Transcript

Nolan Martin : Hello and welcome to the NEGOTIATEx podcast. I'm your co-host and co-founder Nolan Martin, and with me as always, co-host, co-founder Aram Donigian. Aram, you want to take it away from here?

Aram Donigian : I will. You're looking good today, Nolan. You got some of that Miami Vice vibe going on, enjoying Florida.

Nolan Martin : Absolutely.

AD : We're going to go to the other coast today. And folks, it's my pleasure to welcome Keld Jensen, an internationally renowned negotiation expert, TEDx speaker, sought after advisor, and award-winning author with a background primarily in management and as former CEO of a publicly traded technology company.

Keld works with governments and major corporations to achieve success through optimized negotiations. He's also an associate professor and teaches at top ranked universities around the world, including the Thunderbird School of Global Management at ASU, the BMI Executive Institute in Lithuania, BMI Louvain University in Belgium, and Denmark's Alberg University. Keld’s expertise and extensive experience have earned him over 200 international TV appearances, regular contributions to Forbes Magazine and hundreds of published articles in major business publications in Europe, Asia Pacific, and the United States.

He is the founder and head of the SMARTNERSHIP Negotiation Organization, a consulting and training organization that works with private industry and governmental bodies worldwide with clients that include Vestus, Novo Nordisk, J&J , Carlsberg Group, Siemens, Rolls-Royce, Lego, Bang & Olufsen, Mercedes, UCLA, UNICEF, PG&E, Thermo Fisher, World 50 and the governments of Canada, Denmark, and Great Britain.

He is on the prestigious global gurus top 30 and has received numerous awards for his work. His SMARTNERSHIP approach is the world's most awarded negotiation strategy. He's a dual citizen of the United States and Denmark and resides in California. He has lived and worked in five countries. His latest book, ‘Negotiation Essentials’ is being published by McGraw Hill and is already a bestselling book before the release. Keld, thank you for taking the time to join us today.

Keld Jensen : Thank you for having me.

AD : That's a pretty amazing resume. I can't wait to get into all your expertise. I've got to ask, what drew you to the field of negotiation and 30 years into this, what continues to inspire you to do the work that you're doing today?

Keld Jensen’s Understanding Of Unconscious Incompetence to Conscious Incompetence(3:10)

KJ : Well, great question. I would say what brought me into it was I was unconsciously incompetent. I didn't know I couldn't do it. Let's take a step back. In the nineties, I was heading a technology company back in Scandinavia and it was a rather big company and being the head of the organization I thought as many CEOs do, I was a great negotiator. So I was negotiating left and right and up and down and for millions and millions of dollars, with suppliers, and clients, and employees, and staff and what have you.

And as I said, I thought I was really good at it because obviously I was heading an organization so naturally I had to be good at negotiation. So what happened was that my former partners actually established the organization I'm heading today back in 1976 in Stockholm. He was hired in my organization to come and help us on negotiation, and I'm not exaggerating. In less than two hours, 120 minutes, he moved me from unconsciously incompetent into consciously incompetent.

Suddenly I realized that I knew nothing about negotiation. It was a very embarrassing moment when you suddenly realize that what you think you're good at, you're actually miserable at. Now, it's actually nice being unconsciously incompetent, isn't it? Because you think you can do something, but in reality you can't. So it was a really rough awakening right there. So what happened short version is I went back home to my wife and said, do you know what? I'm changing careers right now because there's such a potential of changing the way we negotiate. And since then, basically since 1998 to be exact, my mission in life has just been to improve the way we negotiate and make people aware that we can actually improve our negotiation a lot.

AD : You ever get tired? Do you ever get weary of doing that or is it a passion that continues to fuel you?

Overcoming The Challenge Of Recognizing Negotiation As A Science (4:57)

KJ : That's a wonderful question. The passion is there. Once in a while, I feel it takes an enormous amount of time to change people, how they perceive negotiation. I've been on this mission as I said, since 1998, and the good news is, I see signs of people changing. But changing. Oh, we could just ask this question. Is it difficult to change people? Yes, you have to start with yourself. Is it difficult changing yourself? Absolutely. And then when you're trying to change other people, it becomes pretty challenging. So the passion is absolutely 200% there because there's such a potential and we can do negotiation so much better than we're doing right now, but we really need to change the mindset of how we perceive negotiation and absolutely the step one.

NM : You mentioned several challenges. Overcoming those challenges, overcoming just the sheer, not knowing that you may be a bad negotiator, what was your greatest challenge that you had to overcome and how can listeners who relate to your challenges take steps to improve as well?

KJ : I think my first challenge was actually understanding that negotiation is a science. I was invited to speak at a business school in Europe just one week ago and I accepted. I thought that was great. It was a great opportunity to do that. And I was asking the management of the school, the class, is that elected or is it required? And they said it's elective, and it's an Executive MBA class. So I said, why is it elective? And they said, because the people, the students attending are very experienced executive. And I was thinking, oh god, they got it so wrong, right? Because we have this misunderstanding that if somebody is an experienced executive, just back to my story, they are a great negotiators as well, and that is not the case.

Negotiation is a skillset we need to learn and train just like being a lawyer or technician or army officer or what have you. It's not just something you do automatically, but for whatever reason, don't ask me why a lot of executives just like I did, believe that is something you can just do automatically and where that belief is coming from. I have no idea.

AD : Yeah, it's interesting. I think that leads into a, well just teach me the tips and the tricks and that's all I need because there is no science to this and you push back on that you have this SMARTNERSHIP approach that you've developed, don't want you to give away all the secret sauce, but could you share some of the key principles of this approach that you've successfully launched globally?

The Four Pillars Of SMARTNERSHIP And Mastering The Art And Science Of Collaborative Negotiation(7:21)

KJ : Well, first and foremost, I would chat, what you just said just a tiny bit. I do believe that negotiation is somewhat a science because you can sit down and study it. Now, some people call negotiation the art of negotiation. Some call it the science of negotiation. I would call it the science and art of negotiation because if it was purely an art, you could be born into being a great negotiator. If you're a great artist, you have a natural skillset of just naturally you're a great painter, a great singer, what have you.

Can you excel that? Can you improve that? Of course you can, but there's a science to negotiation as well. We have now been starting negotiate for so many years that we know the requirements, the basics, the checklist, what you have to know, what you have to prepare. And the second we have developed that rule and checklist and order of doing stuff, we can actually put it on a recipe and call it somewhat a science.

So, I think there's a lot of science and knowledge within negotiations today. What you are asking, well SMARTNERSHIP is really just partnership version 2.0. We didn't call it that. We just named it SMARTNERSHIP for several reasons. What SMARTNERSHIP is all about. And the major difference between SMARTNERSHIP and partnership is I would rather explain why we came up with it because I'm a true believer in collaborative negotiation. I'm not ruling out that we should never negotiate in a more position or serious some way. There's certainly situation where we should, but in general I believe we get more value out of collaborative negotiations.

Now having said that, we studied partnership and I've been working with so many clients when I'm asking them, what is your official approach to negotiation? They say, oh, it's partnership. We've been doing partnership with our clients and partners and suppliers for years. And then when you dive in and look at the details, what they're really doing is this long-term series of sub-negotiations. They're just repeating positional negotiation over and over again with the same character part. But when they've been doing it for six years, they call it partnership. But that's not a true partnership. That's something completely different.

So first and foremost, I learned many, many years ago that people are abusing the word partnership. They actually don't know what partnership in reality is. So we have to understand first and foremost, what is a positional negotiation? What is a collaborative negotiation? The reason we added stuff to partnership and called the SMARTNERSHIP is because we identified four things that separates the really great negotiators with the average or the lousy negotiator. And just to list them very quickly and is not in any specific priority, but one of the things we learned very quickly was that the skilled successful negotiator has an official negotiation strategy. We might have time to dive into a little bit what that is all about, but you need to have a negotiation strategy as an organization. And the fun part is that I love to tease people. So when I'm stepping into a new organization, I often ask the top executive, could you please have a look at your official negotiation strategy just for a moment?

And the majority of organizations, when I asked that question, they acquired for about 10 minutes and then some of them goes, “ah”. Because they haven't got any, most of them haven't got an official negotiation strategy.

So that's step one we need a negotiation strategy to be successful. Second one is what I call trust currency. And that's just the two words, trust and currency are put together. And the reason for that is trust is a monetary value. Listen carefully. If we have a high level of trust in any kind of relationship, our transaction costs will go down and our profit will increase, alright? So that means if we are actually able to be transparent and work with trust, and is not as easy as it sound, both you and I will be more profitable in any commercial business deal. So, trust is step two that separates SMARTNERSHIP from a traditional partnership.

Step three is rules of the game. And now I'm saying something, I know it sounds really awkward, but you have to negotiate on how to negotiate before you start negotiating with your counterpart. And the reason for that is very simply, we perceive negotiation differently. So you might come into the conference room and think negotiation is like playing chess, and I may be coming into the negotiation room thinking while negotiation is playing tennis, right? So I'm standing there with a racket and you're sitting there moving your pieces of the chessboard around. It's going to be a really entertaining game, isn't it? Because you're playing a completely different game than I am.

AD : I love that imagery, by the way. Sorry Keld. That's a beautiful imagery.

KJ : And the scary part is this is happening all the time as we talk right now, you are having meetings out there where negotiators are doing exactly that. They're playing two different games. So we have to address before we start negotiating how we want to negotiate. So Nolan, do you want to negotiate in a collaborative way or do you want to negotiate in a more positional orientated way? Do you want to be transparent about your cost and values? Do you want to list your variables that we should negotiate and on and on and on goes that list and the final point that separates SMARTNERSHIP from partnership. And I'm sorry about the long answer here,

AD : That's great. It's great.

KJ : There's a lot of stuff in it. The last part is what we call NegoEconomics and NegoEconomics is an award-winning mathematical model I created that basically identified the asymmetric value between you and I. It's negotiation economics, and it's very simple. It basically looks at the difference between your cost and my value or my cost and your value.

Quick example, if we are negotiating and one of the variables we're negotiating could be a terms of payment, instead of just sitting there arguing back and forth and hackling where you say, “well, I want a 30 days line of credit.” And I say, “we can't give you that. We can all give you 10.” And then we are doing that and then we end up in a compromise somehow. And when I give you 20 days, instead of wasting time doing that, which by the way is not negotiation at all, I should be asking you what's your cost of capital? And you might be answering, well, I'm happy to share that with you if you're willing to tell me what your cost of capital is. And I said, sure, I could do that. My cost of capital is 3%. What's yours? And then you said, well, my cost of capital is 7. Great, we just learned a lot. The one who have the lowest cost of capital should finance the deal.

So, I might be saying, do you know what? I'm happy to give you a longer line of credit than even the 30 days you're asking for because my cost of credit is lower than yours, but in return I want a 6% price reduction or whatever we are talking about. So the concept of NegoEconomics, we have hundreds of variables in every single negotiation where we can identify this asymmetric value. And we have actually identified that up to 42%. I repeat 42% of the values in a negotiation are also not realized, capitalized or identified. So I know a lot of negotiators who are saying, I hate numbers and I hate mathematics, and I'm sorry to bring it up here, but commercial negotiation is about one thing, value, it's about numbers. Otherwise we are not negotiating. So negotiators who are scared of numbers should not be negotiating on behalf of their company. That's it.

NM : Absolutely. And I think that's a great point that you talked about there. I was hoping to ask you. So how has the SMARTNERSHIP approach helped your client avoid some of the common mistakes and challenges you see in business negotiations? What examples can you share?

Negotiating For Profit: The Power Of Expanding Variables (14:14)

KJ : Well, actually just taking a step back to what I talked about, what we typically do when we are working with the client is that before we do anything else, we have to establish a negotiation strategy. And the phrase that water runs downwards, right? So we have to start at the top. It doesn't help that we start working with procurement ourselves a project or what have you because they're all the one break in the wall. So we have to start at the top. So we have to implement the strategy, the organization have to embrace the philosophy and understanding how important negotiation is. When we have done that, then we can actually look at very concrete cases with the counterpart. And I would say the main thing where we help the most, is basically improving bottom line.

And the great thing about negotiation is it's measurable. If you change something, it's just like in sports, right? I love watching sports because you can make small changes and immediately see an impact. In business life, it is harder to make a small change and immediately see an impact. But in negotiations, it is so easy to measure and improve how much more profitable you might be by changing a few tools and pull a handle. So when we work with a client, we are basically looking at a certain problem with a certain counterpart, and then we're implementing the tools to see how can we for instance, increase the number of variables. It's a very simple technique, a very simple tool I would love to share with everybody.

Most of our listeners right now are negotiating on too few variables and obviously that's provoking. I'm saying that because I don't know our listeners, but it's just a general fact. Most negotiators are negotiating on too few variables. They're negotiating on the typical usual suspect, right? Delivery time, price, warranty, right of return, blah, blah, blah, what have you, 7, 8, 9, 10 commercial variables. And I know a lot of people will be shocked right now when I tell them that there might be 40 or 50 or 60 or 70 variables that you need to negotiate on. And if you're able to expand that pizza, just stop talking about more variables. You can also generate more profit.

So again, we could talk about just this question for hours and hours and hours, but typically what we're doing is that we are sitting now with a client identifying what other variables should you negotiate on? And then back to my thing about how to engage into negotiation, then we have to reach out to the counterpart, the supplier or the client and say, how do you want to negotiate? We're going to meet Thursday next week. Do you want to do the positional gain that we've been doing for years or do you want to try and spice it up and actually make some more money because we are here to help you reduce your cost and your liability, and we expect you to arrive at the table helping us reducing our cost and our liability. That was a very long answer to your question. I don't even know if you got an answer to your question.

NM : No, I think that's fair. So basically trying to still pull out the cooperative approach to what may have been traditional haggling over prices or anything like that, like typical positional type bargaining. So it sounds like the SMARTNERSHIP approach basically helps us avoid that. Is that an accurate summary?

SMARTNERSHIP: A Blend Of Collaboration And Zero-Sum Negotiation (17:07)

KJ : The short answer is yes. The long answer requires a little bit more. I'll try to do it very short. When we're talking SMARTNERSHIP, we are majority of the time in a collaborative mode, but you could have a period during that negotiation where you have zero sum negotiations as well. What we often say is that you have to collaborate to create value, but when you try to distribute the value, you could end up in zero sum again. So I'm not naive, I'm not saying everything should just be collaboration, that we should just be sitting there and agreeing everything. End of the day, the reason we are negotiating is to improve our bottom line. Is to create more value. And I truly believe it's possible because I know it is that you can make an additional hundred dollars without, I'm paying for it, but I'm not ruling out that zero sum is not happening in SMARTNERSHIP. It could be happening in certain windows or pockets of that negotiation, which is fine by the way.

AD : If we could take, again, going back to your first step, which is this official negotiation strategy. And in your answer to Nolan, you just mentioned the organization has to realize how important negotiation is. Can we talk about that for a moment? About the difference between negotiating and even negotiating well and negotiating when you have a clear corporate strategy behind you or whatever, how do you advise, how do you help clients actually get that strategy built?

The Key To Successful Negotiation Transformation(18:24)

KJ : Yeah, that's a great question. It's a three month project. We have it pinned down in 9 steps, and the first step is, as I said, developing the idea and the understanding at the C-suite that they need it. Typically, they have realized already that they can improve our negotiation. That's why they're coming to us. Otherwise, it is really difficult. I mean, I gave up years and years ago trying to convince somebody they have a need if they don't understand that themselves, back to being unconsciously incompetent. But if they realize already they have a need and they believe they can improve their negotiation, which the majority of organizations government in the world can, then we starting off simply by identifying what I call negotiation champions in the organization, and negotiation champions; One, the ones that like and love negotiation, and I'm getting back to that in a second, why that is important.

And secondly, it's the one that shows the skill in negotiation. Typically we are running workshop or we do evaluation of the competence level of negotiation. We have a tool. We can actually measure whether people are qualified, less qualified or not qualified to head a negotiation team. Why am I saying it's important that people like or love negotiation? Well, that's based on a study we did where we actually identified that 20% of all professional negotiators are incompetent in the world of negotiation. They shouldn't be negotiating, they shouldn't be heading a negotiation team. It's actually a scary big number. Think about it guys, right now, if we are right, 1 out of 5 professional negotiators out there sitting negotiating right now shouldn't be negotiating at all because they're not good at it.

Now the big question is why is that? And let me just share something very quickly. It's not because they're lacking intelligence, it's not because they don't have the education. Do you know why? It's because they dislike negotiation. They really don't like it. And I think we can all agree that you and I as human beings, we are better at something we truly like and enjoy. Is that true? If we hate doing something, we are never really going to be good at it.

So, one little question I'm always asking my client before we step into negotiation is that, Nolan, are you looking forward to our negotiation on Thursday? And if Nolan says, not really, I would rather sit here in the office and do my spreadsheet and look at the screen, then I'm normally putting down a note in my notebook saying this is not going to be as good as it could be. On the other hand, back to the same question, if Nolan says yes, that's going to be great because I just, oh, it's so boring just sitting here looking at a screen, I love getting out there and boxing with a counterpart and trying to figure out some values and stuff. If that's the reply I'm getting that I'm normally putting down a note saying this is actually going to be quite successful. And the funny part is I'm often right, because if we really like to negotiate, we are just better at it. And if we dislike it, well it's not going to be really good.

Now, we can all have one or two negotiation every year where we're thinking, shoot, that wasn't good. But in general, it should be a fun experience. It should be something that is exciting. And you would actually be surprised, guys, how often I meet people who when they're honest, are telling me, I actually don't like to negotiate because I think it's very confrontational and it's unpleasant and blah, blah, blah. And that's back to how we perceive negotiation. And by the way, how Hollywood is often, we try to create a picture of what negotiation is all about, all the macho guys out there trying to explain to us that what negotiations could be or should be. And by the way, it is not. So yeah.

AD : Any good Hollywood movies that actually demonstrate a SMARTNERSHIP approach?

KJ : That's an excellent question. I never had that question before. I have a long list of movies that doesn't. Having one that really shows SMARTNERSHIP, I have to think about that. I don't have one right here.

AD : If not, that's something for you to work on in the next 30 years of your professional career. We need it.

NM : So Keld, building upon your last answer, what role does preparation play in helping guide and negotiation where the counterpart to the party you're assisting is particularly challenging, perhaps even using dirty tricks or tactics? And how are you able to help your clients still achieve a successful outcome?

Negotiation Checklists: The Key To Effective Planning (22:11)

KJ : Well, I think it goes without saying you guys are professional in the world of negotiation as well. I think we can all agree, regardless what religion in negotiation we believe in that preparation is king, isn't it? I mean, not preparing is the same as preparing for complete failure. I'm a big fan of checklist. And the reason is that we can train and practice and read about preparation and then we step into negotiation and forget 75% of everything because the stress is there, the counterpart is there, we get a surprising information, what have you.

What I quite often tell my client is that when you bought a plane, when you bought a flight, right? If the door to the flight deck is open, you often see the pilot sitting out there with a checklist. And I'm often asking my clients who is not prioritizing to prepare well, I'm often asked them, do you think the pilot sitting out there with the checklist because this is the first time he's going to fly this Airbus 350, do you think he's sitting out there desperately with the checklist thinking what the shoot is this button about? When should I push this thing? I don't think that that's the reason he's sitting with the checklist. He might've been flying this Airbus 350, 2000 times before, but he's still sitting with this checklist. And you know why? Because he knows that he will forget stuff if we don't have a checklist. So if a pilot is sitting out there with a checklist, we should probably work with the checklist as well, shouldn't we? And a checklist should be obviously very simple. We have lots and lots of them for different purposes and different occasions. And in our world, the checklist is basically two pages, that is kind of gathering the information that is required both prior, during, and post negotiation. So for instance, my new book negotiation essentially is sharing these very vital checklists, what it is as a minimum that you have to plan.

Now, back to your question, if what I call smoke and mirrors, if people are trying to deceive you, people are trying to lie or cheat you. Now, one thing I want to say is that I see too many of my colleagues who is obsessed with tools and techniques to read the counterpart, manipulate the counterpart, identify the liar, and figuring out whether they're telling the truth and how can we convince them and how can we make a shortcut into convincing the counterpart. Let me just take a step back and say, why do we have all that smoke and mirrors in negotiation? What if negotiation was just between two human beings that actually wanted to make two plus two create more than four?

What if negotiation was just between two people who talked about how they want to negotiate, they agreed that transparency and openness and just being Nolan and Keld would be way better and would actually achieve more result and save a lot of time instead of playing all these games.

I'm not saying that is possible all the time. I'm just saying there's a big difference whether we are sitting in a commercial negotiation where two parties are trying to generate value and not at the expense of each other, or we are sitting in a hostage negotiation where you can't create a value because it's basically question about one is going to win at the expense of the counterpart. That's two different negotiations. So, when I meet negotiation advisors and trainers who spend most of their time trying to educate people on how they can build up the toolbox of all these techniques and tools to manipulate a read or whatever you call it, the counterpart, I'm thinking, this is a sad world. If that's what we're preparing our corporate negotiators to do, it's basically uphill because that is a step back.

So back to what I said, why don't you just openly talk about what a negotiation is? We have what we call a code of conduct in negotiation that we ask our client to present to the counterpart. And for instance of that code of conduct that's in the new book as well, by the way, is actually stated, ‘we will not bluff, we will not lie, we'll be transparent’. And if you feel that we are not open and honest and transparent, please tell us and we expect the same of you.

So it's about changing again, back to what I said, changing how we perceive negotiation. I can only repeat what I just said. A commercial negotiation is a hundred percent different to a hostage negotiation. It's two different worlds. And if you call me Nolan right now and said, we have a hostage thing going on across the street, could you come and help us? You are an acknowledged negotiation expert. I would say, I would've no clue. I don't know how to deal with any hostage negotiation. It's not my field. So it's two completely different worlds.

AD : You talked about establishing rules of the game upfront. Is that connected to this idea of presenting a code of conduct and say, “Hey, here's the game we're playing. We're not playing hostage negotiation situation, this is what we're doing.” Is this part of it dealing with difficult tactics is how you kind of lay the foundation early?

Navigating Trust and Transparency In Negotiation(26:37)

KJ : Oh yeah. Absolutely. And you know what the scary part is? It's obviously not always working. I had a case, I was sitting in Europe with a client in the construction industry and we were establishing, creating this whole strategy for the business. And the construction industry is especially interesting both in North America and Europe because profits are very low. They have an incredible, huge turnover, but the revenue, the profit is very low typically in that industry. So we have a major construction company in Europe. We want to change that. They're only doing 2 and a half, 3% profit bottom line. And when you turn our wise millions and millions and hundreds of millions of Euros, it's actually a tiny profit line. So they said, Hey, how can we change that? We want double our bottom line.

So they came to us and said, could you help us out creating this strategy? And part of our strategy is actually reaching out and doing a pilot project with one supplier and one client. So we did that. We went to one client, a major Swedish company who were a major client to our client, and we sat down for three hours and we're talking about rules of the game, how we want to negotiate in the future, the list of variables. We wanted to be transparent about, cost, blah, blah, blah, blah, all that. And the Swedish company praised the whole idea, said, wonderful, we'd love to do it. We want to do it. And they accepted and even signed the code of conduct. They went to a German company that was actually on the supply side, and typically the supplier is more willing typically to go into this game because the supplier has more to win and obviously they want to maintain a good relationship to the client. But the German supplier, when completed the opposite way, they actually thought there was an agenda.

Typically, I find that the suppliers are more happy than the clients to embrace the idea of SMARTNERSHIP because they can benefit from it. But this was a German supplier and they went in the complete opposite direction because they actually thought there was an agenda where they'll start arguing saying, “well, why should we do this right now? Because we've been working together for years and years and it's been going perfectly, but we can reduce the price.” So they actually didn't get the concept at all.

So, what I'm trying to say is that it's really important introducing the idea. And back to your question, it's really important to identify and part of rules of the game introduce how we want to negotiate and code of conduct is part of that already at step one. So we agree that you know what, we have to be trying to be honest and transparent, and it's very important actually to verbalize what trust is as well. Some people come to me and said, we can't talk about trust. It is like a taboo. But sure you can and you should actually be talking about trust. So what happens if trust declines? How can we work together to increase trust so the trust factors should be on the agenda.

NM : Hey everyone, Nolan here. I have to jump in at today's podcast for part A of the show. Be sure to rate, review and subscribe to the NEGOTIATEx podcast if you haven't already. And also join us next week for part B of this awesome interview.