Searcher
Vol. 9 No. 6 June 2001
FEATURE
Negotiating: From First Contact to Final Contract
by Seymour Satin Procurious Los Angeles, CA
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The information professional's job description changes so rapidly from day to day, it's hard to keep up. From researcher to Web designer to information guru, the latest skill set all information professionals need is how to negotiate. Negotiation skills are very important in our day-to-day business and also in everyday life. Three areas in particular commonly require our negotiation skills: contracting, purchasing, and licensing agreements.

Some view negotiation as confrontation, and, let's be honest, most of us tend to avoid confrontation whenever possible. Hard as it may be to imagine, negotiation is a natural process, and should be viewed as fun, as an activity both challenging and rewarding. The simple steps and golden rules outlined below can help you achieve this attitude and start you in the right direction.

If you think you've never negotiated anything and have no experience, just ask yourself these three simple questions:

  • Have you ever negotiated any kind of contract?

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  • Have you ever participated in buying a home or a car?

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  • Have you have ever gone out to dinner and a movie with friends or family and swapped paying for the dinner for paying for the movie?
If you answered "yes" to any of the above questions, then you do have some experience in negotiating.
 

"To Negotiate..."
Lets first define what negotiation means. The Random House Dictionary (2nd Edition) defines "to negotiate" as:

...to deal or bargain with another or others, as in the preparation of a treaty or contract or in preliminaries to a business deal.

Webster's Seventh New Collegiate Dictionary has it as:

...to confer with another so as to arrive at the settlement of some matter.

But the best definition I've heard to describe the truth about negotiation came from Robert D. Rutherford, Ph.D., author of The Twenty Five Most Common Mistakes Made in Negotiating...and What You Can Do About Them. He defines negotiation as:

...an effort to resolve a difference between two or more parties by the give-and-take process.
 

Simple Steps: Preparing for the Negotiation
You must understand the issues thoroughly and go in prepared. Do your homework and know as much as you can or you're not going to get too far in the negotiating process. Don't try to wing anything! The old saying librarians have used for years is so true in negotiating, Knowledge is Power!

There are six steps involved in gathering your information.

1. Do a cost benefit analysis. See what types of information resources you currently have within your organization and what the resources cost. Talk to your users and see if the current resources provide what they need. Understand your clients' goals and objectives. See if the resources you currently have will provide what users will need in the future.

Look at competitor vendors' products and prices to have a basis for comparison. Don't be afraid to have the vendor work for you in this process of getting prepared. If you're working on an enterprise-wide deal and currently have this product within your company somewhere, ask the vendor to supply a list of all current users within your company along with an historical usage report to help you with your analysis. Make sure you get raw data. It's funny how easy it is to manipulate numbers. Anyone can make them appear the way they want to, so make sure you crunch your own data. I have found this very helpful.

Once you have this information you can begin the next step.

2. Request trial periods. Trials are very important and can open your eyes to some miscalculations and misperceptions. Let me illustrate this with a story of one vendor. At my prior company, we subscribed to hard copies of a daily publication considered the "bible" to that industry. (Every industry has one.) The vendor developed an electronic edition that we could post to our intranet. At that time, we had over 17,000 employees, but the vendor said a license for 10,000 should cover all users and, of course, presented me with a cost for that many people. Now, my assessment posited that only 500 would have a business need to read the publication, but the vendor said, "It's on your intranet and therefore anyone could read it, so you have to pay the full price!"

I asked them to do a trial. I promised the company would market the product by an e-mail push to each desktop. We would post an icon on each company intranet site. And I would monitor the usage of the system for 1 month. The vendor agreed to our marketing plan and gave us the trial at no cost. After the month was over and we gathered the statistics, we discovered we were both wrong. We averaged only 150 people viewing it on a daily basis! After discovering this information, the contract was written for 150 average daily users. Needless to say, the cost of the new product and its delivery mechanism fell far below the cost for the projected 10,000 users originally quoted. So always insist on a trial.

3. Develop a plan. Have a well-thought-out plan before you go into the negotiation. Know exactly what you want! Working with your clients and IT group, construct a list of everything you need. Break this list into two areas: a wish list of what you would love to have and another list of what you really need. With the wish list in hand, subcategorize the minimum amounts you're willing to pay. Keep this list with you in the negotiation and check points off as you proceed in the process.

4. Know your strengths and weaknesses. No person or organization is immune to weaknesses. For you, it may be as minor as the data supporting one of your points or as major as innate distaste for the confrontational aspects of negotiation. Recognize these weaknesses and try and work out alternatives before you sit down with the vendor. For example: if you don't have a solid understanding about the IT aspects, team up with your IT group members and have them present at the meeting. If you dread confrontation in an upcoming meeting where you'll have to present the vendor with a counter-offer, have someone else present at the meeting, maybe from your procurement group or management team.

Another option is to outsource the process and hire a professional negotiator. Negotiation is a skill one develops over time. If you have a major deal in the works, the best bet might be to hire a negotiator and sit in and watch and learn the process. If your data is weak or incomplete, then you might not want to start the sit-down process until you can improve the data. Knowing your strengths is very beneficial. Data can be your best asset, if you understand it and use it to your advantage. You might be only working on an individual contract for one department, but don't hesitate to use the size of your company and the potential business it might bring the vendor for leverage.

5. Anticipate all options. I can't tell you how many times I have sat in a meeting where a question or situation comes up and no one has an answer. The typical response has always been, "I'll have to get back to you." Sometimes you can't avoid this, but in getting yourself prepared for the negotiation process and keeping the conversation moving, you must try to anticipate what your opponent might do or say and work out different scenarios in your mind. Role play with co-workers, try to get someone to play devil's advocate; anticipate all options that might come up in your meeting. Also reverse the role playing and place yourself on the other side of the table. This will help you to understand your opponent's position. Understanding your opponent is one of the most powerful tools in a negotiation, and it will help you better prepare yourself.

I have played devil's advocate many times in the role playing process to assist others in getting ready for their negotiation. Picking your role playing partner is critical. You don't want to have a "yes" person opposite you. You want someone who will keep you on your toes and think out of the box.

6. Identify your best options. You always need to know your best options: Know what your bottom line is, the minimum you're willing to give up on. It could be dollars spent, port access, printing, number of users allowed, distribution rights, or the renewal or cancellation clause in the contract. Remember, you should already have these points written down on your wish and want lists.

While role playing and anticipating all your options, you should also anticipate the vendors' best options. The vendor is either going to sell you its product at a certain dollar and give into some of your requests, or maybe the vendor's best option, if not getting some aspect of what they want, is just to walk away. If things don't work out in a meeting, then maybe your best option might be to walk away. Walking away doesn't mean you have lost or didn't do everything right; it just means that stroll was your best option at the time.

It doesn't pay to get into a partnership where one side dictates all the terms and conditions. That is not a partnership at all. The most important point in gathering your information and doing your homework before the process begins is to find another vendor to partner with, so you won't have to accept the deal currently in front of you. That way you take the pressure to make a deal work with thisvendor.

I've walked away twice in my negotiating career. One time I was playing the negotiation as a game and wanted to beat my opponent. I wasn't bending and wasn't listening, only focusing on what I wanted. The vendor got frustrated, my boss got frustrated, and both parties walked away. Obviously the deal didn't go through and both parties lost. This was a great learning experience for me in my early days of negotiating.

Another time at my prior company, we subscribed to eight different publications from the same publisher. We had readers of hard copy publications from one end of the country to another and even across the Atlantic Ocean. Another company office had already negotiated a facility-wide electronic agreement with the publisher. My job was to consolidate an enterprise-wide deal to broaden the base and lower the costs. After going back and forth for over 2 months, we faced the following three roadblocks:

  • The vendor wanted to charge us for a trial to see if their electronic application would work on our network. Costs for the 3-month trial were very expensive.

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  • The vendor wanted us to sign an agreement that we would delete all downloads off every machine after the trial.

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  • The original company office's contract was at a 40 percent savings, while the offer for a company-wide consolidation was at a 25 percent discount.
My negotiating team saw many problems with these roadblocks. The IT manager would not approve any system without testing and my team was adamant that we should not pay for a trial period since we already paid for the hardcopy publications. Our attorneys would not approve the section within the trial agreement requiring the removal of all downloads after the trial period ended. They reasoned that our company assumed too much liability. How could anyone police every machine within the corporation and guarantee the removal of all data from the trial? However, the vendor would not budge on this point.

Our methodology was to obtain a contract and divide up the costs to all operating companies based on usage. Naturally, the company office that made the original contract and constituted a major user of the product would not agree to what looked like a 15 percent increase over the deal currently in place. Many meetings with the vendor to extend the original company office's contract terms and conditions to an enterprise-wide contract failed.

So, we decided to walk away. This was the best option at the time and we had no regrets since the savings would be minimal and the liability too great a risk.
 

The Golden Rules of Negotiation
Every process has rules. Here are the top 15 rules that can make any negotiation a successful process:

1. Seek a win-win situation. In a win-win situation, you really want both parties to feel good about themselves, the deal, and the entire process of the negotiation. You don't want to be too greedy. Never go into a negotiation process with the attitude of "my way or the highway!" Win-win doesn't mean you split things down the middle by any means, either! You really have to strive to make both parties winners, but when you go for the win, win!

2. Expect to win! Go in with the attitude that you intend to get everything on the "need" list and some things on your "wish" list.

3. Learn from experience. Negotiation is not a game, because in a game you have winners and losers. You should go into a negotiation seeking that win/win and trying to make sure everyone feels good about the whole process. Once I did play the negotiation like a game and, being competitive, I wanted to win! I wanted it "My way or NO way"! WRONG ATTITUDE! On one negotiation years ago, with me taking that attitude, both parties lost. The deal didn't go through because I wouldn't listen and be flexible. I took the wrong approach with the "my way or no way" attitude and didn't practice the "give and take process" and treated the negotiation like a game. That experience taught me a lesson I've never forgotten.

4. Everything is negotiable, even the process. You can pick the place and whom you would like present at the meeting. When you start talking to them, try and recognize their tactics or negotiating styles. Maybe they're using a good-guy/bad-guy routine or using invisible managers as an excuse not to answer or commit to a question or point in the negotiation. Call the vendor on their tactics. If its good-guy/bad-guy, tell them to come back to the table after they work out their differences. If they use the absent manager as an excuse, ask for their manager to be present or on the phone during your next meeting. You can also let them know that if they don't provide you with the information you requested from them before the meeting to prepare yourself, you won't even meet with them. Do what's comfortable for you and remember, you're in control!

5. NEVER attack the demand, only the rationale behind the demand. This is a very important point! Let's say someone quotes you a high price for their product, your first response, as mine has been in the past, is to say, "ARE YOU CRAZY?" Don't say that, don't go there, don't react at all. Ask them how they came up with that price and how they support it and move on from there. If you attack what they say, you put them on the defensive and they'll probably attack you back, and that gets you nowhere! When they give you the rationale behind their proposal, then you can break it down and attack the rationale behind the demand. You might need time to digest and do more homework on their rationale and, if you do, there is nothing wrong with asking to postpone the meeting until you have had a chance to review their methodology. Really try to understand your opponent's position; you don't have to agree with it, but it does help you to try and understand it!

6. Don't settle for too little. When the vendor makes an offer, check both your want and your wish lists and review your best options. If you have reached a point where the vendor says, "Lets split the difference," that probably means you're settling for too little if you agree. Now if you suggest that approach, make sure you've done your math and analysis right to keep the numbers working in your favor!

7. Be creative...think out of the box. I once negotiated the printing of a newsletter for a senior citizens group, where pricing was very important! I got the printer to reduce his rates by offering a quarter-page within the newsletter for him to advertise his business. This way he could advertise to over 500 people six times a year, and it didn't cost the seniors group anything to get him to lower his price.

8. Learn to listen. During the process of the negotiation, you might start focusing too much on what you want to say and stop really listening to the other side. Listening is one of the most essential aspects of successful negotiating, but one that's always taken for granted.

9. Give and take. Look at the example of the senior centers newsletter. We conceded a quarter-page of space in the newsletter, but getting the lower cost was a major opportunity for us. Be sure that when you give up something, you get something in return. Negotiation is a process a series of give and takes constantly open to adjustments, changes, and renegotiation.

10. Use silence as a technique. People tend to become uncomfortable with silence, so use it to your advantage! If a point is brought up that raises an eyebrow, just sit there and raise that eyebrow. Don't let them off the hook by responding. Let them talk their way out of it and see where it goes!

11. Size shouldn't matter unless you want it to. When you work on a contract and your counterparts have years of negotiating experience, or the money amount involved is something you could retire on for the rest of your life, don't be intimidated! It's all a matter of perspective! To illustrate this point, I'd like to use a story used for millennia that still makes a big point. We all know the story of David & Goliath, where David approached King Saul and asked him to let him fight Goliath. Well the King's first response was to tell David he was too small and Goliath was too big, but David was very persuasive and the King finally let him go fight Goliath. We all know how the battle ended. But did you know that when David came off the battlefield to the cheers of his army, someone from that army then asked him "David, weren't you scared? He was so big!"? To which David replied, "I didn't see him as too big. I saw him as too big to miss!"

12. Never negotiate out of fear. All too often, people make mistakes and early concessions just to get a deal over with. Think of the negotiation and the person sitting opposite you as too big to miss. No one every stated it better then John F, Kennedy at his Inaugural Address, January 20, 1961, as he became the 35th President of the United States: "Let us never negotiate out of fear. But let us never fear to negotiate."

13. Don't concede much at first. You should never go into a negotiation and give up some vital piece of strategic information, for example, 1) you're the only game in town or 2) we love this system and want it, let's talk! You lose too many advantage points this way, points that give an unfair advantage to your opponent.

This deserves a story about a friend of mine who asked me to help him negotiate a car deal. He wanted a certain Toyota and we had gone to three dealers with no luck. We then started using our brains and our cell phones to call around to other dealers and finally found a dealer who had this special car. When we got there, the first thing that came out of my friend's mouth was, "You guys are the only ones that have this car I wanted." Well, I cringed! I didn't see that one coming! Ok, so he test-drove the car. My friend loved it and we sat down to talk. And here came that statement back to haunt us! The dealer kept throwing the statement back in our face that his was the only place we could get this model car.

Finally we arrived at a very good deal and then I tried to get the dealer to throw in the six-CD changer my friend wanted. They said they couldn't give it to him for the price we negotiated but they would for $500 over the price negotiated for the car. Now mind you, this was a $690 CD changer. My friend said he'd get it another time. OK, deal done. So my friend stepped into that little room auto dealerships have to do all the financial work, while I took a walk. When he came out, he told me that the women inside had talked him into buying that six-CD changer and added it to the payment. I asked the price and he said $690. This leads us to Golden Rule #14 ...

14. It ain't over till it's over! ... Yogi Berra made this line famous and he was so right when it comes to negotiating. It ain't over till you get a clear signed contract. Just make sure you get everything in writing, don't assume anything! You want to take people at their word, but many things are stated throughout a negotiating process. Make sure you get all details worked out, from distribution, how long you can keep the historical data, etc., and then get all the details in the written contract or an addendum to your current contract.

15. Maintain good relationships. If you try and succeed at achieving a win/win negotiation, then you'll end up with a good relationship you can build on. But make sure you maintain it. As time goes on, you will probably have to renegotiate your contract and that probably means some changes. Make sure you don't have to face a vendor still smarting from memories of a humiliating, hurtful past negotiation.
 

Good for You?
When you complete any negotiation, you always ask yourself, "Did I get a good deal?" No one can answer that question for you. You have to decide that based on the deal you constructed. You can ask yourself if you got more knowledge to more users for the same or lower price? If you are happy with the deal, then you got a good deal!

You would think one of the simplest ways to assess the merit of your deal would be to ask someone else in another company. Wrong! Vendors put a stop to that by adding a non-disclosure agreement into their contracts. A non-disclosure agreement means that you cannot disclose the terms, conditions, or price of the contract you have just signed outside your company. If you do disclose this information, you have put your company at liability and the risk of a major lawsuit. One way around this is to hire a consultant who has the experience of many deals and knows enough to identify a good deal in your case. The experienced consultant cannot disclose specific information either, but might have the working knowledge to evaluate the success of your negotiation.

In following these steps and golden rules, you can have a productive and successful negotiation. Something always to remember: It's a never-ending process, so keep gathering data and prepare for the future. During your negotiated period, monitor the usage and look at all the points of the contract; do client surveys.

Remember, when you go back to renegotiate, knowledge is still power.
 

Seymour Satin's e-mail address is satin@procurious.com
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