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Successful Negotiating Requires You to Leave Money on the Table

Over the past year I’ve been involved in several large and important negotiations. Failure to negotiate well in any of those situations would have had some ugly effects on my businesses. The following is some guidance that has helped me successfully work my way through those discussions and get to a place where I’ve been happy with the outcomes.

I read a great article in Fortune a while back. Joanna Shields of Bebo.com quoted her dad: “Your career is long and the business world is small. Always act with integrity. Never take the last dollar off the table.”

Fantastic advice. Unfortunately many of us never heed it. We get wrapped up in near term numbers, performance bonuses, and, yeah, I’m gonna say it, greed. In economic times like the present, these pressures are amplified.

Many folks look at business as a competition. In many cases it is (duh, hence the term “competitors”). Sadly we sometimes extend the definition of competitor to include anyone sitting across the table from us. Quite often, that person across the table is supposed to be our partner but we engage in completely dysfunctional competitive or territorial behaviors. Then bad things happen. What kinds of bad things? You know I’m going to tell you.

Shields’ father continues: “You can always do a slightly better deal, but that incremental dollar or windfall is not worth creating an imbalance that affects the relationship. You have to have the intuition to know when to say, ‘I’m going to make sure that we walk away feeling like we’ve both done well.'”

The Hosed Supplier

I had a business partner and friend who was a supplier to a longtime customer. They had a wonderful relationship up until a new manager was brought into the mix at the customer’s organization. My friend traveled to the new manager’s location and introduced himself then reviewed what they had accomplished together as business partners.

He thought the meeting had gone well. He was wrong. A month or so later the customer requested another piece of work from him. After he quoted his normal rate he’d had with this client for several years, he received a terse note back that “this rate is unacceptable. It needs to be $X or we’re taking our business elsewhere.” To clarify, $X was about 75% less than the rates this client had paid him (eagerly, might I add) in the past.

My friend was distraught. Eventually they came to a more reasonable and acceptable rate but the relationship had been poisoned. I’m sure the manager at the customer did very well on her performance review because she slashed costs (he wasn’t the only supplier she had scorched). Unfortunately there probably wasn’t a section on her review for “supplier relationship quality” because she would have failed. Miserably.

My friend no longer trusts this customer. They didn’t care about the impact they’d had on his company. Now when he has to choose whether to do a piece of work for the customer or another customer, his choice is pretty clear. I’m pretty sure that customer no longer gets my friend’s best efforts. And to be honest, I can’t say I fault him for it.

New Hires and Starting on the Wrong Foot

We’ve all hired people. I have a buddy who recently went through an interview process. He loved the management and the team members he’d be working with. They loved him too. They loved him so much they made him a job offer.

Then HR stepped in. They sent him the offer and it was lower than he was expecting. They then proceeded to negotiate and nickel and dime him on all aspects of his package – base, bonus, signing bonus, moving allowance, etc., etc., etc. Every aspect of the offer became a painful negotiation. It got so painful that he called the hiring manager.

“I’m sorry but I’m not going to be able to take the role.”

“What?! Why not? We love you and I thought you loved the team and the position.”

“I do. But I hate the people you have negotiating my compensation package. If that’s how I’m going to be treated, I’m pretty sure I don’t want to be part of your organization.”

He didn’t take the job. Incidentally, my friend heard after the fact that the hiring manager had gone ballistic on the individual negotiating the package. That manager clearly understood why taking the last dollar off the table is a terrible idea.

I’m asking you to remember this principle. Whether you’re negotiating a big deal, a new contract, a new hire offer, or simply a rate change, remember you’re going to have to work with these people after that event. Sure you can be the hero and save a bunch of money short term but longer term you’re building a terrible reputation and eventually no one will want to work with or for you.

Leave the buck on the table. The goodwill and sense of fairness you build by doing so is worth infinitely more than that dollar.

– Mike Figliuolo at thoughtLEADERS, LLC
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11 Responses to “Successful Negotiating Requires You to Leave Money on the Table”

  1. George says:

    Wise advice Mike. Trust relationships take years to build and can be destroyed in a second. When one participant loses, nobody wins.

  2. Tim Rethlake says:

    Mike:
    Good stuff (as usual).
    I have one framed quote on my desk, the only quote in my office incidentally. It’s from Gandhi and simply says: “If there is a loser, the battle is not over.” I try hard to live by this mantra in my professional and personal interactions. It has served me well over the years.
    Tim

  3. Bob Schuerman says:

    Mike,

    You are so right in how you describe how quickly a relationship of trust which has been built over a considerable amount of time and effort, can be poisoned in a flash. I have always negotiated using my philosophy to work towards a true win-win end result. I once worked for a company where I was directed to renegotiate all my supplier contracts in order to reduce the costs in my large area of responsibility. Even as my suppliers weren’t being paid by our Accounting team, and I worked to lower all my supplier costs, I was able to maintain excellent relationships with my clients. Unfortunately, there are many senior leaders in different companies who at times are only interested in the financial reports, and not our external relationships with our partners (suppliers). Keep up the good work!!!

  4. Karen Swim says:

    Excellent words of wisdom! It is too easy to enter negotiations with eyes solidly focused on “winning,” but many forget that a negotiation sets the foundation for an ongoing relationship. We can get so caught up in “game on” that we forget we are not moving chips on a board but navigating relationships with real people.

  5. Sarah says:

    Thank you for this. Living with integrity and creating healthy partnerships are of utmost importance to me, as I always have to work with the people I negotiate with on large projects after the negotiations are over. However the ownership of the company I work for would prefer otherwise – demanding their employees to over negotiate to the point of crass greed. It can be very demoralizing to have to bury your own principles to keep your position, and feel respected at work. The pressure to over negotiate also creates a bad image of the senior leaders/ownership and does not build respect. In the end, you will probably end up paying one way or another anyway.

  6. Tina says:

    Good example on suppliers and customers. If you as the owner are to far out of the loop you may not realize the damage you are causing your business.

    Going after every dollar is not a way to do business. Everyone needs to win in transaction. It would be interesting if this company started to charge their customers more money after nickle and diming their suppliers.

  7. Clark says:

    Business advise that is common sense… almost a scary proposition in today’s business world! I’ve always believed in the motto, “Loyalty is a bond that is reciprocal”. Your article provides real world examples that this is in fact true.

    Moreover, this is advise that would heed us all well in EVERY relationship.

  8. Mike D says:

    First time reader / commenter. Interesting article, though I’m not certain that I agree. As context, I too spend most of my days negotiating with long-term (20+ year relationships) suppliers, several of whom are Fortune 100 companies. These are strategic relationships for us, with annual spend north of $100M.

    There is never perfect transparency in a negotiation. With that in mind, how do you really know when that dollar on the table is the _last_ dollar. You might answer that it’s a trust issue, but my fiduciary duties won’t allow me to just “trust” that my suppliers are putting my best interests in front of their own. My biggest lesson from the MBA negotiations class was that “there’s never a signed deal that both parties can’t live with”.

    Don’t get me wrong – I’m not a hardcore “raze the fields” kind of negotiator. However, I do push hard to get the best possible deal that I can get for our company, in the context of alternatives, potential switching costs and any quality risks that might arise from a damaged relationship. I have strong relationships with the folks on the other side of the table – I’ve known many of them for a decade – but they aren’t my friends. I trust them to do what’s best for their companies, not to do what’s best for mine.

    Just a counterpoint to some of the discussion. Thanks for the post.

    • Mike Figliuolo says:

      Thanks for the thoughts Mike. Sure, transparency is never full. That said, when you sit across from folks you can pretty quickly get a sense if you’re pushing too hard and taking too much off the table. I know everyone goes into every negotiation knowing they’re putting their company’s interests first. The point is doing so in the extreme is very destructive.

      As far as the MBA class lesson – it’s wrong. Read this article about Wal-Mart and Vlasic pickles. http://www.fastcompany.com/magazine/77/walmart.html. Clearly a deal was signed. Vlasic couldn’t live with it but they couldn’t live without it either. There is a point in any negotiation where things get destructive yet a deal is still signed. Long term, behaving like this only tarnishes reputations and leads companies to eventually stop doing business with you purely out of strategic necessity (not to mention the “soft” destruction in terms of poisoned wells of job candidates, impacts on your brand with consumers, etc.).

      You’re right – it’s a balance of getting the best deal while maintaining the relationship. Just understand when you’re approaching the point of doing too much of the former because it definitely comes at the expense of the latter.

  9. jerald says:

    A good deal is when both people are happy, a fair deal is when both are unhappy, and a bad deal is when one is happy and the other is not……………..

  10. Mazen says:

    I deeply believe that masterful negotiations happen when both parties *feel* like they have “won” the deal. Said that, I personally would rather leave the “last” buck on the table feeling that a) I have “won” what I came for, and b) The relationship can continue strengthening with the other party in the future, because we feel good about each other’s communication style.

    I accomplish point (a) above by entering the negotiations knowing A) what I want, and B) What I can “give up” before it becomes *not fair*. This is the measure of “last buck” for me.

    Honestly, a vendor could “bend my arm” in negotiations, and get what they want. However, I will feel resentment for the rest of our relationship and may never come back to use their services later.

    I appreciate this post, Mike.

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