clive

Lovely story heard over the weekend from a good friend of mine about negotiating with BP. He worked with a smallish gas company and was negotiating with BP, a much larger company with considerable market power.

However, the smaller company had 3 representatives in the room at the negotiation and BP only had one. There is an inherent bargaining power associated with out-numbering your opponent. If you have more people in the room you have much more time to think and observe than your opponent, who will have to deal with multiple responses and contributions all by himself. So, by allowing the negotiation to develop as three against one, the smaller company was able to neutralise BP’s greater market power. Never underestimate the power of numbers – and if you find yourself out-numbered in a negotiation meeting, then get out of there!

Great to watch the salesmen and women at work at the moment on a pitch at the end of Oxford Street, just by Tottenham Court Road tube. They are selling bottles of perfume and a willing crowd is always gathered round them (no doubt containing some of their own stooges).

The salesmen all wear headsets with mikes so you can hear them from some distance away. They use incentives and pressures brilliantly – the best kind of behaviour to use in the bargaining phase of any negotiation. Volume discounts are used to play to people’s natural sense of acquisitiveness. “I’m not offering you 2 for 1 ladies and gentlemen, I’m offering you 5 for 3”. And the threat that the offer will be taken away is ever-present, putting fear in the deal for the punter. “Now this offer only applies for the next 5 minutes ladies and gents, after that, I’ll have to withdraw it or I’ll put myself out of business”.

People can’t wait to hand their cash over. Of course it’s all very win/lose in terms of attitude, but you have to respect their effectiveness at getting customers to open their wallets. In these recessionary times, when it’s not easy to earn a pound note, they are an example to us all….

Excellent negotiating advice from Kirstie Allsop last weekend in the Property section of the Daily Telegraph. The host of “Location, location, Location” gave her top tips for buying and selling houses.

Rule 1 was “Don’t dawdle………if you like the first place see, buy it. It’s like dating; if you meet a man you like, you don’t say you’ll have a good look round first.” It’s the same with selling.”On Location, Location, Location the other day, a buyer’s offer was accepted, but the vendors then went back to another couple who wanted the place too to see if they could top my client’s offer. The minute we heard this we withdrew our offer…”
It’s just so important to know when to close a deal. Closure is a fluid moment and it’s important to bottle it, otherwise you risk losing everything.

How on earth did a deal get done for Wayne Rooney last week when he seemed on the brink of leaving the club? Deals only get done when the personal needs of each side are met, so what were the needs on each side and how were they accommodated?

There were of course 4 sides to this negotiating square. Sir Alex Ferguson, The club’s owners, Rooney, and his agent Paul Stretford.

Sir Alex has already achieved so much in the game that it can only be the possibility of further spectacular achievements that drives him on. Achievers like to be involved in unique ground-breaking or sensational deals. Turning Rooney’s head around when he seemed poised for the exit door must rank as one of Ferguson’s finest achievements as a deal-maker, so you can see how that would have met his needs. Sir Alex is also someone who likes and commands respect. Rooney’s public apology probably went a long way to meeting these needs after
his earlier outspoken criticism of the club.

For the Glazers this is a time when they need some reassurance that everything is going to be ok. Can they continue to run the club successfully against a mountain of debt? One thing for sure is that task is made much easier now Rooney stays than it would have been if one of the club’s major assets had left. So you can see why they were so keen to stump up some extra cash and promises to keep him.

Paul Stretford is someone with a “belonging” need – a need to belong to that club of “super-agents” who can make or break players and deals. His box would have been ticked whether Rooney signed […]

As the Apprentices showed in last week’s episode, it really is critical to take a break when you are under pressure.

Shibby found himself disagreeing with team-member Paloma in a meeting with a potential customer. She wanted to take on an extra order which he knew his team could not fulfil. What do you do in that situation? Take a break and sort out a common approach with your team in private. What you do not do is disagree in public in front of your opponent, which is what he did. That exhibits unprofessionalism and makes your team look really weak.

Similarly, poor old Melissa, who was leading the other group, got herself completely off-side when pitching to a hotel management team over an order of breakfast rolls and pastries. Stumped when asked by the other side to quote a price, she sat there in a state of total indecision, poring over her notebook. In the end one of the Hotel management team took pity on her and suggested that she and her team should take a 2 minute break.

Sadly it didn’t help, because she now felt so under pressure that she wasn’t able to take advantage of the opportunity of the recess. In the end the break took 15 minutes instead of 2, and she then came back with a preposterous price which showed that she had not understood her business at all. Had she taken a break before she got herself in such a tizz, maybe she and her team could have used the time more positively.

Breaks are really helpful, they give you and your team the chance to re-group, re-energise and re-unite. If you are feeling under pressure in a […]

Great to hear veteran US negotiator Stuart Diamond on Saturday Live on Radio 4. Diamond has helped resolve numerous intractable issues, including the Hollywood writers’ strike and the strike by Bolivian coffee farmers.

His approach is all about putting yourself in the other guy’s shoes and trying to understand his perceptions. Spot on. Deals just don’t get done unless the needs of each party are met. He also spoke about the need to create a personal rapport at an early stage of the negotiation – a thought echoed on air by former hostage John McCarthy. Yes, yes and yes, this kind of climate setting can be crucial, especially in the early stages of a negotiation.

Great to hear an expert getting the message across so clearly and so well, but, given his background and approach, I suppose that it shouldn’t really surprise us that he was able to build rapport and meet the needs of his listeners!

Fail to prepare and you prepare to fail

As the latest episode of the Apprentice comes to our screens tonight, spare a thought for Melissa, last week’s fired contestant.

It’s difficult to pinpoint exactly what she did right as a negotiator, as she was a poor listener and highly confrontational throughout. But one of the things which consistently let her down was a lack of preparation. In the previous week she managed to quote a price for a bread roll which, at £1.82, was quite ridiculously high, and was clearly made-up. Last week she attempted to bludgeon Debenhams into purchasing two products which they don’t even stock. They don’t sell gardening equipment, but this didn’t stop Melissa digging a hole for herself by continuing with a futile pitch for a spade. They also don’t sell bathroom equipment, but it would have taken more than cold water to have stopped Melissa continuing to pitch her other pointless product, a shower head.

All such humiliations could have been avoided if she had only prepared for her pitches in advance. Negotiators who simply dive into the haggle, thinking they can busk it, are doomed to fail…

Let’s see who fails to prepare tonight…

Interesting to see Judge Jed Rackoff ruling against Terra Firma in its EMI case this week on the question of the maximum level of damages that Terra Firma could win if the Court finds in its favour.

He held that the maximum pay-out could be US$2 billion rather than the US$8 billion of punitive damages claimed by Terra Firma.
Is that encouraging for Citigroup? Maybe. But this dispute is more about each side’s reputation than the money. Moreover, a clearer indication of the Judge’s view may be his aside that he regards this as a “catfight between two rich companies”. That suggests that he may not have vast wells of sympathy for either party.

All of which should point to a settlement being the right answer, rather than the continued enormous expense of litigation. The only problem there is that, as pointed out in my blog of October 22nd, each party needs to feel that its reputation has been saved by virtue of any settlement. As so often in negotiation, face-saving options for the participants are the most critical part of the deal….

Don’t be fooled by the mass marches in Dublin over the weekend, or the carping comments from the opposition parties, the Irish government simply has no choice but to agree to the current bail-out, regardless of the terms and the Eurozone countries have no choice but to provide it.

Both parties to the negotiation have the same “survival” need. Without the bail-out the Irish economy will sink under the weight of its own debt, pulling the credibility of the Euro with it.

The interesting subject for debate is not this bail-out and its terms, but where this negotiation between the Eurozone and the money-markets goes next. Despite throwing 85 billion Euros at the Irish problem I would say that the Eurozone countries are no further forward in resolving this problem. In any negotiation you can only secure a win if the other side believes you mean what you say. In this case the money markets simply do not believe that the Euro can or will be defended indefinitely. Expect Portugal and Spain to come under an intense spotlight over the next few weeks and months as the money markets test the Eurozone’s resources of willpower and money to defend what the markets regard as indefensible.

The latest spat between North Korea and South Korea. May have raised tensions in the area but it is difficult to believe that it will lead to war.

From the point of view of the West, the stakes involved in confronting the North Koreans appear to be too high. The Worst Alternative to a Negotiated Agreement is some sort of nuclear conflict triggered by threatening an unstable and unpredictable regime. Faced with this WATNA the West is going to continue to pursue a negotiated settlement of the current tensions, however elusive that may be.

And what of the North Koreans? Do they really want to precipitate a war? I think not. Their bombardment of a South Korean Island has all the hallmarks of being aimed at a negotiation with their own population, rather than a genuinely aggressive move against their neighbour. If you were a paranoid one-party dictatorship, going through a leadership transition, wouldn’t it be convenient to create the spectre of a foreign threat? Wouldn’t that perceived threat be helpful in encouraging the local population to rally around the new leadership rather than focusing to carefully on any misgivings they might have about the leasdership transition to the current dictator’s son?

The bombardment and the predictable strong reaction against it by the West gives the North Korean leadership extra authority. “Authority” is an acknowledged source of bargaining power in any negotiation, and the North Korean leadership knows how to create it. This feels like another re-run of their favourite movie….