Thursday, May 04, 2006

Yielding to Pressure vs. Negotiating

In my recent consulting clinic, we spent more than a day on negotiating—assignments, prices, conditions, schedules, and just about anything in the relationship between consultant and client. As homework, we were all supposed to negotiate something. I got a free meal for two. Someone else got $50 off the price of a jacket. One participant got on the phone and doubled the fee he had been receiving from a client.

For Americans, at least, negotiating seems to be a dirty word, a taboo—a taboo the homework was assigned to overcome. We learned many thing about negotiating, but the most important were about the emotional barriers we erect for ourselves. To learn about such barriers, let's look at two scenarios of negotiations that went wrong for consultants who were retained to produce a software component for a client.

Here's Scenario Number One:

Bob (the client boss): Fay, what's your estimate of when that component will be ready to ship to testing?

Fay (the consultant): If I get the equipment I've requisitioned, I'm pretty sure I can have it ready in 14 weeks.

Bob: [looking disappointed] Oh.

Fay: Isn't that okay?

Bob: Well,...

Fay: I suppose I can really push and get it in 12 weeks.

Bob: [still looking disappointed] Oh.

Fay: Darn. Well, if everything goes exactly right, I can make it in 10 weeks.

Bob: [brightening a little] Did you say eight?

Fay: Okay, I guess I can push for eight.

Bob: [smiling] That's terrific, Kay. I knew you could do it!

Here's Scenario Number Two:

Darlene (the client boss): Ira, what's your estimate of when that component will be ready to ship to testing?

Ira (the consultant): If I get the equipment I've requisitioned, I'm pretty sure I can have it ready in 14 weeks.

Darlene: [standing up and raising her voice] Ira, that's simply not acceptable. I want it in eight weeks, not a day later!

Ira: [eyes lowered to the his shoelaces] Uh... But there's just too much to ...

Darlene: [turning red, and raising her voice another level] Ira! I hope you're not about to say something negative! You know we're a team here, and we don't have room for nay-sayers!

Ira: [trying to swallow when his throat is dry] Well... I suppose I could...

Darlene: [breaking into a tight smile] ...you could do it! I knew you'd find a way, Ira. [turning towards the door] All right, then. I have your commitment, so don't disappoint me. See you in eight weeks! [out the door].

Q: What's the important difference between these two scenarios?

A: Nothing. Nothing important, that is. Bob used a soft approach; Darlene used a hard approach, but nothing was really different. Successful negotiations usually involve trade-offs among schedule, resources, and technical specifications, but these two contain no trading off at all—just different kinds of manipulations to make one person submit to another person's desires.

Scenario Number Three, which should produce a better result

Annabelle (the client boss): Myron, what's your estimate of when that component will be ready to ship to testing?

Myron (the consultant): If I get the equipment I've requisitioned, I'm pretty sure I can have it ready in 14 weeks.

Annabelle: [looking disappointed] Oh.

Myron: Isn't that okay?

Annabelle: Well, not really.

Myron: If the schedule is that important, we can look at alternatives.

Annabelle: I can't give you any more people. We're shorthanded already.

Myron: Darn. Well, actually, new people right now might be more disruptive than helpful. Well, something has to give—we can't reduce schedule and hold resources and specs constant.

Annabelle: That's certainly true. But I do need something to show to my marketing team in eight weeks. There's that business expo where we have to do a demo, and I can't change that date.

Myron: Okay, I guess we'll have to see what features we leave out of the demo, or perhaps fake a bit.

Annabelle: [smiling] That sounds like what we'll have to do, Myron. Let's take a look at what you can give us that will look good in eight weeks.
—————
And so Annabelle and Myron get down to the business of examining which features will contribute most to a good demo (her problem) while at the same time being within Myron's team's capabilities (his problem). Nobody was forced; nobody was manipulated. The negotiation stayed open and based on facts, not speculation or screaming or placating.

Of course, this kind of negotiation takes trust—trust in the other person, but even more, trust in yourself.

- You must feel that you can be honest without being taken advantage of.

- You must be confident that you understand the trade-offs on your own side of the business.

- You must have enough self-esteem to be able to say what you don't know.

- It also helps to know that agreements forged through manipulation will be weak and unreliable agreements.

In my experience, at least half of the problems consultants have with clients are the result of poor negotiation—usually the result lack of skill and will to deal with various forms of conscious or unconscious manipulation by their negotiating partner.

Do you understand? I have your commitment to learn to do better at dealing with manipulation, so don't disappoint me!

4 comments:

Asher Sterkin said...

As it's well known in the real-estate business, (s)he, who spells out the price first, looses. Actually in all three scenario it was the consultant who spelled out the price (14 weeks) first and thus did make her/him-self volnurable. While a blunt "First tell me when do you need this component" would be too harsh, I think, a more gentle "Are there any deadlines I need to be aware about?" could work pretty fine. If there indeed is a trust the manager would say "We have a very important demo in 8 weeks from today."

Asher Sterkin said...

Jerry, I want to thank you (which time ?). My recent engagement with one prospective customer was a good excercise of "not yelding to pressure" primerily from my inside to get this customer. After a long mice and cat play they offered me 1000 NIS a day (less than $200). After a short check with my friends I discovered that Israeli consulting companies charge between $800 to $1500 a day depending on the company and a number of days. Finaly they tried to offer me $750 a day and I said NO. Your "don't be commodity" slogan followed me during the whole conversation and it helped me to resist a temptation to "just to get the contract". I think there is one deeper reason why a good consultant should never accept the lowest possible fee (not saying beneath it). In my experience sucessuful consulting is 80% about raising self-esteem of your customers. Many times all what you need to do is to deliver your customers a "you can do it" message. One cannot help others to raise their self-esteem if (s)he does not have enough respect for her/him self. Accepting a humilating payment offer will never contribute to a right level of the self-respect.

Patrick said...

I'd forgotten the negotiation homework , but not the principles. I recently was pushed by a client to reduce a time estimate from nine weeks to 'as soon as possible'. I reflected on the needs of the project, the realities of the environment, and the other commitments I'd made, and made them the following offer; if they would triple my rate, I could drop the other things I was doing and guarantee it would be ready in six weeks or, perhaps, less. They ultimately agreed to the nine week plan... which is better for them in both price and probability of them getting what they need. The fact that the owners nearly agreed to triple the rate for a relatively small speedup before the sensible manager talked them out of it is also helpful information for future negotiations. The negotiations didn't result in a financial benefit to me... but it did buy me the time needed to do the best job I can do... which is of value to both the client and I. I credit the lessons learned in the workshop, on SHAPE and in Jerry's books with guiding me in this process. Thanks!

kenro said...

Jerry's examples also demonstrate the negotiation benefits of getting away from what people want (their positions) and finding out why people want it (their interests).

It wasn't until scenario three, when the client explained why she needed the work done in 8 weeks, that the two could start to work to some more practical solutions than "Project complete and perfect in 8 weeks."