I have been involved in a lot of negotiating this year. From small companies with internal problems to very large companies unable to close deals. The subject of negotiating is a big topic and not everything can be covered in a single post. But I want to help you with an important, maybe the most important piece in negotiation.
Let’s get started.
A question I’m often asked is “why are they acting so crazy?” When the other side refuses what we see as a perfectly good offer or when they issue seemingly unrealistic demands, we tend to think they are acting crazy. Let’s get on board with the correct terminology before we go too much further. What we mean to say is that the responses don’t make sense to us. In negotiation terms, we would say that a party acts either rationally or irrationally.
A party to a negotiation is acting rationally when they act in their own best interest. We assume, sometimes wrongly, that all proposals are rational. Don’t people always act in their own best interest? Most of the time that’s true. There are times when we face people who not rational. Hitler wasn’t rational. The ‘dear’ leader of North Korea might not be rational. Might not? Yes, might not. Though his blustery threats to conquer the U.S. with his nuclear weapons program may seem irrational from our point of view, we could after all blow North Korea off the map at any time we choose, he gains support at home and does intimidate other countries including the U.S. We don’t want a nuclear war so we let him continue to build nuclear bombs and to work on the missiles to deliver them. That considered, is he irrational? He may be getting what he wants despite the sanctions we impose.
Back to business.
I recently reviewed a client’s entire process to close a big sale. There were months of negations without the customer agreeing to the deal. My client had made made concessions without getting a “yes”. Then they offered price cuts. Still nothing. That’s when I got the call. “Chris, they’re acting crazy. We’ve offered everything including huge price cuts and we still don’t have a deal. It doesn’t make sense. What do we do?”
When confronted with what seems like an irrational position, the first thing to consider is not whether you are dealing with crazy people but whether you might be suffering from incomplete information.
Many deals have fallen apart because one side has incomplete information. Reacting to incomplete information risks shutting down a process that could end in your favor. When you see what looks like irrational behavior, go to work on gathering more information. You might be surprised at what you discover and subsequently win.
Near the end of World War 2, U.S. negotiators were baffled by the crazy demands made by Soviet negotiators regarding the future governance of Germany. The Soviet negotiators and generals just wouldn’t give on anything. Coming from a country not under authoritarian control, it was impossible for our negotiators to comprehend that the Soviet negotiators feared for their lives. Take a bad deal back to Stalin and end up before the firing squad. We had no idea. So were the Soviet negotiators irrational? No.
What about my client and the problem they were having with their best customer?
I wanted more information. I made a few calls to the customer and we got to know each other. The buyer confided in me. “Look, I’m leaving the company to have a baby. I wanted to get everything set up for my successor but I didn’t want my replacement tied to a contract. So I set it all up so whomever takes my place can be a hero and start by closing a great deal. It’s supposed to be a secret that I’m leaving (shareholder panic) but I’m gone in 2 weeks so it’s out in the open now.” Well that cleared that up. Here’s the punchline. The buyer then asked me, “why did they keep cutting the price? We’ve always had a fair deal in the past.” Ouch.
Working from incomplete information can cost you exactly what you want.
I saw another case where the CEO had demanded that buyers get all purchases cut by 15%. The CEO was under pressure for failing to control cost. He dealt with that in a rather silly way. Obviously every deal cannot be cut by 15%. Many vendors stepped away from this customer. The smart ones realized they had incomplete information. Make it look good somehow. Cut the shipping cost by 15%. Give the buyer something to protect his job. Deal closed.
When you want something and the other party appears irrational, stop to consider if you might be suffering from incomplete information. Before you walk way from the table, find out what is really going on. You just might miss a big opportunity.
It can be tough to get more information. It may take time. But if you are in it to get what you want, it’s worth the effort.
Chris Reich, TeachU