In January, I penned this post about the new plateaus of opportunity that open up for both buyers and sellers when we make the mindset shift to becoming a true strategic partner, rather than just a “run and fetch” vendor that recites features and delivers quotes.
There is a fundamental problem (one that is not necessarily limited to contract negotiators): Even people who build long, otherwise successful careers in demanding positions don’t consider themselves professional negotiators — even though they do it every day! They do it internally with their colleagues, externally with clients and vendors, and even at home.
Why? The word “negotiation” itself can be intimidating. But to gain confidence, we must normalize this language in our lives. Negotiation is simply interaction between or among people to facilitate a positive outcome. (Nobody should do the deal otherwise!)
Not long ago we consulted with one of our clients, a vendor to financial services institutions who was on the brink of their biggest deal of the year, approximately $5 million. We enjoyed a unique situation: The customer agreed with our client’s value proposition. This granted our client positive leverage and gave the customer important capabilities that would help them comply with new government regulations in a timely fashion. After six months of discussions, proofs of concept and validation of the business case, both parties agreed to closing the deal by mid-December.
But on Dec. 3, the customer’s chief procurement officer sent a note to our chief sales officer (CSO): “We respectfully request a price reduction of $1M and two additional resources to support 2 separate data centers.” This triggered an immediate conference call with us, our client’s CSO and their CEO.
After some discussion, we recommended that our client politely demur the request. There was no compelling business rationale for making such a change at that point of the deal!
“We have momentum and agreement on just about everything,” I told our client’s CEO. “If we make a change now, there is a good chance this will prolong the discussion. They’re going to come back with another request.”
In our view, the discount request was simply “fishing” for a better price. And the resources could always be added in January when the work was underway, at which point we would gain a clearer picture of whether or not they were actually needed. Additionally, it was in the client’s interest to ensure timely delivery, and they would be willing to pay for those resources and preserve their time to value.
However, emotional pressure has its consequences. Our CEO, feeling pressure from the board to report on the deal, began rationalizing what was essentially a giveaway: He stated “Placing one additional resource at one of their data centers could deliver us value in the form of market intelligence.” As a result, the CEO instructed the CSO to inform the customer that we would give them one resource. What happened next was predictable: Within hours, the customer asked about additional resources and the discount. Now the mid-December signing date was thrown into question.
This kind of thing is understandable and happens frequently. When we are emotionally involved, our eagerness can get the best of us. In these situations, positive leverage and momentum are lost and we have defaulted to the servant’s role.
The illustrious Cicero of ancient Rome recognized that “In the master there is a servant, in the servant a master.” We are in the role of serving, both internal constituencies and clients. But even servants can become masters, especially when they can effectively guide the master. A great servant is one who is looked upon by the master as a leader because they guide them with precision and thoughtfulness, creating what is essentially a peer-to-peer relationship.
But we often unilaterally put ourselves into the servant’s role, where we are continually responding to a stream of requests from within and without. It would be nice if, once in a while, we could get ahead of the game and stop doing ourselves this disservice.
Sometimes this is because we don’t respect our own resources. We were once asked to step in on a troubled project that had generated a lot of unfavorable media coverage. As a result of the press coverage, our client was very sensitive to every request from that customer. One of those requests was for a proof-of-concept (PoC) in one of the customer’s locations. The PoC was running well and the customer was realizing immediate benefits. The PoC was supposed to have ended after a 30-day period, yet here we were, more than 90 days later, with the customer still balking at signing the purchase order.
When I asked my client why the purchase order hadn’t been signed, I was told that the customer “wasn’t ready yet.” What else would they need to get ready? Nothing came to mind. Did my client have resources dedicated to the project? Yes, several. I asked if these resources were important. Yes, the resources were important and could easily be reassigned to more profitable work. But, my client was hesitant to exercise that option for fear of angering the customer. My contention was that they may never get the order if they were not willing to remove the resources.
The simple takeaway is this: If you don’t respect your own resources, why should the customer? We debated this matter for two days, after which our client’s head of services wrote a letter to the customer informing them that: “the resources dedicated to the PoC are valuable and will be reassigned to other commercially viable endeavors by the coming Monday unless [the customer] deems these resources sufficiently important to keep them on the project by executing the appropriate purchase order.”
There was a signed purchase order in hand by Friday of that week.
When we throw our resources at no-win situations, we become beggars, not valued peers who offer demonstrable value. These examples illustrate just two ways that we can commit unforced errors that do more than degrade the size of our deal — they rob all parties of the benefits of participating in a true exchange of value. This is value that we can never realize unless we move beyond being just a “servant”.