You’re sitting at your desk when your boss calls you in a panic. A new, post-merger policy shift now threatens your division, her career, and yours. What do you do? Can negotiation skills save you? Yes indeed….^^Student Dick Sherman* faced this very situation. His experience demonstrates that negotiation training can literally help you save your career and create millions worth of wealth.
The Crisis in Brief.Acme had recently acquired Beta, the firm Dick and his boss worked for. Now, Acme had decided to ‘tax’ each division in a new way that would cost Beta an eye-popping $25 million. The tax was so stiff that it would turn the economics of the merger upside down, making it a money loser for Beta. What to do?
Factual Research.Knowing that preparation would be the key, he immediately began doing intense factual research. He scoured the financials and called colleagues to learn how different firms tax their divisions. He also learned the goal of Acme’s tax proposal was to cover the cost of blending different technologies.
Options.With this work in hand he was now ready to meet with his boss and two other colleagues. Together, they used this research to help them developed a dozen different options and then worked through the rest of the I FORESAW IT mnemonic.** “It was great to have some bad ideas, ” he writes, “it made the ultimate suggestion stand out.
Eureka! A Common Interest.He writes that while completing the mnemonic “we realized something obvious that everyone had missed when the two sides were bickering. If we didn’t integrate [the technologies], the costs to the firm would actually go up!…and we had the right to block the integration.” Why? “Because my company would be forced to maintain a myriad of duplicate systems” which would create serious inefficiencies. I realized we had a common interest I could exploit”- cost savings.
The ‘common solution’ they uncovered was a special accounting method no one had thought of. Under it, Dick’s division would pay its share of the costs to change the system, but it wouldn’t pay the current operating costs. The method would also cut costs to other divisions by ending duplicate accounting systems, and wouldn’t create any financial issues.
Objective Criteria.Further research confirmed the idea was workable– two other banks used this very approach, and there were no time bombs in the idea that would explode years later. The other banks’ experience were powerful Objective criteria that the idea was fair and workable.
Building a Coalition.Dick then met with the most amicable of the other division heads to win support for the idea and build a coalition: ” I knew if I could get him on board, he would be able to convince the Technology lead. With those two on board, Operations would be easy.”
Empathy. Empathy revealed that the HR head would respond best if Dick focused on the numbers and appealed to his interest in shareholder value, and to the common interest of cutting costs.
At first Dick won a very positive response from the HR head, but then he faced near disaster: “I totally see where you are going with this,” the HR head said, “but I just don’t think it will work.” At that point, Dick writes, “I wanted to reach across his desk and strangle him.”
Going To The Balcony.Fortunately, Dick remembered the concept of “going to the balcony” and politely took a crucial five minute break.
Dumb Questions.Regaining composure, he returned and asked a dumb question: “OK, I don’t have your financial background…. What am I missing? Why don’t you like the approach?” “It’s just that we’ve never done it before.” “OK, why not?” The HR head’s mouth opened, but no words came out. “Honestly, I have no idea!” The HR head’s team spent the rest of that day and most of that night going through the model.
Success.The next morning, the HR head called Dick: “We had to change a number of your ideas and methodologies, but net net we are there.” He had ‘made the idea his own,’ which was fine with me…” The HR head added that he had already reached out to Technology and Operations, both of whom were on board with the new approach.
The ultimate agreement was that Dick’s division would be charged $2.7 million to implement new systems, but the existing ‘tax’ would change only slightly.
A Hero.The net effect was that Dick’s division and the firm as a whole saved over $6 million in operating costs, and his division avoided a $25 million tax and therefore was able to show a net operating profit after the merger.
“Afterward, he writes, “I got calls from both the division head and my boss. I was hero for a day….
Using The Training Intentionally.“I very consciously used a number of the tools and techniques we learned in class before and during the negotiation.”
What surprised him? “first is how great it felt to apply my learning. The [other] is the dumb question; I was astounded that it worked as well as it did. I was able, with that one simple question, to turn him around….”
He concludes, “I know that without this course, I would not have been as successful. First, I probably would not have gotten involved directly because I would have lacked the confidence that I could get the right outcome. Second, if I did agree to help out, I would have tried to ‘talk sense’ into people without doing the preparation. In fact, my biggest lesson from the course is the importance of preparation and organization.”
*I’ve changed the student’s name for the sake of privacy
**I FORESAW IT is a mnemonic that lists ten questions a negotiator should ask and answer before a negotiation. For details, go to the home page and click on “I FORESAW IT.”
***The Topics, Targets, and Tradeoffs grid appears at the end of the I FORESAW IT mnemonic.See http://www.betternegotiating.com for details. Click on “I FORESAW IT” and refer to the last part.