to me in friendship, then this scum that ruined your daughter would be suffering this very day."
Let’s get back to thinking about the terms of your deal themselves, and the concept of the “BATNA”--the Best Alternative To a Negotiated Agreement. Recall from prior posts that this term refers to the scenario if a deal cannot be successfully closed. One way to get to “yes” is to make sure the other side understands its own BATNA. You do this by drawing the picture for them--please, not as graphically as the Don--of what things will look like for them if they don’t conclude an agreement with you. You can be specific about what you believe their alternatives are regarding suppliers other than you, services those competitors can’t provide that you can, their prices, or how their offerings won’t allow your counter-party to achieve its objectives. There are two keys to doing this well: First, focus solely on the other side’s objectives for this deal, and how they won’t be met through alternatives, never what you, yourself, won’t achieve if you fail to close. Second, you must present this sort of an argument in a non-confrontational, non-threatening, positive, and consultative manner. This keeps the conversation about your competitive advantages. That’s our next topic.
"Fredo, you're my older brother, and I love you. But don't ever take sides with anyone against the family again. Ever."
Last time, we floated the idea of "divide and conquer". Usually, however, you want to try your best to keep everyone on your side of the negotiating table on the same page, or else keep them quiet. That may sound harsh, but internal disagreements within your team that are displayed to your counter-party often provide opportunities to drive a wedge between you and your partners, weakening your negotiating position. So, I often recommend having a “pre-meeting” before each major session with the other side to fully hash out any internal disputes and come to final decisions on positions you’ll take on open points. During a live meeting with the other party, if need be, agree in advance on what a signal between you and your partners will be, to ask for a break in order to talk in private about a point that’s come up. If you’re all on a conference call, open up an IM chat among everyone on your side, so you can be communicating with each other as the call is happening, to adjust course (or ask someone to limit their input, if it’s not in line with your negotiating stance). Now that we’ve looked at the parties, on to the deal terms themselves…
If your side consists of more than one person, department, or internal stakeholder, sometimes it can help to play one off against the other. You can indicate that some of the tough stances you’re taking derive from parties, circumstances, or policies that are outside of your control. This may indeed be the case, if there are certain aspects of a service or product you’re providing that cannot be customized, at least not under your business plan. The friend-and-foe tactic is as old as the phrases “good cop/bad cop” and “Mutt and Jeff”, however. If your counter-party is astute, they may quickly figure out what you’re up to and give back the same in return. So, unless you can’t think of another way to get around a particularly contentious point, it’s generally best to take the opposite approach, which is next up on the continuing topic of parties to a deal.