Archive for October, 2008

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3 Steps To Building A Better Negotiation

Thursday, October 30th, 2008
Trust, Rapport, and Satisfaction Are Key Steps In Any Negotiation

Trust, Rapport, and Satisfaction Are Key Steps In Any Negotiation

If you really wanted to, you could go into any negotiation with your guns a-blazing and through dirty tricks, intimidation and other techniques probably get your way. However, you would have established a reputation as someone that nobody wants to do business with. In the end, you would have lost much more than you would have gained. Instead, if you establish a reputation as a tough but fair negotiator whose word can be trusted, then everyone will want to do business with you.

Lots of people don’t understand that during a negotiation you are really creating three different things: trust, rapport, and satisfaction. Instead of viewing a negotiation as a “winner takes all” type of competition, if you can view it as more of a construction project, then you’ll be well on your way to being a successful negotiator.

Trust is a word that we all think that we know and understand; however, we are often too quick to dismiss it when it comes to establishing goals for a negotiation. The first rule of trust is don’t even start to negotiate with someone that you don’t trust – without this basic foundation, the discussions will end up going nowhere. Sometimes when I’m working with people who are just starting out in negotiations, they make the mistake of associating trust with giving in to the other side’s demands. No, no, no! During a negotiation you need to be pushing back, working to get what YOU want from the other side. Just about any tactic (unless they are immoral or illegal) is permitted. However, when everything is said and done, you need to live up to your side of the agreement. Ultimately, this is what trust is all about.

Rapport sure sounds like something fancy, but in reality all it is is a feeling that is deeper than trust. You can think about it as a form of being “tuned-in” to the other side of the table in such a way that you understand them. When we are involved in a business negotiation, having rapport with the other side means that both sides respect each other, both sides actually like each other, and both sides are willing to do whatever it takes to make a deal happen.

The last bit of construction that needs to be done during a negotiation is to build satisfaction on both sides of the table. What this means is that it’s actually very important for you to spend some time thinking about how the other side of the table is going to be feeling when they stand up after the negotiations are over. If they are going to be feeling beaten down, betrayed, taken advantage of, or abused, then you have not done your job. Instead you’ve built a foe that will come back and cause you problems in the future. This where the idea of being viewed as a “fair” negotiator comes in to play. When people deal with a fair negotiator they realize that they are going to have to give in on some items; however, they also expect to get their way on other items. In the end, they expect to walk away from the table with a sense of satisfaction that they were able to negotiate a good deal for themselves.

During your last negotiation did you feel that you could trust the other side? Were you able to establish a rapport with the other side and did it help move the negotiations along? When the negotiation was over, do you think that both sides were satisfied with the way that things came out? Leave me a comment and let me know what you are thinking.

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It’s Negotiation Time At Boeing: Plane & Simple

Wednesday, October 29th, 2008
Boeing And Its Union Can't Seem To Agree On One Key Issue

Boeing And Its Union Can

Even as the rest of the world is going through a financial melt-down, out in Seattle there is still strike going on at Boeing that is costing the company roughly $100M in missed revenue per day. Ouch! Just in case you have not been following this story, the 27,000 members of the International Associaition of Machinists and Aerospace Workers who work for Boeing are out on strike and have been so for since September 6th. Doesn’t this seem like just the kind of problem that a good negotiator could step in and solve?

Currently, both sides are feeling the pain from the strike. On this past Wednesday Boeing had to announce to the press that their 3rd quarter net income sank by 38% due to the strike. Now you’ve got to remember that Boeing is sitting on a stack of orders for their planes right now: they have a backlog of orders for 3,725 planes of which about 900 are for the eagerly anticipated new 787 Dreamliner. Keep in mind that a new airplane costs roughly about $100M to buy and you start to understand that if only Boeing could build new airplanes, then they would be making money hand over fist.

The union folks are also hurting. On average the union workers bring home about $65,000 / year. While the strike is on, they are getting $150 / week from the union in strike pay. This means that everyone is scrambling to pick up part-time jobs in order to stem the bleeding.

The main players in this negotiating drama are well known. On the union side they have Mark Blondin who is a former Boeing machinist who is serving as the lead negotiator for the union. On Boeing’s side, Doug Kight who is Boeing’s lead negotiator. Kight is also Boeing’s vice president of human resources, a position that he took over in late 2006. During previous negotiations, Kight provided legal counsel to his predecessor, Jerry Calhoun, who was formerly Boeing’s lead negotiator.

When we talk about negotiating deals, we often focus on price. However, in this case the price issue is well hidden by another issue: job security. At the heart of the debate is a single question: can Boeing expand the types of jobs that outside contractors perform in assembling airplanes. From Boeing’s point-of-view they are trying to cut costs and reduce the time required to build a plane. In order to do this they are outsourcing jobs to other firms. As a result of the last contract that was negotiated between these two parties, outside firms are now allowed to deliver parts directly to the assembly line. The union is concerned that their members are going to lose their jobs to outside firms if this trend continues. Boeing says that they need to retain flexibility and are unwilling to make any job guarantees. Can you say deadlock?

What can be done to resolve this issue? Remember, the ultimate goal is to make sure that both sides of the table leave the negotiations with a feeling of satisfaction. Additionally, both sides need to give something up in order to feel that they’ve “earned” a negotiated settlement. There are lots of ways that this issue can be resolved. Here’s one that would work for both sides.

I’m sure that there are a lot of other issues on the table like health care, pension benefits, etc. Let’s assume that the core negotiating concept of expanding the discussion has been done and that this issue of job security is really, really a key sticking point. If you focus for a moment on the end game, Boeing really wants to start making planes again so that they can keep their customers and make lots of money. The union members really want to start making planes again because they miss their paychecks and they are proud of their work. This is great news – both sides want the same final goal. Now the trick is to see what can be done in order to get them there.

One thing that makes solving this issue just a bit easier is that Boeing is sitting on a pile of money. Boeing has two issues with the union: the immediate issue of job security for 27,000 workers as well as the long term life of the union itself (will a union be needed in the future?). Both needs have to be met. The union has two issues with Boeing: Boeing wants to lower it’s production costs by using less expensive outsourced labor and Boeing is getting tired of having to deal with a strike and work stoppage every three years. The strikes are playing havoc with Boeing’s ability to compete with Airbus because Boeing can’t honor its contracts to its customers.

So here’s one possible solution. Boeing has 27,000 current employees who basically (just like all of us) only really care about their jobs. What Boeing should agree to is that they will keep these employees working until such time as they no longer need them. At that point in time, Boeing will pay them off to go away. Specifically, Boeing will pay them 1/2 their current salary though retirement age. This will free the worker up to go get retrained and get another job if they want to. Potentially they could earn a great deal of money for the rest of their career. Oh, and they could pretty much pick any job that would make them happy because they would still be getting paid by Boeing. This would cost Boeing some serious cash. If they terminated all 27,000 workers who were making $65,000 / year and everyone was 30 years old, then Boeing would have to pay out $30B over the next 35 years. Now that sounds like a lot of money, but it turns out that it really isn’t. Remember we’re really talking about a long-term solution here. Boeing is going to be paying a lot in salary no matter what. Having the flexibility to further streamline their production process while potentially paying half of that would save the company a lot of money.

Now from the union’s position, they are going to have to change how they operate in the future. Clearly the number of machinists needed by Boeing has been and will continue to decrease over time. However, it can be argued that the remaining machinists will become even more important to the company – they will be doing things that no outsourcing firm can do. The role of the union is going to have to evolve and change. Specifically, over time the machinist union will need to merge with another union in order to maintain it’s bargaining strength. Realizing this earlier than later will be the key to resolving the current issues.

What would your next step be if you were the lead negotiator for Boeing? What would your next steps be if you were the lead negotiator for the union? Who do you think is feeling the most pain right now? Leave a comment and let me know what you are thinking.

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Negotiation Awards: Who’s The Best Negotiator In The World?

Friday, October 24th, 2008
Good Negotiators Try Different Techniques And Keep The Ones That Work

Good Negotiators Try Different Techniques And Keep The Ones That Work

We all like to think of ourselves as fairly good negotiators who are constantly getting better. However, it’s time that we take a moment and acknowledge that there will always be someone better than us out there. Someone to whom negotiating skills come as almost a second nature. Whose very survival, arguably, could depend on their ability to not only negotiate well but to end up getting their way most of the time. I can almost hear you asking: who is this fantastic manipulator of men and how can I learn from them? Well good news, you’ve probably already met them: professional negotiators will almost all agree that the best negotiators in the world are two-year-olds.

Why two-year-olds you ask? Well take just a moment and think about it. If a two-year-old makes a request and then does not get his/her way, what will they do? They’ll fall to the floor and start to cry, scream, kick their feet and maybe even hold their breath until they get their way.

If you’ve ever been the target of one of these fits, you know just how powerfully effective they can be. You just want the kid to stop! This is where the negotiating starts. If the parent tries to appease the child by begging, pleading, or even offering them bribes to stop their behavior then the child will have learned an important lesson: throwing a fit works. This means that the next time that the child wants something, he/she will have the fit as one of their known successful negotiating techniques.

If, however, the parent is strong enough to just walk away and let the child wear themselves out with no effect, then once again the child will have learned something: a fit does not work. In this case the parent’s negotiating technique has taught the child something and so the child will adjust their technique next time: they’ll try something else. The next time that the child wants something, perhaps they will hug their parent or say that they love them or something else along those lines in order to see if this achieves a better result.

We can all learn something each time we negotiate and a two-year-old has a great deal to teach us. A child’s ability to try new negotiating techniques, retain those that work and discard those that don’t work, should be showing us the way that we need to be constantly refining our techniques. All too often I encounter people who view negotiating as a “process” to be learned and repeated over and over again in every situation. This couldn’t be further from the truth.

A better way of thinking about negotiating is to view it as a specialized form of communication. When we negotiate we are trying to get something that we want by interacting with someone else who is trying to do the exact same thing. Every negotiation is different and every individual that we negotiate with is different. This means that there IS NO FIXED FORMULA for negotiating. Rather, skilled negotiators have a collection of skills that they can use as they see fit to do so. I guess the best analogy would be to a carpenter. Every piece of wood is different and depending on what the carpenter wants to create out of the wood, he will choose to use any one of a large collection of specialized tools that he has to work with.

Years ago I used to watch the This Old House TV show in which Norm Abrams would do fantastic things with wood as part of a house remodeling job. It took me a long time to realize that not only was Norm a gifted craftsman, but he also had every specialty wood working tool known to man. He would smoothly swap out tools as he transformed a tree stump into a fantastic Adirondack chair. If Norm was a negotiator, we’d be seeing him swap negotiating skills in and out as he searched for the right tools needed to turn a negotiation into a success.

If you’ve been looking for the one negotiating “system” that will allow you to “win” all of your negotiations, it’s time to give it up. Such a system does not exist and any two-year-old can tell you this. However, if you can understand that like a master carpenter, you can collect the right negotiating tools and by choosing the right tools for the right situation, you can create negotiation results that are things of beauty.

Have you ever had to try to negotiate with a two-year-old? How did it turn out – did you give in or did you take a hard line and let them throw a fit? Last time you negotiated with someone, did you detect them trying out different negotiating techniques on you or were they just executing a fixed system? What negotiating skills do you already have and which ones would you like to develop?

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7 Ways To Be Successful In A Negotiation

Wednesday, October 22nd, 2008
Successful Negotiating Requires Clear Goals

Successful Negotiating Requires Clear Goals

If only there was some magic formula for being a successful negotiator. You know what I’m talking about, some process that if you followed it from start to finish you could always be assured that you would “win” a negotiation. Well, as we’ve discussed in the past on this blog, the concept of winning a negotiation is a bit unclear. Rather we like to say that you want to come away from the negotiation feeling satisfied. Oh, and since a negotiation takes place between people who are infinitely complex and difficult to fully understand (yourself included), there is no way that any fixed formula is going to yield successful results every time. Rather, you need to be flexible and adapt your negotiating style to the current negotiation.

George Ross, who is Donald Trump’s master negotiator, has come up with seven goals for how you can better your odds of succeeding in almost any negotiating situation. Considering how successful George has been, it sure seems like it might be worth the time to listen to what he has to share with us. That being said, here are the seven goals that you can keep in mind in order to be a successful negotiator:

  1. I Want To Find Ways To Get More Out Of This Negotiation: The act of negotiating is a process of discovery for both sides. If you are able to distance yourself from narrowly focusing on just one point in the negotiation (price) and open your mind to all of the possibilities, then you will have a much better chance of being satisfied by the outcome of the negotiation.
  2. Learn, Learn, Lean (About The People On The Other Side Of The Table): Why are they there? What do they want? Almost without fail what you think are the answers to these questions turn out to be wrong. The only way that you are going to learn about the people who are sitting across from you is to start asking questions. Draw them out of themselves and who knows what valuable information will be revealed?
  3. Where Is The Bottom Line?: At the end of the day, this is the critical question that all negotiators need to find an answer to. The other side has a minimum amount that they MUST get out of the negotiations and you have a maximum amount that you are willing to give up as a part of the negotiation. George calls the gap between these two amounts the “zone of uncertainty”. Establishing the outline of this zone is what good negotiators do best.
  4. What Are The Constraints For This Deal?: You have constraints put on you, the other side has the same. These constraints can be limits on the amount of time that is available to negotiate, how much decision making authority each side has, etc. Discovering what constraints the other side is dealing with can help move you towards a deal much quicker.
  5. Connect With The Other Side: It is one of the great truths of life that we all like others who are most like us. What this means is that you need to find out as much about the other side of the table as quickly as you can. Once you have done this, you can start to interact with them in a way that they will most positively respond to.
  6. Understand The People Who Make Up Your Side Of The Table: Nobody negotiates alone. You have a collection of people on your side while you are negotiating. They may not be in the room with you; however, they are the ones whose support allows you to be there and they all have a stake in the outcome of the negotiations. They may not all agree with the posture that you are presenting to the other side of the table, but it’s your job to hid any internal differences and present a single unified face.
  7. Discover What Is “Fair And Reasonable”: This poor phrase has been so overused by both sides of the negotiating table that it can often be ignored. However, don’t do this. At the end of the day both sides of the table are searching for a deal that they believe is fair and reasonable. Unfortunately, we all define this slightly differently. Your job as a negotiator is to question and probe the other side of the table in order to find out how they define fair and reasonable. Then you will need to make sure that the deals that you propose to the other side meet this criteria so that they won’t be rejected.

Do you agree with all of the goals that are on George’s list? Can you think of something that needs to either be added or dropped off? Which one of these goals did you use in your last negotiation? Which one do you think is more important than all of the others? Leave me a comment and let me know what you are thinking.

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10 Tips For Getting Satisfaction While Negotiating

Thursday, October 16th, 2008

You're In Trouble If The Other Side Can't Get No Satisfaction

Ok, so the title for this post is a bit screwy, but hopefully the point is clear: at the end of the day, negotiating is all about having both sides leave the negotiating table feeling satisfied. They may have had to give in on some things; however, in the end they both got what they really wanted. Now this all sounds fine and dandy, but just how does a negotiator go about making sure that everyone is going to become satisfied?

The first step is to realize that a negotiation is really just a specific type of relationship. Even as the world continues to change around us and new ways of doing business emerge such as outsourcing, strategic alliances, and partnerships one thing remains constant: negotiating is always needed. However, how we actually go about negotiating is also undergoing a transformation. As both sides of the table now often have many partners in common, it makes sense to ensure that everyone has a good working relationship because undoubtedly we’ll be doing business again in the future.

When we use the “R” word (relationship) this means that we are starting to talk about how satisfied each side of the table is with the deal that is being worked out. It goes without saying that depending on your actions you can either be building or diminishing the other side of the table’s satisfaction. It’s way too easy to dimish satisfaction so we’ll focus on building satisfaction up.

There are two quick ways to do this. The first, interestingly enough, is to tell the other side “No” one more time. Whereas this does not at first seem to make sense, if you think about it you’ll see that it really does. In order for the other side of the table to feel as though they “got a deal”, they also need to feel as though they worked for it. If they sat down, made a request, and you agreed to it, then they would leave the negotiating table feeling deeply dissatisfied. The reason for this is because you didn’t negotiate with them – they got something for nothing. Although you might think that this is the best possible outcome, it isn’t . They won’t be satisfied. However, if you say “No” then they’ll need to work to reach a deal. Once a deal is reached, they will feel as though they “earned” a good deal.

The other way to ensure that the other side of the table leaves with a feeling of satisfaction, you need to remember the A.I.R. rule. A.I.R. stands for “Ask for something In Return”. Never give up something for free. By asking for something in return, the other side of the table will feel that they “earned” what you gave to them.

In order to help you with the thinking about how best to ask for something in return, here is a list of things that you could ask for during most negotiations:

  1. Better payment terms
  2. A longer term contract
  3. Who is responsible for delivery?
  4. A freeze on prices
  5. Most favored nation price guarantee
  6. Have them buy additional products
  7. Delivery options
  8. Changes in staffing
  9. Changes in specifications
  10. Warranty

How did you feel the last time you left the negotiation table – were you satisfied? Why or why not? Do you ever take the time to think about how satisfied the other side must be? What have you done during a negotiation to ensure that the other side left the table feeling satisfied? Leave me a comment and let me know what you are thinking.

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