Category Archives: Five Fundamental Skills

Economic Renegotiations

In an interview with Inc magazine the other day, I was discussing the effects of the current economic situation on contract negotiation potential.  More specifically, everyone seems to believe that the current downswing is cause for not only some great deals, but also for the potential to create some re-negotiation possibilities.  In other words, the various authors of these pieces are looking for confirmation that now is a great time to buy.  Well, my advice on that issue is pretty simple and I’ll point you all towards the article when it comes out.  😉

I’m more concerned at the moment with the opportunity for re-negotiation because this opportunity does actually exist.  But it’s an opportunity that ALWAYS exists.  The current economic situation is merely bubbling the issue to the surface.

Now, I’ve literally just spent the last half-hour writing and re-writing an attempt to eloqently and gently explain how negotiations are supposed to work and how they’ve not really worked over the last few years due to bullies (both on the vendor and customer sides of the transactions).  The truth, however, is that there isn’t a nice way to explain it.  The negotiation situation has been bad and it continues to be bad – even after the current downturn has made everyone more acutely aware that bad deals are worse when the economy turns sour.  So I’m just going to be really blunt.

Folks: do good deals.  Work well with each other to make sure that each party’s true needs (and a few of each party’s wants) are met during the deal.  Look deeply into the financials of the deal, as well as how they’re calculated.  Don’t guess, don’t assume, don’t overestimate.  Use real numbers, actual counts and a solid basis for each transaction.  Get rid of puffery, boasting, bloating and non-essentials.  If you only THINK or BELIEVE something is going to come to pass, don’t base the deal on it.  Rather, find a way to add it in as a POTENTIAL opportunity – a possible future transaction.  But don’t commit to an uncertain future.

In more Plain English™, buy what you need, sell what you have.  If you don’t need it or don’t have it, don’t do the deal.  Don’t use pretend numbers to support the transaction or the promise of potential to entice you into something that won’t work for you in the current state.  And don’t expect either party to return to the table when the economy goes bad or things don’t work out as planned for you.  Your problem isn’t THEIR problem.  (Perhaps you’ve heard this as “Poor planning on your part doesn’t constitute an emergency on my part.”)  And, for the people who are thinking it, this is not a situation for force majeure.  Economic fluctuations are understood and always possible.

Again, do good deals.  Apply the Five Fundamental Skills for Effective Negotiation.  If you need/want help, get it.  Oh, and contrary to what is happening with certain large industry players at the moment, don’t expect someone else to bail you out because you didn’t plan.  If you haven’t learned the lesson so far, let’s put it in Plain English™, too:  The economy swings both ways.  Unexpectedly.  More often than we’d like.  Regardless of your political leanings, fiscal and risk conservativism is always appropriate.

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Vet Your Lawyer Interview Now Available

I had the pleasure of being interviewed recently by Nat Colley for his series on Vet Your Lawyer.

We discussed the topic of negotiation and more specifically, negotiating with your own attorney.  I won’t ruin the listening experience by rehashing it here – but suffice it to say, the Five Fundamental Skills made a significant presence.

Thanks again to Nat for his time!

Five Fundamental Skills for Effective Negotiation: Communication

Well, over the last four weeks, we’ve been building up to this moment, the fifth fundamental skill. And, like the others, it’s a no-brainer: Communication. You MUST be able to effectively communicate with both your team and your opponent. Sounds easy, of course – they all do. What’s so special about communication?

Remember that communication consists of three separate actions. First is message formulation. You have to be able to create what you want to communicate in your head. This means you need all of the prior four fundamental skills working together to help you develop your idea of what you want to say/do. Having completed Information Gathering and Strategic Thinking, you should have at least a basic concept of what you want out of the negotiation. Preferably, you should not only have a basic idea, but also know what you want four, five and six mental steps ahead.

Second is message transmission. You have to move beyond what is only in your head and convert that into words or actions. The “message” can be spoken words, an e-mail/letter (or other hard copy), or can be an action (getting a signature, obtaining information, etc). Pay attention to things that can get in the way of successful transmission. Language barriers are common.  Time and Power are also components of transmission – for example, when you delay providing information to your opponent, you’re using time pressure to increase your power.

In the technical age, even a missed e-mail – or misunderstanding of humor/sarcasm/etc via e-mail, are painful reminders that different forms of communication may be better suited for the task at hand. Have you ever had someone come to your office/cube to talk with you personally? How did that help resolve an issue you were having that just didn’t seem to make sense while only being discussed in e-mails?

Last is message reception. Inasmuch as you had to formulate the message and transmit it without difficulty, the recipient needs to “decode” that message and understand what you were trying to communicate. If you’ve ever used the phrase “that’s not what I was trying to say,” you probably have a good idea of what I’m talking about. Even with the best of intentions, a message can get garbled anywhere in the communication continuum between idea and reception. So look for clues that your message isn’t being received as you intended.

Silence can be one indicator of failed reception, as humans tend to NOT indicate that they don’t understand something (they don’t want to be seen as less than perfect, especially with regards to intelligence). So ask the person you’re communicating with to communicate their understanding BACK to you. Or ask them questions to determine whether they understand what you’re trying to say.  This means that the communication process has to happen twice, but it ensures that communication was actually successful!

Of all Five Fundamental Skills, communication is probably the easiest skill on which to find training. There are literally thousands of courses, classes, workshops, and training events on communication techniques, skills and styles. Take advantage of these opportunities! But if you can’t, simply try talking/communicating more with your friends, family and co-workers. Tell them that you’d like to discuss a complex, technical idea. You’re going to educate them on this first – then ask them to talk with you about it. This means you’ll have to convert technical concepts into layperson language (assuming that your conversation partner isn’t educated about your topic). Then you’ll have to see if they understand what you’re trying to teach them by asking them questions (and seeing if they ask YOU appropriate questions – or whether they’re constantly trying to clarify what you’re saying). The lesson for you is to determine whether you’re able to move information from your head to theirs – all the way to comprehension.

Another strategy is simply watching how people already in your functional area respond to your communication behavior. Do they constantly ask you to restate what you’re trying to say, or do they seem to “get it” almost immediately? This isn’t a function of intelligence, though, in that just because you’re smart (or not) does not mean you can (or can’t) communicate what you know. Many of the best teachers are not necessarily seen as the traditionally smartest people – but they do know how to transfer information.  This makes them great communicators and excellent teachers. On the flip side, how many times have you met a really smart person who lost your attention because they didn’t grasp the fact that you did not ever understand what they were talking about.

OK, so now you have the Five Fundamental Skills for Effective Negotiation: Information Gathering, Strategic Thinking, Time Management, Power and Communication. If you can master all five, you can learn any negotiation tip, trick or hint and apply it to your situation. But remember these five – for without them, all the tactics in the world won’t help you be successful. If you leave even one of these skills “on the table” (ie: don’t master it), you will find yourself out matched when working with someone who does have these skills down pat.

For more information on these skills, including specific exercises and teaching tips on improving your skill in these areas, you can purchase the Five Fundamental Skills for Effective Negotiation workbook in either a hardcopy or downloadable format. Included are longer descriptions of the skills themselves, added training ideas, as well as a negotiation exercise designed to help use all Five Fundamental Skills in practice.  Additionally, and much to my surprise, one of my favorite blogs about negotiation, Settle It Now is using the Five Fundamental Skills to illustrate a real-world negotiation.

Five Fundamental Skills for Effective Negotiation: Perception of Power

You’ve done your research (Information Gathering), plotted your moves (Strategic Thinking), recognized your constraints (Time Management) and you’re ready to negotiate. Unfortunately, the other side really doesn’t need to talk to you. And guess what? They don’t have to – you’re the buyer today and the vendor is Microsoft. Ugh. OK. So what do you do now? How do you get a player as big as Microsoft to be willing to talk with you and make concessions?

Well, this is all about the Perception of Power – and it’s the fourth of the five fundamental skills for effective negotiation. You need to be able to recognize the power equation and learn how to balance it. This isn’t as tricky as it might first appear and can really be summed up in one single thought. Ready?

“Everyone who sits down at the negotiation table has power.”

It’s that easy. If they’re talking with you at all, you have power. Microsoft, even as large as they are, wants more customers – and yes, contrary to popular belief, they want happy customers. So if you have the potential to be a good reference (a happy, visible customer), they’ll talk with you. This means that as an individual, you’re kinda’ out of luck. But as a representative of an organization, you have more power than you might imagine.

Starting with the basics, make sure you don’t forget or abuse that power. Your goal is to merely balance the equation so that you’re not at a disadvantage, and not seeking, as the old parody Apple ad once proclaimed, “The Power to Crush the Other Kids.” You want what is best for your organization, nothing less and nothing more.

Thus, this sometimes means that you’re going to have to make mention of power and state the obvious – if they want your business, they’re going to need to give you some of what you need. You don’t have to be rude or nasty, just a simple comment that you really want to do business with them, but that you have some requirements that need to be met in order to close the deal. This indicates your willingness to talk and your desire for success. But it also shows that you’re not simply going to cave in to all of their demands or use their templates merely as a result of their size.

Next, you will need to monitor the power balance along the way. Folks like to see this as a teeter-totter – with each side moving up and down, but only one point in the middle where the balance truly exists. I’m not sure that the analogy really gets at the feelings behind the balancing act, so I tend to think of it as you balancing on two legs of your own chair. You lean back, possibly holding onto a table in front of you. You try to steady yourself first – finding the balance point before you let go.

For the first few fractions of a second, you feel totally balanced. Then reality kicks in and you find yourself making small back-and-forth motions to try to keep yourself steady. As time quickly passes, you increase the motions in terms of speed and intensity – which actually only throws you off balance more quickly. In the end, you either plop back onto all four legs… or you find yourself on your back.

The same is true for balancing power. It seems to always start small – posturing to make sure the other side knows that “you’re in charge”… but then gets bigger in a hurry… usually to disastrous results from a negotiation perspective. Thus, keep it small, keep it light and keep it balanced.

After the initial set-up (and the subsequent course corrections), you will also (or may have already) discover that people have a tendency to want to protect their position even within the negotiation itself. As “the negotiator” in many of these situations, my business owners tend to believe it’s my responsibility to take command. But the truth is that I’m no more in command of the negotiation than the bat is during a baseball game. I’m an instrument of the individual/organization in charge. Which means that I don’t make the “decision” but rather I help the business owner determine how to use me best… and then respond to their swing. You may talk with me, but you’re really talking to the business owner.

But this also plays out as folks wanting to make sure they’re heard when they do not understand their role – or believe their role is something more than it really is. Salespeople, for example, seem to fall into one of two camps – either they want to do all of the talking (they’re in command), or they do none of the talking (the contract is up to the lawyers). But again, they’re representing the business interests on the seller’s behalf – so while they’re in charge, they need to learn how to direct the activities of their team, even without saying a word during the actual negotiation.

Power also seems to manifest itself in a variety of strange ways. Most frustrating is the individual who wants to make sure they’re always the center of attention (which isn’t power). There’s also the person who tries to be a bully (again, many folks incorrectly believe that Microsoft acts in this manner, simply because of rumor). And most interesting to me, at least, are the folks seemingly oblivious to where power really sits – as it so often occurs in international relationships such as between Japanese and American business folks.

The key is just to remember that power surrounds and is infused in all negotiation. Knowing who has it, how much, and in what ways they use it will allow you to respond accordingly. Or not at all. 😉

Five Fundamental Skills for Effective Negotiation: Time Management

Any negotiation starts before you actually sit down with the other side. The Information Gathering and Strategic Thinking skills are obviously necessary prior to talking with your opponent. The third skill, Time Management, is an extension of this concept. You need to understand this key constraint and plan for the effects it will have on your negotiation.

Time affects us all. Luckily, at a base level, it’s 100% equal. One second for you is the same as one second for your opponent. Thus the important factor in Time Management is knowing the specific things that create constraints for you and those that create constraints for your opponent. Part of these should have been revealed in the Information Gathering skill (remember I said that you’d bounce a bit between the skills once you got started). So, the discovery phase of Time Management should have already been completed. We’re concerned now with the effective use of time.

Let’s start with one side’s time constraint – a business owner that wants to close the deal and install a product by a given deadline. You also, unless you’re really lucky, have more than one deal on the table at this moment – so there are many deadlines all tugging at you. Thus, prioritization is very important. Learn to separate the urgent things (those which appear to need speed) from the important things (those which are actually vital). I can’t tell you how to segment them in your own brain – but it starts with asking what will happen if some specific thing does not get done by its deadline. In other words, what’s the impact of ignoring time?

Your opponent, in this case a salesperson, also has time constraints – deadlines by which they must close their deals to meet their pipeline goals. [If you’re not familiar with sales terms such as “pipeline,” I would suggest reading through a basic sales how-to manual. It will help you understand their perspective a lot more clearly.] They too, have urgent and important things on their plate.

Unfortunately, that’s usually where the perfect symmetry ends, as your specific constraints won’t always mesh with your opponents constraints… nor will the list of urgent versus important items. Figuring out what’s really important to both sides can thus play into a timely deal closing, for if you know when both parties really need the deal to close, you can work together to accomplish the goal.

A disparity happens when one side needs the deal to close before the other. This becomes a pressure point, one that can increase the leverage for the non-constrained party. But unless you discover this issue, chances are that you will continue to believe that you’re both operating on the same time table – yours.

On the flip side, what if you’re the constrained party and you are rightfully concerned about leverage? You can do one of two things about something that is problematic and visible to others. You can either fix the issue (get rid of the constraint), or you can address it head-on and make it a non-issue by telling the other side that yes, it is a constraint, but that failure to create a solution by the deadline will affect both parties (ie: if we miss the deadline, the price goes up).

Oh wait! You’ve seen this? Of course. The end-of-quarter or end-of-year firesales held by many vendors in an effort to drive deals to closure to pump up sales figures. Did it work to close the deal by the deadline?

Regardless, you experienced (or managed) a time constraint first-hand. Using the next fundamental skill, Perception of Power, you will see how to shift the balance of power in response to these identified issues.

Five Fundamental Skills for Effective Negotiation: Strategic Thinking

After completing Information Gathering, the next logical step is deciding how to use the information that you’ve compiled. This is called strategy – and it’s a skill that some folks just do not have.

Some believe that this is just a matter of learning how to play chess. To a degree, this is correct. The game of chess is a strategy game – where the true masters learn all of the potential strategies that can be employed and how to work with, through and around them to reach their ultimate goal.

Chess is a good basic analogy for this skill. You have a playing field, the chess board, which delineates the boundaries of the engagement. You have pieces that each play a particular role and represent different values. You take turns “moving”/”negotiating” the board, analogous to the back-and-forth nature of concessions in a traditional view of negotiation. So, in all, it’s relatively appropriate to think of negotiation as chess.

The problem with using chess as the analogy is that chess has fixed rules for operation. A rook can ONLY move laterally and a bishop can ONLY move diagonally. Granted, this could be a metaphor for how you have various constraints put upon you in a negotiation. In actuality, however, you ALWAYS have two extra options available to you.

You can create a new move… or you can walk away without finishing the “game.” These are important and illustrate why strategic thinking is so valuable. If you have not considered what impact your behavior will have on the other side, you probably have not actually completed Information Gathering, thus, you aren’t prepared to fully understand what is on the table and how you both might be able to meet your needs.

Strategic Thinking is also an active skill – one that must be employed while in the heat of the negotiation. Also thought of as “thinking on your feet,” it’s the ability to respond to the other sides’ tactics in an appropriate manner. It’s possible that you could, in some situations, effectively pause the negotiations to go back to your corner and consider your next move. However, this takes Time (the next skill) – which you might not have.

So, how do you develop this skill? First, recognize whether you’re predisposed to it. In fact, there’s some research that suggests that from a personality perspective, people are either born as strategic thinkers or tactical thinkers – which allows them to either always see the trees (tactical) or the forest (strategic), but not both.

I’m not sure I agree with this extreme idea, but the truth remains that I have seen enough first-hand negotiations to witness what happens when someone doesn’t think strategically to say that it really doesn’t matter whether you’re predisposed at strategic thinking or not. You MUST become good at it, or you must find someone to help you with this step. In other words, it’s imperative that you learn how to think three, five and ten steps ahead to reach your end goal.

Next, when faced with a negotiation, sit down and ponder your moves. This starts with your intent, moves to your motives and ends with your behavior. You can come out of the gate with guns blazing – looking for everything you want and only seeking your own objectives. This will set a specific tone and you need to think about how the other side will respond. On the flip side, you can come out conceding every point, seeking to be as “cooperative” as possible. This also will set a specific feel/tone to the negotiation.

But it’s not as hard as you might imagine to envision what will happen if you take one of these moves. If you come out guns blazing, the other side is probably going to respond in kind. Which means that you’re setting the stage for an aggressive negotiation and will be fighting for things along the way. On the other hand, too soft, and you’ll give up everything. This is where some of the experts obviously advise differently. One camp says “play stupid” and seek what you can get through self-depreciating behavior. Another camp (pardon the pun, but it’s actually Jim Camp) says that you should always “Start with No” as a way to encourage discussion.

The net result of Strategic Thinking is an ability to not only see what your path could be, but to also see where your opponent is going to move. For if you play a win-win strategy against someone with a win-lose strategy, who do you think is most likely going to lose? If you’ve considered your various options and thought Strategically, you’ll know how to respond.