Nobody sets out to fail. In fact, generally, people do everything in their power to avoid a failure. So once a negotiation has started, it can be easy to become wedded to achieving an agreement at all costs to ensure the negotiation is not a failure. Without careful analysis of the situation, this desire to avoid failure can lead to agreements which are not in your own best interest.
A story of failure
I was working with a client recently who wanted some guidance over a negotiation that had been going on for some time. My client was a director at an IT consulting company. The company had been working for a government department for several years, providing services in a specialist area. Twelve months previously, she had started negotiations with the department to take over all of the it’s IT needs. After a year of ongoing negotiations, she was feeling stressed that she would have to report a failed negotiation to her bosses. She sought my advice on how to get the deal closed.
We started by looking at the interests of each party. My client needed to achieve certain KPIs and ultimately, wanted to ensure a deal which was profitable and long-term. The department wanted strong, consistent service with minimal disruption to the business.
Next we considered alternatives. We knew that if no agreement was reached, the department was likely to continue using the incumbent supplier. My client told me that the incumbent supplier had a long history working with the department and that as far as she knew, there were no quality issues. Based on the information she had, the competitor’s pricing was aggressive and below what she could offer within her KPIs.
As for the client’s alternatives, she reported to me that the market was relatively buoyant. While there were not many contracts the size of the department’s, she was confident that it would be relatively easy to secure three or four clients bringing in equal revenue. Given that there were no quality issues, it was going to be very difficult to convince the department’s procurement team to accept a deal at a higher price.
After a thorough analysis of the situation, my client collated a report to management, justifying why the negotiation should be ended. Rather than reporting a 'failed negotiation" she reported a success. Time spent in the negotiation had built a strong relationship with the department, positioning the company well for future opportunities. Closing the negotiation now would allow the team to focus on winning other, more profitable deals.
Without having taken the time to analyse the situation in a structured way, the company could have continued to divert resources to a deal that wasn't going to succeed, missing valuable opportunities along the way.
Two key lessons can be drawn from this example?
Be careful how you define success - Success is not just about getting an agreement but is must be and agreement which is better than your best alternative.
Applying a structured analysis to your negotiations will assist you in mitigating biases and blindspots in your negotiation and lead you to a better outcome.
For more information about how to negotiate effectively, or for assistance with your next negotiation, contact us for a no obligation discussion.