Give away nothing for free

RULE NUMBER 9 GIVE AWAY NOTHING FOR FREE

When negotiating, a good mindset to adopt is the one that says everything has a value and that nothing should be given away for free. And yet, far too often, well-intentioned or naïve negotiators give away items to the other party when they need not. The irony is that by giving something away too easily, its value to the recipient becomes much diminished. Let me share two related but different perspectives on this.

First, giving something away is not negotiating. It is conceding or avoiding the negotiation. This is akin to buying items from a shop, where few would bargain with the shopkeeper for a better price. It is simply giving or taking an order for goods or services, but not negotiating. However, some people do negotiate in shops, and with stellar results.

Second, many negotiators are prone to certain behaviours and styles that render them vulnerable to exploitation when striking a deal.

Why do negotiators give away value?

There are four major factors that govern the tendency to give away value:

1. Habitual “expensive” persuasion styles

As the persuasion tools model (shown opposite), based on work by Kenneth Berrien, illustrates: l Bargaining and compromise are expensive persuasion methods because we have to give away or trade some items of value l Emotion and logic cost nothing and can be very powerful persuaders l Our database suggests that about 90% of people naturally overuse bargaining and compromise l More than 65% are comfortable with logic

If we split the emotion box into two elements: l Positive emotion (warm supportive words) – few people are comfortable with this style, even though

it is relationship enhancing and can be a very persuasive approach l Negative emotion (cold threatening words) – 75% of respondents overuse threat because it is easy, even though it damages relationships.

So what? The vast majority of negotiators leave lots of value on the negotiation table. With training and coaching, their styles can change substantially to deliver much improved value consistently.

2. Relationship outcomes are more important than commercial outcomes

In many commercial negotiations, the balance of power is tilted firmly in favour of the buyer, due to a psychological phenomenon related to the balance between the importance of the relationship versus the importance of the commercial outcome. This is highlighted by the strategic relationship matrix illustrated below. l Many sellers are too often accommodating, enthusiastic, “lose to win” deliverers who are soft on people and the problem and hence prefer to avoid confrontation. They often seek agreement in a friendly way, to protect the relationship at all costs. We like them and they want to be liked. They are in the top left “accommodating negotiations” box. l Contrast them with the traditional or tactical buyers – people who are confrontational and demand concessions as a condition of the relationship, who are hard on the people and the problem, whose goal is victory in a “win/lose” contest, and who will fight opportunistically for the commercial outcome with little or no regard for the impact on the relationship. They are in the bottom right “opportunistic negotiations” box.

PERSUASION TOOLS MODEL

High intuition

Intuition Influencing Low influencing High influencing

Bargaining Emotion

Low intuition Compromise Logic

STRATEGIC RELATIONSHIP MODEL

High

Importance of the relationship

Low Accommodating negotiations Collaborative negotiations

Contractual negotiations Persuasive negotiations

Avoiding negotiations Opportunistic negotiations

Importance of the outcome

High

HIGH EI/EQ

Warm

l Conceding l Avoiding l Unassertive l Weak l Persistent l Committed l Empathic l Assertive

QUITTING

Weak

l Ineffectual l Pathetic l Beaten l Morose

PERSISTENT

l Uncaring l Hard l Aggressive l Angry Strong

Cold

LOW EI/EQ

BALANCING VALUE AND PRICE

PRICE

USP VALUE

In this scenario, ask yourself who will make the commercial concessions first, and keep making them to protect the relationship? The ideal negotiator is driven by the importance of the relationship, but also by the importance of the outcome, and is prepared to be highly assertive when sticking to their goals.

3. Preponderance of unassertive behaviour

Behaviour can be measured by plotting emotional intelligence against persistence (shown in the top diagram above): l Many negotiators show a lack of self-confidence and belief, and unassertive behaviour, leading to overly quick concessions l There may even be a tendency to avoid confrontational or difficult negotiations altogether l Another facet of this behaviour is a propensity to be overly subservient to the customer (“the customer is always right”) with a corresponding unwillingness to say “no”.

These are major factors in not only soft negotiating styles, but also the preponderance of scope creep in service businesses. While some of these traits can be addressed through training and coaching, there are also some people who are simply not cut out to be effective negotiators because they will always concede too easily. Best to keep these individuals away from the negotiating table...

4. Lack of understanding of their value

The fourth factor comes down to commercial naivety. The negotiator simply fails to grasp the value to the other party of the item they are bargaining over, as illustrated in the see-saw diagram shown on the left.

In every negotiation, each party has things that they’re looking for. Similarly, in almost every negotiation, people have things that are of little or no cost to them, but which are highly desirable to the other party

When we’re negotiating with somebody, we may have something that we don’t really need or has little value to us – perhaps because we have it in great abundance – that the other party would value and would be of benefit to them.

You need to grasp this fundamental point when you are negotiating. You need to understand the other party, what you have available, and how it could benefit them. Is there something that you have that they would like, or they value highly, that would be of benefit for them? Similarly, what can you offer that no one else can? If you understand these issues and perspectives, you can negotiate without giving away value for free.

Stop and think

Interestingly, these four factors are all about mindset, or attitude, before and during the negotiation. Negotiators who are lacking in confidence, and are unassertive or naive tend to give away value. If you are happy with leaving some money on the negotiating table, that is fine – you could carry on as you are. However, my advice is to make sure that the other party appreciates the true value of what you are giving to them for free. Look them in the eye and make it clear that this is a deliberately generous gesture and not an unplanned offer by the negotiator.

However, if your margins are being squeezed and the other party is taking advantage of your goodwill or naivety, you may need to change your mindset. It sounds easy, but it is not.

First of all, get over yourself and start thinking commercially about this issue. Just how much is this factor worth to the other party and how much is it costing you? Such a thorough and honest analysis can be shockingly revealing.

Second, in almost every negotiation, there is an element of confrontation between the two positions – get used to it. It is not personal. Those who are well prepared and rehearsed, warmly assertive (without being aggressive) and who have done their homework beforehand, will be comfortable with the confrontation, manage it well, and understand how to use their value. They will be rewarded.

So, the message is simple: the next time you feel like you may make a concession and give away something for free, stop and think again, carefully.

RULE NUMBER 10 BE PREPARED TO WALK AWAY THE BUYER’S POSITION

There is nothing quite so empowering to a Wow! Ideal Walk away or highly unsatisfactory negotiator as knowing that they can walk away from a deal if necessary. This enables them to be assertive on their goals, confident that if an acceptable deal is not reached, they have an alternative option. The The buyer’s strategy other party will sense this and be wary of pushing too hard. Unfortunately, the opposite is true too. Having no alternative, such as when facing a Walk away or highly unsatisfactory Ideal The seller’s strategy Wow! monopoly, can leave you vulnerable. However, walking away from a tense negotiation is never easy, particularly after you have invested THE SELLER’S POSITION time and effort in it, and emotionally you want the deal. It is even worse when you feel that the deal is there for the taking but it then slips through your The zone of potential agreement fingers – that feels like a loss. In the diagram above, the zone of potential

There are a number of steps that will help you agreement exists between the dotted lines – before avoid getting in so deep that to walk away would be reaching each party’s walk-away position. If there is too painful. Defining the no overlap between the potential deal-breaking “The next time you feel you may walk-away positions, factors early can save everyone time and effort, not to mention the stress give away something for free, stop and think again, carefully” there is no zone of potential agreement. Most importantly, if you of a deal breaking down. don’t know your worst case or walk-away, you risk giving up too much. Key tradeables You should walk away because you aren’t prepared. There are normally only a few key tradeables that When you’re prepared to walk away, you will can genuinely cause the breakdown. These might have an established Best Alternative to a Negotiated include the price, the time schedule, and the Agreement (or BATNA). This is essentially your chemistry between the two parties. These are issues fall-back position if your final offer fails in any of of high importance, which, if not resolved or the key tradeables and you fail to reach agreement. negotiated effectively, should cause a walk-away. Successful negotiators always know their BATNA For example, if the price is not right, you will feel before entering a negotiation. exploited. So, you need a “below this, I walk” Curiously, “no” can be very powerful word – and number firmly in mind. However, be sure to do it doesn’t necessarily mean the negotiation is over. your preparation thoroughly so that when you do By walking away from a potential deal, you’ll learn fall below this number, you do actually walk away. how much the other party wants to work with you. I have seen numerous cases where the negotiators If the client is seriously interested in working with have hit the walk-away number but kept on going, you, pulling out will force them to try and get you so it was not the real walk-away number at all. back. If not, at least you’ll get resolution. Of course, not everyone has the luxury of Preparation walk-away to the same degree, and you may be Knowledge is power, and the more power you’re pressured to take on a bad deal because you have no armed with, the better you’ll fare in the negotiation. alternative (or BATNA). This is bad news, but you Before entering the negotiation, do your preparation need to get the best terms you possibly can and then to understand your position and options as well as work furiously to make sure that you are never the other party’s. boxed into this situation again. Finally, remember

But how do you know when it’s time to walk that sometimes, “No deal is better than a bad deal.” away? This requires you to understand your “zone Whenever you walk away from an opportunity, of agreement”. you might initially regret that you couldn’t make the

Each party in a negotiation has a desired outcome deal work. Eventually, though, you realise you’ve and a worst-case scenario. In a sales negotiation, the done the right thing: you’ve retained your selfseller’s asking price is their desired outcome, but respect – and probably gained the other party’s SIMON BUZZA is a member of they should also know the lowest price they’ll accept to still do the deal in the worst case. The buyer respect, too. Don’t burn bridges. You don’t want to sever all ties with the other party. Be courteous, as the ISM and founding partner of the NewDawn Partnership, an advisory service that focuses on should also enter the negotiations with a desired low there may be another chance to work together in delivering operational price point while understanding the highest price future. In fact, walking away may convince them improvements to the buyer and seller interfaces of a business. Visit: they’re willing to pay in the worst case. that they should call you back with a better deal. www.newdawnpartners.com