In a previous post I spoke about negotiating past the agreement at hand.  As promised, here are some things to consider:

Does my counterpart’s opinion of myself or the deal matter to me?  Unless you are buying a knickknack souvenir on vacation (in which case, feel free to skip this post altogether and enjoy your vacation!), odds are the person you are negotiating with will be able to affect you in some way down the road, be it through reputation, referrals, how they comply (if at all) with the agreement or in any number of ways.

But if there is a relationship in place, be it a requirement for future performance, a partnership, or even the possibility for referrals (or public complaints), you might want to look past the “Yes” and consider some additional points:

1)      Does my current negotiation strategy improve or compromise my relationship with my counterpart?

2)      Are my counterpart’s interests being met?  If not, what does that say about the medium to long term viability of this relationship?

3)      Is the deal we are putting together self-policing?  To wit:  are there built-in incentives to both parties that encourage them to carry through on or even add value to the agreement?

4)      Is there a dispute resolution clause?  Hint:  there always is an implicit dispute resolution clause:  the courts.  Is that the one you want to use or would you prefer to build in more viable options (mediation, arbitration, confidentiality clause, choice of venues, etc, or any combination of the above)?

5)      Is the case of partnerships, is there a dissolution clause in place?  Example:  shotgun offers, a formula for valuating the business in case of a buy-out, a non-compete clause, etc).

6)      Are there contingencies in place to address events outside the control of the parties?  If sales exceed x then a discount of y applies.  If the price of concrete drops below x then the agreed price proportionately matches the drop, etc.

7)      Is there a referral fee for additional business?  Turning clients into champions is good business – do it as often and effectively as possible.

Finally, a bonus tip:  Once you have a deal in place, consider reopening discussions and trying to find an even better arrangement.  This can be tricky, but can pay major dividends.  If you’ve done your homework on the relationship and built trust and an environment of cooperation (instead of purely competition) there is often an opportunity to review the arrangement looking for opportunities to increase value, either between the parties or by an outside agent.  All parties have the option to stick with the deal in place, so there is a good chance they will be more forthcoming about their interests and creative with their solutions.  And again, if they don’t like the new deal they have the option of sticking to the deal in place.  Handled properly, there is an enormous opportunity for value creation.

“Yes” is a great thing to hear, but it’s a jumping off point, not a destination.

Ran across this article this evening:  http://business.blogs.cnn.com/2010/06/24/knowing-when-yes-means-no-in-business/

What jumped out at me was not so much the article itself, but the comments.

Let me know what you think...

Getting to Yes and Getting Past No are two books on negotiation I find myself recommending to clients, friends, family (and just about everyone else).  They’re easy to follow, yet provide game-changing insights to the would-be negotiator.  If you haven’t yet read them, amazon.com is your friend.

I mention this because what I’m seeing more and more of is people negotiating to get to a close, be it a contract, a handshake or a general agreement, without considering the ‘what next?’  So, in deference to Mr. Ury and his excellent books, this post is about Getting Past Yes.

Bargaining hard and getting the concessions you want is great, we all love the feeling that comes of a successful negotiation session.  But in most cases the agreement has to survive past the contract.  The person you’ve been negotiating with actually has to follow through with the agreement.  They can do it joyfully, willingly, grudgingly or not at all, depending on how well they perceive their interests are being met.

This is a point that we often overlook – our agreements need to survive past the yes.

Some years ago, I was negotiating the incoming salary of a key employee.  This was someone I would count on to help move my business to where I wanted it to be.  We were on the same page, he wanted to work with me, I wanted him onboard, all that was left was the money.  He, not knowing his market value, proposed a number I found to be far less than I was prepared to pay.  Normally, I would smile inside, shake hands on the deal and move forward.  But would that be in my best interests long-term?

Was it in my best interests to pay him as little as I could get away with?

I took the opportunity to garner some goodwill and start our relationship off on the right foot.  I countered with what I was originally prepared to pay him – 70% more than he had proposed – and added on a performance bonus.  And I never made him have to ask for a raise.   What I got in return was loyalty, and I set the tone for the rest of our (excellent) working relationship.  Not coincidentally I gained a bit of insurance that someone else wouldn’t steal him out from under me when I needed him most.

I tell this story not to show how smart I am (I’ve made plenty of mistakes since then, and expect to make many more), but rather as an example of seeing past the negotiation at hand and into the implementation phase.

All this comes to mind because of a similar case that has come to my attention.  A business owner I know is in the process of trying to lease his business and premises, and is asking for a yearly rent that is simply unsustainable.  Assuming the potential lessee agrees, then what?  How many months will the lessee pay the rent until he can’t pay anymore?  Then what?  Lawsuit, expenses, eviction, etc.  No doubt the owner will feel taken advantage of, but it seems to me that he himself is building this situation by trying to negotiate a contract that he himself should know is unsustainable.  Would he not be better served charging a more reasonable rent, or at least structuring a deal that allows them both reasonable revenue based on income (or some other factor)?

Yet more and more I see people committing exactly that mistake – being short-term greedy instead of long-term greedy.  Negotiating to yes, instead of past yes.

The thinking is that following through is the other guy’s problem.  The thing is, his failure to follow through invariably becomes MY problem.  Remember that the goal is not to get the other party to agree to perform, it is to actually get them to perform.  To do that, their interests have to be satisfied as well.

I’ll come back to this point in an upcoming blog, because I think it bears further discussion.  In the meantime, comments are more than welcome!

Is being poorly quoted worse than being misquoted?

We gave an interview with a very well-respected journalist who was kind enough to visit us.  The title of the interview itself is misleading, as no one ever talked about mediation being vital to arbitration, and I feel the part about tourism was oversimplified to the point of missing the point.

What I had said was that:

1)      The all-inclusive tourism model prevalent in the DR is so vertically integrated as to preclude much of secondary and tertiary industry participation vital to growing the economy

2)      We need to move away from the commoditization of the tourism product and compete based on value added, rather that price

3)      The DR has reaped huge gains from the present model, but that there is a lot of room for the addition of other models of tourism

4)      We need to pay attention to the quality of the entire tourism experience, as opposed to simply quality resorts, which means taking a serious look at the surroundings

Nevertheless, I admit to being flattered at being interviewed as an expert.  Next time I will know to bring press points to better harmonize what I want to convey with what is actually conveyed.

http://www2.listindiario.com/economia-and-negocios/2010/5/31/144260/La-mediac...

...and Seven Contrary Virtues to see you through

1) Wrath   "I'm going to beat this guy -- I'm going to win for once!"
Winning implies beating someone - but what does beating someone actually win
you? What do I care if I 'win' a negotiation where I make 100K if by
'losing' I could have made a cool million?  Patience: Keep your eye on the
prize. Your goal isn't to win a negotiation -- negotiation is only a tool
to achieve your goal. How do I get the most value from this negotiation?
When things get heated, take a step back. My father used to say that you
don't eat your soup as hot as you cook it. Make it a point to not burn your
lips.

2) Greed   Much like gluttony, greed keeps us coming back for more.
It's not enough we did well, we have to go back for another bite at the
apple. The problem is that greed elicits a similar response in our
counterparts and sets off a zero-sum game. Liberality:  Be what a good
friend of mine calls 'long-term greedy'. Step back and look at the big
picture. If leaving a bit on the table will allow you to come back to that
table over and over, be a little generous in the short term.

3) Sloth   It's easy to hand off the negotiations to lawyers, or to cut
corners on preparation, but 'easy' is not the goal. The goal is to generate
and claim value. Diligence:  You're the world's leading authority on your
own business and on where your interests lie. While lawyers by definition
understand the law and can often have excellent insights because of similar
deals they've seen or worked on, not all of them are the business experts
people think they are (or they themselves may profess to be). Remember
that once the negotiation is done, it's up to you to follow through on the
deal you made -- for better or for worse. So stay personally involved in
every phase of the process, from preparation to execution. As an aside,
I've found that consulting with a good attorney (and a good CPA) during the
brainstorming phase of a negotiation can yield excellent results, whereas
leaving them out of the loop until you're ready to draw up a contract is a
recipe for renegotiation, delayed or lost deals and frustration all around.

4) Pride   This one should be a no-brainer, yet how many times do
executives come to the table relying only on what they consider to be their
considerable expertise and experience to get them through a negotiation?
Ever see a professional fighter step up to the ring without a solid training
camp behind him? How did that work out for him? Humility:  Have enough
humility to do your homework, despite your towering genius. Hard work and
talent will win out over talent every time. Come to the negotiation with
your interests clearly defined, with a solid BATNA, with your team aligned
and sure of their roles and with a clear strategy. Having a hard time
preparing? Be humble enough to get help. But do not sit down to negotiate
until you are prepared. Pride will cost you time, energy and yes, money.
And I hear it cometh before the fall.

5) Lust   We all fall victim to this from time to time. We fall in
love with a new car. We get attached to a deal, or a house, or a potential
job. We respond emotionally to what is, in essence, a financial
negotiation. Chastity:  Don't fall in love. Simple, right? How do we do
that? Prepare, prepare, prepare. The more information you have, the more
fully developed your BATNA is, the more clearly defined your interests, the
easier it will be to resist making those emotional decisions.

6) Envy   You've worked hard, invested time and resources and have
finally come to an agreement you can (maybe) live with. But wait a minute -
how do you know this is the best deal possible? Maybe you could have done
better? Oh no, it's buyer's remorse! Kindness: Fortify yourself by
developing alternatives before even beginning negotiations. Negotiators
refer to this as BATNA (Best Alternative to a Negotiated Agreement), and it
means what it says. What are your alternatives to this deal? Once you
equal or exceed your BATNA, show a little kindness and accept that your
counterpart might have bettered his BATNA as well.

7) Gluttony   After a long and mutually frustrating series of
negotiations, you've finally made a breakthrough and managed to drag your
counterpart kicking and screaming to the deal you wanted. Not only have you
make your slice of the pie bigger, you've left him nothing but crumbs.
Congratulations! Now what? Your deal has to survive the contract and
you're now counting on your counterpart (you remember: the same person
you've been squeezing, threatening and cajoling) to follow through on his
end. Good luck with that. Abstinence:  Don't try to eat the whole pie!
Look for ways to trade concessions that mean little to you but much to your
counterpart. If your cash flow is where you need it but your counterpart's
is an issue, look at ways to structure the payments to suit his needs in
exchange for that price concession you want. This sort of creative thinking
shows that you're willing to work to address your counterpart's needs, not
merely your own, which will come in handy when the shoe is on the other
foot.

.

I’ve found that most people who make the comparison between poker and negotiation generally know little about either.  As I know a little about both, and because there is still some value in the comparison, I’ll brave the cliché.

Beginning poker players think it’s all about the big bluff or hitting that fifth spade for all the money, just like in the movies.  Neophyte (and often seasoned) negotiators tend to think in those terms as well.  The high-pressure boardroom, a twitch, a glance and then the almost palatable moment when the other side caves.

The truth is, unfortunately, much less interesting. 

A good poker player has a deep understanding of the mechanics of the game, the odds if you will.  He studies his players.  He pays attention to what cards his opponents play and how they play them.  In essence, he collects and interprets information over the course of hours (or days, months even years) of playing with a person and uses that information to decide how to play against that particular player.

Not only that, but a good poker player reviews his game.  He takes notes and critiques (or brutally dissects, as the case may be) his own play.  He is constantly looking for flaws in his game, because he knows that flaws are money leaks that need to be plugged.  He reads up on theory and respects the game enough to put in the time and effort to constantly improve.

He also pays attention to how he himself is perceived at the table and how that can affect the decision-making processes of his opponents.

In short, a good player constantly studies and controls the only factors under his control – his decision making process and his effect on the decision making processes of his opponents.  In a very real sense, a good poker player has won before he even sits down because he is better prepared than his opponents to maximize his wins and minimize his losses.

The average player sits down and sees what happens.

Thing is, the average player is a losing player.

Over the short term, an average player might actually hit that fifth spade on the river to bust your set for all the money, but over the long term a solid player will grind out that average, albeit lucky, player for as much money as they’re willing to spend.

In negotiations, we might get lucky enough to walk up to the table and hit that big score.  We might even get more than we want.  But a skilled negotiator will have stacked the deck.  He’ll have put the time into learning his craft.  He’ll have invested the effort and resources into being prepared and will arrive at the table with his goals, strategy and alternatives well defined.  He’ll have the information at hand to anticipate his counterpart’s moves.  Over the course of a career, he’ll maximize the value on all his negotiations and minimize the losses. 

The average negotiator, well, he’ll wing it and hope for the best.

So my question:  which negotiator are you?

In my most recent blog, I talked about the error of trying to squeeze a new paradigm into an established mould.  It’s been brought to my attention that I may have been a little harsh.  A little negative.  It was even suggested that I was not *gasp!* my usual cheery self!

Perhaps I’m being a bit hard on them.  After all, it’s not easy to change the way you look at an established business.  Especially when the business in question has been successful for so long.

But this is the very challenge facing business after business in industry after industry – how do we adapt an established business to new challenges?  The answer invariably comes back to the same thing – with new thinking.

By this I don’t mean new ways to do what we already do.  I’m talking about a revolution in thinking, not an evolution – and revolutions by definition require revolutionaries.  Rick Barrera’s bestselling “Overpromise and Overdeliver” is full of examples of established, successful businesses who reinvented or refocused themselves and were able to effect substantial changes in their business models – to dramatic effect on the bottom line.

What did all these businesses had in common?  They stopped thinking about how to make the customer do what their business model required and started thinking about how to design their business model to provide what their customers required.

That same approach is being applied in all facets of business negotiation.  Instead of learning tricks and stunts designed to lead the opposite party to an ‘ideal’ decision, forward thinking negotiators are partnering with their supposed adversaries and finding ways to come together to create value for all parties.

Imagine that – instead of my counterpart trying to gobble up as much from the negotiations as possible, he’s trying to find out what it is I need and trying to find ways to give it to me.  And I’m doing the same.  We’re working together to build a deal and a relationship that will not only add value to both of us, but which stands a much better chance of surviving well past the signing.

Sound like utopia?  A pipe dream?  It’s not.  It’s happening in the boardrooms and conference rooms and back rooms of businesses large and small across the world.  Potential executives are using this approach when interviewing for positions, farmers and co-ops are using this approach in their dealings with distributors.  Small business owners and captains of industry, politicians and community organizations, employers and unions – they’re all coming to see the value in a collaborative process instead of a strictly competitive one.

Are you?

In your negotiations, including (and especially) your dealings with your customers, are you trying to find out what they want and finding creative solutions to giving it to them, or are you trying to find a way to make them do what you want them to do.  And do you know the difference?

Your competition does.