by Lionesses of Africa Operations Dept
Negotiation, a word that brings fear into many, not least because it usually involves two or more parties that are not close, don’t know much about each other, and are not sure as yet if their counterpart can be trusted to ‘negotiate in good faith’. Easy to be overwhelmed.
So let us relax a little and consider this from a different angle. You don’t jump into a relationship with another business just because you woke in a good mood and decided that the first person you met on the road is your new partner. Instead it is a slow careful process as you think of an opportunity, hear of the possible company/partner, ask around for references, watch their social media and latest launch, then finally walk through their front door…at which point, they hear of your company, recognize the opportunity, ask around for references…and so on. This is a dance played out in real time across weeks, sometimes months.
The Dance
The dance has been going on for a while, both parties have now found out enough about each other to really sit down around a table and thrash out ‘some details.’ Or, to continue the dance analogy, you have shyly worked your way around the room, occasionally catching the other’s eye and at last have plucked up the courage to firstly say “Hi” and start a conversation and then a little later, to ask for a dance, at which point they say yes and the relationship moves a little closer. The first was a song that anyone could freely dance to, but now a slow song has started…. Gulp!
How is that some people are better at this than others - are there tools of the trade we can all learn or are some just simply born better at this? Let’s get something straight. This dance is an essential part of the build up to negotiations and continues into the actual negotiations themselves as it lays the groundwork, the trust, and gives both parties early views of boundaries past which the other party will not go. Such as, “We are a proudly Rwandan company, our Head Office if we agree to merge will be in Rwanda, never in your massive building in Texas.” Or even…“Just be careful where you put your hands, that part of my business is not for sale…”.
This dance also cannot work if one party is useless - no one can physically pick up the other party and carry them through to the end of the song. Each party has to do their own bit. We were reminded of this in recent conversations with Dr.Geoff Heald a serious expert in Negotiations who lectures at GIBS, and is well known by so many major companies across Africa who constantly lean on his deep expertise. Why is this - surely if you sit down opposite someone who is hopeless then you will ‘win’ the negotiations and that is what you want - no? To win? Yes, and no. Just like the best dances are with two who both know how to move in a rhythm, so with negotiations it does indeed take ‘Two to Tango’!
Let us look a bit more closely as to why this is. The first issue is that a bad negotiating opposite number will not understand the deal, your business, or what the JV is aiming to do or even the project. They will not have done their homework and when you explain, they will not listen but instead be preoccupied with what they want and what they will say. If they do not understand the deal, which includes their responsibilities and obligations, then the project, JV or business will fail or become very lopsided, as you end up doing all the work. Then no matter how much cheaper you got the deal, or how much less money you were required to invest, the cost to you will be dramatically higher than you ever imagined.
This is far more common that one thinks - and is when the expression, ‘The Devil is in the Detail’ appears. One negotiating party thought they were getting ‘x’ and signed, only to realize later what it really meant.
Secondly, a bad negotiating opposite number may be tempted to push you into a corner that you do not want. This will cause resentment in you and again will cost far more in the long term. There are many examples of this, usually by a larger party imposing its will on the smaller company.
Thirdly, a bad negotiating opposite number may revert to expectations of bribes and corruption and may well sign but then later use strong arm tactics and threats to get what they really want. There are many other examples around the globe of this sadly and with well known names who should have known better.
All three result in an unbalanced result (to put it politely) which is no good for anyone in the long run. Balance (albeit with the highest possible value for you) is what we need and that comes from trust and respect. This is why the expression, ‘We got into bed with…’ as in “We got into bed with ABC Company” is often used. Trust has to be there and Trust comes easier when there is Respect (as the late, great Aretha Franklin taught us).
What can you do when you are in those situations? Leave! It’s that simple. You don’t trust them, either to negotiate in good faith or to uphold their side of the bargain. Is it really worth it to constantly have to worry about what is going to happen? Far better (even in the first of the above examples - tell them to come back when they understand) to have a balanced relationship, than one where you are having to carry your dancing partner.
So, what if you have decided they can be trusted, they do know what they are talking about, how can you change the balance in your favour? Trying to move away from the dance and ‘evening out’ analogy before we go too far, but failing miserably, here comes the obvious next question:
Your place or mine?
There is no doubt this is a hot topic as Harvard point out (here). If you go to their place, they will have a huge office, a large imposing Boardroom, a roomful of Lawyers. They will set the agenda - when breaks for coffee, when Lunch. If you have flown in (remember those days?), will you be in a rush to catch the last flight home? But on the plus side, you will have shown serious intent, a sense of being able to stand your own in unfamiliar surroundings, a chance to learn more about your potential partner, and most importantly as we shall come to later, able to leave when you want.
At your place? How does it look? Occasional peeling paint in your office might be a worry, but here is your chance to show your company, your workforce, your machinery, your capabilities, your potential. You can set the agenda, the coffee breaks, you can ‘if needed’ be called out for a company matter (while you secretly consult another) and continue to run the company. Everything is familiar, to them it is not. Plus they might have to rush back early to catch that plane. Seriously, this makes a difference as: “Visiting executives may tend to make a deal or break off talks more quickly than if they were negotiating on their own turf, often to their disadvantage.” Harvard.
So what next? Are there any other tools of the trade, or is one just born to be a great negotiator?
Break the ice
You are now sitting down around the boardroom table, who breaks the ice and mentions a price first? You do! We wrote previously back in November 2020 (here) of ‘anchoring’, creating a suggestion bias that is affected by the framing of a question…
According to the Science Daily magazine (here) - “Anchoring… is a term used in psychology to describe the common human tendency to rely too heavily, or "anchor," on one trait or piece of information when making decisions.
Usually once the anchor is set, there is a bias toward that value.”
That is important - if you can get your anchor in first then all subsequent discussions, arguments and probabilities can be (and often are) biased by this. “I am assuming you are aware that my company has been valued at around ‘x’?” and watch the opposite side of the table recalculate in their minds in front of you - try not to smile! Harvard (citing Galinsky and Mussweiler) point this out (here) “…the first offer accounts for between 50% and 85% of the variance in a negotiation’s final outcome”. That is massive! Obviously if they bite your arm off in their eagerness to accept your value, you calculated wrong…“DOH!” as Homer Simpson would say. So do make sure you know your value!
This anchoring also works for the senses - not just numerical values, as Gaurav Jain, in the Journal of Behavioral Decision Making showed (here). Great for your Sales Team to know as you sell your product! Obviously your opposite number may well also know of these tricks and so you do need to be ready to walk away from the deal, remembering that:
No means No!
Before entering into negotiations there are some values you must work out. There is a ‘reservation value’, the lowest value you will accept in the negotiated proposal. Just like a reservation at an Auction, if the price does not reach the reservation, the object is not sold, returned to the store room at which point potential buyers can negotiate one on one should they wish with the owner, who will (although they might not recognize this) be considering their BATNA.
BATNA: Your “best alternative to a negotiated agreement,” or to put another way - if you can’t reach an agreement, what would you be willing to accept, prior to truly rejecting any deal. This is your line in the sand and the top negotiators know this well before even catching the flight to visit you. Work it out and know that it really is the point beyond which No means No.
As Harvard say (here): “When you fail to determine your alternative, you’re liable to make a costly mistake—rejecting a deal you should have accepted or accepting one you’d have been wise to reject. In negotiation, it’s important to have high aspirations and to fight hard for a good outcome. But it’s just as critical to establish a walkaway point that is firmly grounded in reality.”
Remember before starting any negotiation, prime your superpower - your mind as we previously wrote here. Keep in your mind that this is your business, they are your employees, your communities, your dream and you know why you first started your business and where your future lies. This will give you the strength to be able to be ‘fair but firm’, even in the face of lines of expensive Lawyers and a huge impressive Head Office. As we have said many times, so many depend on you and trust you - turn it into a strength.
Then rather than leaving you with a broken heel, large blister, and a head that suggests the previous evening was wrong in so many ways, you will know your voice, you will know your BATNA and know when to stand up and leave. Once your counterpart knows that, greater respect will be forthcoming and balance with a better outcome for you will be far more likely.
All great partnerships and especially great dance partnerships had respect at the core, but it has to be in balance and each party must know when to stand up and show the value they bring. One of the greatest dance partnerships ever was Fred Astaire and Ginger Rogers. In one interview with Ginger Rogers the interviewer asked her what it was like to dance with the Great Fed Astaire, how did she concentrate being in such a partnership with this amazing dancer and how did she keep up? Ginger took a moment and answered: “It’s not so difficult, in fact we both do exactly the same steps, except I do them backwards and in heels…”. (You Go Girl!)
Know your value, don’t be afraid to state it and ensure at all times that whatever you negotiate the end result is in balance (albeit with the highest possible value for you). This balance ensures that the end of the negotiation is not the end of the Dance…
Stay safe.