Transcript

Nolan Martin : Hey everyone! Thanks for joining us on the NEGOTIATEx podcast. We are continuing our conversation with Mark Ruffan. He is the host of the Negotiations Ninja podcast. So, if you haven't ever listened to his podcast, be sure to do that. Let's jump in the conversation with Mark.

Aram and I are big believers in preparation. We know that you are as well. What are some of the tools or techniques that you interact with your clients, you help them out, maybe consulting clients to help them become better prepared for a negotiation?

Mark Reveals Leaders In Most Organizations Don’t Receive Any Negotiation Training And Why It’s A Problem [1:44]

Mark Ruffan : I think whenever I talk to people, it's usually based on a team. So, I have, I usually chat with a VP of sales or a chief procurement officer or someone in legal to say, okay, hey, we need to level up our team's skill set to be able to work on these things that we've identified as gaps. And then we develop a program for them, or we sort of do one of our off the shelf programs. It's really dependent on where they think the team needs to improve. Most teams, the vast majority, 98% of the teams that I talk to have either not received any negotiation training or some of them received some negotiation training at some point in their past.

And so it's choppy. There's no unified approach. There's no unified methodology, which makes it really difficult for leaders in those organizations to know whether or not their team has the right skillset and whether or not their team is approaching the negotiation with a unified methodology.

And that's a big problem from a leadership perspective, because God forbid, someone decides to leave the organization and leaves obviously their work behind, someone needs to know how to pick up the pieces from there. Like where do they often leave the strategy? What does the strategy look like? All that kind of stuff becomes critical to the conversation.

So, when I chat with folks, it's usually sort of at that leadership level where they say, hey, we've got these gaps. These are the things that we think we need to fix. We have a discussion about it. We talk about maybe problem actors in terms of the suppliers that they're working with, or the customers that they're working with, depending on what side of the table they're sitting on. And then we develop a strategy around, okay, how are we gonna fix those problems? What does the curriculum look like? And then we deliver that training.

Aram Donigian : Yeah, it's amazing to me that number is so high. Do you have thoughts on why is there such a gaping hole? And I guess it's a good thing for those of us that are interested in this topic, that there's plenty of opportunity, there's an unserved market there as, as your bio reads, you know, why is it though? Why do we allow this leadership challenge to exist with no unified language, methodology, approach tools, skills, why is that?

Reasons Leadership Challenge Exists in An Organization When It Comes To Negotiations [4:08]

MR : I think it's two reasons. I don't have any data to back this up. This is just my anecdotal read on it. Most of the time, if you're on the sales side of the conversation, you're heavily investing in sales training, like heavily, heavily, heavily investing in sales training, but sales and negotiation are not the same thing.

Negotiation is a part of that sales process, absolutely. But most of the sales training centers around prospecting, it centers around account management, it centers around relationship management. And they make the assumption that the negotiation part of that is part of those discussions when it's usually pretty loose. And the goals that sales people have do not incent them to negotiate, meaning they usually get compensated based on top line revenue, not on margin retained or on value generated within the deal. And when I say value, I mean margin in general profit, which makes sense, right?

MR : I mean, if you're, let's just use tech, for example, if you're a tech company, your word to your board of advisors, your investors is always gonna be on growth. But the downside to that is growth at what cost at what risk those conversations are rarely had. And only later when it's too late, do those leaders go shit! We shouldn't have made those deals, right? Like that's we made that a too high of a cost and now we've gotta figure out a way to get out of it. And then they realize, okay, we need negotiation training.

On the other side of the table on the procurement side. It's because they're severely under budgeted. Like procurement is historically in my opinion, the most under budgeted department in the entire organization, because they don't drive the growth, so to speak that that profit that's seen, or the revenue number that's seen by the board. When they're just as important at maintaining risk at reducing risk at maintaining profit at increasing profit.

MR : And it's purely a budget conversation when it comes to the procurement side of things, when it comes to other groups, it's usually around conflict management. So if you're a mid-level manager, senior manager working in other departments, the conversation of negotiation usually centers around conflict. How do we deal with conflict? How do we resolve conflict? How are we more respectful in our conflict conversations? And that only pops up after a conflict has happened. [laughs] and so it's almost too late because then that's sort of sours sort of the pool and then everyone's upset about it. And then you've gotta retrain people on how to think. So, I think it's a reactionary move more often than not instead of a strategic move.

AD : Yeah. Everything you're saying, it just, just reminded me of an article that I had my students read, where I teach, it's called Negotiation As A Corporate Capability. And it hits all these things you're talking about. If you really wanna be an organization, and by the way, it's, it's interesting that you do work with teams and you're really focused on building the capability there at a team level.

But if you wanna do this well, it's gotta be, there's gotta be common skills. There's gotta be a common language. There's gotta be the right incentives. We've gotta, you know, the conversations that we have to reinforce this it's, it's about, it's kind of about taking on the entire and, and it's gotta be nested within culture and strategy, right? So, the business strategy, the category strategy, we've gotta have it nested. What we're doing at the negotiation table needs to fit and support those things. Not be some sort of abstract thing that sometimes we get lucky and sometimes we don't.

Mark Explains Why Negotiation Trainings Are Undervalued At Organizations [7:55]

MR : Yeah. And I think, fundamentally it's a misunderstanding of the value that negotiation provides at a senior leadership level, right? Like we train for all of the other things, we train for sales and we train for process, and we train for lean six sigma and we train like all of those things. And that makes sense because it's easy to quantify. What's hard to quantify in negotiations is how that generates value within the organization, easier on the sales side and the procurement side, but when it comes to like conflict management and that kind of stuff, the, the value conversation is difficult because you could say, well, you know, statistically, if we have less conflict, that means we're gonna be more productive, more productivity leads to X, but that's very theoretical. It's hard to be able to drive, you know, training to outcome in that kind of conversation. And I think that's why a lot of people don't do it.

AD : You were talking about BATNA earlier, knowing what your plan B is. It's easy when it's, you know, a firm comparison of apples to apples, it's tangible to tangible value. With what you just talked about too, in terms of thinking about value in measuring an ROI on your negotiation, how do you try to account for the, the intangible things, whether it's with measuring value or it's comparing to my plan B and really knowing whether I should walk away, how do you, how do you think about that?

MR : I think you can objectively measure that because if you know what you need and you know what you want, and you know, what the values you want to attain on those things are, or even the clauses, what you kind of want the clause to look like, or how much risk you're willing to take on for a particular thing, then you can have that really well laid out so that, you know, like a negotiation theorists, call it your reservation point. It's just your walk away line, like where, where am I gonna decide to walk away from this deal?

And then once you know where you're gonna walk away from this deal, that becomes easier to be able to say, okay, where am I gonna walk away to? But I think it's a lot easier to put into practice than people think it is. People seem to think that figuring out your walk away point is hard. It's not that hard.

NM : You know, something you had said earlier, Mark, was don't be afraid to ask for it and don't be afraid to ask for more. How do you teach this in your training for people to be comfortable asking for more than what they necessarily need, but maybe a number that they would want.

Mark Explains How To Be Comfortable Asking For More Than What You Need [10:25]

MR : So, we cover the concept of anchoring: Anchoring is the psychological predisposition where whoever throws out the first offer, usually statistically, we end up closer to that first offer than whatever we think the secondary offer is gonna be, right? So, and it's a psychological thing that just happens in the brain. There's a danger of extreme anchoring where people throw out too high of a number and then lose the deal entirely and someone just decides to walk away because they say, that's crazy, we're not gonna do it and they haven't even gotten into the negotiation yet.

Most of the time when it comes to a negotiation and asking for more, it centers around fear of looking foolish or fear of losing the deal or fear of rejection, there's a lot of fear that's associated with asking for more than we expect to get, because we're, we're putting ourselves into a very awkward and uncomfortable position by doing that.

MR : And depending on where you live in the world, there may even be a social taboo that exists with asking for more because you don't want to be seen as greedy, or you don't wanna be seen as asking for too much. And I think once people come to terms with the fact that asking for more doesn't necessarily mean just asking for more money, it also means asking for more value. It means asking for better terms, it means asking for more commitment from the counterparty, it means asking for a bunch of different things, right? So, we're not just talking about price. We're not just talking about a dollar value, we're talking about all the components within that deal, then all of those things become tradable.

MR : And once all of those things become tradeable, then it becomes easier to be able to say, well, maybe I'd be willing to give up on this if I get more of that, right? But unless you actually have that mapped out and know how much more you're gonna ask for, those things that are tradable are invisible to you.

So, I wanna circle back to something I said there, cuz I think it's really important: the fear aspect of things. Getting people to overcome that fear is really hard and the truth of the matter is there's no silver bullet, right? Like there's no magic formula with dealing with that, it's just something that you have to practice.

We do an exercise, I think it's a fairly common exercise where we ask people to go. And the next time they're at a coffee shop, grocery store, liquor store, whatever it is when they got their bag of goods at the end, ask for a deal on that purchase, the goal is not to get the deal, as strange as that sounds. The goal is to put yourself into an awkward situation where a social taboo exists so that you can learn to deal with the discomfort of asking for more and then just sitting in that and getting comfortable with it and practicing it over and over and over again.

MR : We took that exercise from a friend of mine who is a health and wellness coach. He's the kind of guy that you see on the magazines, right? He's got all the abs and he looks fantastic, but one of his goals is getting people comfortable with their bodies so that they can work out in public and enjoy themselves in public. And he needs to get people to come to terms with the fact that you are going to be judged. Fact! Yes, it's wrong. Yes, we don't want people to do it. Yes, it's uncomfortable, but you will be judged. People are gonna stare, people may giggle, people may laugh, people may smile. Unfortunately, that's reality. So, what he does is he gets people to go out into crowded areas, um, malls, grocery stores, wherever, and gets them to do air squats in front of everyone. So, they'll do like 10 to 20 air squats in front of everyone randomly with no warning.

AD : This is Nolan's favorite thing to do by the way, Mark, he's, he's always out there doing air.

NM : Yeah, you missed it. I was already out last hour. So…

MR : The goal is not to get the exercise and that's an ancillary benefit. The goal is to get comfortable with the fact that people are gonna stare at you and that's okay. And the same thing is true for negotiations.

AD : Well, and, and it could, because not everyone grows up in a house like you were describing where conflict is you know, we jump into it, right? You know, you talked about the building, like the ability to trade things because we, you know, and I assume that links back to a good understanding of what our priorities were. And so this kind of leads through the negotiation. I mean, a good process is so important. You talk about the ability, you know, the importance of taking notes, sometimes even assigning a scribe to that. Yeah. Yeah. Why is that so important? Are there other process things just essential in terms of how you manage the negotiation?

Importance of Planning For Concessions In Negotiations [15:16]

MR : Because if you don't have it, you're flying blind. And if you haven't worked out what it is, you're gonna, not to say that you would concede something, right? That's whenever I say, okay, manage your own expectations about what it is you're willing to give up in the negotiation plan for concessions that you're willing to make. When a lot of people hear that they get like the ego takes over and they're like, well, I'm not gonna make concessions. And so, I don't think I should plan for it. Well, the danger to that thinking is that if you don't plan for concessions, that you might be willing to make you end up actually giving away a lot more than you should in the negotiation. And then also if you don't know what you're willing to give up, there's nothing that's tradeable right, like, so you're gonna ask for something, don't be naive.

MR : The counterparty's gonna ask for something in return. They're not stupid. This is a negotiation. If you just ask for something and they give it to you, that's not a negotiation. That person is taking an order from you. So, the goal here is planning ahead of time so that you know what you might be willing to give up. Now, does that mean you need to give up the full thing? No. Does that mean that you need to give up the thing very easily? Also no. But you do have to know whether you'd be willing to give up on something. And that's really important for people to understand.

MR : There's one, um, analogy that I use in a lot of my training, that's something to the effect of, let's just say, you're gonna go buy a golf bag and you're frugal. So you go onto Craigslist or Facebook marketplace or wherever you buy your used goods and you find the golf bag.

You love, you go to the person's house, you see it, they've listed it for 250 bucks. And you say, I'll give you 200 right now to do the deal. And they say deal immediately. And you pick up the golf bag and you immediately feel terrible. Because now that deal has been given up too much, right? Like you've, you've achieved that concession too easily. And the simple answer to that of why is because there's no scarcity that exists with the concession that's been given to you. We all know basic supply and demand. The more scarce that we make something, the higher the perceived value of that thing. Now, when we make concessions and we plan for our concessions, if we give those things away too easily in the negotiation, what are we doing? We're driving down the perceived value of the concession that we're giving up, which makes the counterparty not actually feel as good, strangely enough, the way the brain works in a negotiation.

And so when I say plan for the concessions that you're planning on making a trading plan, have an understanding of what you might ask for in return, that doesn't necessarily mean give it away, but it does mean know what you might be willing to give away and the strategy by which you might release those things.

AD : Hey Mark, you do a lot of work with procurement specialists. You have a background in procurement, you know, we're living during some of just amazing times of, inflation, supply chain challenges, things stemming from the pandemic. In your blog, you've captured some of the advice that you're giving those in procurement. Can you summarize for our listeners? What are some of the key points in your thinking, as we sit here in the summer of 2022, what can they do to better manage those supplier negotiations?

Negotiation Plans Are Influenced By The Market, Economy, Industry And Geography People Play In [18:48]

MR : Yeah. I think that a lot of people believe that their negotiations are independent of the market and the industry and the geography that they play in. But the reality is they're not. Any negotiation plan that you put in place has to be influenced by the market and the economy and the industry and the geography that you're playing in because all of those things could be different. So, a lot of people try to paint the same negotiation strategy across multiple negotiations, especially if you're a global company that's really dangerous because we don't know what the local geography market is like, right? So, a market in the middle of Vietnam for buying goods and services is different than that exact same market of those goods and services in South America or Europe or North America or wherever. And so applying the same strategy to everything is crazy.

MR : It's bananas. Now, you can apply the same methodology of thinking to those things, but you can't apply the same moves so to speak. And so what a lot of procurement people are going through right now is an adjustment phase because they've been living high on the hog for quite some time where it's been a buyer's market for the last few years, they've been able to get phenomenal deals. The unfortunate thing is because of the economy and the supply chain issues that we are facing. It's not that way anymore for some, it is for most, it's not. And the negotiation plans need to adjust as a result.

So, previously a procurement team two years ago, cost reduction for a particular thing like year over year, price decreases may have been a big target that they were looking for in their negotiations. Today, it's about stemming an inflationary cost increase.

MR : So, avoiding a particular increase to them as a result of what's happening in the marketplace. And a lot of folks are having a lot of trouble with that because procurement people are very used to being pursued, not vice versa. And so now they have to deal with the reality that the market has changed and we have to adjust. And that's hard for a lot of corporate leaders as well. When you say, Hey, look, we're taking a 7% hit minimum on year over year price increases, corporate leaders are like, what? And then you tell them that, oh, revenue's decreasing as well. It's becoming a very difficult situation for a lot of companies in North America.

AD : Thanks. You know, another question is, um, as you look at your own negotiation experience, do you have any examples that you consider to be, you have an example because your greatest negotiation failure and what did you learn from it?

Mark Shares His Biggest Negotiation Failure [21:24]

MR : I've had a lot of negotiation failures.

AD : Oh! As a Negotiations Ninja, I'm surprised. I wasn't sure you'd have.

MR : No, listen, I'm fortunate I, the name is, it sounds like I've got some sort of crazy thing to sell when I say Negotiations Ninja, right? It, it sounds like a Get Rich Quick scheme, but the truth of the matter is, yeah, I've had a ton of negotiation failures, and I think that anyone that's been in the game for a while as probably also had a ton of negotiation failures, the biggest lesson that I learned was a lesson about humility in negotiations and not letting your ego get the best of you. I was negotiating a large deal. And when I say large, I mean large for me, it was, um, a, a big deal. It was 250 million and I'd been negotiating this deal for nine months and had gotten about three quarters of the way done. And at this point, the counterparty and I were just butting heads and it wasn't going anywhere.

MR : The progress was, and we were sort of at risk of damaging the relationship. At this point, the decision was made to pull both of us off of the deal. Their party pulled that counterparty off and my party pulled me off. And that was the right decision because the people that came in after us closed that deal in the next three weeks after we bang our heads for nine months. And that was not a fun feeling. It wasn't a pleasant experience by any stretch of the imagination. The ego definitely got hurt, but it was the right decision because we couldn't let our egos get in the way of making the deal work.

Now, that's an important lesson for a lot of people, I think because sometimes our egos drive the conversation like we want to achieve something for us. It's a win for us. It's not, we need to check that ego often throughout our negotiations.

AD : First of all, thanks so much for sharing that. That's a great example. And I find that most of my failures, uh, also kind of result from a list of Locke humility. How about a, a success, a time that you've been able to maybe even a surprising success, something you didn't expect put into practice, these concepts and tools that you coach others to take, and you were able to achieve something that didn't seem possible maybe at the outset.

Mark Shares His Biggest Negotiation Success [23:47]

MR : Probably the biggest success that I've had in my negotiation life is getting my kids to go to bed on time.

AD : That's another question which just does the stuff show up in, in personal life. Can you, can you actually use it? Yeah.

MR : Well then let me tell you, like, don't teach your kids how to negotiate too young. Cause they'll start to use it against you.  There was one situation. I'll tell you guys a funny story of where I came back from like a few months of travel and my wife Jen had left cuz it was girls' night and I hadn't been around.

So, I obviously needed to step up. And the kids obviously noticed that I was super tired. Right? I'd been on the road for a long time. And my eldest who was three or four at the time, I told him, Hey, listen buddy, it's time for bed. Now, I looked like I had massive fatigue, right? And he noticed, he noticed this and kids are amazing at this. And he said, daddy, I can't go to bed. I said, why? He is like, I need two Smarties before I can go to bed.

And I said, no, you, you can't have two Smarties. It's just bedtime. He's like, and he sat at the bottom of the stairs and he folded his arms like this. And he said, fine, three Smarties. And he in, he increased the amount and I'll tell you, man, I should have told him to go to bed immediately or carried him up the stairs. But I buckled under pressure and I gave him his three Smarties to go to bed. I have since learned the error of my ways with my kids and getting them to go to bed on time is one, one of my biggest successes. But yeah, it's uh, it's wild.

AD : Uh, thanks for sharing that Mark. That's cute.

NM : Well, that's awesome, mark. And I just wanna be the first to say thank you so much for joining us on the negotiate X podcast, truly an awesome conversation. You had a ton of great insights, definitely gonna be one of those episodes that we're gonna have to listen to again. So, as I said earlier, this is a podcast that is all about elevating your influence through purposeful negotiation. So, with that, I'll turn it over to a, for some key takeaways.

AD : First of all, Mark. Thanks. Let me kick it to mark for just a second. Mark, any final, final takeaway or thought on, on your behalf, any anything you'd like to leave our listeners with?

Final Takeaways [25:52]

MR : I would be remiss if I didn't plug what I'm doing. So, obviously go and check out what I do at Negotiations Ninjas, just type that into your browser, you'll find me, but a secondary aspect to that is don't believe people who teach negotiation who say things like this is the only way to do things, cuz it's not.

There's a wide variety of approaches. There is a wide variety of skills and negotiations is a spectrum on the, on the one side you've got the super collaborative, you know, getting to yes, Harvard program, style of negotiation. On the other side, you've got the slit your throat, I'll take everything that you have, gym camp style negotiation. And then there's everything in the middle that exists. And it's all good. It's all valid, right? Like gym camp stuff and the Harvard stuff is all amazing. And it's all gonna teach you something. So, don't just stop at one thing, read as much as you can, listen to as much as you can and practice as much as you can.

AD : Thanks. That's great advice. As folks go back and listen to the way that Mark frames mutually beneficial outcomes, appreciate that. The idea that the great negotiators are ruthlessly self critical. So appreciate that. The idea that Premo mortem, the idea that it's a real leadership challenge when we don't in our organizations get this right and really commit to doing the hard work around negotiation training and processes and, and systems and getting those in place, learning to lean into the discomfort. I love that exercise. I'm gonna steal that one.

And then the last thing I'll share is, is a takeaway is, Hey, we've gotta be able to match our negotiation strategy with what we're seeing in the marketplace, the economy what's going on in the industry and, and geographically, and, and not try to say one size fits all approach is gonna work. I like what you said, the thinking is consistent. Our strategy needs to be flexible enough to adjust as conditions change. So mark again, thanks so much for being with us today.

MR : Thanks for having me guys. I really appreciate it.

NM : That is it for us on today's podcast. Thanks so much for listening. Please rate, review and subscribe to the podcast. So we get this in front of other leaders and we'll see you in the next episode.