Recommendation: Intelligence, Integrity & Innovation

"Julian is a highly intelligent individual driven to find innovative answers and solutions. Coupled with an excellent work ethic and being highly personable he is a bonus to any team. He is also excellent at customer facing roles and clients view him with integrity."
 

John Openshaw, Team Leader, MoD Integration Authority March 11, 2010 (managed Julian indirectly at MoD Integration Authority)

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The Arts of Negotiation

Whether you are buying or selling something, even if that something is a one-off commodity, item there is always scope for negotiation — the very nature of the wish to buy or sell is a factor in determining the price and conditions of a deal. No doubt there's a plethora of good books on negotiation but here are a few handy hints — some more useful that others no doubt.

Firstly, don't neglect personal relationships: liking and trust both have value. In some places (perhaps France, for example) the unquantifiable value of a good relationship may nonetheless be high enough to outweigh other significant factors. In long-term business relationships there is considerable value in spending time & money on your partners... but don't be over generous: you'll either look needy or sleazy.

Secondly, don't forget the cultural factors — the local style of negotiation and attitude to business in general. In some places it may be appropriate to throw an occasional tantrum (indeed lack of passion for the business may be considered a negative quality), in some it is very bad form to say simply "No" to a proposal or request (the Japanese for "No" in such situations is merely "That would be very difficult."), in some you should attend to the spirit of your proposed agreement and in others the letter (and, in the case of the Netherlands, what the other side may be mentally including/excluding in invisible ink — "In matters of commerce the fault of the Dutch//Is offering too little and asking too much."). As the American's might say, don't bet the farm on the first deal in a strange land.

Thirdly, always be clear about the bottom line: at what point must you walk away — know the value of the business as well as the price.

Fourthly, never make two concessions in a row — a principle even better deployed if your first concession is a "gimme" (i.e something you had planned to give away anyway). The reasoning behind this is that if you do not require something to balance a price reduction (e.g. longer delivery, shorter warranty, larger up-front payment etc.) the original price was (un)necessarily inflated: you should be protecting your margins at all times. (Though we cannot neglect other considerations, such as the time-value of money (cash-flow) it's a very bad idea to appear needy.)

But, beyond these things, what about some specifics. Here are a few negotiating ploys encountered , and my (successful) responses to them

You must give us a discount because we are a prestigious customer. 

The idea behind this ploy is that somehow by associating with you, the customer is adding value to your business. Typical specific examples include "Other's follow where we lead, if we buy from you, this will encourage others to buy — and we should share in the value we add to your business."

I have no objection to sharing the value once the (theoretical) value has been realised. If the client actively participates in a sales and marketing program, provides sales leads, introductions,etc. then it would be entirely appropriate to offer an element of commission on sales arising from their efforts... in appropriate proportion to those efforts. Obviously I couldn't discount the price for the current contract as the added value is currently undefined.

We will buy more from you if you reduce the price on the initial sale.

Again, a theoretical benefit is being offered. Offer a quantity discount with a fixed call-off period; charge the quantity price and if no subsequent order materialises invoice for breach of the quantity discount arrangement (if cash-flow permits such an arrangement).

We have already bought X units from you.

This was particularly amusing when deployed by a South Korean buyer since the first two units had been sold at a significant discount on the basis that the next order would in fact return the average price to the nominal list price (the price had therefore gone up). Answer: yes, but you didn't tell me you were going to buy more and you certainly didn't contract to buy more. That information or such a deal might have been valuable then. Do you think you might buy even more? Perhaps we should negotiate a quantity discount now so that you don't miss out again in the future.

You could also point out that if they intend to buy more from you then the previous purchases must have been at minimum satisfactory — probably better — and so the economics of the first deal was beneficial all round anyway.

It's too expensive.

A truly classic and vapid approach, which really means only "I want to pay less." Ask (delicately), "What does 'too expensive' mean?" If the answer is that it's more expensive than competing products, use product differentiation to justify the price differential. If the answer is, "I don't have the budget," then obviously you should seek to re-examine the requirements and then to offer something that does fit — or you could phase implementation (find out what the budget issue actually is).

Sometimes a buyer might challenge you to justify the cost of something — price breakdowns are always useful for dealing with such challenges since, below a certain level of granularity it is simply not possible for anyone to object to a particular cost item. But, when price breakdowns are not appropriate or unavailable (Why aren't they available? Always be prepared.) hand-waving arguments about long-term viability, investment, contingencies, etc. can deal with many specific objections.

Feel free to add your own one-line negotiating ploys and responses.

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A Sabot in the Works

While I was at the home office, working "without portfolio" I came across an interesting problem.

Beyond the Immigration and Nationality Department's main offices, front-line immigration staff were — erroneously and discriminatorily — often thought of as confirmed Luddites. At a time when the asylum processing system was in crisis, the perceived unwillingness of outlying units to cooperate with technical and process improvements was both a source of friction and a genuine impediment to the implementation of necessary organisational changes.

Being without portfolio I took it upon myself to visit a certain significant location to find out what the real problem was. Not having a portfolio, and hence being agenda-less, it wasn't too difficult to begin with a simple "exchange of views": I explained the issues as seen from "head office"... and they told me why they weren't interested in any solution emerging from East Croydon. Unsurprisingly (to me) most of their objections were reasonable and they all boiled down to one fundamental issue — no one listened to them and took into account their particular situation.

So I asked them to explain the difficulties they perceived with the technical and process developments being discussed and then asked whether, if I could come up with some way of bridging the divide, they would be willing to discuss matters further. The answer was, of course, yes indeed they would: they were neither Luddites, nor saboteurs; they were, as is usually the case, genuinely committed and working hard to achieve the organisations goals. The only problem was that, based upon experience, whatever was imposed from without

• Wouldn't work
• Would very quickly be replaced by something else
• Would probably leave them worse off than they already were

Anyway, to cut a long story short, I went away and built a prototype system that would interface the centre with East Croydon whilst also providing some buffering, and reflected both the local processes and the needs of head office. I then presented it to them — not by giving a presentation but actually by sitting them down with the prototype and working through some representative cases.

Of course the system was not right — there were mistakes in my understanding and process refinements and subtleties to incorporate — but having clearly seen their input reflected in a technical solution they were then ready to engage... and engage they did. A couple of months later, as the system was being finalised, not only was everybody enthusiastic about the new system, when certain significant technical issues surfaced they were even willing to propose modifications to their own processes in order to make it work — and thus were the so-called Luddites shown never to have been anything of the kind.

Following which, it should then have been And they all worked happily ever after...; alas, owing to a certain Not Invented Here mentality back in East Croydon, the final hurdle to formal roll-out and implementation was never cleared and the effort stalled.

What are the lessons from this?

Firstly, that passive resistance or even active obstruction to business change — whether technical or process — is not proof of corporate treason.

The basic psychology of motivation is this: in order to be motivated to do something one has to believe:

• that the goal is worthwhile
• that the goal is achievable in principle
• that one has the personal capacity to achieve the goal in practice
• and, finally, that the value of achieving the goal outweighs the value of the effort required.

Or, to put it in shorthand: Motivation = Value x Achievability x Practicability x Relative Cost.

Failure to appreciate this is a common problem. The British Prime Minister Tony Blair once famously railed against the workers of the National Health Service for their opposition to what the government perceived to be necessary changes to the NHS; this was both a political mistake and failure of leadership. NHS workers, like the vast majority of all workers, being genuinely committed to their organisations goals would, I am sure, have enthusiastically done what was necessary if they had believed in the achievability of a desirable goal. The problem was that they were not merely unmotivated, they were positively de-motivated to cooperate (which problem Tony Blair's comments only exacerbated).

In the case of the Home Office outpost, the value of the goal was not in doubt — what I did was help the immigration staff see how it could be profitably achieved.

Secondly, do not allow the ultimate goal of perfection to prevent any progress at all*: do what works until you find a better way.

It seems obvious, but somehow those to whom it should be obvious frequently fail to see such things.

* Whilst I first came across the idea that "The best is the enemy of the good" in an engineering context (attributed to Voltaire in the words "Le mieux est l'ennemi du bien," but apparently of even earlier origin), the mindset it epitomises is almost universal.

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