By BRIAN BABCOCK
First published in the Globe and Mail, July 4, 2003
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'It's simple: We want your price lowered."

The unexpected and abrupt message from the chief executive officer of his largest customer left Dale stunned and panicked.

At 26, he'd owned his start-up service company for less than a year. He wondered how he would be able to continue in business without this key contract.

The customer had anchored his position on "price only," but Dale was already at his bare-bones number. He was stumped.

But not for long. On the advice of his business mentor, Dale asked to meet with the CEO's board. He made his purpose clear to the chairwoman -- to get a ruling on the CEO's bargaining position. Dale also asked that the executive be present. By doing this, the CEO would be fully informed as to what took place at the meeting.

"Prepare your brief, then review your brief, and prepare it again," the mentor told him. "Learn their interests as distinct from their CEO's position. Know your best alternative to an agreement and try to discover theirs."

He also suggested that Dale bring a representative to the meeting.

Dale wondered who that should be: A lawyer, or perhaps an accountant to justify his price. Upon careful reflection, however, Dale asked his mentor to join him at the negotiating table.

The response: "Sure, but I have to control our communication at the board meeting." This left Dale curious, but he agreed.

Here's what happened:

Upon their arrival, the mentor asked the board chairwoman where they should sit. After the formalities, he addressed his questions directly to the CEO.

"Please tell me your service experience with Dale's company," he asked politely.

"Oh it's okay."

"When compared to other providers is it the best, the same or worse?"

"The best, I guess."

"Are you sure it's the best?"

"Yes."

"Are you afraid Dale will exit his business, do you have any financial stability concerns, competency concerns, or any concerns at all?"

"No. He's very well educated and we've researched his financial backing. It's solid. He's young, but I guess none of us can fault him for his ambition."

"I see. Well how's his price, is it higher or lower than market-based comparisons?"

"Well, I guess I have to admit it's lower, but you seem to know the answers to these questions, so why bother asking them?"

Still courteous, but more firmly, the mentor replied: "Because I want to hear you explain to your board your unreasonable expectations on price. I think you've described Dale as your 'all-round best supplier.' How do you justify your tactics and position in bargaining?"

All eyes in the room turned to the CEO. His response: "You are correct. Dale is our all-round best supplier. I'm going to recommend that we sign an agreement with him today and accept the terms that Dale has proposed."

The mentor countered: "You mean the terms as we've mutually agreed"?

"Yes" the CEO replied.

On the return drive, Dale's mentor asked him what he learned from this experience. His answer encapsulated the basic principles of principled negotiations:

Change the rules of the game. In this case, deciding who was present at the board meeting was crucial. There are other ways to change the rules with options that invent opportunities for each party's interests to be satisfied, including what's negotiable and how it's negotiated. Even "where" can be important.

Do your research. Learn as much about their interest as you can.

Disclose your interest judiciously, but disclose it.

Know your best alternative if you have to walk away from the negotiation. Try to discover theirs. Dale knew he could find work as an executive, after all, he was in the top 10 per cent of his class from a respected school. Someone would hire him. His biggest worry was for his employees.

Don't go it alone. By having his mentor at the table, Dale was free to develop a courteous relationship with the CEO, whose first "line of anger" was directed to the mentor. Those two would probably never see each other again.

Think carefully about the skill sets of your team. In this case, Dale needed an experienced negotiator at the table with him.

Sometimes power resides in substance and principle, not in bluster and brinksmanship. The little guy can be powerful, but that power must be exacted with civility.

In this case, the CEO may think twice before trying again to bully a young entrepreneur. His actions were likely scrutinized by his board for a long time.

Dale, with the benefit of hindsight, realized that most corporations take responsible attitudes toward their behaviour. In this case, an extreme situation -- facing the loss of his company -- called for extreme measures -- going over the head of the CEO.

This story only touches the surface of principled negotiations -- the subject is enormous. Indeed, Roger Fisher, the former dean of the Harvard Law School, might tell us "life is a negotiation."

But for the basics, ask yourself these questions before your next bargaining session:

Have I prepared, revised, and prepared again? Do I know all I can know about my market and my competitors?

Do I have a plan for negotiations? Can I illustrate that plan?

Have I judiciously communicated my interests to the other people at the table? Do I understand their interests?

Do I know what I'll do if negotiations fail? What's my best alternative to agreement?

How can I change the paradigm? Is my interest to expand the possibility of mutual gains?

Am I positional bargaining or interest-based negotiating? Do I remain principled in the face of brinksmanship?

Have I separated my emotions from the bargaining process? Can I identify when my energy is wasted on emotional "nonsense" and blame?

Will the agreement create lasting relationships of respect and trust? If not, how do I create those critical and strategic positions?

With these questions, you'll know the simple basics of principled negotiations. Whether in business or life, you'll find multiple levels of improved agreements. You'll expand the concept of mutual gain and enhance the world around you.

Dale was wiser for his mentor's intervention. So was his customer. Lessons well learned -- at any age.

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