Sunday, 5 June 2011

Negotiations and the Sheer Force of Will

In my early years as a Strategy Consultant I and a colleague were travelling around the Far East whilst gaining an understanding of our client’s International Sourcing operations.  After moving between several countries in just a few days we found ourselves having dinner in down-town Bangkok and decided to get a Tuk Tuk ride back to the hotel.

We were savvy enough to know that we should agree the price for the journey before getting in and we hailed our first Tuk Tuk driver and duly started negotiating.  We weren’t going to be taken for mugs and we knew the price in Baht for the journey shouldn’t work out at much more than about £1.  We were unsurprised to be offered some outrageous prices but - with a long line of drivers willing to haggle for our business - we merrily dismissed driver after driver as we waited for one to accept a reasonable price.  Eventually we persuaded a driver to accept our £1 and take us to the hotel.  At the end of the journey he pleaded with us for a decent tip,  explaining passionately that we really were paying too little for the journey. By this stage brimming with confidence in our negotiation skills and pleased with ourselves for having not been taken as a pair of fools, we airily waved him away.

Now here’s the rub. The following morning we realised that - having been through several currency changes in the preceding days - we had completely messed up our exchange rate calculations. What we had thought was £1 was in fact only 10p.

What I found interesting about this experience was that although we almost certainly weren’t being reasonable in our negotiations, that didn’t matter – we *believed* we are being reasonable. Whether or not what we eventually paid was a fair price is irrelevant, we would never have negotiated that low if we had known the correct exchange rate.

Just last week I was reminded of this experience during a ‘real business' negotiation.
The incident relates to a contracted service that is variably billed but has a minimum annual charge associated with it. Basically I had screwed up by failing to ensure that we were monitoring our utilisation of the service - when we passed the contract year-end I was surprised to see a (several £'000) invoice hit my desk for the unutilised service amount. On checking I realised the contract was tightly worded and we had also missed our break option so were committed for another year. 

My initial response was to attempt a rational, 'reasonableness' based negotiation with the service provider. Sure, we had signed the contract and legally they were in the right -- but shouldn’t they have been helping serve us (their customer) by alerting us to the unused commitment as we neared the contract end? Surely they could see that it was not ‘fair’ to charge us the full amount?  Their response was a (frankly not unreasonable) “hard cheese, you signed the contract, you owe us the money”.

So, remembering my Tuk Tuk experience and with nothing to lose, I abandoned my rational approach and adopted the following stance: “Well I just don’t think that’s fair, you've upset me. Please go away and rethink your position.”  As I hung up the phone I joked with one of my colleagues that it would be interesting to see if this rather unsophisticated “You’re upsetting me” approach would yield any return.  Of course you will have guessed the outcome; they came back agreeing to credit us 50% of the disputed amount and to restructure the contract going forwards.

So next time you are negotiating and you realise that rationally you are in the wrong, try to forget the rational stuff and see if you can make yourself believe you are being hard done by. You might be surprised with the results.

 Don't underestimate the power of conviction and 
sheer force of will in negotiations

No comments: