Negotiation Blog

Negotiating Demands for Unjustified Compensation

By Thomas Wood

As many issues typically arise during execution of an agreement as arise during contract negotiations. Some require contract modifications, while others require a change in performance expectations. I worked with a manufacturing client recently on its dispute with a valued customer. The challenge was how to resolve the compliance issues without damaging the relationship. 

PROBLEM:

My manufacturing client (Sandra) couldn’t get an important customer (Joe) to pay his bill. Joe insisted that a special order of a low volume, high cost part was delivered a week late. This caused Joe to miss his delivery deadline with his big customer. Joe is being slapped with a penalty fee from his customer and wants a 50% discount.

After probing Sandra, I learn that a delivery deadline was not in the contract. There was a verbal commitment to get the part there as soon as possible, but no promised date. Sandra wants to keep Joe happy, but since she didn’t violate the contract, she won’t discount the price.

Try this:

Before asking an irate customer to be reasonable, Sandra should invite him to problem-solve a win-win solution. A particularly effective way is to listen, draw him out, respond and summarize. For example:

  • Joe: "You were late, which made us late and now we are slapped with a penalty; it is your fault and I am not going to pay your bill."
  • Sandra: "You are getting flack from your customer and the reason is you were delayed because our product was delivered to you later than expected."

It is challenging to actively listen when you feel attacked, so practice before you make the call.

DON'T:

Be careful not to make counter-accusations. It is counter-productive. "It is not my fault; you ordered the product last minute and we delivered as soon as we could, which is what we told you when you placed the order."

NEXT STEPS:

Suggest that you do some research together on what went wrong, what the current obligations and understandings are, and whether they need to be revised. For example, Sandra might say: "I would be happy to consider compensation once we agree on the facts. Would you be willing to take out the contract, see what we agreed to and then decide what needs to be done? Let’s also review the order and communication process that occurred for this part and see if they need to be changed."

Once you have agreed on the facts and process improvements, choose an offer.

CHOICE ONE: Create good will with a concession other than a price discount. Sandra might say, "Given the facts we have uncovered, I’m not inclined to discount this particular order. But I am sorry and want to help. For example, I could eliminate the late payment penalty."

CHOICE TWO: Offer a trade in exchange for a concession. Sandra could say, "You are an important customer to me and I’d like to help you out, so what I could do is give you a 4% discount on this order, if you pay it within 3 days."

CHOICE THREE: Use legitimacy (facts, such as previous agreements, industry standards, competing offers, cost plus). Sandra could propose, "Let’s both see how we have handled this in the past. I will look into how we have dealt with similar situations with other important customers and you look at what you have agreed to with your customers in this sort of a situation. What do you offer your clients if you were not contractually late on delivery, but yet were later then they expected?"

KEY to negotiating a resolution

The key is to turn the conversation into a problem-solving negotiated agreement.

  • Make trades you are comfortable with, but get concessions in return.
  • Let the facts be the bad guy. It will keep your negotiation from turning into an argument.
  • Jointly determine deadlines, but probe arbitrary deadlines you are given
  • Come to an agreement on how to keep this from happening in the future.
  • Remain calm and sympathetic.

If you do this, your relationship with your customer will be stronger than ever. Remember…. Be firm but fair!

Negotiating Tip

Take a negotiating risk today: Ask, "Is there any flexibility on that?" where you usually don’t negotiate. Try at it work, at home, and in the mall. You will be surprised at how effective it is. What do you have to lose?

 


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Negotiation Blog

Film Award for Best Negotiating Practices

By Thomas Wood

The lead up to the Academy Awards always gets me excited about seeing great films. This year Martin Scorsese's "Hugo" and Michel Hazanavicius’s “The Artist” were fabulous, and received 10 and 11 nominations respectively. But will they win at the 2012 Academy Awards? I hope it's not deja vu of the 2011 Academy Awards, when brothers’ Ethan and Joel Coen’s “True Grit” received 10 nominations but didn’t win. Well, True Grit definitely won Best Picture for Negotiating Practices among our team of professional negotiators here at Watershed Associates.
True Grit tested the “grit” of every character’s negotiation moxy in the various negotiations that transpired in this movie, and there were many.
 
The story is tried and true:  Teenage girl seeks revenge on her father’s killer, and pairs up with two strong willed lawmen-for-hire to chase down the killer in Indian territory of the 1880s. There’s an opening scene with Dakin Matthews playing a tough and crotchety old businessman and trader, Colonel Stonehill, and Hailee Steinfeld playing the vengeful teen, Mattie Ross. As Mattie prepares to set out on her adventure, she needs resources, and she comes to the trader to negotiate for them.
 
Before he died, Mattie’s father had purchased and paid for two ponies from the trader. Her father had paid for the ponies, but the ponies had not yet been delivered to him and are still in the custody of the trader. Mattie’s father also had his saddle horse boarded at the trader’s stable. Along came a thief who, upon murdering Mattie’s father, stole her father's saddle horse, and left behind the saddle, the two ponies, and the less valuable horse Mattie's father had lent the theif.
 
When Mattie approaches the trader, her astute preparation becomes apparent. The trader is quick witted from years of experience (and a great script), but has to determine whether Mattie has a strong BATNA (plan B), or is bluffing. Mattie uses just enough friendliness and legitimacy to her advantage, while also showing she is prepared and goal oriented (a picture perfect example of Watershed’s mantra: be firm, fair and professional). The trader is caught off guard by this shrewd teenager, and to his disadvantage underestimates her negotiation skill and determination.
 
There are lots of negoiation missteps, mostly on the part of the experienced trader. There are things the trader could have learned about Mattie’s need for resources if he wasn’t caught off guard and had asked better questions. Simply by using sincere curiosity and probing more effectively, the trader could have landed a much better deal. He focuses only on dollars instead, missing low cost/high value trades he probably could have made with the girl. He also makes other common erros in his haste, such as
  • responding to her offer in a way that makes it difficult to explore Mattie's interests,
  • negotiating against himself without waiting for a counteroffer when faced with Mattie’s various BATNAs/bluffs, and
  • declaring multiple times that this is his final offer.
And yet, the trader held all the cards from the start. At the opening of the negotiation, Mattie has nothing and the trader has everything – the ponies, the payment, the saddle, the less valuable horse, and the expertise. Mattie doesn’t beg or play the victim who needs charity. She uses many Best Negotiating Practices, among them
  • an assertive but defensible opening offer,
  • legitimacy,
  • persuasive analogies,
  • a strong BATNA, and
  • a tapered concession pattern.

Mattie has almost no power in this negotiation, but she leverages something much more potent – her skill as a negotiator – her true grit.

And that’s only one of many negotiating scenes in the Oscar nominated movie from 2010.
 
See True Grit again or for the first time, and test your “grit” as a negotiator by spotting all the missteps and Best Negotiating Practices interlaced in this great film.

 

Negotiating Tip

When negotiating via email, establish rapport first: start with a telephone call or web conference. Even better, if possible, start with a face-to-face meeting.


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Negotiation Blog

Don’t “Just Ask”: 3 Keys to Negotiating a Raise

By Marianne Eby

 

Satya Nadella, Microsoft CEO, recently suggested that women should have faith in the “system” that will give them the right raise, rather than ask for a raise. He went further to call women superheroes for not asking. Nadella has since admitted that he was “completely wrong”. But in his mea culpa statement to Microsoft employees, Nadella got a few more things wrong, and that's where this blog begins.

In his original statement at the Grace Hopper Celebration of Women in Computing conference (GHC), Microsoft’s CEO, Satya Nadella, said that women shouldn’t ask for a raise; they should  have “faith that the system will actually give you the right raise as you go along.” He went on to say that women who don’t ask for a raise have a “super power” in that they know how to use this “good karma” of not asking in order to get what they want.

Every good negotiator knows that you have to ask for what you want, and certainly there’s been a lot said (BloombergCBCSalon, et al.) about Nadella's live interview comments. We can take some comfort in the fact that Nadella's other stories, and his post fumble tweet, give us some indication that he too can have his eyes opened and learn from mistakes -- the mark of a good leader, and a good negotiator.

Nadella was being interviewed by Maria Klawe, a Microsoft Board Director and President of Harvey Mudd College, who was very professional and passionate in disagreeing with this man she respects so much:

"This is one of the very few things that I disagree with you on."

She gave some examples from her own career, and then said to the audience:

Here's my advice to all of you. First of all, do your homework. Make sure you actually know what a reasonable salary is."

Klawe also reminded women to role-play, or practice, the ask.

Klawe was right of course. And Nadella acknowledged that Klawe was right when he issued his written mea culpa to Microsoft employees:

“And when it comes to career advice on getting a raise when you think it’s deserved, Maria’s advice was the right advice. If you think you deserve a raise, you should just ask.”

I want to share a negotiator’s perspective regarding what Nadella said in this more prepared written mea culpa. I want to talk about whether "deserving" is sufficient, and if the best way to go is to "just ask."

Deserve v Worth
Should you ask for a raise because you think it’s “deserved?”
Not exactly. You should ask for a raise because you are worth it.

You can accuse me of splicing words, but maybe the words we use to describe why we want something are critical to getting it.

You may deserve more money for lots of reasons, but are you worth it?

  • To “deserve” more connotes that you have been cheated out of something. This leave the boss on the defensive, feeling the need to protect her/his own past decisions.
  • "Worth," on the other hand, connotes value; value gets the boss’s attention. The boss starts to conjure visions of success, reward, and what happens if you leave.

Also, if you think in terms of deserve, you may talk yourself out of asking for a raise if you think the system is not able to adjust based on unique talent or results. For example, if you are working in a system that is stepped, like a training program, law firm associate, government jobs, or someone who recently got this year’s compensation increase and is not due another one for a year, you might hesitate to discuss what you “deserve.”

But if you think in terms of worth, you are more likely to initiate the conversation anyway, because a “worth” conversation leads to ideas – like higher profile assignments, other positions, switching geographic or subject areas, meetings with key leaders, etc. When possibilities emerge, you and your boss can find ways to compensate you for your worth.

Master negotiators leverage the worth v. deserve distinction all the time. Don’t pay us more, or provide a higher quality product, or meet a shorter deadline because our company deserves it after we took a hit on the last deal; instead master negotiators say (and demonstrate with legitimacy sources) --  give us more in this negotiation because our product or service is worth it. Now the counterpart feels psychologically motivated to give more.

“Just ask” v. Plan your approach strategically

“Just ask” rubs me the wrong way too. If you are worth more to the organization, more than likely you will have to show it, not “just ask.” And to do that effectively, Klawe was spot on when she said you have to do your homework.

There are 3 main considerations that should be part of your homework – People, Data and Plan B:

People Support

  • Decision maker: Who’s decision will it be? Has that person been exposed to you, and if not,  how can you get that exposure before you ask for the raise.
  • Influencers: Who influences the person who will make the ultimate decision?
  • Peer relationships: What will colleagues say about you? If asked, would they say you are worth it? Have you formed the relationships that will reinforce your request?
  • Ego needs: Know the ego needs of the person you are planning to ask for the raise. Is her/his ego need to be respected, right, in control, liked, feared, etc? Uncover the person’s ego need and find a way to satisfy it before you make the ask. If you don’t satisfy the boss’s ego need, it may conflict with your ask.

Data Support

  • Market data: How does the market value your skills, talent, position? Would another organization pay you more to come to it?
  • System Comparables: What does the internal measures say about your worth in your position? Are they paying you low for your position, or are you in the wrong position? In other words, should your ask be for a raise, a promotion and a raise, or a different position?
  • Results: What data or examples support your worth? What did you do that brought value to the organization – leadership, savings, revenue, margin, strategic partnerships, risk avoidance, team building, etc.?
  • Fairness: If you believe you are being unfairly compensated vis a vis similarly/less talented/skilled peers who deliver the same or less results, this is a far more delicate conversation and needs to be addressed with the right people. Be prepared to make fair comparisons so your credibility is never at risk in the discussions. But do make the ask - you are worth it!
  • Read more on Standards of Fairness as you negotiate.

Plan B

What’s your plan B or BATNA -- Best Alternative To a Negotiated Agreement? If this raise doesn’t work out, what are your next steps? Don’t wait. Network, share access and influence, help others. Test the market. Begin working on your plan B, or BATNA, now.

Remember...

Any “ask” is the beginning of a negotiation – a conversation about how to address your worth. To be a real superhero, don’t “Just Ask “– Plan strategically to ask for your worth! And all my fabulous male negotiator colleagues -- this applies to you too!

One absolute positive from Nadella’s comments is that the ensuing discussion is loud and hopefully has legs beyond the tech sector.

The tech industry has 30%/70% workforce split of women to men. And as reported in the New York Times, while female computer scientists are catching up and making 89 percent of what men in the same occupation make, other professions in the tech industry may not be so lucky. For finance professionals across professions, for example, women make only 66% of what men make. And across industries, another study showed that in 2013, women working full time earned only 78% of what similarly situated men earned.

Raising awareness about women lagging behind in salaries and leadership positions is always a good thing because it propels change. I always opt for controversy over silence; controversy sparks conversation, which can lead to solutions. Similarly in negotiation, controversy (you want x and I want y in exchange) drives conversation, and that conversation leads to solutions.

        (Review information on Watershed's Advancing Women Negotiators workshop.)​

Negotiating Tip

Path to enduring agreements: build trusting relationships; share interests; create value as you address interests; distribute that value.


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