Home  Clients  How We Work  Services  Case Studies   About Us
« Previous Entries
Next Entries »


Negotiation Scenarios: lack of authorization
Saturday, March 25th, 2006

Albert was planning to purchase computers from Shelly.  As the date for the purchase approached, Shelly changed the terms. 

Instead of net 45 for payment, as they’d agreed to initially, Shelly told Albert that her company’s policies had changed.  The company now insisted on payment net 30. 

Initially, they’d agreed to three years of onsite tech support with the purchase.  Shelly said that she could only offer two years of tech support, and the tech support would be provided at a service center instead of onsite. 

Albert asks for an explanation.  Shelly says that she found out that she hadn’t obtained proper authorization from within her company for the original terms.

Issues

In Albert’s situation, what would you do?  How should Shelly’s company handle situations like this?

Albert’s Options

The critical question is whether Albert wants to go forward with the deal for some reason.  Here are a few options that Albert has:

  1. Escalate the issue within Shelly’s company, providing copies of the correspondence.  Suppliers often stand behind their employees’ representations, even erroneous and unauthorized representations, at least up to a point.
  2. Walk away from the deal.  If a supplier behaves this way before it has one’s business, how will it react if it actually earns the business?
  3. Seek specific performance.  In many cases, verbal agreements are as enforceable as written agreements.
  4. Consult the Uniform Commercial Code (”UCC”) and other resources.

Do you see other options?

Shelly’s firm

Most customers that I’ve represented or sat across the table from expected their suppliers to stand behind Shelly’s word and to deal with her as an HR matter, at least most of the tome. 

As a general rule, customers tend to walk away from suppliers that don’t “talk straight and follow through.”

If the difference is too far off from the customer’s expected range, the supplier may have an out.  That said, if Albert asked and confirmed the information, the out may be “out the window.”

Posted in Customers, Negotiations, Solving Problems | No Comments »



Negotiation Scenarios: knowing when to walk away
Friday, March 24th, 2006

After the parties decide to work together to solve a business problem, they must build a relationship.  In order for the companies to be successful, both companies have to share information that is needed in order for the project to be successful.  

Initially, both parties may feel hesitant to share information because they aren’t comfortable with each other.  Sharing information makes one vulnerable.   

Issue

Can the relationship work without sharing information?

After all of the efforts have been attempted, if one party is unwilling to trust the other enough to talk, what is the other party to do?  How far is far enough?  At what point is it time to walkaway?

Answers

Can the relationship work without sharing information?  This question is a difficult one to answer.  It depends on the nature of the acquisition.  On tactical acquisitions, it may work very well. 

On strategic acquisitions, the parties may make the relationship survive.  Is it a relationship that has great value to either party?  Is it a situation where either party trusts the other one?  It often has greater value for one party than the other.  Often, the party realizing the value from the relationship is the listener, rather than the speaker. 

After all of the efforts have been attempted, if one party is unwilling to trust the other enough to talk, what is the other party to do?   Each party has an obligation to itself to decide if the relationship meets its needs.  If a party concludes that the relationship is not meeting the party’s needs, the party has the standard choices - live with what is, change it, or walk away.

How far is far enough?  At what point is it time to walk away?  Certainly, it is important to give the other party a chance to share information.  Some are not used to having their voices heard and they forget the importance of sharing information.  

How important is it to share information?  A few years ago, clients purchased a training class from a supplier.  They wanted the class to be using a specific software and computer, just as the supplier’s course had in the past.  That was a critical success factor.  Imagine the clients’ surprise when the supplier shows up with a different version of software and different computers for training.  The clients could have accepted the change, if they’d known about it in advance.  As it was, the change caught them by surprise. It came up during the class itself.  In business, surprises are bad…

There is a delicate balancing act.  Just as one needs to give the other party time to share information, one also needs to ensure that the needs of the business are met.  When one concludes that the other party is unwilling or unable to change and the current situation does not meet the party’s needs, one should walk away.  When that happens, both parties should make the change smooth and facilitate the transition to other solutions. 

Posted in Negotiations, Solving Problems | No Comments »



Business Puzzle: protecting proprietary information
Friday, March 24th, 2006

Bill is an IT manager at a Fortune 500 company and you are Bill’s supervisor.   Several projects in Bill’s group have fallen behind schedule.  You authorize Bill to bring in six people as independent contractors. 

The contractors are scheduled to work on some of your company’s most sensitive projects.  Bill has talked with sourcing and legal.  Both organizations were concerned about making certain that the company’s proprietary information is adequately protected.   They have asked you to put together a plan for protecting the data and to allow them to review the plan before the contractors’ first day on the project. 

You and Bill are under tremendous time constraints.  The plan is not created before the independent contractors arrive.

When the independent contractors arrive, do you:

  1. Assign them to other tasks while working on the plan.
  2. Assign them to the sensitive tasks that they were asked to perform without a plan.
  3. Negotiate an amendment to the contract to have them begin the contract at a later date.
  4. Throw together a plan.
  5. Call legal and sourcing for advice.

Approach

There is no substitute for upfront planning.  It can be tempting to throw a plan together or to let the project start anyway.  Will that serve your business?  Assume that every one in the world knew all of the information that the contractors will have access to.  Where would that put your business? 

When proprietary information is disclosed, court orders and temporary restraining orders are inadequate to compensate firms for the damage that is done. 

Worst Answers

In this situation, the key focus is on protecting your company’s proprietary information.  The worst answers are choices 2 and 4 above.  

If it is important enough for us to be concerned about protecting the proprietary information in the first place, we should not assign the independent contractors until such a plan exists.  

A plan that is thrown together on the spur of the moment is unlikely to include sufficient protection.  We often overlook important details in such situations.  Reasonable safeguards may be missed.

Best Answer 

The best answer is generally choice 5.  Rather than following one decision that often results from pressure to meet needs of the business with another than it made as the result of being in the pressure cooker, it helps to have an independent set of eyes (or two independent sets of eyes) looking at the issue.   

When we call legal or sourcing, they will probably recommend choice 3, negotiating an amendment to the contract.  Sure, it may cost us time.  It will probably cost us some money.  That said, it still is likely to beat the alternatives.

Posted in Negotiations, Planning Tips, Solving Problems | No Comments »



Networking supports sharing of ideas and learning from each other
Thursday, March 23rd, 2006

“Human beings, who are almost unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so.” 

 – Douglas Noel Adams

Facts

Steve, a sales person, tells you about a project that he has just finished. 

Steve had trouble with the contract negotiations because the customer didn’t want to prepay for the services and wanted performance guarantees.  After spending weeks stuck, Steve stumbled on an idea that met the customer’s needs.

The customer was thrilled with the results.  Steve is very happy because the customer is introducing Steve to several other customers.

Steve is in a different industry.  How do you respond? 

  1. Listen attentively and try to learn from Steve.

  2. Listen politely to make Steve feel good.

  3. Change the subject.

The answer to that question is critical to your organization’s success.  Organizations need their employees to learn from other people’s successes and failures.  They don’t want the “Steve’s” of the world to stop sharing the experiences.  They want their employees to listen, attentively and actively.   Why?

Lessons that can be learned 

Organizations want to learn, identify new options, and understand the opportunities.

The questions that they would like to understand include:

  1. What were the customer’s concerns and questions?

  2. How did the customer make its decision to purchase the products or services?

  3. With whom did Steve interact?

  4. What were the customer’s critical success factors?

  5. Who else did the customer consider as a potential supplier?

Organizations want and need their employees to learn from every person with whom their employees interact. 

Posted in Business Tips, Networking, Solving Problems | No Comments »



Negotiation Scenarios: issue resolution
Wednesday, March 22nd, 2006

Two home alarm monitoring services.  The resulting customer, Company X, engages John Smith, Inc., to create a system that allows data entry to be made via a single front end.   

John Smith, Inc., recommends that the databases be merged in order to minimize total cost.  Company X agrees.  John Smith, Inc., merges the databases and delivers the merged data. 

Company X has 30 days to inspect the database and validate compliance with the contract.  Company X assumes that the databases were merged correctly and does not test the data.  Company X signs off on a document stating that it accepts the database as fulfilling the contract terms.

The final invoice is received from John Smith, Inc., and Company X pays the invoice without dispute. 

Now, sixty days after the merged database was accepted Company X realizes that the data was merged incorrectly. 

Issues

What can Company X do now?  Path forward, what should Company X do differently?

Current situation

When Company X signed the acceptance document, Company X essentially said that John Smith, Inc., had fulfilled its obligations.

From a legal perspective, Company X limited its options by signing the acceptance document.  The passage of time is a second factor that may limit Company X’s rights even further.

From a business perspective, Company X should contact John Smith, Inc., and attempt to negotiate some type of remediation.  Some suppliers provide remediation even if it is not legally madated in order to preserve goodwill. 

Path forward

What lessons can be learned from this experience?  Are things that could have been done more effectively?  Here are a few thoughts on that:

  1. Always include the complete specifications and acceptance criteria in the contract.
  2. Contracts should include remedies in the event that the deliverables do not meet the specifications.
  3. When items are delivered, we should test them to ensure they comply with the acceptance standards.
  4. We should read and understand documents before signing them.
Posted in Negotiations, Solving Problems | No Comments »



When a negotiating lightweight meets a professional negotiator
Tuesday, March 21st, 2006

When one reads negotiation books, one sometimes get the sense that the negotiators use humor, sarcasm, bumbling,  flirting, flattery, and other tactics to get their way.  And, by the way, it often is “their way or the highway.”  

One sometimes encounters negotiators who’ve read the manual on such approaches.  What are the two types of negotiators?  What can one expect when the two types of negotiators meet in a contract negotiation? 

Negotiators

Lightweight Negotiators 

Reliance on tactics, games, and other factors is the mark of an amateur or a lightweight.  The tactics may win the battle, but they never win the war.  Over time, such negotiators lose credibility and lose far more deals than they win. 

Professional Negotiators 

Professional negotiators kick ass and take names.  And they do it by being themselves.  They don’t waste time playing  games or engaging in trickery.  The only tactics that professional negotiators use are those that drive the negotiation forward.  Professional negotiators do their best to make their clients successful and respected. 

Real world example

Joe (a sales rep for a major IT firm) said that his firm would not sign the nondisclosure agreement because it already had one with the client.  The firm was eliminated on the spot. 

The firm tried an “end around,” going first upstream in the procurement organization and later going to clients.  It did not work.  The IT firm lost approximately two million dollars of business that it was positioned to win. 

As a postscript… A different supplier was selected and the project was extremely successful based on feedback from the clients and the supplier.  When surveyed, the clients and supplier credited the negotiator for the project’s success.

Posted in Negotiations, Solving Problems, Sourcing | No Comments »



Business Puzzle: build value, manage costs
Monday, March 20th, 2006

George is getting ready for his college reunion.  He thinks back and wishes that he knew what happened to Sheila, his college sweetheart, and Jason, his roommate.  After graduating from Oregon State University, they just drifted apart. What can George do?

Well, if George is a member of Oregon State University’s Alumni Association, all he has to to is contact the Association with information for Sheila and Jason.  If the Association has an address on file for Sheila and Jason, they will forward Georges information in accordance with the request…  For free. 

Why does the Association make an offer like this?  What lessons can we learn from the Association’s approach?

Reason for the offer

The Association is likely to benefit in terms of increased membership and greater donations by providing this little value add.  The cost is minimal to the Association. 

If someone wants to reconnect with more than one or two people, the Association says that it may charge for the assistance.  This limit helps the Association avoid risk that it will be taken advantage of.

All that said, it is great public relations and the messages is extremely soft.  Here is a link to the site so that you can see exactly what the Association said. 

Application to other businesses

How can we use this information to build our value with customers? 

What steps might we want to take to make sure that we had identified approaches that were aligned with our customers’ needs? 

When to use this

This approach is frequently used in contract negotiations.  We often think of suppliers using this approach.  Customers who want to build a good relationship with suppliers often come up with similar value adds themselves. 

What to use

Think of options that are easy to fulfill.  Maybe it is something that can be automated so that we are not incurring costs or encumbering resources. 

Other examples

If customers are purchasing a lot of a particular product, it can be helpful to offer to send the customer a case of one’s printend catalogs.

When one organization was going through resource cuts, a supplier offered to allow the organization to share CDs.  In that case, the organization had to turn down the offer because of administrative issues and the mixed message.  That said, the supplier still improved an already top-notch reputation. 

Many answers to this issue are readily apparent as the parties talk about how the relationship should work, their hopes, and their challenges.

Posted in Negotiations, Solving Problems | No Comments »



« Previous Entries
Next Entries »