It looked like an amazing opportunity.
Several years ago, Tim, a consultant for a design business, was in the box seat to secure a contract to overhaul a brand at a well-known American company.
The brand had not been revitalised for years. The client was desperate to present a new image at an upcoming event.
Whilst not known as a brand design house, Tim’s firm had packaging experience which overlapped with branding. His skills were a suitable match and he was the only one shortlisted. Three months from the unveiling of the new brand, the client was desperate.
Things, however, did not go to plan.
Whilst the client expressed excitement to have him on the team, the procurement manager indicated that there were ‘just a couple of things we must address before signing off on your purchase order’. These involved a client purchasing policy for a 20 percent discount on fees worth more than $300,000 and payment terms of 180 days post completion.
Before he knew it, Tim had agreed to terms which were far from favourable.
Such a story was related by David Sherwin in his 2012 book Success by Design: The Essential Reference for Designers.
Whilst the case above deals with product and brand design, it underscores the importance of negotiation skills across all companies. This is no less the case for built environment professionals, who must negotiate with clients, consultants, contractors, employees, regulators and others.
This matters. Negotiate effectively with clients and you can achieve the best possible price and terms for your services whilst establishing mutually beneficial relationships. Negotiate poorly and you risk devaluing your offering and creating distrust, acrimony and disputes.
That raises questions about strategies which can be adopted to negotiate effectively. For answers, Sourceable spoke with Adam Le Good, managing director of management, personal and team development training firm Fundamental Training and Development. As part of his firm’s offering, Le Good runs courses on effective negotiation.
For simplicity, this article focus on client negotiations.
According to Le Good, there is a common misconception that negotiations involve winners and losers. Under this view, each party benefits only when counter-parties fail or receive less favourable outcomes.
This, he says, is wrong. Where outcomes are not fair, it is unlikely that both parties will agree to them. Further, where one party is hoodwinked, they are likely to feel hard done by. In such cases, they may respond either by taking shortcuts on their contractual duties and/or by refusing to enter future agreements.
Beyond that, Le Good says there can be a suspicion of counterparties and a view of clients and others seeking to manipulate. Truly manipulative people, he says, are rare. Indeed, many clients themselves are equally fearful of being manipulated by you.
According to Le Good, an effective negotiation is one where the outcome is beneficial to all parties and results in a stronger relationship between the parties. High levels of trust will be evident as will a sense of partnership.
Notwithstanding this, it is important to be aware of tactics which can be applied by counterparties. These, Le Good says, are most commonly employed by poor negotiators and/or those who view negotiation as an adversarial process.
First, there is intentional deception such as lies, manipulation or withholding of information.
To counter this, negotiators must be informed and be prepared to verify information. If told that standard rates are $90 per hour when in fact they are higher or lower, those who do their checking can correct their counterparty and bring the negotiation back toward a sensible level.
When doing this, Le Good says negotiators must not become angry or make accusations. Instead, they should calmly and factually correct their counterpart.
Next, there are strategies to apply pressure and to induce hurried decisions. These could include unrealistic deadlines or leaving things until the last minute.
To counter this, Le Good says it is important to follow a planned processes which affords time for considered decisions. Where more time is needed, this should be requested. Pressure to make time restricted decisions should be resisted.
Third, there are threats, bullying and personal attacks.
These are countered by confronting the behaviour prior to the negotiation (or immediately where it happens during the negotiation). Negotiators should clearly state that such behaviour is unacceptable and will result in termination of negotiations if continued.
This must not be an idle threat. Where poor behaviour continues, Le Good says architects and engineers should walk away. It is often better to lose work than to be stuck in an agreement with parties whose behaviour is such that they are difficult to work with, he says.
Forth, there is the ‘good cop/bad cop’ routine.
This, Le Good says, should have died in the 1980s but still happens.
A common scenario involves two representatives from the counterparty entering a meeting. One will be a bully and may thump the desk or otherwise act aggressively before walking away. The, ‘good cop’, will then say, ‘he’s going to be back in twenty minutes, let’s just agree on this, this, this, this and this’. Such tactics are designed to induce hurried decisions.
Le Good says it is important to recognise this tactic and call it out. He encourages those subject to this behaviour to make clear that they understand what is going on and to state that they will not be rushed into a decision. They should state that they are happy to deal with the, ‘good cop’, under a scenario of adequate time for each party but are not prepared to negotiate with the bully.
In fact, Le Good says bullies often back down when challenged.
Another strategy involves counterparties refusing to negotiate at all unless you agree to certain actions as a precondition for negotiations. This is essentially blackmail.
When responding, Le Good stresses the need to be firm. One approach involves proposing a time to negotiate and to specify the consequences of the counterparty not coming to the table.
Next, there are extreme negotiation claims. Whilst many negotiations involve ‘ambit claims’ such as quoting a price of $12 when you would really accept $10, some parties may instead quote $50. The idea is to shift the goal posts so that the party making the claim achieves a favourable result.
According to Le Good, this often backfires as the party making the claim loses credibility.
To counter, he encourages negotiators to call it out and be clear that such claims need to be withdrawn. Where possible, it can be useful to refer to reference points such as industry standard prices, terms and conditions to get the negotiation back to a reasonable level.
Finally, there are escalating demands. Under this strategy, one party will wait until negotiations are nearing completion before asking for something else.
Where the additional item is minor, Le Good says it may be best to agree to the claim and finalise the negotiation.
For more significant claims, he encourages architects and engineers to try to agree upon what had already been discussed – stressing that this had been negotiated in good faith. When doing so, negotiators can make clear that failure to agree could lead to negotiations starting over.
Finally, Le Good says there are several strategies which can improve the likelihood of success.
Before starting the negotiation, it is important to be prepared. This involves being clear about your own desired outcome, what your counterparty may seek and what constitutes a reasonable outcome given relevant industry standards. It also involves understanding your trigger points for walking away and how you will manage should no agreement be reached.
Second, it is important to be cooperative.
Too often, Le Good says people approach negotiations with a combative attitude. Instead, he encourages negotiators to establish rapport and to be transparent about intentions for a mutually beneficial outcome. This is to be done whilst being sufficiently assertive to avoid submitting to negative tactics.
Finally, it was important to invest in negotiation skills training. Architects and engineers, he says, are typically well trained on technical aspects of design but are rarely given guidance on negotiation. Negotiation, he says, does not always come naturally and often needs to be learned.
For built environment professionals, effective negotiation skills are critical.
With simple strategies, the likelihood of success can be improved.