Field-tested negotiating strategies to get the value you deserve.
Have you ever sent a proposal in to a client that has not responded back to you for weeks or months? Suddenly a call comes in from them, usually on Friday at about 11:00 a.m.
You’ve got people sitting and waiting to get to work on this project, and now the call comes and the client says, “Oh my gosh, I’m sorry I haven’t called you but we’re ready to go, we want to start on Monday. Just take ten percent off the fee and we can get this thing started.”
Have you ever had a call like this? It’s a trick. They know you have people sitting and waiting. They are hoping you’re so anxious to get them working that you’re going to rush into an agreement without thinking and say, “Yes.” This ties back to the rule we discussed earlier in the book, Don’t React.
So what do you do in this situation? I had one of these calls from a client in another part of the state.
“That’s great,” I said. “We want to get started on Monday, too. I’ll be there in three hours.”
“What are you coming here for?” they asked.
“Well, clearly we’ve opened up the negotiation and it’s urgent. I’ll be there in three hours. I’ll just run to the airport, get on a shuttle and I’ll be there. If this is urgent and you need to start on Monday, I want to help you out.”
“Maybe we can meet next week,” they said.
“Okay, I thought it was urgent, but if you want to meet next week that’s okay,” I said.
In the back of your mind you may be thinking, “Well, can’t I just give in on this so we can start on Monday?” But remember, it’s a trick, they don’t really need to start on Monday, and your response is, “No, we have to sit down and talk about this.” It may come in different forms, but it is a trick. Call them on it.
At the start of my Effective Negotiations class I always ask the students to list their expectations for the class. We write them on a flip chart and hang it on the wall for the duration of the program. In one of the classes a student said his goal was to “learn to negotiate faster.”
After going through the first day of lessons and exercises, this student walked to the front of the room, crossed out the word “faster” and changed it to “learn to negotiate slower”.
One of the fundamental tactics of a positional negotiator is that of pushing to go fast during the negotiation.
The value proposition we share also applies to the actual negotiation. In a negotiation, speeding up the negotiation is normally a trick. The need to thoroughly consider each item, recall your preparation, focus on achieving your interest and developing creative options take time. The process should not be rushed.
Just as in driving, in negotiations, speed kills.
If You Don’t Ask…
Do you know who the loser is in a self-negotiation?
There’s an old story about a city slicker who is out driving in the country on a Sunday afternoon. A few miles after passing a gas station he runs over a nail and gets a flat tire. He opens the trunk but he doesn’t have a tire iron and ends up hiking three miles back to the gas station. As he walks he starts thinking, “These country gas stations are all alike, they charge you an arm and a leg for being open on Sunday.” This idea makes him a little angry. “They won’t like me anyway,” he goes on, “because I’m wearing a suit, and they’ll probably charge me extra for being from the city.” He gets even madder. The longer he walks the angrier he gets about the outrageous amount the gas station is going to charge him to borrow a tire iron. When he finally reaches the gas station he walks up to the startled attendant, throws money in his face, and yells, “There! And you can keep your stupid tire iron, I don’t want it anyway!”
He never even asked.
What I have learned over the years about car mechanics is that when you go in and they tell you the price, always ask them, “Can you do any better?” Nearly all of them will say, “Well, let’s see, we can take 10 percent off.” Or more! In the past, America had a non-bartering culture. You went to a retail store, looked at the price tag, and paid that price if you wanted the item. One of the few items where negotiation was involved was car buying, which made it one of the most hated activities in the U.S. Everyone loved getting a new car, but hated having to buy it because it involved negotiating with someone who was a lot more skilled at negotiation than you were.
Today, due to many influences, Americans are slowly learning how to barter and such negotiations are becoming more commonplace. Businesses and retail stores are now more willing to negotiate than ever before.
However, if you don’t ask you will never know if the item you are buying is negotiable.
Ihave found that tremendous amounts of revenue are left behind by design professionals due to an unwillingness to request additional funds for out-of-scope work.
Architects and engineers have developed an extensive list of justifications for not pursuing additional services:
■ We don’t want to be accused of nickel-and-diming.
■ We have to maintain the client relationship.
■ We don’t want to get into a fight.
■ We forgot to define what was out-of-scope.
All of these excuses are symptoms of avoidance. Do you really think that the client has never had to go to one of their own clients at some point and say, “We’re happy to do X for you, but it falls outside our agreement and will be billed separately”? Of course he has, it is a normal part of business.
An even more important consideration is this: What is the client’s BATNA (Best Alternative To a Negotiated Agreement) for this out-of-scope item? They probably do not have one. If you cannot negotiate a settlement over an out-of-scope item, what are the client’s alternatives?
For example, if you are designing a building and the client wants to rearrange a floor when you are well into the documentation phase, what BATNA do they have if you clarify that this is out-of-scope and you need to negotiate a separate fee for this work? Will the client really cancel the project at this point, go back to square one, issue a new RFP and hire another firm? Of course not. The client has a problem to be solved, they hired you to solve it because they felt like your firm had the best solution for their needs. They want to work with you, they chose you.
A key to successfully negotiating out of scope items is to identify them immediately. A question to immediately ask when an item is identified is:
“How do you want to handle that?
Normal response: “Handle what?”
“We have just been talking about an effort that is out of scope. Do you want us to:
■ Submit a proposal and have it approved before we begin work?
■ Send you an email that we are working on this out of scope item and get your written approval to proceed?
■ Open a new number to track this effort?”
The chart below shows the chance of getting appropriately compensated for an out of scope item over time.
By the way, the concept “if we wait until later to ask for compensation it will be better” is just plain wrong. It never works and never will.
It does not hurt if you already defined how to handle out-of-scope items during your negotiation, because that is one of your interests.
It’s not a pie, it’s an AMOEBA
Many negotiations books and courses talk about “making the pie bigger”. However, I don’t believe this metaphor represents what happens in an interest-based negotiation.
A better way to represent a negotiation is to compare it to an amoeba.
The amoeba has a flexible shape, and its shape changes based on the direction it wants to go, and where it finds the least resistance in its environment.
Similarly, a negotiation is a search for the areas of least resistance in order to expand our interests. The final shape of a negotiation is based on where both parties found opportunities to expand, and necessities where they had to contract. It’s not a perfectly round pie, but an irregular, organic amoeba shape determined by the discovery of mutual interests.
The A/E Business Cycle
We are all aware of the up/down/up nature of the business cycle. Typically architecture, engineering, construction and their related field of businesses weather recessions well because many of their projects last for years.
At the current time, the problem for our professions is that the business cycle we are still seeing play out went much higher (crested), and then deeper (troughed) for much longer (wavelength) than any previous business cycle in living memory. In other words, both the amplitude and the wavelength of the business cycle have increased.
The design profession is handicapped by a limited perspective: we tend to think conditions are at a different place on the curve than where they are actually positioned.
My theory is that the design professions tend to only recognize two spots on the curve.
In the early 2000s the widespread thought was that we were at Point A, representing conditions that “are good, but we’re going to hit the downturn any minute.”
In reality, we were at Point B and still on the upswing.
The result of this misperception is that firms were reticent to hire, in the belief they would soon have to lay people off, and ended up too short of people to do work effectively. This situation was brought about by the industry’s natural tendency to believe that the good times never last.
Another very dangerous point for firms in design and construction is Point C, the “it can’t get any worse than this” spot. At this point many firms feel they must take any work, no matter what it is, and when this feeling of desperation takes hold, you lose sight of your interests. Many firms accept projects at these times that result in:
■ Bad fees
■ Poor terms and conditions
■ Dangerous indemnification clauses
■ Impossible schedules or other demands
■ Shifting of risk towards your firm
■ Lack of concern for good design
Interestingly enough, at Point D, when things are getting better, no one can remember why the firm took a project back at Point C that is now a drag on the firm: the fee did not improve when the economy did, so you now have people tied up on a project at a low fee when higher paying work is becoming available.
Especially in tough economic times, you must look out for the interests of the firm.
—Adapted from Negotiate With Confidence: Field-tested Ways to Get the Value You Deserve by Steven Isaacs. Copyright © 2013. Published by Greenway Communications in coordination with the Östberg Library of Design Management. Copies are available at the DI.net bookstore.
Steven J. Isaacs, PE, Associate AIA, is a division manager in the Architecture and Engineering Services Division with FMI Corporation. He has forty years of experience leading design and construction firms and major engineering, architecture and planning projects throughout the United States and overseas.