Chapter 9
Negotiating from Weakness

What if you're negotiating with someone who has the upper hand, that is, more clout at the table? Let's say, their side has property you “must” have. Or their company is the “only” customer for your goods. Or, maybe, they know that you're “under pressure” to make a deal. How can you still be a formidable negotiator? How can you achieve your interests? How do you negotiate effectively when you're in a weak position?

Perceived Weakness versus Real Weakness

The first question you have to answer is: Are you really negotiating from a weak position or is it just your perception? Too often, we exaggerate our own weaknesses, assuming them to be greater than those of the other side. Don't assume the other side holds all the cards. You may have a good sense of what their strengths are, but you don't know what they perceive as their own weaknesses or your strengths.

Ask Questions

The best way to determine the other side's state of mind is with thoughtful inquiry. You don't have to ask, “Do you think you have me where you want me?” But you can dig into the subject by getting surrounding or ancillary information by finding out:

What other deals of a similar nature have they made?
What brought them to you for this deal?
What can they tell you about the background of their company or their players?
Who are some of their references?
What do they know about your company and/or players and what can and should you tell them?
How do they see the negotiations going? Timing? Goals?

The content of their answers will tell you how they perceive their side and yours, as will their style of answers. For example:

Are they arrogant? This may be an overcompensation for their own fears.
Are they confident? Perhaps they are realistic about their own strengths. This will be helpful to you in determining your strategy.
Are they hesitant? Maybe they are worried about your strengths or their own deficiencies.
Are they open and friendly or closed and guarded? Again, this will tell you about their self-perception.

Consider the Real Possibility That They Are Afraid of You

Both sides go into negotiations with trepidation. It's natural. You probably don't know each other. You may not trust each other. You have different, perhaps opposing interests.

Take a step back and assess your own strengths. Try to put yourself in the other party's shoes. How would you like to deal with you? What would be most intimidating about your position, most influential, least assailable? What do you have that would be most enviable? That's what the other side is seeing.

Now ask yourself, who has the stronger position? Or, more pointedly, does one side even have the stronger position? You may well find yourself better armed than you thought. You may be able to enter the negotiations on even footing, or maybe with the scales tilted in your favor.

But what if, after honest evaluation, you conclude you really are in a weaker, more vulnerable position? Then what do you do?

Expand the Goals

If you are, in fact, in a weaker position, it's on the basis of the apparent goals of your negotiation: You want to win a contract, but you have to protect your profit margin. You're a seller and you want to get a favorable price. You're a potential merger partner and you don't want to get swallowed up. You've discovered that you lack strength when these are the goals. Don't sacrifice your goals; change or expand them.

Though it may seem so, money isn't your only goal nor is it the other side's. Turn hard-dollar deals into percentage of profit deals where you make more if they make more. Consider joint ventures instead of buyouts. Change the terms or timing of a purchase to make a higher (or lower) price more palatable.

Look for intangibles that may be important to the other side. If you're joining forces, whose corporate name will prevail? Who will control the press spin on the deal? Do you have other resources valuable to the other side such as customer leads or referrals?

Make the deal bigger than it is. If you're looking at a one-time deal, perhaps there are other pieces to add. Bid on multiple contracts, not just the one at hand. Sell several parcels of land, not just one. Consider joint venturing with the other side. Put renewal or option clauses in the deal, raising the potential upside for both parties. Bring in more partners for an even bigger deal.

You don't necessarily think about creative solutions when you are feeling weak in price negotiations. Yet witness how my partner, Todd Lenhart, was able to overcome a demand that could have led to lost business.

Turning a Perceived Weakness into a Strength

A few years ago, SNI was attempting to enter into a new client marketplace for the firm: pharmaceutical sales companies. We got involved in an opportunity with a global pharmaceutical corporation and were up against several competitors that had more extensive experience working in the industry. However, during the sales process we earned the respect of a key decision maker who was willing to position us with the selection committee. We earned a spot in the final selection process, but ultimately found ourselves dealing with a procurement team that used our lack of experience and, hence, credibility in the industry against us. They applied pressure to our pricing model and told us they would simply go with the more proven vendor partner if we did not meet their discounting demands.

Todd and our team explored options and collaborated closely with the key decision maker. Rather than caving in on price or walking away, Todd identified a way to lower our base price but link our training impact to several key business performance indicators that the client agreed to measure. The deal was structured so that 30 percent of our overall fee was contingent on meeting or exceeding the goals identified in the partnership agreement between SNI and the client. If met, attaining those goals would result in additional income, to make up for our initial discount.

In the end, Todd and the SNI team made a significant positive impact on the company's sales. SNI ended up capturing even more revenue than the original proposal provided because of the return on investment gained by the client due to SNI's training. The perceived pricing weakness, and Todd's creative response, ultimately worked in SNI's favor, as SNI established itself in a highly competitive industry and also captured a model that SNI could take to other clients.

Locate Allies

Even if you can't strengthen your position, there are several ways to strengthen your negotiating team and, in turn, bolster your position.

Add to your team. Bring in another entity, company, coinvestor, buyer, or partner. You will immediately change the equation. The new player's strength could be in your area of weakness. Let's say you're a high-quality manufacturer selling to a distribution company. They're skeptical of your ability to deliver goods to their various warehouse locations on a timely basis. So they're forcing your price down to compensate for possible late delivery. Bring in an established shipper to partner with you. Suddenly, you've changed the balance.
Find an expert or coach. These outside eyes will look at the deal through the lens of their respective specialty. You'll get an accountant's view; a stock-trader's view; or a marketer's view. They may assess your vulnerabilities differently. They may bring creative solutions to the table that you have overlooked or taken for granted.
Locate others similarly situated. Rosa Parks was arrested for refusing to give up her seat to a white passenger and move to the back of the bus. Though her gesture was brave and symbolic, there was little she, or any other individual, could do to end segregation in the South. But Martin Luther King, Jr., knew the power of numbers. Where one individual was powerless, one hundred, one thousand, or one hundred thousand individuals working together helped take African Americans from the status of individual weakness to a position of group strength.

When you feel weak or alone in your position, find others in a related or similar situation, join forces, and gain negotiation clout.

Improbable Allies—Unexpected Impact

Because of my love for the game of baseball, during the Major League's labor dispute in 1994, I found myself in the role of informal mediator. It started with frequent conversations with Randy Levine, the chief negotiator for the team owners, and Don Fehr, the head of the Players Association. Both Randy and Don have extensive backgrounds in labor law. In order to decipher some of the issues raised in our conversations, I turned to some former law school classmates who were experts in labor law. While it was not enough to put me on an even playing field with Randy and Don, at least the expertise of my law school friends gave me a comfortable position on the bench.

As the labor dispute continued, I was spending as many as 20 hours a week talking to various parties. The Players Association and the club owners had teams of negotiators and substantial resources. Being an informal mediator, without official designation, title, staff, or budget, I often felt weak, by comparison, as I reached out to the two sides.

In an earlier story, I told about the ill-fated meeting at the Mayflower Hotel in Washington, D.C.—one of the low points of the baseball dispute. While the principals were not making settlement progress, during my time at the Mayflower, I was able to forge an alliance with Tom Reich, then one of the game's most respected player agents. Following those meetings we, in turn, connected with Randy Hendricks, Jim Bronner, Bob Gilhooley, and Tony Attanasio, all highly regarded agents who shared my strong desire for a solution to the player-owner battle. By creating this network of similarly situated parties, by working together, the six of us were able to influence the process to a greater extent than any one of us could have, working alone.

Our ad hoc confederation of allies strengthened our position but we knew, as agents, we would still be perceived as primarily representing the players' interests. To broaden and bolster our influence and credibility, we needed a partner whose interests were parallel to those of the owners. Propitiously, Aramark, one of baseball's biggest business partners, providing food, concessions, and other services to a number of teams, also approached me about working on the problem. Joe Neubauer, Aramark's chairman, not only offered profound insights and strategies, but had great respect from Don Fehr, creating another link between the players and the owners. It's no coincidence that Aramark's motto was “unlimited partnerships.” I believe it was our own unlimited partnerships that we, collectively, were able to build during the labor dispute that helped us turn our negotiation weaknesses into strengths.

While the official representatives of each side continued their protracted, publicized, and frustrating negotiations, we worked quietly, cooperatively, in the background. The public didn't know of our involvement. It wasn't until the settlement was reached that our influence came to light.

It took a federal judge's order to bring about the resumption of baseball. And then it was eight months after that order that a real settlement was finally negotiated between the players and the owners. While management's chief negotiator, Randy Levine, and players' head, Don Fehr, were the principal architects of the peace, the New York Times recognized the impact of our unofficial alliance: “The new labor agreement would not have been possible without the behind-the-scenes initiatives of a group of player agents.”

We each played different roles in the game of baseball. As agents, we could be rivals, vying to sign the same player. Then, representing a player, we could be out to get the most money from a club for our client, leaving less for the next agent's client. When it came to Aramark, we were even on the opposite sides of the age-old labor–management spectrum. We were competitors; we were adversaries; but in this case, we had one common interest—the game. And in that, we were similarly situated. Unlikely allies can forge a strong negotiation force. When you look for allies, look beyond the obvious, to those who share the overall goal—the business or endeavor that feeds all of you. If you're successful, afterward, you can always go back to being rivals.

Never Let Them See You Sweat

You may evaluate the situation and determine, in all objectivity, that the other side possesses all the leverage. But they may not know it. They may not be as smart as you are. They may not have gone through an objective evaluation. They may assume you have strengths that don't show. There's no reason to give away your insecurity. The way you act telegraphs how you view your pluses and minuses.

If you act weak, you will be treated as if you're weak. Let them know you're not as financially liquid as you'd like to be and they will demand more collateral. Send signals that you have pressure to close a deal regardless of cost and you certainly will pay a premium.

Keep talking. A dead giveaway that you feel less than secure in your stance is cutting off or limiting communication. You're withdrawing. Withdrawal says fear, regrouping, or retreating. It's as loud a signal as yelling, “I surrender.”

Continue talking; ask questions; go on negotiating. Keep finding common ground. Keep looking for common interests. Keep getting to know the other side. The other side is much less likely to extract a pound of flesh from a party they've come to know, than from a stranger.

Act confident. Whether you are confident or not, act that way. That doesn't mean act cocky. Conduct yourself with sureness, steadiness, and a sense of control. Two things will happen. You'll communicate that confidence to the other side; they will not sense vulnerability. And you'll actually get more confident by acting confident. It's self-perpetuating. Many deals are won more on confidence than on pure merit.

The Inventor and the Investor

I represented a young man with a great imagination. He had watched athletes in competition—tennis players, ballplayers, bowlers, golfers—constantly wiping the perspiration off of their hands to better grip the racquet, bat, ball, or club. Most of us barely notice such a thing. An inventive mind sees opportunity: People who play sports need something to keep their hands dry. He came up with an invention to do just that, a compound that absorbed perspiration on contact. The compound was so effective, the inventor convinced a major superstar athlete to give it his endorsement and become an investor in the company.

The problem came when the superstar's advisors grew impatient with the way business was being run. Unless they were given control of the company, they threatened to revoke the star's endorsement, thereby deflating the value of the company and sending it into bankruptcy, leaving the inventor with nothing.

The inventor didn't have the financial resources to fight back against the advisors or buy out the superstar-investor. Sure that his position was weak, the inventor panicked. I sat with him and we worked through the process of negotiating from weakness. First, we tested the basic assumption: Was his position really weak? Yes, on most objective measures. The success of the company was predicated on the superstar's endorsement. No endorsement meant no company. It was that simple. Was the superstar-investor's position truly strong? Yes, because of the investor's deep pockets, he could even buy the company post-bankruptcy and jettison the inventor. But did the investor and his advisors really want bankruptcy? Placing the company in bankruptcy might taint the superstar-investor's well manicured image. That was a big risk just to take control of, and run, such a small company. Therefore, it was unlikely they'd take the fateful steps that might impair the superstar's reputation. That was, in effect, our strength and his weakness.

Next, we searched for allies, someone to act as a failsafe. What if the investor's people did put the company in bankruptcy? Who might be willing to replace the investor with fresh funds? We found some interested candidates but frankly, no one who was willing to commit. No strength here.

So, the inventor and I set out to expand his goals. The primary issue was control. Who would run the company, the inventor or the investor? I asked my client, “Why do you want control of the company?” He said that he saw the company as the platform for his real goal, to develop and launch more and more inventions. To do so, he would need capital. Therefore, we expanded our goal from complete control to some control and, more importantly, additional capital.

We were determined to never let them see us sweat. (We sweated plenty, over our relative strengths and weaknesses, over locating other investors, and over finding ways to expand the goals. But we did it in private.) In front of the investor's people, we appeared calm. Why? Because we had thought through the process and had a plan. We never stopped talking and negotiating. We kept the lines of communication open. We didn't allow animosity to creep in because, if we were able to work out our difficulties, the inventor and superstar-investor would still be in business together, albeit in a different relationship and configuration.

By focusing on the expanded goal of financial reward, we moved past the issue of control. Maybe the investor's advisors could run the business better. What the inventor wanted was to be sure that if the product succeeded, he reaped the fruits of his genius, and found a platform on which to create his future inventions. We offered them what they wanted—to run the company—in exchange for a favorable royalty deal—a financial return on each product sold. The needs of both parties were met. The weaker position of the inventor was negated.

Brainstorming

Another ramification of feeling like the weaker party is that you can't see other alternatives that may be available. If you sense your vision has been clouded in that way, you can use the tool of brainstorming to help come up with creative approaches to seemingly insoluble dilemmas.

Few situations can make people feel as weak as facing a government agency. Imagine you walk into a Zoning Board meeting with a proposal to build a shopping center in a booming residential area. You unroll your plans and make your case: It's a state-of-the-art mall offering 200 stores to a community that is drastically underserved for its retail needs. You sit down, having presented your case. But one board member says, 200 stores seems like too many. Another says, as far as he's concerned, they don't have any underserved retail needs. Another says that malls are ugly. The last member adds, shopping centers cause traffic jams. Unless you have something else to say, they're going to put it to a vote. And you're going to lose.

Talk about being in a weak position. The government officials across the table have ultimate power. They can reject your proposal dictatorially, irrationally, close-mindedly, or just plain unfairly, but no matter, it's their door to slam. What do you say? How do you counter? If you're like most negotiators, you don't know. You came with your best argument. Period. And that was your first mistake.

When you're David squaring off with Goliath, it's not a bad idea to bring more than one stone. How? In negotiation terms—brainstorm. Get a partner or two; lay out the problem, and purposely generate a vast array of solutions. Preempt complaints. Offer alternatives. Overcome likely objections. Demonstrate flexibility. Approach the problem differently.

Overcoming Objections

Salespeople feel weak when they face recurring objections from potential customers for which they have no answer. The salespeople need to regain their confidence to rebut competitor claims, unsubstantiated rumors, or customer misunderstandings about the products or services they are selling.

I remember one such instance when we advised the affinity credit card pioneer MBNA. Competitors tried to weaken MBNA's market position with potential affinity partners by floating objections in the marketplace related to diminishing service MBNA provided its partners. They suggested that, among other things, MBNA had grown so large and had so many partners that its potential partners would feel like a small fish in a big pond. They also accused MBNA of turning over account executives so frequently that “it's like a revolving door.”

To counter objections such as these and build salespeople's confidence, we recommended a brainstorming session among MBNA's business development leaders; ideas were shared, and ultimately a list of best answers was developed. The result, an Objection Planner, included scripts of solid responses to the preceding objections. The responses included “You should not be concerned with how large we have grown, but rather with the service and compensation we provide; operating in sectors and through regional offices allows us to be close to our customers.” And, “Your account executive may change from time to time, but other members of your marketing team stay in place to promote continuity. New account executives bring fresh ideas to your program.” We also crafted potential scripts for responses to 34 other objections, all of which empowered the salespeople, after practicing delivery, to give confident responses. The brainstorming sessions were the key to unlocking the salespeople's dilemma of how to effectively respond to potential partner objections.

Back to the Zoning Board challenge: After conducting a brainstorming session, you might come up with the following ideas:

Prepare a study of the number of households in the residential area, members per household, typical shopping needs, distance currently traveled to shop, cost of travel, time away from home, and other related statistics to illustrate the service and convenience the mall would provide to families.
Use statistics to demonstrate that the mall will keep businesses and taxes within the community rather than having those jobs and dollars go elsewhere.
Present an environmental impact plan to show how the center will be sensitive to natural surroundings.
Answer concerns about parking and traffic patterns before questions are raised.
Offer to have a community panel for input into the structure and placement of the mall.
Create a tie-in with local schools to display students' outstanding work in the mall courtyard.
Show three plans, each with a different number of stores so the Board dwells on what size the center should be, not whether there should be a center.

These are only examples. You could brainstorm many more, then narrow them down and refine the best of them. But most people don't know how to brainstorm. They think negotiation is a one-on-one contest. They think they know all the answers and the input of others would simply be distracting. In our office, we adhere to the saying, “None of us is as smart as all of us.” When we face a tough situation, we follow the four rules of brainstorming:

The Four Rules of Brainstorming

Brainstorm in groups of four or less. You must have two to brainstorm. Two people will have more ideas together than if they each have ideas separately and add them up. One person's ideas spark another's. However, there is a point of diminishing ideas. Groups of more than four tend to stifle ideas. The group becomes an audience instead of participants. Judgments set in. Status can play a part. Such factors tend to inhibit ideas.
Don't criticize ideas. Let them flow. A great idea can be the first words out of someone's mouth; or the last. Let them all come out without succumbing to the temptation to evaluate, accept, or reject. Nor should anyone feel the need to apologize for an idea either before or after uttering it. Just throw it out there. If it isn't good, or even if it's awful, it could be the seed of an idea that's great. Do the sorting and sifting later.
Keep at it. Creativity is more perspiration than inspiration. Effective negotiators are creative negotiators. But many people are intimidated by the prospect of having to be creative. They shouldn't be. Everyone has the capacity to create ideas. It is an exercise where you force yourself to think of that which is not apparent. You impose a rule, for instance, that you must come up with 20 answers to a question that seems to have only two answers. Among those 20 are bound to be another one or two creative solutions. Volume begets creativity. Don't worry about the ideas that don't work. You only need to use those that do.
Make it fun. Like most preparation, brainstorming is not inherently fun. So, make it fun. Sometimes we brainstorm by splitting into two groups. Each side gets a packet of Post-it Notes®. The idea of the game is to write down ideas, one per note, and connect all the ideas into a chain of notes. Depending on the issue, we take from five to fifteen minutes to generate ideas. People become so involved in coming up with ideas, connecting them, and trying to construct as long a chain as possible, they invariably come up with new solutions, no matter how many times we've taken on a problem before. Of course, some of the ideas aren't great (maybe some are even awful) but that isn't the point. Finding one or two good solutions is the goal. By making it fun, we come up with new ideas, ideas we might never have found if we were sitting around a conference table seriously debating the merits of a problem.

Brainstorming Works

A young woman named Shannon called me with a salary challenge. Her employer offered her a promotion from bookkeeper to business manager. The company wanted to pay her a salary of $125,000—but based on precedents for like jobs, and her new responsibilities, Shannon sought $150,000. When she addressed the issue with the managing partner, the partner declined her request: “That is the salary budgeted for this position and we cannot move on it.” But recognizing that she was important to the organization, he agreed to talk to her about the issue the following week, adding she should not get her hopes up because there was simply “nothing more available,” and that the person she was replacing was paid $112,000.

Prior to her meeting, I advised her to “think outside the box”—to brainstorm ideas that might achieve a satisfactory result for her and allow the managing partner to maintain the budgeted salary. She enlisted two of her book club friends for brainstorming help. Together they came up with a significant list of alternatives to a salary increase. They didn't restrict themselves or their thinking—instead they fleshed out all ideas, both good and bad, and put together a list that looked like this:

Deferred income instead of salary.
Same pay but for fewer hours of work, allowing Shannon to use open time for consulting.
Same take-home pay but have the company make a donation to a charity she supports.
Childcare reimbursement instead of added salary.
Change her promotion to a higher title with the salary budgeted for that position.
Larger office in lieu of higher salary.
More vacation and personal leave time.
Additional staff support.
Enrollment in a 401(k) matching savings plan.
An education supplement for children when they go to college.
A company car or other tax-deductible benefit.
Profit-sharing and/or a phantom stock plan.
Incentive or performance plan for outstanding work.
Commission in addition to salary.
Home office equipment to allow her to work at home.

The best ideas were not uncovered first or last or in the middle of their session. Some ideas grew out of others. Some took them down blind paths. Others were unexpected but creative. Many of the ideas only occurred because Shannon had her friends to play off.

She went to the meeting with the managing partner and reiterated her desire for $150,000. Again, she received push back. Shannon countered by positing a package built on her brainstorming list: A profit-sharing bonus not to exceed $15,000; $10,000 in deferred funds to be paid upon retirement; and a company car.

After further discussion, the managing partner told Shannon that to ensure that he didn't lose her, he would offer a package valued in excess of the $25,000 salary difference that was at issue. He agreed to the profit-sharing bonus and deferred income, but told Shannon the company car would have to wait until she completed one year in her new role. He also said that while he wouldn't put this into a formal agreement, she could count on him that it would happen.

So, Shannon brainstormed her way out of a deadlock with her boss, and into a WIN–win deal.

Refresher

Chapter 9: Negotiating from Weakness

Perceived versus Real Weakness

Question, probe, explore.
Learn your vulnerabilities and theirs.

Expand Goals

Money isn't the only goal—percentage of profits, partnerships.
Look for intangibles—control, influence, public relations.
Make the deal bigger than it is—for both sides.

Locate Allies

Add to your team—bring in partners who have strengths you lack.
Find an expert or coach—gain outside knowledge.
Locate others similarly situated—create alliance of common interests.

Never Let Them See You Sweat

Keep talking—keep the deal going.
Act confident—confidence makes more deals than clout.

Brainstorming

Brainstorm in groups of four or less—small and manageable.
Don't criticize ideas. Let them flow.
Keep at it. Creativity is more perspiration than inspiration.
Make it fun—create a game of idea generation.

*“Frankly, Dennison, this was not the merger proposal I was expecting.”*

Mort Gerberg © 1998 from *The Cartoon Bank.* All Rights Reserved.