By BRIAN BABCOCK
First published in the Globe and Mail, July 4, 2003
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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.
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.
me your service experience with Dale's company," he asked politely.
"Oh it's okay."
to other providers is it the best, the same or worse?"
"Are you sure
it's the best?"
"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?"
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"?
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.
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
about the skill sets of your team. In this case, Dale needed an
experienced negotiator at the table with him.
resides in substance and principle, not in bluster and brinksmanship.
The little guy can be powerful, but that power must be exacted with
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
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
Dale was wiser for
his mentor's intervention. So was his customer. Lessons well learned
-- at any age.
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