Episode #48 Key Things Not To Do When Negotiating

We rarely meet super pro negotiators in business. Often the other side are just like us, rank amateurs. Because we are just turning up to negotiate, we are often at a disadvantage because we don’t really know what we are doing. We also don’t do it on a regular basis either, so the frequency gaps between actual hard edged negotiations can be quite long. If we were doing them every day, we would become pretty good at them. But that is hardly ever the case. Some things work better than others, so it is always good to have what works and what doesn’t work in mind. Do you know the difference?

Before we get into this week’s topic, here is what caught my attention lately.

The young in Japan have recently discovered everyone loves them and they are in big demand. Consequently they are now looking at becoming more mobile and considering moving firms. This is not something their parents would have ever entertained. A Tokyo recruitment agency Disco, did a survey and found that forty three percent of new employees were already taking action to change jobs. Masuno Tanide from Disco said this number was “high for those just into their first year”. Their average satisfaction rate with their employer on joining was nearly seventy three percent, but within a year this has dropped to fifty seven percent. The shine has definitely come off for many new employees. Asked if they would choose the same company again, twelve percent said absolutely not and a further forty five percent said they would make different choice if they could. In a separate CABINET OFFICE SURVEY LAST OCTOBER AND NOVEMBER, SEVENTY TWO PERCENT OF people aged between sixteen and twenty nine were supportive of changing careers. This is a long way from the old idea of one company for life and we will see more and more of this free agent attitude and activity from Japanese youth as they enter the workplace. Strap on your helmet for a dizzy ride, as we navigate this new free agent era of work in Japan. In other news, according to Hiromichi Shirakawa, Chief Economist for Credit Suisse in Japan, the rich elderly spend eighty seven billion dollars a year from their savings on their adult children. Why do their kids need money you might be asking? Why aren’t they more independent? As of 2016, the average real wage for employees in their early forties has fallen thirteen percent compared to those who were same age a decade earlier. The elderly’s support for their kids and grandkids will likely take on even greater economic importance in the years ahead, possibly growing by ten percent a year, given their savings stash and a fading desire to leave behind an inheritance. Watch carefully because we are about to see the greatest transfer of wealth between generations in Japan’s history. The Japanese tax office can barely restrain its excitement at harvesting all of that potential inheritance tax.

This is episode number #48 and we are talking about Key Things Not To Do When Negotiating. Soredewa ikimasho, so let's get going. Former American President John F. Kennedy left us with a great quote: “Let’s never negotiate out of fear. But let us never fear to negotiate”. Actually, we do fear to negotiate though, don’t we. We worry about asking for too much or too little. We usually imagine a “negotiator” as someone totally unlike ourselves, a tough individual with ice coursing through their veins.

Ironically, we are all negotiating everyday within our families, circle of friends and companies. Decisions have to be taken, a direction has to be chosen and we need others to agree with our idea. This often requires compromise or even giving up our idea, in preference to competing suggestions. We are not taught how to negotiate though and so we are mainly unschooled amateurs flailing around.

Somewhere along the line, we find ourselves in a sale’s role and we have to negotiate with the buyers. Procurement officers are often highly expert in negotiations or at least they are deaf to our appeals about the value we provide. In Japan however, they are rarely specialists and often take a very basic approach.

They have their matrix with your name arranged vertically down the left side of the spreadsheet, together with all your competitors. Across the top they have the products nominated. In the corresponding spreadsheet cells, they plug in the prices. Bingo, find the lowest priced cell and buy from that company. This is bad. There is no allowance for any differentiation which you may have, because they are applying a very basic code of reference here. In these cases, we need our internal champion to intervene and fight for paying more for better quality.

Let’s now look at the usual negotiation cases, where we are not dealing with these dastardly procurement officers. This “negotiation” issue is a big topic, so let’s narrow the focus to common mistakes we may be making right now, which we should eliminate forthwith.

1. Negotiating price before details

There are many elements usually involved in making a decision and price is just one of them. We need to garner the full spectrum of issues involved and check our assumptions about what will happen once a deal has been struck. There are variations on pricing according to volume, frequency, regularity, quality, colour, sizing, delivery options, etc. Many aspects are in play in addition to just price, although most people get fixated on that one variable and that is a mistake.

Clients are also going to be suspecting things like hidden fees, tricky terms of payment or penalties, timings. Hopefully, you don’t have any of these issues to complicate building the relationship with the buyer.

We should anticipate the client’s concerns and create our own checklist of items, before we even have any discussion with the other party. The object of the negotiation is not to outsmart the other side. It is to create a relationship, which is mutually beneficial and so tricks and clever tactics where you win and they lose is a formula for a short and limited relationship.

2. Failing to keep the end in mind and leaving no room for negotiation

Key details can occupy our complete attention to the detriment of what we are ultimately trying to achieve. There are micro and macro perspectives involved and we need to be able to keep reminding ourselves of the big picture, while we are mired in the mud and blood of the details.

3. Lack of confidence

We undermine our mental attitude to the process of negotiating by talking ourselves down. Coming across as hesitant, unsure, nervous may embolden our negotiating partner and we achieve a diminished result as a consequence.

Salespeople who have targets, quotas, bonuses or commissions riding on a deal, are very prone to cave in on price, because they are so desperate for business, any business. This weakness will come across to the buyer and the price achieved is almost guaranteed to go down as a result.

Remember, in our lives the vast majority of people we will be negotiating with will be rank amateurs, just like us, so we shouldn’t be shy about what we are doing. As a salesperson, if you believe in the goodness of what you are doing for the client, then you can be confident when negotiating.

4. Failing to understand the needs of the customer

Some things may not be negotiable, often for reasons which we could never even imagine. Once we understand clearly what the other side wants, we will be in a better position to find middle ground and strike a mutually satisfactory agreement. We can get captured by a single item in the negotiation and miss the many options that are also in play. Often, what we imagine to be the key for the other side, may not be their main concern. We need to find out what is their main concern and find a way of supplying it to their satisfaction.

5. Letting the customer dictate the process and outcomes

The buyer may feel they are the dominant side in the negotiation and may try to force us to an agreement through the brute strength of their buying power. A bad agreement is a bad agreement, so we are reasonable in asking for input into the process and for deciding to walk away from the negotiating table if we need to.

6. Acting desperate

We may in fact be desperate, but handing that key insight over to the negotiating partner is not necessary. We become all give and no take in the toing and froing of the negotiating process.

7. Using argumentative communications

Emotional control is an asset we should develop and cherish. Verbal or written outbursts may make us feel important. Usually, however, they don’t help to find an agreement. It is rarely a good idea to set fire to the emotional wick inside the other person we are negotiating with.

8. Failing to recognize the walk away points

We don’t have to agree if we don’t like the arrangements and we are better to flag those early, if they are deal breakers. Time is money, so let’s move on and find someone else more suitable to negotiate with. We need to have our BATNA (Best Alternative To A Negotiated Agreement) ready to go, should we need it. If the buyer is being a real pain, remember life is short, so go find a nicer buyer! We have to spend a lot of time with our clients and having a client list full of nice people who appreciate all that you do to advance their business is the better way to live.

9. Narrowing negotiations to one point, usually price

Price is only one element of cost – there are other levers around financing, quality, timing, volume, contract length, etc., which can come into play. There are so many combinations which can create flexibility in the negotiation process. Always look for points of agreement where the value you can provide outweighs the cost of you product or service. When you really understand the client’s needs, proffer a very good solution, often price isn’t even raised.

Sometimes we get in our own way and make things unnecessarily hard for ourselves. If we stop making these basic negotiating mistakes we will do a lot better in getting a preferred outcome. The preferred outcome is a happy client, you are also happy and the relationship is becoming more and more solid, based on trust you are building and the partnership you are creating.