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2018-01-23T13:57:31.522Z
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Either through becoming emotionally invested, getting pressure from leadership or being unable to analyze key factors that should indicate retreat, business negotiators often find themselves spending long amounts of time on deals of diminishing — or even illusory — value.

One of the cornerstones of negotiation theory is BATNA (best alternative to a negotiated agreement), advanced by Roger Fisher and William Ury of the Harvard Program on Negotiation (PON) in their book, Getting to YES.

The wisdom of BATNA is that you cannot make wise decisions about continuing to negotiate unless you understand the available alternatives if you (or the other side) walk away. By looking at your perceived BATNA you should understand alternative courses of action in the event that a negotiation fails. It is intended to serve as a guidepost. If the outcome of the deal is likely to be worse than the BATNA scenario you have calculated, it may be time to walk away.

As Fisher and Ury recognized, “The reason you negotiate is to produce something better than the results you can obtain without negotiating.” That presumes at least four conditions:

1. You understand the results, i.e., value you will get from continuing to negotiate.

2. You understand the alternatives and the value you can glean from them.

3. You understand the alternatives available to the other side.

4. There...

Some concepts are better expressed using an example. Our client was at a crucial juncture with their customer — a European bank. In just three months, the time frame was expiring on an agreement to provision identity access management. That project had been running for three years, and had progressed substantially as forecasted. So a renewal to continue with the work was being discussed, plus, our client wanted to extend the scope of services for 24/7 identity and access management, which they believed the customer could use.

This project was extremely complex, and it was incumbent on our client to express the value delivered to that point. This is extremely important: Nobody owes you recognition of your value. You have to make the case!

Being successful in this situation meant deriving leverage from that value. The concept of leverage originally comes from physics – as Archimedes said “give me a lever long enough and… I will move the world.” In a pulley system; the more levers you have, the more easily you can move objects of heavier mass. In negotiation, it’s the ability to move people closer to your way of thinking – your value arguments are your levers. The more credible value arguments you have, the more easily you can move people closer to your point of view.

This is a far cry from the coercive connotations that some people attach to...


By Jim Hale, VP of Business Development, K&R Negotiations

In my work with sales teams all over the world, I am often asked about what is the most critical trait for a successful sales person. My answer is always the same: “Genuine curiosity.” Curiosity is like a Swiss Army knife with all the attachments. It gets the job done in nearly every situation and is easy to access once you’ve got it in your tool kit. Curiosity helps you:

  1. Build customer relationships. You will notice a different level of respect from your clients when you show an authentic level of interest in them as individuals and their company. Humans respond extremely well to this almost without exception.
  2. Increase your business acumen. Being curious about your own industry and the industries of your prospects drives you to learn more.  As you satisfy your curiosity, you augment your ability to add value to your customer’s business. Clients want to know that you have invested in learning about their ecosystem: industry, customer set, products, services and impact trends.
  3. Be believable and sincere. You ask questions that uncover needs because you are genuinely curious, not because it’s in the training manual. People can tell from your demeanor that you’re being natural and not formulaic.
  4. Solve customer problems. Sales reps who aren’t curious about what makes people tick and why technology works (or doesn’t) don’t solve customer problems; they just sell “stuff.” Curiosity enables you to create unique solutions to their unique issues.
  5. Negotiate successful contracts. Your ability to understand the positions of the other party is directly dependent upon your ability to be truly curious about them. If you’re not curious, you’ll end up arguing about issues that aren’t important.
  6. Correct sales errors. When a customer buys from somebody else (or doesn’t buy from anyone), if you’re not curious about what happened, you won’t bother to find out why — and therefore can’t learn to turn your failures into future successes.

In short, curiosity is at the core of truly successful business efforts.  If you don’t have curiosity, you can’t expect to be successful as an entrepreneur, a salesperson or even as an engineer. Period.

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You may think arming yourself with facts and data will help you convert prospects into customers, but it’s more important that prospects believe you truly understand their business, the industry, the company, the LOB’s and the Individuals within the organization. This issue comes up time and time again in our interviews with clients, they want their solution provider to understand their business.

This is hardly surprising, since you can’t add value without having a clear picture of the business and the client’s position in the industry. Once you understand their business you can better understand the core business issue. The three critical components that drive the sale:

  1. Demonstrating that you truly understand what their business issue is, and how it negatively impacts the company’s performance (current state)
  2. Knowing what their desired outcome will be, and how that will improve their overall success (future state)
  3. Knowing the prospects “measurements for success” (not yours)

Understanding and clearly articulating these three key decision criteria with your prospect enables the “why buy”. The ROI is strictly “how” they will buy your solution, which is the “what” they will buy.

People buy based on emotion and justify with fact. You may resist this statement. You may want to shout – but the truth (truth that will help your business grow) is – your client rationalizes the purchase base on facts (ROI), but they make decisions based on emotion or feelings (can you eliminate my business problem and meet my measurement for success?).

The single biggest motivator in buying is not data, nor is it facts; it’s emotional response. Humans buy when they feel comfortable, when they feel they can trust you, when the process feels natural and reassuring, and when they come to believe that buying will make them feel good.

To succeed in selling, you’ve got to speak to the need your customer feels. There are a lot of good reasons, not to mention the entire history of successful selling, to back this up. As you can see from the DDI (Development Dimensions International) study below, ROI analysis is dead last in terms of what the client is looking for. In part, this is true because the ROI analysis is almost always slanted to the supplier’s point of view.

Of course, people have both logical and emotional buying motives. Some recent consumer surveys show that 20 percent of the decision to make a purchase is logical and 80 percent is emotional. What is logic? It’s reason supported by facts. What is emotion? It is a feeling that leads us to act and react.

So, what is more important when persuading people – facts or emotion? We don’t mean to imply that customers never want cold, hard facts. Of course they do. You should always have them prepared and available, and you should present them when the time is right. But it is not facts that convince customers to go with your company. It’s emotion – do I feel you can you solve my problem?

Customers need to feel that you really understand their business issue and how it is negatively impacting their organization. They also need to feel that you will deliver their desired outcome and that you will meet their measurement for success. That measurement may not be the traditional business case ROI but rather what they have established as success. They will then use the ROI facts to “pay for” or rationalize purchasing the solution.

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Delineating how and when senior management will take part in negotiations is an important factor in maintaining position and outcome. When a member of senior management’s personal timeline or motivations clash with an already established value argument, money can be left on the table.

K&R Negotiations CEO Mladen Kresic used a deal from the firm’s client case files to illustrate just how this can happen in Negotiation Lessons: When CEO Meddling Degrades the Deal, a contributed article that was featured this October at ChiefExecutive.net.

“It’s easy to become emotionally invested in a deal, especially a complex one that requires a significant time and resource commitment from you and your team. Nobody wants to simply walk away from something they have cultivated for months—even when the value of the deal begins to degrade.”

Mladen offers several takeaways from the case study that serve as good counsel for CEOs whose teams have a big deal on the hook and may or may not need the chief’s “help.” We’d like to thank ChiefExecutive.net for accepting our contribution. We’re honored to be included.

K&R CEO Mladen Kresic Discusses Negotiation Know-it-Alls with Knowledge@Wharton Host Dan Loney (Complete Transcript)

On Friday, May 20 K&R CEO Mladen Kresic joined Knowledge@Wharton (Sirius XM Channel 111) host Dan Loney to talk about how negotiators can keep “know-it-alls” from ruining their next big deal. (Kresic wrote on the subject in his 2016 white paper, “Dealing with Negotiation Know-It-Alls: How to Keep Instructors, Intimidators and Impostors from Derailing Your Deal.”

During this segment, Loney and Kresic discussed the three major types of know-it-all (The Instructor, The Intimidator and The Impostor), the threats they represent to successful negotiations, and strategies negotiators can use to mitigate their negative influence and keep their deal discussions on track.

This content reproduced courtesy of Sirius XM and Knowledge@Wharton.

Loney: Have you ever been part of a negotiation and feel like you’re hitting your head on a brick wall because the person on the other side is the “know-it-all”? It can be one of the most frustrating things to deal with, but there may be some hope. Mladen Kresic returns to the show. He’s the president and Chief Executive Officer of K&R Negotiations. He’s recently published a white paper on the problem and how you can handle the situation — and maybe even make it work for you. Mladen, the author of Negotiate Wisely in Business and Technology, is joining us on the show right now. Great to catch up with you, Mladen. How have you been?

Kresic: Really, really good, Dan, thanks for having me on again. It’s a real pleasure. And by the way, I chuckled at the song that was really good choice to have on a weekend.

Loney: See? I’m telling you, Dion. My humor’s not all that bad. C’mon, bud, I’m not that all bad. Mladen, let’s get to the heart of this. How frequent do you think this type of a situation happens in a negotiation?

Kresic: Yeah. In business negotiations, actually, it happens quite often. Remember, in business in particular, people want to look good, they want to appear knowledgeable and often, intentionally or not, will run on and on on a subject that they may or may not have adequate knowledge about. So in a broad sense, it appears quite often.

Loney: You talk about kind of three important pieces to this problem that need to be addressed. First, is that it ends up being a big waste of time.

Kresic: Yeah. It’s absolutely a waste of time, especially if the subject that somebody’s pontificating about is not pertinent or not key to a particular deal. The other issues with that are that very often it erodes focus, which sows confusion. In fact it can, in some cases, kill the deal or certainly derail the process. And a certain type of know-it-all, we’ll talk about it in a little bit, called the intimidator, tends to erode the benefits, the value and actually pushes the deal to one side or the other in an unnatural way. So those are the kinds of things you want to deal with.

Loney: You also talk about it hampering the, obviously, the credibility because if you’re dealing with somebody that’s running on and maybe not knowing what they’re doing, that can be a little bit of a deal-breaker just because that person is not presenting what needs to be presented.

Kresic: Yeah, that’s a very good point. Actually, the credibility of both sides is affected, right? If you have a know-it-all on your side and you’re not managing them, obviously your credibility is affected and the flip side is true as well because, like you said, they take the deal into directions that it shouldn’t go in.

Loney: If you’ve been in this situation or you’d like to ask a question, you’re more than welcome to join in right now. The number to give us a call is 844-WHARTON, 844-942-7866. We’re talking about dealing with the know-it-all in terms of a negotiation. Mladen Kresic is our guest. 844-942-7866. There is the fact that, and you brought it up a second ago, is that a lot of times, people will be saying one thing when they have no idea what they’re talking about, correct?

Kresic: Yeah, unfortunately, that is often the case. What’s interesting is that it’s even more about confidence. Usually people with great confidence have enough confidence to listen, so they won’t pontificate. They know that they have the time to make their point when it’s timely. The person who lacks the confidence or lacks the knowledge often feels like they have to get it out because they might forget it if they don’t get it out, so to speak, and as a result, they need to be dealt with. These are the people that don’t know enough on a subject to be valuable in a particular negotiation. They…

Loney: Of a case, is it that a deal gets thrown out the window altogether because of something like this? Or is it more leaning towards you have to take a step back and you want to deal with somebody else in the corporation to get this done?

Kresic: Yeah, look. In reality, in most cases, you can deal with it. If the deal is doable, you’ll figure out a way to deal. We’ll talk a little bit more about that, I suspect. But there are cases where if you don’t deal with it, it will crater the deal.

We had a situation not too long ago where we actually prepped with this person in advance. He was an executive for one of our clients. And they walked into the discussion, started talking about why the deal is good for the other side, that it was going to make them more competitive in their industry, and five minutes into the conversation, the guy didn’t take a breath. Once he took a breath, the person on the other side said, “Look, we’re not in it to make us more competitive in our industry, not for this specific deal. We want to get compliant with new government regulations.” This had nothing to do with the subject the guy was talking about; they lost credibility, they lost the deal.

Loney: Mladen Kresic joins us, president and CEO of K&R Negotiations. Your comments are welcome at 844-942-7866. Maybe you have been in this situation, you’d just like to tell the story, we’d love to hear it. 844-942-7866. All right, so you say there are three types of people that really fall into this category: one, the Instructor; two, the Intimidator; and three, the Impostor. Let’s start with the instructor, and kind of give us a breakdown of what this person really is.

Kresic: Yeah, the Instructor is a person who actually can be very useful. They are usually people who are really knowledgeable and want to share that knowledge, but then in the process of doing so, they get into so much detail they waste valuable time. And as a result, obviously, the deal drags on, resources are used and so on. So that’s the Instructor. The Intimidator is a little bit different. The Intimidator uses knowledge as a weapon. The Intimidator…and we’ve all run across people who are Intimidators, sometimes you see them in a political scene, as well. They can attack your credibility. And if you’re not careful and you’re not confident in your position, the Intimidator will actually erode the value of the deal for you.

And the third is the Impostor, which you mentioned. And the Impostor is the one that we were talking about originally, which is the person who’s trying to make themselves look knowledgeable but in fact, they don’t have the right knowledge for the deal. And it’s interesting, if you actually look on Wikipedia for the definition of a know-it-all, they seem to think that the know-it-all is the person who purports to have expansive comprehension on the topic, when in fact, the comprehension is inaccurate or limited. So they sort of kind of categorize it as that third person, the Impostor. We feel that it’s all three that need to be dealt with as know-it-alls.

Loney: All right, so how do you deal with each one of those types in terms of still trying to get the deal done, obviously trying to get the most out of the deal for your end?

Kresic: Well, let’s talk about them in sequence. The Instructor…you have to be careful with the Instructor because they are usually a respected person on the other side; very often it may be technical person who is there to actually shape the business outcome of the deal. And you don’t want to contradict them. You don’t want to embarrass them. But because they are detail-oriented — the nature of being an Instructor — you can get them focused on the flow of the deal if you simply agree to an agenda at the beginning of the discussions, maybe the first meeting. That way you can always remind them go back to the agenda, because you’ve agreed to rules for how you’re going to run the deal and how you’re going to deal with it.

And by the way, a lot of times, it may be your perception that somebody’s being too instructive or too detailed on something. You’ve got to check to make sure that is not just your perception, but that the entire group of people that are involved in the deal feel that this person is going on in too much detail, otherwise you may be stopping the flow of information that’s very important.

Loney: Well, and that goes also to the fact that sometimes, and it goes back to your story a little bit, that sometimes it’s better to listen than to talk, right?

Kresic: Yeah, you know the old saying, “God gave you two ears and one mouth, and you should listen twice as much as you talk,” which one of the things about people who do negotiations for a living or certainly negotiate frequently, most people like that tend to be type triple-A personalities, right? They’re aggressive, they tend to want to speak, and it’s a discipline to slow yourself down so that you actually listen and absorb what is being said, and use that as an avenue to get to the deal.

Loney: 844-942-7866 is the number if you’d like to jump in and ask a question of our guest Mladen Kresic. We’re talking about negotiations and dealing with the know-it-all on the other side of the desk. Or, maybe you’d just like to relay a story of maybe an instance where you had to deal with this and tell us how you got through it. 844-942-7866 is the number to give us a call. Mladen, for people that would like to be able to read the paper and kind of go through it, what’s the best way for them to be able to get a hold of it?

Kresic: Yeah, good question. Thanks, Dan. We have it posted on negotiators.com, N-E-G-O-T-I-A-T-O-R-S.com, which is our website. And anybody who wants the paper or any of our other white papers can go right on the website and put their name in and get a copy of it, and it’s also been released in parts through our blog, which is available to everybody.

Loney: Okay. And we’ll make sure we give that out once again before you get done. David is in Fairfield, Connecticut. David, welcome to the show.

David: Hey, thanks for taking my call. My question is in regard to negotiation where you’re dealing with a business entity and they usually have a technical person, it might be an IT person or it might be a legal person who just wants to take the conversation down this very technical path that may not have the business’s best concern in mind. In our conversation, we call it “stump-the-chump.” and it’s just somebody who’s there as a subject matter expert but maybe not a business expert, and I was wondering, how our expert deals with those folks in a negotiation.

Kresic: Yeah, let me make sure I understand the question, Dave. You’re talking about somebody who comes in on a specific subject and then lets that subject be the focal point, not focusing on the actual business matters of the deal, but they focus on the legal aspects, the technical aspects and therefore the deal sort of takes the wrong direction as a result?

David: Yeah, they’re a part of the team, but they want to go down this technical road and just prove that their expertise level is higher than ours.

Kresic: Yes. When that happens, usually it’s a result of not preparing the agenda together with whoever is leading the deal on the other side, right? One of the things I make sure on my side is I always have the roles defined of the individuals that are going to go into the deal. And they need to know the context in which their expertise appears. And I expect the other side to do the same. And I will have a discussion about that expectation with whoever is leading the other side.

Now, even with the best preparation, it’s going to happen occasionally. So when that happens, it’s okay to pause, listen and then when the person takes a breath, ask them if they feel that whatever point they made is critical to the deal. Then often, they’ll step back and start asking questions themselves about the other merits of the deal because they don’t have the full context. So that is one of the ways that you can deal with them. Obviously, if you’re taking a break, having the discussion with a person who’s leading the deal on the other side, to ask them if that person who is derailing the deal has been prepped properly is an appropriate discussion.

Loney: David, hopefully…go ahead, Dave.

David: That’s brilliant! That’s brilliant. Thank you very much. I appreciate the input. I love the setting up expectations and being able to sidebar with your business partner.

Loney: David, thanks very much for the call. 844-942-7866 is the number. We’ve got a few more minutes. Mladen Kresic is our guest. He is the author of a white paper that talks about dealing with the know-it-all in the negotiation setting. 844-942-7866. How difficult is a situation when you get into a negotiation and, as David kind of laid out, one person has kind of monopolized the conversation on their particular area? It’s not like you can break the meeting right in mid-stream and take those people outside and have that conversation with them.

Kresic: Yeah, that would probably be the wrong thing to do because then you just piss them off, to put it bluntly. It’s okay to take a time out at different times. You have to gauge when the appropriate time is to take a pause and, like I said, have a discussion with the person who is leading the negotiation on the other side. If the person who is leading the negotiation is the one that’s pontificating, it becomes a little bit more challenging, and I’ve had that happen.

In those cases, it’s okay following a break, to ask for a few minutes to just talk about the agenda. And define the agenda in such a way that not only are the subjects on the agenda, but the timing of those subjects, so that person won’t be able to talk about just one thing that they want to talk about the whole time. Agenda management is so critical in all of this, and we find that a lot of people do a poor job of that because they are just not taking the time upfront to prepare that agenda in a way that gets the agreement from the other side.

Loney: 844-942-7866 is the number. A couple of lines are available right now for you to call in. We go to Colorado. Nate joins us. Nathan, welcome to the show.

Mason: Hi there. My name’s Mason, actually.

Loney: Oh, I’m sorry. Mason. Mason, where are you calling from in Colorado?

Mason: I’m calling from Colorado Springs, actually.

Dan: Nice. Great to have you on the show. Go ahead.

Mason: Hey, I appreciate it. Mladen, I really appreciate the insight this morning. You’re talking about Impostors as well as the Intimidators. I just graduated college. I started a small business in which I’m trying to help local businesses in the Springs do some digital marketing and get themselves an online presence. But my problem is, a lot of times when I go in to sit down and talk with clients, suddenly I find they become these Impostors and suddenly they know everything about digital marketing or they become these Intimidators, and I know my age is a factor in this. How can I try and overcome that and really focus on the task at hand rather than my age?

Kresic: Well, now one of the things that helps is ask them upfront what it is that they believe digital marketing is and what it is that they know about it so that you can be most helpful to them in filling in the gaps, right? If you allow them to give you as much information as they have in those cases, then anything that you can add to that will become useful to them, and they’re more likely to have had their say and listen to you at that point, because one of the problems you’re having is getting them to listen.

Loney: Mason, does that answer your question?

Mason: Yeah, I think that’s great. I think that would be a great way to try and approach a conversation. I can definitely try it, see where it goes.

Loney: Great, Mason. Enjoy your day. Thanks very much for calling in. Mosely is in Cold Spring, Kentucky. Mosely, go ahead sir.

Mosely: Hi.

Loney: Oh, I’m sorry, ma’am. I apologize.

Mosely: That’s okay. I’m a doctor and twice I’ve tried to buy in with the group, a different group each time that I’m practicing with and both times I’ve gotten burned really bad and ended up leaving the practice because of the conflicts. I’m not business-oriented. If I were, I’d be doing business with dad and with my brother.

I’m pretty smart, but I don’t know anything about business. I just don’t get it. I get stuck. But I get duped really bad, and there’s a lot of, “Come on,” like, “Oh, we know that you know so much about so much,” and I just don’t know why. I just get…so how do I…a lot of my questions are very basic, but obviously they’re not the right kind of questions and in asking them, I feel really stupid.

Loney: All right, let me jump in there, Mosely. Mladen, we got about a minute left so go ahead.

Kresic: Yeah, let me just address this in two good ways. One is, before you sit down and have these kinds of negotiations, if you’re not comfortable in the environment, get yourself somebody who is business savvy to help you in the process, okay? And they can set it up so that whatever questions that you have are preceded by the fact that, look, this may be an obvious question to the person on the other side, but it’s not necessarily obvious to you and it’s a legitimate question that should be answered, okay?

You need to respect your own ability to question together with expecting them to respect you. So, two things: One, be sure that they understand that no question is a dumb question. Two, get yourself some good representation because obviously you’re not comfortable in that environment.

Loney: Mosely, thanks very much for the call. Mladen, it’s great having you back on. We look forward to having you again down the road. Did a great job, thank you.

Kresic: Likewise, Dan. Have a great weekend.

Loney: Thank you very much, Mladen Kresic. By the way, the white paper, as we mentioned, you can find at their company website, K&R Negotiations. Dealing with negotiation know-it-alls. Wow, great show…

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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”.

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When competition starts putting the pressure on you, it’s natural to look at price-cutting as the primary way to keep the business. But in the long run, this is a mistaken impulse, unless accompanied by a sound business rationale such as a reduction in scope, change in terms or outcome from the deal. One of our engagements with a client that served a European industrial (the customer) with technology solutions definitely illustrated the value of avoiding such “unprincipled concessions!”

Unprincipled concessions are “giveaways” not tied to a credible business rationale. Our research shows that this simple business negotiation mistake costs companies between 9 and 18% of gross revenue and significant profit. (See our infographic on the topic for a more detailed discussion of this vital principle and how it can be applied.)

Our client was bidding for four different stacks of technology services worth in excess of €100M over a number of years. They were incumbent and delivering successfully in two of the stacks — but heavily challenged by highly skilled competition.

The customer requested significant discounts off existing services and that our client pay for transition costs related to the area of services it was not yet providing. Our response? Why would we lower the price for services that are already being successfully delivered (given identified risks of change) and eat the costs on the transition to new services? After all, if the value proposition was not strong enough, the client would not go through the headache of change? Instead, we were able to obtain a principled concession from the client by agreeing to a partial success fee structure, raising the amount of the variable components of the deal. As principled concessions tell us: Adjustments in price are justified if the outcomes, content or terms of the deal change. In other words, our approach had the effect of communicating that there would be no arbitrary concessions. Therefore, when it became clear that no additional concessions were justified, we said “no,” explained why, and that position was respected.

This deal was dependent on the value being delivered, but the success in maintaining an acceptable margin and revenues to deliver successfully for the client hinged on principled concessions.

The result? Our client documented a 4% improvement in PTI (pre-tax income) on a €100M+ total contract revenue, saved over €100K on bid and proposal costs and improved time-to-close by six months. Great results like this come from understanding and applying the concept of principled concessions.

Our client also reported improvement in intangibles that feed their success — most notably, increased credibility (which always leads to more positive leverage) and a more structured approach for all their future dealings with this valued customer. Certainly, our client felt more confident going forward in their ability to retain their well-earned advantage and expand their business with the customer in the future. Click here if you would like to see more applied examples of K&R’s negotiations principles.

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There is a world of difference between being a vendor that takes orders and being a valued peer or co-strategist. The former defaults to a defensive or reactive position, missing opportunities to help their client, increase the value of an account and build a more durable, mutually profitable relationship.

Moving from the master/servant paradigm isn’t about gaining the upper hand in a brute power scenario, but rather about moving to a peer-to-peer relationship where mutual benefit flows from mutual respect and acknowledgment of exchanged value. From our experience, the master/servant trap is an easy one to fall into, even with some of the world’s top-tier service organizations. After all, if the customer orders, the vendor sells and delivers.

There are organizational factors that drive the master/servant mindset, but at the root of it, this springs from the type of personality that is natural to a sales and services role: a people-pleaser. But in learning to be responsive to requests and doing “whatever it takes” to keep an account happy, a salesperson defaults to a reactive and often subservient position —falling into reflexive activity even if going over and above is not necessary or even valued.

Over the years we have developed many tools for creating leverage through preparation, assessment, articulation of value and much more. But before exploring the mechanics of better deal-making, a shift in mindset must occur.

This shift is founded on the understanding that most high-value sales relationships will be peer-to-peer in nature. Sales representatives will reach their peak not as order-takers, but as strategic consultants to the customer’s business who have taken time to understand their customer’s internal challenges and competitive landscapes. With this knowledge, they offer new insight (not just new versions of a product) that creates linkages to new outcomes — ones that improve both businesses. These insights are delivered to leaders of client organizations who are driven by those outcomes.

When this kind of relationship is established, the “run and fetch” dynamic will give way to a bilateral process where the customer becomes the client who feels equal responsibility for action items that drive valuable new outcomes. Having helped the customer understand what is to be gained, the salesperson has the positive leverage to rebalance the relationship and expect that the client will work as a partner to realize these outcomes.

We understand that this is not possible in every single sales relationship. But even sales representatives in “product” roles can elevate themselves to “trusted advisor” status — maybe not quite peer-to-peer, but still much better than being just a vendor who feels harried for quotes and specs.

Servants are useful. They get paid. But they are not peers in a bilateral relationship. Approaching an account with the mindset of being a valued co-strategist will open up new horizons and vibrant opportunities for both the seller and the buyer.

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The “time factor” — how you manage it against other considerations and use the high-level (or macro) agenda to help create agreement has a huge impact on your success!

This was certainly the case during an engagement with one of our technology clients, whose customer was in the European auto segment. All of our client’s revenue with this automaker was in jeopardy when the automaker announced that a purchasing freeze would be in effect at the beginning of the coming year, due to deteriorating economic conditions and new IT management. Since it was October, these developments required immediate action and a clear agenda that would culminate in closure before end of year.

In our view, too much is made of “agenda control.” It’s nice to control the agenda, but both sides in a negotiation have issues that need to be addressed, so control is not as important as managing the agenda. So, agenda management was critical in this situation: getting bogged down in the automaker’s 90-day RFP processes would carry us over the “buying freeze” line and erase a €6.7M opportunity for our client!

We will discuss this example in context of the macro agenda — the high-level view of the entire negotiation process. This includes both external and internal discussions (the combined “we” – meaning K&R working with our client), the timing of document creation and exchange, and meetings.

In this case we were able to manage the macro agenda to establish credibility and a manageable timetable with the customer. So we would not waste our time, one thing we confirmed internally was our understanding that the automaker would jeopardize strategic business initiatives if the IT projects we were bidding for were stalled because of the freeze.

When we heard about the upcoming spending freeze, our team immediately scheduled a meeting with the automaker’s line of business executive (marketing), whose business this project would support, their new IT management and their procurement team. This enabled us to get to know them and educate them about the benefits of our client’s solutions and the agreement terms.

This is extremely important: One of the key aspects of successful macro agenda management is confirming that your counterparts on the customer side feel the same urgency that you do. If they don’t, there will be no reason for them to act on your timetable. In this specific case, the entire sales process would be futile without this confirmation.

This meeting began the process of confirming two key factors that would determine if the deal could be done before the end of the year:

  1. The criticality of the project to the customer’s business had to be established.
  2. The RFP process would need to be accelerated or eliminated.

Getting the ball rolling well in advance of the automaker’s fall RFP deadline meant that not only did we avoid the cumbersome (and deal-killing) RFP process, we were able to successfully confirm with the automaker’s senior leadership that there was a clearly communicated and defensible business impact to them if they delayed the deal.

By aligning closely with our client and clearly delineating a strategy to get to closing and begin the project in a timely manner, we demonstrated great teamwork at every customer touchpoint — from executive channels to IT decision makers. We were able to turn the buying freeze into a compelling event for the customer and turn a “no sale” into €6.7M in booked revenue.

If you have excellent value creation and qualifications that solve the other sides’ problem as they emerge, you may be able to accelerate the process, but that involves thoughtful agenda management. That’s why getting and confirming agreement on timing is important. If you believe you can accelerate the process to closing, you must engage the right resources on both sides to make decisions.

We like to manage the macro agenda by working backward. We start with the date on which the customer wants to close and work back through the steps that need to occur in order to make that date. For example, if we want to close by December 15, we put in a target date of November 1 to allow contingency time for availability of key participants and unpredictable events.

Then we work back from November 1. Usually, the last set of approvals from the other side is from finance and legal counsel. That means that around October 1, we will need a close-to-final business case from the joint efforts of our team and the customer’s sponsors (this could mean involvement of finance, business development etc.) people. Of course, this agenda and process management requires that you ensure the buy-in and approval of everyone on your own internal team.

In the end, successful macro agenda management is all about aligning your and the other side’s activities and resources across a rational timeline to reach the desired result in a given timeframe.

Want to see more examples of how we apply our negotiation methodology to solve challenges — from dealing with intimidation to making stronger value arguments? Click here!

SIDEBAR

Key External Considerations for Your Macro Agenda

• Establish start and end dates

• Ensure there is a compelling reason to make decisions

• Understand customer alternatives

• See if there is any advantage in delaying (for the other side)

• Understand your customer’s decision making process

• Confirm that this deal is worthwhile for the customer and for you

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I recently noticed and greatly enjoyed Dave Stein’s LinkedIn Pulse post, “If I Have to Sit Through One More B.S. Sales Training Class…” Dave discusses the major pet peeves of a sales “heavy hitter” who bristles at the thought of sitting through sales training meetings conducted by people who have never sold, don’t know sales’ specific challenges or how to have sales people leave the session with clear steps that will help them sell more.

Stein identifies a number of root causes for why sales leaders bring in the wrong training at the wrong time. If you have ever had a hand in sales training procurement at your organization, I highly recommend reading the post to see if you are walking into any of the pitfalls that Stein illuminates.

As an organization that delivers sales and negotiation training, teaching people methodical ways to define and deliver value while closing bigger deals is a pillar of our practice. Our workshops must adhere to the same standard. If you are thinking of sourcing training for negotiation skills for your team, here are a few important pre-requisites for success. If your training organization isn’t delivering on these, then something important is missing!

Do your negotiation trainers understand the roles and objectives of your negotiators?

Negotiation is not a monolithic practice; your procurement team is going to need slightly different training than your business development team. In turn, the needs of each all these major roles can vary greatly by what business unit they’re in, their target market and where they’re doing business.

You can easily find universal negotiation wisdom in any blog. But if you’re investing in particular outcomes, you want trainers who understand the landscape in which your team operates.

How many deals have your trainers negotiated in your chosen niche?

Again, if you’re investing in specific outcomes, this is no time for general theory. A “been there, done that” instructor who has actually had to find a win in a grueling nine-month service-level negotiation is going to help your software sales team much more than a “textbook lecturer.”

This person can more readily tailor training to deal with the situations he or she knows your team will face and craft general negotiation training curriculum to be more effective. Which leads to…

Did the trainer send your team out the door with practical, applicable ways to be a better negotiator than when they walked in?

We follow up with our trainees and survey them to ensure that our sessions are relevant, and more important, provided measurable progress toward their desired outcomes. Additionally, we conduct detailed role play in situations specific to the group and impart follow-up tactics that can be immediately applied and measured. We consider this a must-have part of the training.

Negotiation spans all business activities, but general principles are more effective when delivered in the context of business unit roles and goals.

Have you ever been in charge of upgrading your team’s sales and negotiation skills? Did the experience deliver the outcomes you targeted? Please feel free to comment and share your thoughts and experiences!

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Recently our friend and colleague, Jim Hale, published a blog on territory management and the art/discipline of applying multiple resources and time to effectively generate sustainable sales. In the end, winning Territory Action Planning (TAP™) results in increased customer satisfaction and relationships, higher win rates and overall better revenue and profit results. Because this is such an important subject, we reprise some of the best practices associated with TAP in this blog.

High performing sales teams manage territories like they are individual businesses to build strong sales pipelines, advance their sales opportunities and grow relationships with selected accounts. They have realized through experience that the sales territory is the superset of our sales assets, and that without the proper care and attention, we can put these assets at risk.

What is a sales territory? In our sales and negotiation training with clients we have seen practically every possible flavor and derivative of “the territory,” including geography-based territories, industry-focused territories, product-focused territories, named-account territories and even territories that consist of a single account.

Building a Territory Action Plan – the TAP!

Whether the territory is based on geography, industry or named accounts, most effective territory business plans include seven core components. In situations where strategic account management programs are utilized, named accounts are typically grown through the development and deployment of strategic account plans, a type of business plan for extending and expanding the relationship with an individual account (to be discussed in a future post). But in the case of the more typical sales territory, the core elements of the territory business plan should include:

  • How much do I have to sell (quota)
  • Where do I sell (territory)
  • What do I sell (solutions)
  • Who do I sell it to (the best profile for a viable prospect)
  • What should my message be (unique, compelling business impact messaging)
  • What is the best way to create awareness (routes to market)

The TAP Outcomes

When the sales territory is managed and developed properly, you can expect to see several predictable outcomes. Effective territory management and planning will typically result in a “target rich” business environment in which the territory manager is selecting and growing existing customers and accounts, as well as advancing and winning targeted sales opportunities.

In an effectively managed territory, we expect to find a portfolio of existing customers that are providing (or will potentially provide) new business opportunities, as well as references and proof statements of the business value that has been created for them through their previous experience with their territory manager and his/her company.

There are several key areas of inspection that can provide significant insight into the overall health and performance of the territory and an effective territory plan, and these include:

  • Growth of Strategic/Key Customer Relationships
  • Identification and Advancement of Opportunities in the Sales Pipeline
  • Development and Close of Targeted Sales Opportunities
  • Accuracy of Sales Forecast
  • Increased Margins

We have seen these results during good times and bad — through Y2K and multiple recessions — across six of the world’s seven continents. It all centers on the implementation and utilization of practical sales skills.

There are three key areas where we see significant issues with today’s salespeople:

  1. Territory/account planning and management to proactively build a solid business pipeline
  2. How to have compelling business conversations that clearly quantify and articulate the business impact of the solutions
  3. Effective sales and negotiation skills that enable stronger margins by negotiating for business value, not price.

If you would like to learn more about our structured and proven approach to maximizing territory revenue including the TAP program, please click here.

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This blog post is excerpted from the K&R Negotiations white paper, “Dealing with Negotiation Know-it-Alls: How to Keep Instructors, Intimidators and Impostors from Derailing Your Deal.

The white paper explores three types of know-it-all that you are likely to encounter during negotiations and shows how the experienced negotiator can mitigate their negative impact and keep the deal moving toward a win for both parties.

The Impostor

Just like the Negotiations Instructor, the Impostor wants to raise his or her profile in the process, with one key difference: Either from ignorance or lack of preparation, it’s readily apparent that he or she has no idea what they’re talking about. They either misunderstand the topic at hand or are simply out of their depth because they have been included on the team, often because of a questionable management decision.

The Impostor in Action: An Example from Our Case Files
One of K&R’s professionals tells the following story: We were assisting a client in selling a technology solution. The buyer’s team was led by a know-it-all lawyer who always acted as if everyone in the room was inferior. The lawyer tried to intimidate everyone on both teams, but while taking knowledgeable legal angles, took unreasonable business positions due to a lack of expertise.

In preparation for a critical discussion of product “end-of-life” and inventory management, we asked the buyer’s CFO if she could join us. She did, sitting in the back of the room. The lawyer proceeded to request that we guarantee to have at least three years of inventory available for them if we decided to end the current product life.

Our lead negotiator glanced at the CFO and asked, “In a business where most production is on a rolling 90-day basis and product cycles are 12 to 18 months, we rarely recommend you acquire and pay for three years’ worth of inventory. Would you like us to do it in this agreement?” The CFO immediately understood that this was a ridiculous request. She helped us to resolve the problem quickly, and made sure to have representation in all our future meetings.

We know that no one has all the skills in equal measure to solve every problem in complex negotiations. It’s why we advocate strategic team-building. When the other side does not recognize their own limitations — they use an Impostor — we need to be able to overcome it, as we did in this example.

Dealing with the Impostor
This can be an exasperating person to have at the negotiation table! Unlike the Instructor, who can offer value with their knowledge if correctly managed, the Impostor is going to waste time, sow confusion and take you off course if his or her presence isn’t artfully mitigated.

Key tactical points:

  • Agenda planning and management will proactively preempt the Impostor from derailing the process. Before each face-to-face or remote interaction, it’s on your shoulders to get the right talent from both sides to participate. It will be critical for you to have the buy-in of your counterpart on the other side, such as your sponsor. They are in a much better position to handle the Impostor than you are.

     

    Once the agenda is set, irrelevant or wasteful comments along the way can be artfully shelved (remember what we said about helping everybody “save face”) if they do not fit the agreed-upon agenda. Graciously thank them and move on to the agenda items at hand. Of course, agenda management is critical in all negotiations, not just in dealing with an Impostor.

  • When faced with irrelevant or distracting “contributions” from someone who has obviously missed the point or is out of their depth, you can gently call their bluff by forcing them to justify their statements: “That’s interesting. Why do you say that?” Their response gives you the opportunity to guide the agenda back to better things and underline the fact that they aren’t helping much. In all these situations it is critical to have someone on your team or a friend on the other side who has actual knowledge of the facts.

Click here for a complimentary download of “Dealing with Negotiation Know-it-Alls: How to Keep Instructors, Intimidators and Impostors from Derailing Your Deal.

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This blog post is excerpted from the K&R Negotiations white paper, “Dealing with Negotiation Know-it-Alls: How to Keep Instructors, Intimidators and Impostors from Derailing Your Deal.

The white paper explores three types of know-it-all that you are likely to encounter during negotiations and shows how the experienced negotiator can mitigate their negative impact and keep the deal moving toward a win for both parties.

The Intimidator

The Intimidator is not interested in sharing knowledge for knowledge’s sake — their goal is to aggressively use their knowledge to keep you off balance and challenge your credibility. Whether they’re doing it out of personal insecurity or as a conscious tactic, the goal is the same — to make you lose control of the negotiation and to erode your position.

The Intimidator in Action: An Example from Our Case Files
We once coached a sales team that got berated by an executive of one of their prospective customers. Ten minutes into a key meeting with our client’s team, the customer’s executive began ranting: “You don’t know my business! How can you tell me these results could be achieved…” and went on to share a dozen or so facts about why our client’s proposal was stupid.

He then left, telling the rest of his team: “Sort it out or kill the deal!” In fact, our client’s backup materials addressed a majority of the customer executive’s concerns, but did not lead with them. When our client’s sales team called us for a coaching session, we recognized that the materials did not reflect the importance of the assumptions to the angry executive. We suggested that they take their potential customer’s team through the backup material first, identify which of the executive’s issues were already covered, and address any they may have missed. That would give the executive’s own team the fuel to be advocates with the executive and prevent similar outbursts in the future.

The executive’s concerns were real, no matter how emphatically expressed. Our client’s team refused to panic, addressed the content, and ended up with better credibility as a result. Our team had made an error, but a recoverable one, because they stayed cool under attack and constructively addressed the factual portion of the executive’s rant. The deal was done.

Dealing with the Intimidator
The Intimidator is one of the biggest challenges you have to face in your development as a negotiator. If you get drawn into a personal battle with them, you are in danger of neglecting one of the most critical approaches to dealing with tactics— keeping the conversation focused on the business merits of the engagement.

Key tactical points:

  • Keep your cool! This goes for any phase of a negotiation, but it is absolutely critical at this juncture, since a loss of control will damage your personal credibility, especially if the Intimidator tries to beat you with knowledge. “How could you not know?” is often how they make you feel. The worst thing you can do is act based on the panic or anger you feel at being subject to someone else’s arrogance or hostility. Getting defensive or escalating the hostility will divert you from the business merits of the deal.
     
    Instead, be patient. When the Intimidator pauses, ask if they are finished. If needed, acknowledge the emotional content of their speech. Then, work to get the conversation back on track regarding the merits of the deal. If you need to, take a break to gather information or just cool the atmosphere. Alternatively, ask the Intimidator, now that they are calm, to educate you (but you better know the person or you may set yourself up for another round of intimidation).
  • In intimidating situations, calmly return to the merits of the deal. When challenged with someone who wants to beat you with superior knowledge, play the Inquirer and parlay the personal challenge into an opportunity to gather information and advance the conversation.
  • For overtly hostile challenges from which there is nothing constructive to be mined (“It’s obvious that you guys have no idea what you’re doing!”), a bit of self-deprecating humor can come in handy. Or a bolder response might be, “If we don’t know what we are doing, why are you talking to us?”

Alternatively, in the face of consistent aggression, you have to demonstrate self-respect. (After all, if you don’t, why would the other side respect you?) Let them know that the behavior is unprofessional and you would like to take a “time out” for everyone to cool off. Or pause and let the other side know that you have to confer with your team. All of these tactics can defuse the Intimidator’s behavior and allow you to “reboot” the conversation after a cool-down period.

Click here for a complimentary download of “Dealing with Negotiation Know-it-Alls: How to Keep Instructors, Intimidators and Impostors from Derailing Your Deal.

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This blog post is excerpted from the K&R Negotiations white paper, “Dealing with Negotiation Know-it-Alls: How to Keep Instructors, Intimidators and Impostors from Derailing Your Deal.

The white paper explores three types of know-it-all that you are likely to encounter during negotiations and shows how the experienced negotiator can mitigate their negative impact and keep the deal moving toward a win for both parties.

The Instructor

The Instructor wants to contribute and show their value by demonstrating how much they know about everything being discussed. They will often sidetrack the discussion with (often long-winded) contextualization and explanation as a way of demonstrating their usefulness. The more complicated the deal context, the more the Instructor has to say.

The Instructor in Action: An Example from Our Case Files
A few years ago we worked on a deal where our client’s project director was key to a successful implementation of a technical solution. The project director was very knowledgeable, having led similar implementations in the past. Yet, each time we came to a discussion of project responsibilities, he felt it necessary to describe all aspects of the technologies involved. These discussions would drag on until we could remind the teams of the problem we were trying to solve.

Privately, during one of our breaks, we discussed the need to have shorter explanations and a greater focus on project responsibilities. 15 minutes after we returned to the conference room, the Instructor went into another deep technical description. Our client’s lead negotiator rolled her eyes and looked at us.

Noticing this gesture, our team leader interrupted with the following: “Excuse me, Henry. Your technical knowledge will be critical to carrying out the responsibilities we are discussing.”

Then, addressing the whole group: “As we are short on time, may I suggest we first focus on who does what, and make sure that we incorporate Henry’s more technical input when we move from that topic to how they do it?”

This approach aligned us with the rest of Henry’s team. It also made a promise to Henry that he would get a chance to bring his expertise to bear, which apparently was his concern. The deal progressed more smoothly, and Henry was a key player in getting the technical details right — later in the process, when his knowledge was most needed.

Dealing with the Instructor
Having the Instructor at the table isn’t necessarily a negative thing; in the course of their “teaching,” this person can often provide significant value. In fact, sometimes that value is unintentional. As they expound, they may reveal important facts that help you better understand the other side’s motivations, needs and competitive pressures. In another negotiation we were in, an Instructor revealed how critical our solution was to his team, which improved our negotiation leverage.

Key tactical points:

  • Generally, avoid contradicting or embarrassing the Instructor; an approach that causes them to lose face may make them hostile. In the example above, we were able to give face to the Instructor while moving the process forward. We ensured that his relevant expertise was held “on tap” for its future value to both teams. In the end, people do business with people they like. Negotiations are a continuous process and our ability to avoid placing others in awkward positions helps us build more lucrative long-term relationships.
  • Read the room: Is the discussion actually dragging on or is it just your perception? Are we losing the focus in the entire room? Determine if the best course is probing into or clarifying the Instructor’s comments, attempting to table them, or re-focusing the conversation. Act promptly to keep the negotiating room in alignment. Still, this may be an opportunity to glean powerful knowledge about the other side! Demonstrate a sincere interest in what they are saying, repeat what you just heard and ask for confirmation or clarification. If the majority of the room is lost and the benefits of the information are not at all apparent, thank them for bringing it up and offer to discuss it at a later time.
  • It is important to set the agenda and rules for running the session in advance. This is good practice and helps minimize long digressions. For discussions that take place by video or teleconference — where your ability to interact directly and personally is limited — the agenda and rules become even more important.

Click here for a complimentary download of “Dealing with Negotiation Know-it-Alls: How to Keep Instructors, Intimidators and Impostors from Derailing Your Deal.

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K&R CEO Mladen Kresic Discusses Negotiation Trends and Principles with Knowledge@Wharton Host Dan Loney (Complete Transcript)

On Friday, November 13 K&R CEO Mladen Kresic joined Knowledge@Wharton (Sirius XM Channel 111) host Dan Loney to discuss negotiation trends, principles and tactics.  The talk centered around practical negotiation strategies from Kresic’s bestselling “Negotiate Wisely in Business and Technology,” which was republished this fall with updated information and a new companion workbook.

Loney and Kresic discussed the nature of credibility, leverage and other key principles of the book, which has been read widely by business professionals and used in universities and numerous corporate programs across the world. This content reproduced courtesy of Sirius XM and Knowledge@Wharton.

Dan Loney: Negotiation, I think everybody would agree, is pretty much a common part of our lives on many fronts, whether you’re talking about our business lives or just negotiating the price of something we want to buy on Amazon or Ebay. But there are certain tactics that you need to be aware of, especially when you’re in the business world or even in the realm of technology.

Mladen Kresic is the president of K&R Negotiations, is also a technology lawyer and co-author of the book, Negotiate Wisely in Business and Technology. He joins us on the show right now. Mladen, thank you very much for coming on.

Mladen Kresic: Thank you for having me, Dan.

Dan Loney: You’ve represented quite a few companies in the tech sector. I would think that negotiation in this area is at an all-time high or very close to it…and expected to continue that way?

Mladen Kresic: That’s a good observation. Business negotiations have been pervasive for time immemorial. What’s particularly increased the pace of negotiations in technology is the pace of innovation. In fact, traditional companies like banks and financial institutions are now technology companies. The answer is, “Absolutely.” You’re on point.

Dan Loney: The interesting thing is, we’re talking about an area that not only has the massive tech companies, but it also has so many entrepreneurs that are trying to push that next great idea out there, push that new idea forward. You’re talking about very different types of frameworks for companies.

Mladen Kresic: Absolutely. You see in nanoseconds companies grow from being startups to having multibillion-dollar valuations, and a lot of that’s through negotiating deals with other companies in the business.

Dan Loney: Are some of those entrepreneurs, when you’re talking about negotiation and deals they are trying to get done, are they even running into a little bit of resistance from those “big guys”?

Mladen Kresic: That’s natural. The big guys want to defend their turf, but I think a lot of companies that would be considered in the traditional sectors have become accustomed to the fact that they can be disintermediated, in other words, their businesses can be turned upside down by innovations. So they’re more likely to make deals with small companies.

You don’t have to look much past Kodak, for example, to see what can happen to a company that doesn’t react to innovation in its industry.

Please click here to read the full transcript.

 

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There is a world of difference between being a vendor that takes orders and being a valued peer or co-strategist. The former defaults to a defensive or reactive position, missing opportunities to help their client, increase the value of an account and build a more durable, mutually profitable relationship.

Moving from the master/servant paradigm isn’t about gaining the upper hand in a brute power scenario, but rather about moving to a peer-to-peer relationship where mutual benefit flows from mutual respect and acknowledgment of exchanged value. From our experience, the master/servant trap is an easy one to fall into, even with some of the world’s top-tier service organizations. After all, if the customer orders, the vendor sells and delivers.

There are organizational factors that drive the master/servant mindset, but at the root of it, this springs from the type of personality that is natural to a sales and services role: a people-pleaser. But in learning to be responsive to requests and doing “whatever it takes” to keep an account happy, a salesperson defaults to a reactive and often subservient position —falling into reflexive activity even if going over and above is not necessary or even valued.

Over the years we have developed many tools for creating leverage through preparation, assessment, articulation of value and much more. But before exploring the mechanics of better deal-making, a shift in mindset must occur.

This shift is founded on the understanding that most high-value sales relationships will be peer-to-peer in nature. Sales representatives will reach their peak not as order-takers, but as strategic consultants to the customer’s business who have taken time to understand their customer’s internal challenges and competitive landscapes. With this knowledge, they offer new insight (not just new versions of a product) that creates linkages to new outcomes — ones that improve both businesses. These insights are delivered to leaders of client organizations who are driven by those outcomes.

When this kind of relationship is established, the “run and fetch” dynamic will give way to a bilateral process where the customer becomes the client who feels equal responsibility for action items that drive valuable new outcomes. Having helped the customer understand what is to be gained, the salesperson has the positive leverage to rebalance the relationship and expect that the client will work as a partner to realize these outcomes.

We understand that this is not possible in every single sales relationship. But even sales representatives in “product” roles can elevate themselves to “trusted advisor” status — maybe not quite peer-to-peer, but still much better than being just a vendor who feels harried for quotes and specs.

Servants are useful. They get paid. But they are not peers in a bilateral relationship. Approaching an account with the mindset of being a valued co-strategist will open up new horizons and vibrant opportunities for both the seller and the buyer.

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Our Risk-Free e-Learning Program for Aspiring Negotiators

Although negotiation touches every part of your working and personal life, for many people it seems to be an intimidating endeavor. People in demanding roles find they must embrace it, and look to continually sharpen their skills to close important transactions, increase deal sizes, grow their companies or build profitable long-term relationships.

For those who want to learn more about the fundamentals but don’t have a structured approach, we created a self-guided e-learning program, Fundamentals of Negotiation. Our intent is to provide you with a practical program introducing the principles of negotiation and giving you the desire to negotiate and learn more.

Fundamentals of Negotiation provides a foundational understanding via three courses that can be taken at your desired pace:

  • Introduction to Negotiation: Why do you negotiate? What is negotiation? This module teaches you key concepts for understanding the practice and how it touches everything we do.
  • Credibility & Leverage: When you are perceived as credible, it gives you tremendous power to move the other side closer to your way of thinking. Far from the “winner take all” view of negotiations presented in movies and elsewhere, we introduce a positive concept of leverage and explain why it is so dependent on credibility, integrity and ability to communicate.
  • Principled Concessions: A successful negotiation is one where both sides leave the table with an understanding and appreciation of the value they have received. We introduce you to the concept of principled concessions, which helps negotiators across the world preserve their value and position without creating hard feelings or “giving away the store.”

At K&R, we’ve had the honor of working with some of the world’s top organizations in both high-stakes negotiations and in a training capacity. These fundamentals are part of what we employ to train and assist business and sales leaders. Everyone has to start somewhere. Why not give our no-risk e-learning program a look? When you finish, you might even be able to teach a more experienced negotiator a thing or two. But more importantly, you’ll have a path to participating more fully in one of the most essential activities in business and life!

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The “time factor” — how you manage it against other considerations and use the high-level (or macro) agenda to help create agreement has a huge impact on your success!

This was certainly the case during an engagement with one of our technology clients, whose customer was in the European auto segment. All of our client’s revenue with this automaker was in jeopardy when the automaker announced that a purchasing freeze would be in effect at the beginning of the coming year, due to deteriorating economic conditions and new IT management. Since it was October, these developments required immediate action and a clear agenda that would culminate in closure before end of year.

In our view, too much is made of “agenda control.” It’s nice to control the agenda, but both sides in a negotiation have issues that need to be addressed, so control is not as important as managing the agenda. So, agenda management was critical in this situation: getting bogged down in the automaker’s 90-day RFP processes would carry us over the “buying freeze” line and erase a €6.7M opportunity for our client!

We will discuss this example in context of the macro agenda — the high-level view of the entire negotiation process. This includes both external and internal discussions (the combined “we” – meaning K&R working with our client), the timing of document creation and exchange, and meetings.

In this case we were able to manage the macro agenda to establish credibility and a manageable timetable with the customer. So we would not waste our time, one thing we confirmed internally was our understanding that the automaker would jeopardize strategic business initiatives if the IT projects we were bidding for were stalled because of the freeze.

When we heard about the upcoming spending freeze, our team immediately scheduled a meeting with the automaker’s line of business executive (marketing), whose business this project would support, their new IT management and their procurement team. This enabled us to get to know them and educate them about the benefits of our client’s solutions and the agreement terms.

This is extremely important: One of the key aspects of successful macro agenda management is confirming that your counterparts on the customer side feel the same urgency that you do. If they don’t, there will be no reason for them to act on your timetable. In this specific case, the entire sales process would be futile without this confirmation.

This meeting began the process of confirming two key factors that would determine if the deal could be done before the end of the year:

  1. The criticality of the project to the customer’s business had to be established.
  2. The RFP process would need to be accelerated or eliminated.Getting the ball rolling well in advance of the automaker’s fall RFP deadline meant that not only did we avoid the cumbersome (and deal-killing) RFP process, we were able to successfully confirm with the automaker’s senior leadership that there was a clearly communicated and defensible business impact to them if they delayed the deal.

By aligning closely with our client and clearly delineating a strategy to get to closing and begin the project in a timely manner, we demonstrated great teamwork at every customer touchpoint — from executive channels to IT decision makers. We were able to turn the buying freeze into a compelling event for the customer and turn a “no sale” into €6.7M in booked revenue.

If you have excellent value creation and qualifications that solve the other sides’ problem as they emerge, you may be able to accelerate the process, but that involves thoughtful agenda management. That’s why getting and confirming agreement on timing is important. If you believe you can accelerate the process to closing, you must engage the right resources on both sides to make decisions.

We like to manage the macro agenda by working backward. We start with the date on which the customer wants to close and work back through the steps that need to occur in order to make that date. For example, if we want to close by December 15, we put in a target date of November 1 to allow contingency time for availability of key participants and unpredictable events.

Then we work back from November 1. Usually, the last set of approvals from the other side is from finance and legal counsel. That means that around October 1, we will need a close-to-final business case from the joint efforts of our team and the customer’s sponsors (this could mean involvement of finance, business development etc.) people. Of course, this agenda and process management requires that you ensure the buy-in and approval of everyone on your own internal team.

In the end, successful macro agenda management is all about aligning your and the other side’s activities and resources across a rational timeline to reach the desired result in a given timeframe.

Want to see more examples of how we apply our negotiation methodology to solve challenges — from dealing with intimidation to making stronger value arguments? Click here!

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I recently noticed and greatly enjoyed Dave Stein’s LinkedIn Pulse post, “If I Have to Sit Through One More B.S. Sales Training Class…” Dave discusses the major pet peeves of a sales “heavy hitter” who bristles at the thought of sitting through sales training meetings conducted by people who have never sold, don’t know sales’ specific challenges or how to have sales people leave the session with clear steps that will help them sell more.

Stein identifies a number of root causes for why sales leaders bring in the wrong training at the wrong time. If you have ever had a hand in sales training procurement at your organization, I highly recommend reading the post to see if you are walking into any of the pitfalls that Stein illuminates.

As an organization that delivers sales and negotiation training, teaching people methodical ways to define and deliver value while closing bigger deals is a pillar of our practice. Our workshops must adhere to the same standard. If you are thinking of sourcing training for negotiation skills for your team, here are a few important pre-requisites for success. If your training organization isn’t delivering on these, then something important is missing!

Do your negotiation trainers understand the roles and objectives of your negotiators?

Negotiation is not a monolithic practice; your procurement team is going to need slightly different training than your business development team. In turn, the needs of each all these major roles can vary greatly by what business unit they’re in, their target market and where they’re doing business.

You can easily find universal negotiation wisdom in any blog. But if you’re investing in particular outcomes, you want trainers who understand the landscape in which your team operates.

How many deals have your trainers negotiated in your chosen niche?

Again, if you’re investing in specific outcomes, this is no time for general theory. A “been there, done that” instructor who has actually had to find a win in a grueling nine-month service-level negotiation is going to help your software sales team much more than a “textbook lecturer.”

This person can more readily tailor training to deal with the situations he or she knows your team will face and craft general negotiation training curriculum to be more effective. Which leads to…

Did the trainer send your team out the door with practical, applicable ways to be a better negotiator than when they walked in?

We follow up with our trainees and survey them to ensure that our sessions are relevant, and more important, provided measurable progress toward their desired outcomes. Additionally, we conduct detailed role play in situations specific to the group and impart follow-up tactics that can be immediately applied and measured. We consider this a must-have part of the training.

Negotiation spans all business activities, but general principles are more effective when delivered in the context of business unit roles and goals.

Have you ever been in charge of upgrading your team’s sales and negotiation skills? Did the experience deliver the outcomes you targeted?

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