Just a short note to inform you that our signature programme on negotiation skills – Negotiating to Win™, is being held once more in Singapore on Friday, March 30th, 2012. This is our content-rich 1-day programme, absolutely packed with tips, practical exercises, negotiating simulations, and many techniques to help sell-side professionals close better deals. And it will also help buy-side professionals make thousands of dollars in savings.
With 2012 coming round the corner, just bear in mind as you launch into new deals, that a much overlooked aspect of negotiating in Asia is the deal “set-up”. The set-up is particularly important because if you don’t get this part of it right , no matter what tactics or strategy you use – you won’t be able to make much headway. Here’s an example of a set-up that went wrong:
A local company here wants to negotiate a buy-side deal with a supplier. the
local company sends their top procurement officer to make the purchase. A deal is struck. Sometime later, a similar procurement exercise is done, but the vendor sends a another member of their staff to cut the deal with the top guy in the buyer’s company. The buyer doesn’t know the vendor’s staff very well and initiates a casual conversation. In the conversation, the vendor lets on that he’s leaving the company. The deal goes less well as the procurement pro realises that the the vendor’s staff isn’t fully motivated to get the best possible deal for his company as he is leaving his employer in a matter of weeks. He caves in, and makes too many concessions.
Lesson: The practice of initiating seemingly innocent chit-chat prior to business in Asia is often a great practice in unearthing nuggets of information that can help you make a better deal. In this case, the set-up was all wrong. The vendor should have sent someone with a greater vested interest in the eventual outcome of the sale
The Biggest Decision You Will Make…
….in a leadership negotiation is simply this: Whether you will negotiate or not. If you want to negotiate, then you had better be 1) prepared 2) equipped with more than just a few negotiation ploys, and 3) have your BATNA prepared.
Right now, our company is engaged in a negotiation to purchase a commercial property. Here are some things we’ve applied so far from our own Negotiating to Win™ programme:
First, we’ve scouted the marketplace and caveats of past sales and valuations of similar properties and that the purchase meets our goals.
Second, in negotiating, we found the buyer has already rejected a prior offer from a 3rd party. Rather than upping the offer, we’ve decided to tease out from them a price that they want, and then base our offer on what we think is a price we want based on their ‘offer’ price. By doing so, we avoid a classic mistake – being the first to make a major concession. The negotiations haven’t concluded, but we are living by the principle that you shouldn’t want something too badly. Many small and large corporate transactions have seen losses because they paid too much for something because they simply ‘had to have it’. Call in corporate “sunk cost; factor perhaps. A well -known case is the takeover of Cadbury by Kraft. Nearly 70% of the Wall Street Journal readers think Kraft paid too much. So did Warren Buffett.
Third, we have a BATNA – or Best Alternative to a Negotiated Agreement – and that is to simply take our money elsewhere to invest or expand; bearing in mind both costs of acquisition and yields.
The trick lies in wanting what you bid for, but not that much
David Lim
Chief Motivation Officer
PS: Interested to read past features on negotiating? Check out these articles from Life Without Limits and my Asian Negotiator blog or take part in our LinkedIn global survey on what constitutes the Most Common Negotiating Mistakes Made.
Register for the Negotiating to Win™ workshop, Aug 1, 2011
In 2010 I managed to quadruple my sales target and this was definitely helped by using the techniques I learnt in David’s workshop. I have been in sales for ten years and was quite confident about my style before attending David’s workshop. I learnt very quickly in his course however that I was using only a few techniques and there were many more available especially in terms of negotiating tactics.
Grant Rawlinson
Sales Manager, Subsea
KONGSBERG MARITIME PTE LTD
Most buy/sell side professionals are failing to get what they deserve simply because of a poor understanding of how to negotiate fees and terms effectively. Applying just ONE of the skills you will learn here successfully in your next negotiation could pay for your investment in this seminar, and more!
Learn how to
* Negotiate more effectively immediately
* Improve negotiation skills in probing and listening
* Improve your negotiating style through a validated psychometric tool
* Avoid common negotiation mistakes
* Use up to 15 strategies and tactics
* Ask for, and give concessions effectively
* Negotiate with real case studies and exercises
Register before the closing date July 25th. Details here
“I attended David’s workshop “Negotiating To Win” and found it very insightful. The techniques that he taught are very useful in “real business world”.Check out the programme. You will not regret it.”
Richard Gavriel
Director
Releve Singapore
What's behind an Asian smile?
We do business with people that we like. It doesn’t mean we won’t do business with slimeballs, but all things being equal, we award contracts, work with and – especially in the area of return-on-investment type of intangible – people we like. In Asia, a common mistake is assuming that we, across from the Big Lakes or far from Anglo-centric powers, are just one big group of people who think and behave alike. I can tell you right-away that a Chinese business person from Malaysia, Singapore, China or HongKong will have enough cultural and national biases to make even dealing with ONE Asian race – say Han chinese – pretty tricky at times.
Let’s focus on less obvious aspects of doing better in negotiations for example. One of the first things we normally do is to build rapport. This is a complex mix of reaching out through language, gestures, actions, words and protocols designed to bring ourselves closer to another person – even if it’s someone we have some misgivings about. In Asian cultures where the Chinese race dominates, certain threads and cultural underpinnings are key in understanding how rapport works. However, in this article, I want to move away from the more conventional information about do-s and don’ts which are based on more obvious customs and business etiquette.
Instead, let’s go deeper into the Asian psyche.
HIGH /LOW CONTEXT: Small things, signs gestures mean a lot in a societies which place hierarchy and respect for rank. First time meetings where you bring a small token or gift that represents your nation or company are welcomed and often a sign of courtesy . We tend to be a bit more higher context than in industrialised Anglo-centric cultures
FACE: Enough said. You create rapport by giving appropriate face to all staff present. Going over the head of someone in a negotiation process may lead to loss of face and you will not win that person’s support or influence in the future. Here’s an extreme example when it can go wrong. An acquaintance of mine was once assigned to close a multi-million-dollar deal in China. For three days, he had to wine , dine and entertain the buyers. When he fell ill on the fourth days, he excused himself from the evening sessions. Upon his return to Paris, his boss told him that the Chinese feedback included a retort that the harried executive had not shown them enough ‘face’ when in China. They lost the deal.
POWER-DISTANCE: Geert Hoftstede’s studies in the concept of power distance in culture continues to fascinate me. For many years he measured and studied employye values across cultures. The term “low” and “high” power distance refers to the relative inequality of the distribution of power within a society, culture or organizations. Many Sacndinavian countries for examples have a ‘low’ power distance culture, with fewer layers between the boss and the shopfloor worker. Culturally speaking, Scandinavian countries are also egalitarian in terms of wages, and standards of living. These countries score hovers around 30 on Hofstede’s scale
India has Power Distance (PDI) as the highest Hofstede Dimension for the culture, with a ranking of 77 compared to a world average of 56.5. This Power Distance score for India indicates a high level of inequality of power and wealth within the society. This condition is, to some extent accepted by the population as a cultural norm. India has Power Distance (PDI) as the highest Hofstede Dimension for the culture, with a ranking of 77 compared to a world average of 56.5. China by comparison is also high at 80, and Singapore is not very far behind too; and reflect’s the countries distribution of power both political and wealth.
So in this context in an everyday negotiation, understand that in high-power distance countries, there are likely to be many more gatekeepers with who you may need to win over before you actually get to negotiating with the economic buyer. In a low-power distance context, far less rapport-building energy may be required. The higher hierarchy in Indian and many East Asian cultures also suggest that approaches to negotiation may require the unpeeling of the proverbial onion – discerning just who is the economic buyer mad who are the influencers involved in the process.
CONFUCIAN PRINCIPLES: Though not explicit, many East Asian companies are still run with the ethics and thinking of the ancient Chinese philosopher from more than 2000 years ago – who outlined how we should live, run governments ,and lead a household. These include principles that championed respect for elders, filial piety, a strong work ethic, and effective governance of the state. You can’t effectively negotiate any Chinese who has some Confucian exposure, and not realise its influence. So in the context of a negotiation – respect your elders, though you may diplomatically disagree with their position.
And when it comes to filial piety –that’s a phrase that’s almost NEVER used in Anglo-centric societies. When you get broken homes, a culture which focuses on individual freedoms over collective interests, when you call your father by his first name (and he’s OK with it) – you get a society far divergent from Chinese cultures where filial piety reigns. It extends to taking care of your parents even if you don’t get along with them.
In a family run business (and many of the largest Asian busineses are still family-owned), understand the power dynamic of the matriarch or patriarch, and ask if the Harvard-educated eldest son will really ride roughshod over his father…no matter what he says
So if you wish to get of on the right foot, think about these when building rapport with Asian decision makers – show some respect, be open, listen when the oldest/eldest at the table speaks, understand the context of the familial situation. You’ll be mutually respected in liked. It makes a good impression.
These are just some of the lovely complexities that make up negotiating in Asia
DAVID LIM IS A LEADERSHIP AND NEGOTIATION COACH AND CAN BE FOUND ON HIS BLOG http://theasiannegotiator.wordpress.com, OR subscribe to his free e-newsletter at david@everestmotivation.com
Many buy side and sell side professionals lose clarity in pursuit of the deal. When deciding on whether or not to negotiate, plan ahead as to what you walk-way fee or price would be or what package would clinch a deal. Poor negotiators begin a negotiation even if the money discussed falls into the negative fee range. What do we mean by negative fee range. Assume you charge $10000 for a service or product, and you know you will profit when you sell it at any price over $7000. Your cost price is $6000. And between $6000- and $7000 is your breakeven price after factoring some other costs. When offered $5000, you should not even consider negotiating as the price offered is in the ‘negative’ zone ie you will lose money no matter how you negotiate this amount; unless you can get it to $6000+.
Now at $7500 for example, the price offered is in the ‘positive’ zone. This means even if you accept the first offer as a seller, you will make a profit; and it is likely you might be able to get a higher price.
So, when negotiating, consider if you are in the positive or negative zones even before entering a negotiation
Most recently, I was negotiating a presentation fee with a non-profit; albeit a wealthy, non-profit organisation in Singapore. After I made known my usual fees, I let them get back to me with a counter-offer. In most ASian societies, especially an East Asian one like Singapore, many people find it less polite to come upfront with figures in a corporate negotiation where some back and forth is expected. Instead what you get sometimes is a phrase like ” can you do a bit better on the price?” or ” Can you offer a kinder fee?”.
Mind you, a non-profit is a tax category, and nothing to do with the ability to pay in some cases. So what would you do? Some professionals already have a non-profits rate to be consistent when approached by such organisations. Some refuse to offer variable fees. There is no single ideal situation.
Asking questions then take the forefront. Here’s how you might say it in Asia:
” What kind of fee were you expecting to pay?”
” I understand completely, if you had a different fee in mind, but what was it, and perhaps we can close the gap somehow?”
In this case, the fee they had expected to pay was way lower than my corporate fee, but close to my non-profits rate. The appeared keen, and so I pitched my fee slightly higher, and also asked for other non-monetary items to be included. They accepted. The key lessons here, are:
- ask the right questions in the Asian context, so all will save face
- be firm, but not pushy
- think of a bigger pie, rather than just focusing on price/fees/monetary items
If you liked this article, do forward it to others, and consider attending our Negotiating to Win seminar in Singapore , Aug 25+26, 2010.Details can be found here: http://www.everestmotivation.com, and downloading the full brochure here:
http://www.everestmotivation.com/EMTdownloads/NTW.Aug2010.pdf
Losing Thousands on the Bargaining Table:
Common Mistakes in Negotiations
One of the quickest and best ways to increase your negotiating ability is to eliminate the common errors made by many of the most experienced negotiators. An examination and constant review of the common errors listed here will help you eliminate these errors from your negotiating style and help make you a more effective negotiator in Asia.
1. UNDERESTIMATING YOUR OWN POWER OR STRENGTH IN A NEGOTIATION
Because of the complexity of most negotiations and the many factors which affect power in a negotiation, studies have indicated that most negotiators tend to underestimate their own power in a negotiation. You are aware of the limits to your power in a given negotiation situation, but are often unaware of the limits to power of the other party. There is a consistent tendency to underestimate your own power in a negotiation. In that sense, if you come from a non-Asian culture which insists on things being said all the time, you may miss calibrating the other side’s nuances. A Japanese executive may say “ this will be a bit difficult” when he actually means “this is not going to happen at all”. Sometimes silence after a prelimiinary position is taken is a wise move as both parties sit back momentarily to absorb the information. Sometimes, if the suspense is too great, the first party that proffers a concession, a sweetener, will be one losing money at the end of the meeting
2. JUMPING TO A CONCLUSION
One of the most common errors made in negotiations is jumping to a conclusion or making assumptions rather than getting the full facts involved. A good example here would be assuming what the other party’s needs and desires are, rather than skillfully probing with questions to determine precisely what they are. Rather than assuming, the skilled negotiator become more effective by asking probing questions which can sometimes determine the real needs and desires of the other party.
In team negotiations, awareness of who are the more talkative members of the other party may allow you to engage them such that they may inadvertently reveal more than they had anticipated. For example, they admit that they are running short of time as an event for which the vendor was being assessed has been brought forward. If you are a vendor, and have already engaged them for some time, the other party may feel too invested to start the process all over again. This knowledge, if extracted can be immensely useful. The skilled negotiator avoids jumping to a conclusion.
3. FOCUSING ON POSITION, NOT INTEREST
One of the most significant findings to come out of the Harvard negotiation Project was the understanding that a very common error in negotiation was to focus on the other person’s position, without looking behind that position to the real needs and interests of the other party. The much-quoted example is the two daughters arguing over the last orange in the house. They each were concerned only about the other’s position. That is, “I want the orange.” A wise father, hearing the dispute, handed one of the daughters a knife and asked her to slice the orange in half, indicating that the other daughter would then select which half she wanted. On a global scale, some of the seemingly intractable problems in Arab-Israeli conflict have to do with parties adopting entrenched positions, rather than looking at mutual interests. Anwar Sadat’s historic break from this positional way of looking at issues led to the landmark Israel-Egypt peace deal, which has led to nearly 30 years of peace between the two countries.
A brilliant solution? Not really. Because, you see, each of the daughters got only one-half of what they could have had, had they taken the time to look at the interest behind the position. One of the daughters wanted the orange for juice; the other needed the peels for baking. Now, you might suggest that this is a very simple example, and that most experienced business people would see through it and not make that mistake in the business-negotiating environment. However, in numerous business simulations, participants get caught up in positional arguments, and then may feel they have to continue behaving in a way consistent to that position, leading to a lack of clarity as to their interests.
5. ENTERING A NEGOTIATION WITHOUT A BATNA
Fisher and Ury, in the popular book, Getting to Yes, point out the extreme importance of determining a BATNA — Best Alternative to Negotiated Agreement — before entering any negotiation. The only reason to negotiate in the first place is to arrive at a conclusion that is better than that which would be achieved without the negotiation. If we take the time to analyze our BATNA, we will then know clearly what our “best alternative” is. In the case of a business dispute, your BATNA might be a lawsuit and subsequent trial. In the case of negotiating the cost of a financial consulting project, your BATNA might be using another consultant.
Keep in mind an important caution here — don’t fall into the trap of cumulatively looking at all options and seeing the many different benefits inherent in all of them. You will not have the option of all of them and, therefore, it is necessary to weigh your current negotiation situation with the best alternative to a negotiated agreement.
One of the major advantages of having a BATNA in every negotiation is that it helps you determine your negotiating philosophy; whether one is “hard” or “soft”, “firm” or “flexible” now becomes largely a consideration of how strong a BATNA you have. An extremely strong BATNA allows you to use the more risky tactics of “walkout” or “take-it-or-leave-it.”
6. GETTING HUNG UP ON A SINGLE NEGOTIATED ITEM
In practically all negotiations, there is more than one item to be negotiated. Whenever this is the case, the skilled negotiator realizes that they need not be hung up on a single negotiated item. Price might be a good example. If price becomes a non-negotiable item for one side in the negotiation, the other side could concede price negotiations, if they got concessions that accomplished the same thing in the areas of interest rates, payment plans, quality and content specifications, etc. The experienced negotiator looks at the total package and is not hung up on a single negotiated item. In Asian societies which often value the relationship ahead of the transaction, sometimes being too tough over one single item can sour an otherwise profitable relationship. See the bigger picture.
7. ASSUMING A FIXED PIE
Many negotiators view each negotiation as a fixed pie. Anything I gain, you lose, and vice versa. Actually, however, this is not the case because of the many variable factors in the negotiation and the relative value of each of those factors to the various negotiators. Someone may concede on price to the other party who holds price as perhaps the key item in the negotiation. However, that concession on price may have been achieved through the price-sensitve party conceding something that was not price related – for example, on the speed of delivery, exchange of documentation, and so on
8. ALLOWING THE OTHER SIDE TO “SAVE FACE”
How many times do we see a negotiator back themselves into a corner where it is impossible for them to complete a negotiation and save face at the same time? The skilled negotiator understands this and looks for creative ways to help the other party save face, once they have backed themselves into a corner. Example: When someone says, “This is my final offer,” and makes a big point of it, they have obviously created a situation where they cannot make any compromises and save face on their commitment. In that situation, the skilled negotiator must create additional facts and circumstances, and point these out to the other party in a unique way that allows them to reconsider their previous position based on new facts, thus saving face. A good negotiator allows the other side to save face – a sure winner in retaining a possibly valuable working relationship.
David Lim is a leadership and negotiation coach and can be found on his blog http://theasiannegotiator.wordpress.com, or david@everestmotivation.com
Have you negotiated with parties from China? What have you found interesting and caused you to adapt, adopt and reject?
David Masover from Hungary (Consultant and Author of “Mastering Your Sales Process”) answered my question with some powerful lessons about negotiating in China. he said:
“I have been working for the last 18 months on behalf of a European R&D company on a long term, complex manufacturing negotiation for an innovative, highly technical product with Chinese manufacturers. The most striking lessons have included the realization that while many Chinese partners we have worked with have been somewhat Americanized in the way they negotiate, things like saving face by having the “big boss” hide until the end of the negotiation cycle, and the idea of more holistic negotiation are often still very true. The latter was quite confounding at first. In this approach, there is a big distinction between what we experienced in China and a more American style.
In America, we seem to want to address one issue at a time in a check list type fashion. The more holistic approach seems to bounce from issue to issue without reaching resolution on anything, until resolution on the whole picture can come into focus.
So the bottom line answer to your question of strategy is to understand the decision making process of your negotiating counterpart. It differs region-by-region in China, and I am sure that it differs country-by-country across all of Asia. That quest for understanding along with a VERY disciplined effort to understand the deeper interests on your own side of the table will help you to remain flexible enough to reach acceptable results through a sometimes quite different approach to consensus.”
I would add that China has over 30 provinces, some with populations exceeding that of , say Germany – and that is further complicated by the different approaches to foreign negotiators taken by business people in beijing (1st tier cities) versus Shenzhen (2nd tier city)
In our negotiation programmes, we teach a simple acronym PINE, that helps you structure a negotiation:
P:prepare for a negotiation mentally and physically
I: gather INFORMATION about who you will deal with in all aspects – technical and contextual
N: Negotiate -using our 30 strategies and tactics, power principles and avoid the commom mistakes made
E: Execute – now the fun begins as you execute an agreement, and may need to revisit the original agreement and re-negotiate once more. Dont forget that in many Asian societies, paper agreements are just that : PAPER! many value flexibility, some give and take even AFTER the ink is dry. This drives Western-oriented, empirical cultured people absolutely nuts. But more on this later.
Have you watched the recent movie the Blind Side? Sandra Bullock won her first Academy Award for Best Actress in her role as a determined, wealthy white woman who helps, and then later adopts, a 300lb, disadvantaged black teenager. Through his new-found family, he finds his purpose in life, and in return discovers new meaning. Based on the true story, Michael Oher grew up not even knowing his father, had a mother who was a drug addict, and could have been consigned to the trash-heap of life. Instead, he became a leading football player in the National Football League.
There are TWO things not immediately obvious about the movie:
1) This movie includes some cool negotiation lessons. In an amusing scene, Michael’s younger adopted brother negotiates on his be half as one university football coach after another seeks to present why their college is ideal for Michael, and he should sign up with them. SJ, the younger, pint-sized brother. SJ understood one of the key Power Principles of negotiation which was knowing which power was dominating the discussion. In this case, he had Scarcity Power – in that Michael represented a rare and attractive talent to these university coaches eager to recruit him. Second, he knew when to invoke the competition, another useful tactic. So if they let him lead the team out onto the pitch on the opener match, another college had to offer him the opportunity to toss the coin to decide the kick off too!
2) The movie is about the power of teamwork Once a shared vision was created – of Michael being part of a new family, and that he was to get a 2.5 Grade Point Average to be eligible for a sports scholarship, everyone in the family pitched in to win support, and inspire each other to believe this was possible. Teamwork goes beyond just the workplace, and can produce great results in our private lives as well
| Losing Millions
A lack of negotiation skills is potentially costing end-user firms and suppliers millions in missed opportunities, according to a global research report by Huthwaite International. They found that very few of the 124 firms it interviewed performed at the highest level on its negotiation benchmark and few had organisation-wide procedures for negotiation in place*. So let’s face it, we have our prices when we go to sell (or buy), just how much do we ‘ give’ to confirm the sale? So here are two quick tips this month. a) a common negotiation mistake is to underestimate your value to the client. Do your homework (part of the PINE process: Prepare, Information gathering, Negotiate and then Execute), and establish which part of your offering is of high value to the client. That’s the nub of many failed negotiations – the client asks for a discount, and you drop your pants! . If you aren’t convinced of your product or service’s value, it will show in a negotiation. b) the best time to ask for a concession – is when you get asked for one instead. Endeavour not to volunteer concessions until asked. We too readily give away discounts and other goodies, without fully realizing the client’s willingness and capacity to pay full fee. |
