CHAPTER 7
Strategizing: One Size Does Not Fit All
Taking Measurements
In the next segment of the workshop, Dr. Patrick Perkins moved to Step 3 of the negotiaphobia treatment process he was prescribing: strategize as you select the proper strategy for this particular negotiation.
“You will recall that one of the symptoms of negotiaphobia is using the same negotiation strategy irrespective of the situation you are facing. Experience has shown me that none of the four strategies that should go through your mind as you review Step 1 of the treatment are universally appropriate or inappropriate. As we discussed in the last session, you may be up against a highly competitive driver; and if you try to use collaboration, you are really unintentionally doing what, Jay?”
A bit shocked, Jay responded, “Accommodating without a tourniquet.” Dr. Pat smiled and nodded. Jay was glad Dr. Pat liked him. He could not imagine what it would feel like being on the wrong side of this guy.
Dr. Pat continued, “Let’s now look at factors we should consider as we quickly scan the situation and strategize to find the optimal fit for a given set of circumstances. For this discussion, keep in mind that Step 3 builds on Step 2, so you will need to consider your personal tendencies, as well as what you have just learned about the most likely strategy to be deployed by the other side.”
Your One Minute Drill: Each time you begin a negotiation situation, take a minute to review the three steps.
STEP 3
Strategize: Select the proper strategy for this particular negotiation.
STEP 2
Assess: Evaluate your tendency to use each of the negotiation strategies, as well as the tendencies of the other side(s).
STEP 1
Engage: Recognize you are in a negotiation and quickly review the viable strategies.
Both Eduardo and Jay were now very curious as to whether the preliminary decisions they had made about several of their customers and prospects would match the guidance from Dr. Pat’s strategizing discussion.
When Does an Ostrich Fly?
Dr. Pat opened the strategizing discussion in the lower left corner of the matrix introduced in Step 1. He indicated that there are some situations when not engaging (avoidance) is the best negotiation strategy. “Avoidance has the potential to be the best strategy for you or others when the topic is a minimal issue, or when a superior option is readily available elsewhere.” He then put a caveat on this directive. “The problem with avoiding what at the time may seem to be a minimal issue is that, over time that insignificant issue can grow exponentially in importance. So, where avoidance may look like a good strategy to use today, it may turn out to be an inappropriate fit for negotiations with that same party six months from now.”
Demonstrating the homework he had done on XL team members’ negotiation challenges, Dr. Pat used the example of a good customer wanting one hour of free technical support. “At a billing rate of $200 an hour, this is not that large an amount for a good five-figure revenue client. It might be tempting to use an avoidance strategy and just do it. When multiplied by 10, however, that number becomes a significant situation with $2,000 on the line. I recommend the use of what I call a ‘no-charge invoice’ for very good customers when facing a request like this. This is far superior to avoiding the discussion of the additional investment issue, which in this instance would be de facto accommodation. That approach is playing unnecessarily in the bottom half of the strategy matrix.
“The first hour should be invoiced at $200, with ‘no charge’ in the bottom right ‘amount due’ box. Send this unique document to them via e-mail, but do not submit it to XL’s accounts receivable department. If the customer likes the result from the service and then wants ten more hours, they now understand what it’s worth, and you should let them know they will now be invoiced for the appropriate total. If we avoid in this situation and just give our services away, they ain’t worth a plug nickel.” Dr. Pat went on to say the no-charge invoice also demonstrates the investments we have made in the relationship over time much better than a traditional avoidance- or accommodation-based approach. This technique helps make future negotiations much more collaborative.
The second possibility identified where avoidance is a proper strategy is when we or the other side recognize the significance of the issue but feel better served by continuing negotiations with other parties. “When you have a bird in the hand, and you really like that bird, why would you go reaching into another thorny bush in search of a different one?” Dr. Pat reasoned in his Texas drawl. He elaborated that if a sales organization was one of several firms that presented solutions to a prospect, and the negotiators for that prospect have no questions and don’t return calls, then their avoidance strategy indicates that this alternative is no longer in the running.
“Salespeople generally despise objections in negotiations, but, in reality, objections are almost always a sign of some interest. No one objects about the time it will take to transition to a new information system if they have absolutely no interest in changing. Likewise, they usually don’t push you about your pricing if they already have a favorable option that is significantly more economical. They simply say, ‘Thank you, and we will get back to you,’ and then send out a ‘You were nice, but you lost’ e-mail. Given that negotiations consume valuable resources, why would someone continue to negotiate with another party they see as materially inferior to their better alternatives for the situation they face?”
Jay had to agree with Dr. Pat that avoidance was the most painful and frustrating strategy from the other side he had ever experienced in his career. He also thought of the many times he had used this very strategy as a sign of disinterest with colleagues, and he even had to admit to utilizing avoidance with Laura on the house and other issues. Earlier this month she had sent him a text asking for dates he would be available to meet with a real estate agent she met and liked. He simply did not respond, hoping he could claim the “lost in cyberspace” excuse should she ever bring it up.
When to Bleed
Next, Dr. Pat positioned accommodation as an appropriate strategy for situations when we are in a significantly weaker leverage position that is obvious to all sides and have no other options with which to negotiate. He indicated that understanding leverage is essential when strategizing about the need to accommodate. Dr. Pat clarified this key negotiation term by stating, “Leverage is the ability of one side to influence what another side thinks, says, or does. It can be generated by a party’s ability to reward or punish us. We are in a much weaker power position in comparison to the tow truck driver who can severely punish us by simply driving off if we attempt to negotiate the price per gallon to get fuel in our empty gas tank in the middle of the desert. An improper scan of the power situation as you strategize will leave you scanning the sky above for buzzards.” Everybody snickered at the Texan’s analogy.
According to Dr. Pat, another important source of power today is knowledge leverage. This comes from our information analysis and preparation in understanding the situation, and the development of insights into how to make all sides more successful. The least prepared or knowledgeable side of the negotiation table is frequently the one feeling the need or being pushed to accommodate. Jay made another note to himself that gaining knowledge leverage would be critical in moving out of what had been an accommodation strategy with MGB Properties, and perhaps others.
Dr. Pat next emphasized that how we accommodate as our strategizing leads us in this direction is just as important as knowing when to do it. He clarified that the subservient comment should be carefully phrased and rehearsed. He recommended it be something on the order of “This time around, due to the unique situation we find ourselves in, we would be willing to entertain what you propose be done to address the issues of concern, and reach an agreement.” The “this time around” comment was stressed by Dr. Pat as a critical component of the statement, because a proficient negotiator wants to avoid setting a negative precedent for ongoing accommodation.
“Let me also stress that you should indicate you are only willing to entertain the other side’s proposal, but not automatically agree to it. It only takes a little bit of effort to carefully craft this comment, and days, weeks, or even years to deal with the consequences when it is poorly phrased or not voiced at all.”
According to Dr. Pat, “An interesting aspect of accommodation with other parties is that when you do it properly, the other side will frequently ask for less than you were willing to give up to rectify mistakes that have been made. Here you may be willing to give them the entire cow, but they only want a couple of T-bones.” He explained that he had worked with one group that had received $75,000 to conduct a project that, for a variety of reasons, including team member turnover, had not even been started several months after the contract was signed and the check deposited. “Having taken a minute with me to strategize, they appropriately went to the meeting in an accommodation mind-set, willing to return the money in full to their client. After using the phrasing suggested here, the customer responded, ‘Just go ahead and do the darn project. I wanted it done, and I still do. If I had wanted the money, I would have kept it in the first place.’”
Dr. Pat went on to explain that when we find ourselves in a situation calling for accommodation, we should not go into a laundry list of excuses. The other side almost never cares about why we failed to perform and instead is primarily interested in us taking ownership and suggesting going-forward solutions.
Times to Battle
Moving to the top half of the matrix, strategizing resulting in the use of a competitive strategy, Dr. Pat said this approach is appropriate when we have a negotiation involving an opponent not inclined to or capable of collaborating, or one simply not worth the effort. The lack of capability may come from our lack of success in getting senior-level decision makers in the room or be due to a general lack of collaborative skills on their side.
“I often hear people say they have a collaborative relationship with a lower-level purchasing agent or salesperson. This is rarely possible. To have a situation that fosters collaboration, you need the senior players in the loop because they are the ones most likely to know their side’s true needs and can communicate such. These members of top management can then provide input regarding alternatives and make decisions about the options we propose, as well as secure funding and other resources. As you strategize, you need to look for these pieces of the puzzle if you decide to collaborate; and if some are missing, and you have some leverage, competition would frequently be your best option.”
The not-worth-the-effort aspect of strategizing calling for a competitive approach generated some discussion among the participants. Dr. Pat strongly emphasized the need to look beyond the current negotiation encounter to the true potential afforded by the encounter. “Many car dealers negotiate with you in a highly competitive fashion because they fully expect to never see you again. The exception would be organizations like Carl Sewell in Texas. Carl’s book, Customers for Life, outlines Sewell’s strategy for taking a longer-term and more collaborative approach to working with their customers in meeting their and their family’s transportation needs.”
Dr. Pat continued with his clarification of situation potential by stressing that some customers will negotiate a small piece of business with a new vendor just to experience their approach and capabilities. They are giving the new resource the opportunity, with a strong collaborative performance, to earn additional and more substantial business. He stated that when strategizing, it is usually better to err on the side of thinking that there could be more potential than underestimating the opportunity.
When to Win-Win, and Win Again
The Step 3 strategizing segment of the workshop was concluded by clarifying the circumstances when a particular negotiation guides us toward a collaborative approach.
“You want to at least try to collaborate when the situation presents a significant opportunity with capable and willing decision-making teams on all sides of the table,” Dr. Pat advised. “Most people call collaboration a win-win strategy, but I have found it instructive to add in a third win. When we successfully collaborate, you win, I win, and, perhaps most importantly, the relationship between us or our companies wins as we gain a much broader and deeper understanding of each other’s capabilities and needs. I regularly see cases of two companies doing business with each other for forty years, with the players in each changing several times. The relationship itself is vitally important.” Dr. Pat indicated that his strategizing experience has shown that two sides being willing and able to collaborate only happens in about one in five of all the negotiations most people engage in. Bringing in Pareto’s law, commonly known as the 80/20 rule, he went on to say that this relatively small percentage of all negotiations normally represents about 80 percent of most people’s and organizations’ overall success.
He continued, “The time and effort it takes to collaborate requires that we reserve the selection of this strategy for a very special set of negotiations. The amount of preparation and need identification necessary to foster a problem-solving environment is only justified due to the superior and long-lasting outcomes that can be achieved when our strategizing shows this fourth strategy is appropriate and then is successfully utilized. The candor required to collaborate must be based on a high level of trust and a low level of interpersonal stress. Everyone must feel that the information being shared between parties will be authentic and used for the common good, not for opportunistic ploys to achieve personal gains.”
Dr. Pat proposed that participants should always seek to select a collaborative strategy for negotiations between different parties within the XL organization. “Internal negotiations can be extremely difficult at times due to conflicting goals and objectives. However, when marketing, sales, production, finance, and research and development can pull together using a collaborative approach, there are few limitations in terms of what this organization can accomplish. That said, our strategizing frequently shows we are fighting for the same ‘pork chop’ when it comes to organizational resources.”
Eduardo and Jay gave each other that knowing look indicating that XL had a long way to go to get to the point where most of the internal negotiations could be collaborative rather than competitive turf battles.
Setting Up the Drill
Dr. Pat concluded the session by indicating that they would next be moving into the Y of the EASY process. “Your One Minute Drill is a process you engage in each time you face a negotiation situation. You will simply take a minute to review the three steps that comprise the negotiaphobia treatment process. You should recall that we started with Step 1, Engage, where you recognize that a negotiation is necessary and review the four negotiation strategies. Then we moved to Step 2—Assess your own strategy tendencies and the likely strategies to be deployed by the other side. Finally, in Step 3, you identify the strategy that fits the situation. By reviewing these three steps, you are conducting your drill to succeed in any negotiation you might face. With only limited practice, this should be a drill you can complete in only one very valuable minute.”
Eduardo was looking forward to using this drill. He was expecting that Anderson Industries had the potential and could be worth the effort of investing in a full collaborative strategy. He made a note on his action items list to complete his drill again to see if it supported collaborating with this client upon his return to Florida. He had already made notes of customers that seemed to match the other three strategies in terms of their potential and how he believed they negotiate with him. His use of the One Minute Drill would help him clarify the strategic path he would at least initially follow for each of these negotiations.
At the same time, Jay was wondering about the use of a competitive approach at MGB Properties. He had never been able to get the organization’s senior players engaged in discussions about information system needs or solutions. The use of a competitive strategy was looking like his best alternative.
1. Skilled strategizing will show there is a time and place for selecting the avoidance and accommodation strategies, despite the generally inferior outcomes they tend to generate.
2. Although people don’t like objections in a negotiation, they are better than the deadening silence one encounters when facing an avoider.
3. A competitive strategy is often the best one to select when our strategizing shows this is an insignificant deal, but we must be careful not to judge the significance of a deal only by its cover.
4. Collaboration requires a great deal more work than the other three strategies, but when our strategizing leads us in this direction, the returns can make it more than worth this investment.