Jointly Creating and Claiming Value in Sustainable Way – Part II

At the request of several participants at the two days workshop, I am writing about “Creating and Claiming Value in a Negotiation.” This issue is Part II of the three-part series on this topic. If you missed the Part I, please visit my blog to read it.

Always assess the full set of interests at stake, yours and that of the other negotiating sides. These include relationships, the process itself and the social contract.

One of my telecom customers sent a cancellation notice for a five-year, $40 million a year Operations Management contract. I set up a meeting with the decision maker at her office in Kuala Lumpur, Malaysia.

The customer was not too happy about the currency fluctuation resulting in payment of the higher amount in the local currency Ringette. She also expressed her concern for U.S. based Tier I technical support. It was expensive and not conveniently available due to the time difference between the U.S. and Malaysia.

I made her this offer:

“If you renew the five-year contract today, I will buy a hedge against currency fluctuation with you as the beneficiary, and have Tier I support available to you out of our Mumbai, India facility.”

She agreed, and I flew back to the U.S. with the contract renewed for another five years.

Buying a hedge against currency fluctuation is insignificant in cost as compared to the value of the contract. Offering Tier I technical support helps the customer, and it is cheaper for my company. I was clear on ultimate interests of my employer and those of the customer or the other side. I also knew my trade-offs among lesser interests and was flexible on the means of sourcing them.

Frequently negotiators address tangible factors such as price, timing, and specifications. Most deals are fifty percent emotion and fifty percent economics. Crucial interests are often intangible and subjective: the character of the negotiating process, the effect on trust and company reputation, and so on. For example, when working out longer-term arrangements, relationships, rather than transactions, can be the powerful negotiating interests in much of Southern Asia and Latin America.

Then there is the “social contract.” The spirit of a deal. Beyond trust and the good relationship, it includes expectations about the nature, extent, and duration of the transaction, about the process, about the way to handle unforeseen events, and so on.

The telecom customer’s position to cancel contract was due to currency changes. Once I addressed the real interest, the sale resumed.

Always probe the negotiating positions to understand deeper interests. Learning about and reconciling the full set of interests requires patience, researching the other side, asking many questions, and Real Listening.

Appraise each side’s no-deal options. Understand the threshold of the full set of interests that any acceptable agreement must exceed for each team. If I had challenged the cancellation of the contract, the matter would have gone to the world court than the opportunity to do continued business and more business later. At the same time, the customer’s operations would have been disrupted, which is a price to pay.

Think about it. See if it applies to any of your situations. If you have questions, ask. I will reply. It may just take a few days due to the volume of email.

I will talk more about Creating and Claiming Value in a Sustainable Way, in the next issue of the Knowledge Letter.

Spring is around the corner. Smile!

Satish
“Negotiate less out of habit and more out of Intent.”

P.S. Let me know what issue keeps you up at night. Maybe I can help you in your negotiation.