Clarity is a virtue

Sometimes you think you are communicating well but you are not. The conversation isn’t going where you want and you are not reaching any kind of agreement. That is because to truly communicate, the other party must understand both what you are saying and what you mean. Sounds simple, but it often is very complicated.

In business negotiations, the ability to communicate ranks near the top of needed skills for a negotiator. And most important in the spectrum of communications skills is verbal clarity.

Speaking clearly and plainly goes a long way to make communication easy to understand.

There are two issues in communication. One has to do with the physical aspect of communication and the other has to with content.

The physical side:

To communicate clearly, you must speak clearly: Avoid mumbling and slurring your words. Enunciate, and be mindful of accents (some people have difficulty understanding different accents).

The content side:

Language choice: Are you using too much jargon? Are you using regional idioms? Are you using difficult words when simpler words are available (i.e. utilize instead of use)?
Complexity: Are you expressing yourself plainly? Or are you needlessly complicating what you are trying to say?
Style and grammar: Are you using proper grammar? Are you using overlong sentences or the passive voice instead of active voice?

Communicating clearly takes thought and practice. It involves your physical speech and the words you choose to express yourself.

In his book, In Business as in Life – You Don’t Get What You Deserve, You Get What You Negotiate, Chester L. Karrass quotes the following from Confucius:

“Therefore, a wise and good man can always specify whatever he names; whatever he can specify, he can carry out. A wise and good man makes it a point to always be exact in the words he uses.”

Staying on higher ground.

What happens if a business negotiation degenerates into a squabble? There is no agreement and no resolution and everybody goes home unhappy. Perhaps the best way to avoid this scenario is to take control from the beginning of the negotiation.

How do you establish a “higher ground?” You come to the bargaining table with back-up. According to Dr. Chester L. Karrass, there are five types of backup that can help you stay on higher ground:

1) Guiding Principles: Agreeing on principles makes it easier to agree on details, so establish the principles at the beginning of the negotiations. For example, a guiding principle is that the seller is entitled to a fair profit.

2) Guiding History (Precedents): It makes sense to know what has happened historically between the two parties: what prices were paid, quantities negotiated, any problems or issues. You can’t argue with history!

3) Guiding Logic: Using logic and reasoning makes any negotiation more civilized and thoughtful. Logic is persuasive.

4) Guiding Standards: Standards are really guidelines. What are the standard terms and conditions, the standard prices? By sticking with standards, your viewpoint may prevail.

5) Guiding Rules, Regulations and Laws: Before you go to the negotiation, be sure to research what company policies or government regulations support your position. Rules and regulations can help increase your legitimacy

Basically, it is up to you to gather together the information (backup) that you need to set the tone for the negotiation. By using this backup and communicating it clearly to the other side, you are lining up resources to favor your position. It is hard to argue with principles, history, logic, standards and rules!

What type of backup do you use most often?

Endgame: a movie about negotiation.

Last night on its Masterpiece Contemporary series, PBS aired Endgame, a movie based on the real, secret negotiations to end apartheid in South Africa. The talks took place in the United Kingdom between representatives of the African National Congress (ANC) led by Thabo Mbeki (played by Chiwetel Ejiofor) and representatives of the Afrikaner South African government led by Professor Will Esterhuyse (played by William Hurt).

The secret negotiations started in 1985 and culminated in 1990, when both parties agreed to hold official negotiations to abolish apartheid. In 1990, the de Klerk government made a large concession by freeing ANC leader Nelson Mandela.

The negotiations came about in an unusual way. Michael Young, who was then the chief of public affairs and communications for Consolidated Goldfields, believed something needed to be done to stabilize South Africa, which at the time was embroiled in growing violence and repression. The instability was threatening the company’s interests, so Young proposed “creating a neutral arena” to encourage negotiations. Young recruited both Mbeki and Esterhuyse, and convinced them to engage in secret negotiations on neutral ground in England. No one was to know about the talks and Consolidated Goldfields was not to be implicated.

Young arranges for ANC and South Africa government representatives to meet in a large country house in England, where he wanted to “maximize opportunity for chance meetings.” Part of the strategy was to break down the distrust between both sides.

The meetings start with an agreed agenda, in which the first order of business is to find out what demands, hopes and fears each side has. The ANC want to end apartheid and have majority rule. The government wants assurances that the ANC will stop the increasing violence. Complicating the negotiations was that during the first phase, which took place under the Botha government, government negotiators did not bring anything to the table. Later, when de Klerk took office, the negotiations were able to proceed because de Klerk government was able to offer to free Mandela.

If you missed Endgame on PBS, it will have its theatrical release this Friday, October 30. Here is one of dozens of reviews: http://www.boston.com/ae/tv/articles/2009/10/24/endgame_is_a_masterful_retelling_of_how_apartheid_fell/


Did you watch the movie? What did you think?

Language Skills

If you are native English speaker you’ve probably never given it much thought. You’ve been able to conduct your business negotiations without the additional burden of trying to figure out idioms and usage. For those who speak English as a second language, it’s probably much more difficult.

More and more, English is the universal language of business. For instance, deals between Japan and the United States are conducted in English. But does that put the Japanese at a disadvantage?

Language is more than just knowing the words. To be fully conversant in another language, you have to understand idioms, expressions, nuance, and alternative uses for words. For instance, in English we often say sarcastically, “yeah, right!” If you just listen to the words and don’t understand the sarcasm, this could mean that everything is OK.

In business negotiations, everything that is said at the negotiating table matters. Everyone must understand what is going on and what is being said. It is essential to master the language that is being spoken. That does not mean that you cannot participate if English is not your primary language, but perhaps it will depend more on your skill level.

For people who are learning English as a second language, specifically for business, there are many resources out there. We found this website that gives an overview of useful business expressions: http://www.eslgold.com/business/useful_expressions.html

Native English speakers also have to be aware of their language during a negotiation. In this case, it is not simply about understanding the words, but understanding the other side. For instance, are you dealing with people whose culture is more polite? Then you would do well to be more polite in your language. Are you using too much jargon? Are you being grammatically correct? In short, are you making yourself understood? Here’s a helpful guide on “How to Use Appropriate Business Language.” http://www.ehow.com/how_17589_appropriate-business-language.html

Have you encountered a negotiation where language was a barrier? How did you manage to overcome the situation?

Off the record?

We’ve all heard the following scenario: the politician tells the journalist that he will only talk off the record. The journalist agrees, the politician gives up some juicy information, and the next day, the whole story is told in the daily newspaper, citing an unnamed source, which it turns out can ONLY be the politician. Politician gets angry at the journalist, and trouble ensues.

But, for the record, there is a legitimate need for off-the-record talks when you are conducting business negotiations.

Off-the-record talks are any informal communication between the negotiating parties. The talks can be held in an elevator, in restaurant or wherever the negotiation is NOT taking place.

In an informal setting, people discuss their personal problems and gripes, and generally, the stuff of everyday life. These informal discussions make it safe to let out steam. Because there is no structure, and what is being discussed does not have to be agreed to, both parties can test assumptions.

Being off the record allows the parties to say what is on their minds, and give a more real sense of the issues and problems.

According to Chester L Karrass, off-the-record talks “are mandatory when official positions have hardened and deadlock is imminent. While it may be difficult to say anything conciliatory at the table, a few well-chosen words after dinner can indicate unofficial willingness to compromise.”

Because off-the-record talks tend to be more social in nature, people are easier on each other. It allows common ground to appear.

As Karrass punctuates: “Not everything that must be said can be said at the negotiating table. A good negotiator knows that.”

How often do you go off the record? Have you found that it has moved a negotiation to reach a deal?

What's your personality?

In business, especially in business negotiations, you are always dealing with people: their personalities, their needs and their opinions. Business decisions are sometimes influenced by personal issues and not solely by business strategy and the bottom line.

On this blog we’ve discussed issues like motivation, behavior and traits of a good negotiator because it is important to be aware that personality and personal needs come into play at the negotiating table.

Personality affects issue such as aspiration and goals. Chester L. Karrass, in his book The Negotiating Game, identifies the relationship between personality and aspiration levels. He tells us that someone that is achievement oriented, who believe that hard work pays off, has a high aspiration level. And in negotiations, those who have a high aspiration level reach higher goals.

Dr. Karrass recommends paying serious attention to the personalities of people on your negotiating team. His research found that personality factors are extremely important in effective negotiating.

Personality is defined as the essential character of a person. Usually we can find a group of traits that define a personality type. For example, in this article (http://www.streetdirectory.com/travel_guide/191402/communications/how_to_communicate_to_the_four_main_personality_types.html) Lee Hopkins classifies four general business types:


Extrovert


Amiable


Pragmatic


Analytical


He then suggests tailoring your message so that you can communicate effectively with each person. Clearly, personality influences how you understand and how you communicate.

There are tests designed to discover your personality type. A very popular test is the Myers-Briggs, which classifies personalities into sixteen distinct types.

Figuring out your personality, the personalities of those on your negotiating team and the personalities of those sitting opposite you on the negotiating table will be very valuable.

Do you prefer to negotiate with certain personalities? How does it influence the outcome of a negotiation?

Wise Negotiations

Sales perspective:

Today’s economy makes deals harder to close and margins tighter. Buyers are tough today. It is never easy to make a sale, but now it is harder than any time in recent years. Now you really have to negotiate.


Buyer’s perspective:


Procurement and supply chain managers are under tremendous demands to reduce costs. A recent study by Purchasing Magazine indicates purchasing professionals today are more focused on cost-reduction strategies than on other issues such as supplier capacity, finances or consolidation of suppliers.


Results show 48% of buyers polled said negotiating lower prices for products and services with their suppliers is their biggest priority right now. Other supplier-facing priorities ranked in order of importance included supplier consolidations (15%), ensuring the financial health of suppliers (14%), getting suppliers more involved with product development (12%) and, lastly, ensuring suppliers have the capacity to ramp up production when the economy recovers (11%).


Cost Savings Example:

Consider this example which illustrates the true business impact of negotiating better pricing from suppliers.

In 2008 ABC Inc. sold $987.4 Million and made a net profit of $81.4 Million, That’s about 8.2% net margin. This means, if an ABC Buyer can save $100,000 by being a better negotiator, this contributes just as much profit as if ABC could increase their total sales revenue by $1,219,512. And in today’s markets most companies are finding it rather difficult to increase sales.

So for ABC Inc. $100,000 in cost savings has the same impact as a $1,219,512 increase in sales.

Negotiating the Deal:

At the same time more organizations are pushing buyers to reduced costs, other organizations are pushing salespeople to increase sales—at higher margins. All this makes for some really tough negotiating.

So, what should salespeople do when negotiating prices with buyers that are on a price cutting mission?

Buyer’s must remain aware, and sometimes need to be reminded, that the cheapest per unit cost can often end up being the most expensive ‘total cost’ decision.

Switch from ‘Price’ to ‘Total-Cost’

Sellers must get buyers engaged in a ‘total-cost’ analysis. And it is in the buyer’s own best interest to do exactly that. This is really the only way a buyer is going to be able to discover, document, and get credit for ‘real cost savings.’ The blending of a buyer’s expertise on what they need, with a seller’s expertise on what is possible, provides a route to true cost savings. Best of all, during this discovery and analysis process, relationships are built which lays the groundwork for future business.

Satisfaction

The outcome of your negotiations must be a mutually agreed upon result that creates a Both-Win atmosphere rather than a one-win atmosphere. Satisfaction of both parties is key, and determines future business opportunities between the parties.

Are you being Lowballed?

We’ve all heard this one before: if it sounds to be good to be true, it probably is.
Keep that truism in mind when a seller offers you a price that sounds too low. Most likely, the seller is trying desperately to get you into a deal. What will happen later is that you will end up having to pay for “extras” or for any changes to the deal.

Anyone who is working with a tight budget could fall prey to a lowball offer. After all, you are being motivated by the bottom line. Buyers who don’t know the market well enough or who are not clear with what they really want can also fall victim to a lowball deal.

Lowballing is not limited to sellers. Buyers can also be lowballers. Today’s real estate market is being flooded with lowball deals. Candace Taylor reports in The Real Deal (http://therealdeal.com/newyork/articles/lowballing-turns-predatory) that:

“Potential buyers are now putting very low offers — often 20 to 40 percent less than the asking price — on multiple properties at the same time, a strategy that was virtually unheard of only a few months ago. Sellers, increasingly desperate to unload their property, are countering offers they once would have considered insulting. And as lowball offers become the norm, this back-and-forth seems to be accelerating the downward slide in prices.”

The best thing to do is to stay away from lowball deals. How? First you need to recognize you are being lowballed. Do your research. Be sure you know what the market price is for the product or service you want.

Here are a few suggestions from Dr. Chester Karrass to avoid getting stuck in a lowball deal:

1.) Know what you want
2.) Don’t get hung up on price
3.) Get full price breakdowns: be sure you know what will be extra and what it will cost
4.) Before doing any deal, negotiate your change procedures
5.) Don’t be greedy—someone always pays for lunch!

Have you been victim to a lowball deal? What happened? How would you have done things differently?

Do you make negotiating mistakes?

“The only real mistake is the one from which we learn nothing.” ~John Powell

Who doesn’t make mistakes? Nobody is perfect, and many of us may make some mistakes when we are negotiating. It’s only human, but learning to spot these mistakes may prevent them.

In his comprehensive negotiating book, Give and Take, Chester L. Karrass lists and categorizes several negotiating mistakes. Following are some to watch out for:

Power Mistakes
Underestimating your power
Assuming the other party knows your weaknesses
Being intimidated by status, statistics, precedents, principles
Revealing your power too early
Forgetting your opponent has something to gain from the negotiation

Concession Mistakes
Setting your initial demand near your final objective
Assuming you know what the other party wants
Accepting the first offer
Conceding without obtaining a concession in return
Losing track of concessions you’ve made

Closure Mistakes
Agreeing to a final agreement because of a time deadline
Being intimidated by the other parties “final” offer
Being afraid to break an impasse
Trying too hard to be liked in the final phase of negotiation

General Mistakes
Talking more than listening
Entering a negotiation with a chip on your shoulder
Discussing an issue that you have not prepared for
Not having a first-rate negotiating team on your side

How many of these mistakes have you made? Have you successfully avoided making them again?

What is your motivation?

“Every business transaction involves an exchange of motives.”(Chester L. Karrass in The Negotiating Game)

Perhaps when you enter any business negotiation your primary motivation is to achieve the best deal possible. The people your negotiating with will probably share the same motivation. However, both you and the other party probably have many secondary motivations, which are not as obvious.

Why is understanding motivation important? Motivation is what makes people tick and it shows what they really want. In Both-Win negotiations you will want to satisfy both parties’ goals, and understanding the many personal and business motivations from both sides will make it easier to achieve these goals.

Here is a list of possible motivations:
1) Wanting to feel good
2) Wanting to avoid risk
3) Wanting recognition
4) Wanting job promotion
5) Wanting to work easier
6) Wanting to do what matters
7) Wanting to be listened to
8) Wanting to be liked
9) Wanting material goods
10) Wanting to be seen in a certain way (for example, as being of good judgment, honest, responsible, smart, etc.)

Many of these motivations are psychological in nature. A good business negotiator will seek to understand these motivations, and fulfill them when possible. In this way, the other party will feel good, and will be more likely to be cooperative.

Have you analyzed your motivations when you negotiate? Do you think your opposing party understands those motivations?

Playing good cop/bad cop

If you want to see a good cop/bad cop scenario played out, look no further than your TV, especially on the long-running crime drama, Law & Order. In the earlier episodes, Lenny and his partner (who changed about every two seasons) would find a suspect and take him in for questioning. One of the cops would play it tough, scaring the suspect or making him angry, and the other cop would play it easy, being more friendly and coaxing the information out of the suspect in a “this helps all of us” way.

Why is this scenario so effective? Simply because the bad cop makes you want to collaborate with the good cop. The good cop will seem reasonable and pleasant. And we all want to work with the more friendly types.

The good cop/bad cop scenario can be used in negotiations exactly the same way the police use it. One person on the team can be the designated bad cop. He or she will play it tough, be aggressive and have the biggest demands. When the time is right, the good cop takes over. The good cop will take the tone to a more cooperative level, and decrease the demands. The other side will be much happier to deal with the good cop, thinking his or her demands are much easier to deal with.

What if you are on the receiving end of a good cop/bad cop scenario? Can you recognize it and deal with it appropriately?

Chester Karrass recommends the following counter moves:

1) Let the bad cop talk until the other side gets fed up
2) Walk away
3) Use your own bad cop
4) Call a caucus
5) Learn to recognize that both the good cop and the bad cop are on the same side and want the same things.

Have you played good cop/bad cop successfully? Were you able to up your demands because of it?

Is it urgent?

When we scan business news stories about negotiations, many times we see negotiations described as “last minute.” For instance, here is a story about the last minute negotiations on Michigan’s state budget, where lawmakers scrambled to create a budget after their midnight deadline: http://www.detnews.com/article/20091001/POLITICS02/910010435/-1/rss

There is little doubt that when one or both parties at the negotiating table feel a sense of urgency, there will be a serious push to resolve the issues at hand. Sometimes, the only thing that leads to a resolution is the feeling that it is urgent to do so.

Urgency also plays a role in diplomatic negotiations. This past week we’ve seen a flurry of diplomatic activity regarding Iran’s alleged nuclear program. As a revelation was made that Iran had a second nuclear enrichment facility, American and European negotiators went in to high-gear, convening a high level meeting with Iranian representatives in Geneva.

When negotiations get down to the wire, resolution becomes urgent. Often, there is a deadline that must be met. The truth is deadlines force action because urgency is a great motivator.

As Chester L. Karrass points out in Give and Take:

“Deadlines pressure people into making an either-or choice. If the choose to accept the deadline, they get the deal over with. If they don’t, the consequences are unpredictable.”

For some people, to reach a deadline and have no resolution is failure. Most people, especially negotiators, want to avoid failure. This desire to avoid failure also leads to a sense of urgency.

Urgency will certainly lead to increased negotiation activity, and usually, to resolution. The easiest way to create a sense of urgency is to impose deadlines that must be met.

How do you deal with urgency in negotiations? Do you use urgency to your advantage?

Business Negotiations in the News

There have been two high profile negotiations reported in the news this week: General Motors-Penske and General Electric- Comcast.

GM-Penske
As part of its bankruptcy restructuring, GM planned to sell its Saturn brand. It had been negotiating with Roger Penske, who in turn had been negotiating with Renault-Nissan. Penske was unable to reach a deal with Renault, and the entire deal fell through. As a result, GM announced on Thursday that it will close all Saturn dealerships nationwide.

GM started Saturn in 1982 in order to compete with Japanese imports. The brand did well, and people liked its policy of no-hassle sales. However, sales had been declining, especially during 2009.

Read the Detroit Free Press account of the collapsed deal here: http://www.freep.com/article/20091001/BUSINESS01/910010457/1318/Collapse-Saturn-deal-stuns-GM

GE-Comcast
GE, parent company of NBC Universal, is negotiating with Comcast, the cable company, to spin off NBC by giving Comcast a 51% ownership. GE, which currently owns 80% of NBC, would buy the additional 20% from Vivendi. The new company would be entertainment focused and include some Comcast properties such as the Golf Channel.

CNBC is reporting that “Comcast would merge content assets that it values at as much as $6 billion, along with cash, so that it would take a 51% ownership stake. GE would control 49% and—as part of the spin off of NBC Universal—would be able to contribute as much as $12 billion in debt to the spun off entity...” (Read the full report here: http://www.cnbc.com/id/33123120 )

The negotiations are still ongoing and no deal has been struck.