Hey folks! Welcome back to the NEGOTIATEx podcast. We are continuing our conversation with John Dieffenbach, a highly experienced and renowned negotiator. In Part A of this episode, John elucidated the role of communication, improvisation, humor, and a keen understanding of the negotiation context in reaching successful outcomes.
He also shared strategies for handling challenging negotiation scenarios, including walking away when necessary, and highlighted the necessity of trust-building. Today, he delves into a range of different topics with greater detail.
So, without further delay, let’s get to the meat of the matter.
Nolan and John discuss the idea of ‘setting the table’ in negotiations. These are the initial steps taken before and during the early stages of negotiation to set the agenda and ground rules and shape the environment for a more fruitful outcome.
John explains the significance of understanding the other party involved and shares his strategy of reaching out to them before the negotiations begin, building rapport, and emphasizing their shared goals. He underscores the need for both parties to manage the negotiation process collaboratively to expand the zone of potential agreement, meet deadlines, and make the deal beneficial for all involved.
Additionally, Dieffenbach highlights the importance of a systematic approach, such as building a cadence or creating a ‘close plan’ that plots the course of the negotiation in detail over a set period. He argues that while most people focus on negotiation tactics and substance, they often overlook the process.
According to him, a poor process can ruin even the most promising deals, and he advises that the right team should be assembled for negotiations.
Next, Aram asks John about the temptation of entering a bad agreement due to the pressure of closing a deal. Dieffenbach acknowledges that it’s a difficult situation in business, especially because negotiators have to consider not only the company’s interests but also the interests of everyone on the other side.
He highlights the importance of understanding who they are dealing with, their social styles, and what’s important to them. Dieffenbach also notes the internal pressures that can come from salespeople and executives with their targets and quotas, which can make it hard to challenge a deal that starts to go awry.
To counteract this, John often has to push back against his team members, explaining that saying ‘no’ to certain requests can actually help close the deal. He uses his experience to illustrate that the other party isn’t likely to bring in the competition after long periods of negotiation, even when a request is refused.
Dieffenbach also discusses his role as a negotiator and its limitations, as he doesn’t always have the final say on decisions. He shares an anecdote about an executive undermining his decision, which led to a conversation about the importance of maintaining credibility and authority in negotiations.
Lastly, John emphasizes that negotiations aren’t just about the substance of the deal but also the process and dynamics of the negotiation, including who is the face of the vendor to the client.
After that, Nolan inquires about John’s experiences with complex multi-party negotiations and asks him to share his strategies for managing such situations successfully.
John distinguishes between two scenarios of multi-party negotiations. In one scenario, he is negotiating with a team of companies that are aligned in some way, and in another, there are multiple distinct companies, and a three-way agreement is necessary. Dieffenbach finds the latter more challenging due to the increase in the number of interests, variables, and potential conflicts.
In such complicated situations, Dieffenbach explains, some suggest forming a joint venture to simplify matters, but he cautions against this. He argues that creating a new entity introduces another layer of complexity, with new issues about control, ownership, and intellectual property. Instead, he recommends trying to negotiate contracts that can achieve the same goals without forming a new entity.
John maintains that the key principles remain the same, regardless of the number of parties involved. It’s essential to understand the interests of all parties, to analyze their positions, and to anticipate the likely outcome based on the current trajectory. If the relationship with the other parties is poor and their BATNA (Best Alternative to a Negotiated Agreement) is strong, he advises against proceeding with the deal.
For negotiations involving multiple parties, he identifies the need for each party to have a ‘voice of the deal’ – someone who can articulate a unified perspective and represent common interests. Furthermore, he emphasizes that it’s crucial to align on the goal from the outset and have representatives who can speak for the interests of their respective parties.
With these elements in place, while negotiations might still be challenging due to the number of variables, they can potentially be successful.
Moving on, Aram asks John about his experiences leading teams of negotiators and what he does when he’s in charge of such a team.
In reply, the latter highlights that he is part of a team of 12 people at Ernst & Young who always share best practices and discuss what they see in the field. He says that the team manages a portfolio of deals at various stages. Each team member is a “first chair” negotiator, and he helps them understand who they’ll be working with and what to expect based on his experience.
Additionally, John underscores the importance of adapting to the social styles of the people with whom they are negotiating. Dieffenbach himself is an ‘expressive,’ someone who talks a lot. However, if he knows he’s negotiating with an ‘analytic’ who prefers facts over discussions, or a ‘driver’ who wants to get things done quickly, he knows to adjust his approach.
On that note, he shares a story about a mentor, also an expressive, who successfully adapted his approach for an analytic client. Given a 30-page PowerPoint deck to explain a proposal, the mentor chose to use just one page, knowing that an analyst would focus on reading the data rather than engaging in conversation. After the client had absorbed the information on the one page, the two were able to have a productive discussion.
Overall, it’s important to understand the person with whom you’re negotiating – knowing what they’re like and how best to communicate with them. Dieffenbach emphasizes the need to use the right words at the right time with the right person and to adapt one’s social style to match that of the other party for successful negotiation outcomes. His mentor’s story illustrates this principle in action.
When asked to share a negotiation failure, John mentions that the negotiations he considers the most unsuccessful are those that ended in deals that should never have been made.
He highlights that negotiation isn’t about reaching a deal but rather about reaching a decision on whether or not to make a deal. In his view, many negotiations fail because the parties involved are not ready for what they are getting into. He refers to instances where clients were unprepared for the demands of the deals they were entering into, leading to damaged relationships and broken agreements.
John puts forth that in most cases, when deals fall apart, clients claim that as experts, service providers should have known they were not ready to fulfill their obligations. He explains that in such situations, he always informs his clients about what they need to do to be ready, but sometimes this advice is not taken seriously enough.
The speakers then go on to discuss the challenge of protecting clients and ensuring they understand their limitations. Dieffenbach adds that in his line of business, negotiations don’t end with the signing of a deal but continue over the years as the nature of the services provided or the economic environment changes.
He stresses that companies should cultivate a culture of negotiation and customer service. This involves not just securing a deal but also managing the relationship post-contract to ensure a balance between providing the best service to the client and getting the most out of the deal.
John points out that companies often overlook this aspect of negotiation, which is crucial because it’s where the actual profit lies.
John also talks about the importance of accurately measuring performance and outcomes in sales and negotiations. He refers to the well-known saying in consulting that “you get what you measure,” underlining the fact that if sales are what a company cares about, they will achieve sales. However, that doesn’t necessarily mean they’ll be good.
John also advises carefully considering what outcomes are sought and ensuring that these are clearly communicated as targets. He points out that the same principle applies to Key Performance Indicators (KPIs). According to John, setting KPIs that reflect a business’s or client’s priorities is essential; otherwise, the metrics may be met, but they may not measure what is truly important.
So, he highlights the need to understand what the client truly cares about, change the KPIs and metrics accordingly, and track these instead. He underscores that this principle applies to sales, negotiations, and general performance across the board.
His key message is that you will always achieve what you’re measuring, so ensuring you’re measuring the right things is critical.
Next, Dieffenbach recounts a negotiation he’s particularly proud of due to its strategic approach and positive outcome. He speaks about a deal with a dominant telecommunications company in Europe. The company, which was going through cost-cutting due to increased competition, asked John’s team to reduce their rates by 30%.
Instead of simply agreeing or denying, John and his team took the time to understand the company’s underlying interests. They realized the company was more interested in cutting the cost of services rather than the rate.
This crucial difference led the team to suggest several modifications, such as extending the contract from one to five years and offshoring some of the work to India to reduce costs. They also ensured a revenue commitment of $50 million per year from the company.
Additionally, Dieffenbach’s team proposed a package that cut the cost of the service by 31%, not just meeting the client’s initial ask, but exceeding it, allowing the purchasing department to look like ‘rockstars’ within their organization.
As the conversation wraps up, Dieffenbach offers his final thoughts, urging listeners to stay curious and to learn from their surroundings. He also speaks about a recent addition to his negotiation toolkit – mindfulness.
John strongly believes that mindfulness helps manage and control emotions, which enhances one’s ability to influence others.
He encourages further reading and understanding of psychology, emotional intelligence, and the source of emotions as potent areas for self-improvement and building confidence in handling situations.
Thank you for your time!
Nolan Martin : Hey everyone, thanks for joining us on the NEGOTIATEx podcast. We are continuing our conversation with John Dieffenbach, a corporate negotiator. If you haven't already checked out part A of this show, be sure to do that first. Let's jump in the conversation with John.
NM : So I think what you're discussing gets to the concept and negotiation of setting the table and it involves all of the things that you do before the negotiation even begins. And in the early phases of the negotiation to set agenda, ground rules and things like that. Are there things you intentionally try to do before the negotiation starts to create a process and environment conducive to what you're trying to accomplish?
John Dieffenbach : Yes, absolutely. I mean, certainly in terms of understanding who the other party is and the approach that I'm going to take. And I do like the notion of set the table because that's absolutely right that I will, if I can try to have a one-on-one with the other party, if this is something that's come through a competitive bid and I've had some exposure to them as part of, you know, what people call bid defenses or orals, where you have to present your solution to the the client. And if I have identified who my counterpart is going to be in some of that process, I may reach out to them one-on-one and to try to build some affinity with them on the notion of we're trying to accomplish the same thing. I've used this line many times because it's true. I will say to the person from purchasing, procurement, sourcing, whatever you want to call them, “there are two people in this room who know how to get deals done, you and me.
Everybody else, they think they know how to get deals done, but they don't do this for a living.” So we're going to make this happen. We gotta manage these folks. And the notion of running the room is not me, it's running the room together with the other party. Because you really need two parties to do that, to be effective in order to expand the zone of potential agreement, make the deal bigger and better, hit the deadlines that you need to hit.
So, it has to be a collaborative effort. In the event that I have a difficult party on the other side though, I then also have to be able to run the room by myself and know how I'm going to get that party to follow a closed plan.
So, a big thing to do, for example, is just build a cadence. If you're going to do something that's a big deal where they say, we want to get this done in 90 days, well then we need to plan out the next 90 days.It can't be ad hoc every Monday that you're saying, when can we meet this week? So I will usually block the calendar for three hours every morning for the next 90 days for everybody who's involved with the deal and say, this is just so we're protected if we need this time.
And the deal that I'm on right now, as I said, we're meeting every day for two hours for the next two weeks to get it done. It's on everybody's calendar. So the close plan, which is something that a lot of people don't think about, but people think about the substance. I mean, a lot of the stuff you read about, people talk about tactics, they talk about anchoring, they talk about who bids first. But people don't think about the process of the negotiation and how you're managing the process. And the process can destroy. Bad process can destroy great substance.
If you have a negotiation where you've got a great deal, but the wrong people are communicating with each other, you've got the wrong people at the table, you're going to run into a lot of problems in terms of trying to come to agreement on things because you don't have the right authorization, you don't have the right point of view. You may have somebody in there from legal who's negotiating it without the business context. So part of the process, you have to figure out, okay, who's going to be at the negotiation table? We need a subject matter expert.
We need legal, we need somebody from finance. And that's at a minimum. We need those three roles there. I'll have those three roles. Now we can kind of handle the scope of the deal. If you're missing one of those people, you're going to have a problem with process, you're going to destroy a great deal. So all of those things are things that I think about when I'm starting the deal in terms of how am I going to set the table? How am I going to manage a process? How are we going to get to done and publish that with the client and get them to agree to it that this is the way we're going to work together. And usually they like that because they want somebody who can come in and say, this is the way to get to signature. Because you know, my joke with the team is if you're lying on the operating table, you don't want the surgeon to walk in and say, so has anybody ever done this before? How do we start?
NM : Look who got reinstated?
JD : That's a great commercial. Yeah. So, that's, that's like the first thing is show up and say, I know what to do. Here's how we're going to get to where we need to go and show that confidence in managing the process of what has to get.
Aram Donigian : So, John, two thoughts. One, your comedy bit has inspired Nolan to jokes, which I'm enjoying, but why I love that quote, bad process can destroy.
JD : Bad process can destroy good substance. Yep.
AD : Hey listen, you know, I know that sometimes negotiators get caught up in the, you know, hey we just gotta, let's make a deal. Let's just get a deal done mindset. And sometimes that leads us to agree to something that we really should have walked away from, you know, has that ever happened to you or a member of your team? How do you coach or how do you guard against the temptation of a bad agreement.
JD : Yeah, it's really hard in business because you have to go all the way back to the notion of interests. Because interests are not just the company's interests. You've got the interests of every single person on the other side of the table. So again, going back to the notion of setting the table and how you prepare, create a power map. Who are all the people we're going to be dealing with? What are their social styles? What are they like? What's important to them?
And if you have somebody, the people on your own team, if you've got a salesperson who has to meet a date to hit a quota or an executive that needs this deal to close to make their numbers, now you have an interest that's going to be really hard to challenge if the deal starts getting messy. And so a lot of times I have to push back on those people because they see me saying no to things. They see me challenging the legitimacy of something the client has asked for as now the deal's not going to get done, John, because you're not saying yes. And I have to say to them, no, actually saying no is going to get the deal done because they're going to keep asking until we say no.
So the time has come to say no, they're not going to go anywhere. They've been talking for three months. You think they're going to bring in the competition now for something that they have to get done and they have to get started on in the next two weeks? No. So we have to say, no, we can't do the deal this way. It'll undermine the deal, but I only have so much authority. We negotiators try to be influencers without authority because you don't necessarily control the final decision. That decision is above my head.
So somebody can come in and say, now John, we're going to say yes to this [laugh]. In fact, I had a challenge with an executive one time where I said, they're going to ask for this and the answer has to be no on it, or it's going to undermine the integrity of the deal. And he said to me, well, you can go ahead and say no, but Harry can come in and, more senior executive. Harry could come in and he'll say yes to this and, and then he'll get the deal done.
And I said, “Jim, if Harry's going to come in and take my legs out from underneath me, then he should just sit at the table right now. I'm not going to sit there and say no. So he can come in and say yes, that will then take all authority that I have and all credibility I have as the person who's trying to get the deal done outta here.” His head kind of went back like, gee, I'd never thought about that. And I thought, yeah, of course you never thought about that because you're not a negotiator, you're [laugh], you're a business guy you know who sells services. But this is what happens. This is the dynamic. And again, it's a process thing. That's not a substance thing. That's a process thing is who is saying yes, who is the face of the vendor to the client.
AD : And you're getting a little bit there too, to influencing upward, which is so difficult to do. And so critical to your work.
JD : Yeah, it is. If you're in the world that I'm in where you're trying to do this in a corporate environment and you're dealing with a different team, every time I have to build trust with that internal team first. I have to win the first chair on every single deal. Nobody ever says, John's here, he's going to run the deal. I show up with an account team that's trying to get a large deal done and they kind of look at me like, and who are you? So the way it went. And then when I'm hiring people, I will describe the job as you're going to get dropped into the jungle. You're going to have one tool and you have to get out of the jungle in time with only that one tool. And that one tool is your experience. You have to drop into that conference room, meet this team, internal team for the first time, build a relationship with them, have them give you the first chair, take that first chair, and now you have to do the same thing with the client.
You've gotta build that same sense of trust. You've gotta build the relationship all over again. And it's all just leveraging experience. It's all, like we were talking about the improv. You don't know where it's going to come from. You gotta kind of think on your feet and react and figure out how am I going to communicate? What are the words of influence, what's the right thing to say right now? And I've said the wrong thing sometimes. You sit there and it's just something pops into your head and you say it, oh, that was not good. [laugh], I should not have said that one [laugh]. But you know, over time you forgive yourself. [laugh]
NM : Could you speak for a moment about complex multi-party negotiations and business and maybe share an example, what do you see as the key things to get right or to manage success, to manage to be successful in the multi-party context?
JD : Yeah, so there's two different versions of this that I've dealt with. I've had multi-party where I am negotiating with a team of companies that are trying to create something. So, now I've got four different companies in front of me and they are aligned or not aligned or whatever they are. So that has its own dynamics. And then you have it where there's three different companies that are there and you're trying to get a three-way agreement. That's actually the harder one to do. The three-way agreement because you know, mathematically the number of interests and variables and conflicts and things that can arise become much more difficult. And in those situations, that's usually when you'll have somebody say, why don't we just do a joint venture? And my line is, the first person in the room who says joint venture is the one who knows the least about deal making [laugh].
Because everybody thinks that's an easy thing. It's like, oh, let's just create a company. It's kind of like the, you know, the old kids thing. Hey, my dad's got a barn, let's put on a show. Like, hey, let's just create a joint venture. This has got, well no, now you've got a whole another layer of complexity that gets involved in it. Because now you've gotta figure out who's got control of the joint venture, who owns this, what shares are in, what happens when it dissolves, who owns the intellectual property. So it's always better to just try and negotiate contracts that can do all the same things that any kind of joint venture would do, rather than trying to create a new entity.
And I challenge anybody to give a list of 10 joint ventures that have actually fulfilled their purpose when companies have created them. Because 90% of the time they fail and they fail because of their founders. Their founders eat away at the value of the joint venture and they're destroyed.
So it's still the same fundamentals though. You have to analyze the parties, understand the interests, and at this point I'm at a point where I can sit down and kind of take in the story, the deal, list everything that's going on and say, based on the trajectory we're on right now, this is where the story's going to end. It's not going to end well. Here's what we need to change. And that's all a function. Looking at the seven elements, doing an assessment of where are we? I do a red, amber, green on them, how's our relationship to the point around trust, right?
If you do an assessment of those elements and you find that relationship is red, we have a bad relationship with the parties and BATNA is red because the client has a terrific BATNA, they don't need to do this deal with us, then just stop doing the deal because this is a client that doesn't like us and can go to somebody else. So why would you even start?
So the same thing happens in a multi-party agreement. You've gotta identify the voice of the deal for each one. When I had the situation with the four parties, that's what made it so difficult is there was no voice of the deal. They all had their own point of view and they were all asserting their point of view. And I had to say to them, guys, where's your visionary? Where is the one person who represents the common view you have of this outcome that I can work with? Because I keep getting different answers from the four of you. And the deal took a very, very long time. We got it done, but it took a very, very long time as a result of that.
So if you've got a voice in the deal on each party and they can sit down and say, this is what we're trying to put together, and they can establish a goal. Usually if you get that goal established, that becomes your north star to say, guys, we're trying to accomplish this. Isn't there a way we can work out our differences here to make this happen? And so that's the key part. If it's multi-party, you've gotta align on what the goal is upfront. You've gotta have the people who are the voice of the deal at the table. And then you, you might get somewhere, it's going to be tricky because you've got so many more variables, but you can still get it.
AD : Love the idea of, Voice of the Deal. You need to write that book. There's your title right there. So [laugh]
JD : Actually I am writing a book and it's called ‘Running the Room’.
AD : Yeah[laugh] of course. Of course. Well, we'll, we'll show up. Listen, as you talk about running the room, you mentioned leading teams of negotiators and something you've done a lot of in your career. For someone who hasn't done that, what exactly do you do when you are running that team of negotiators and what's the value of having that kind of specialized asset, a specialized negotiation team to a company.
JD : Yeah, that's a great question. So basically I just sit around all day and let everybody do the work. I'm really fortunate to have a community among the 12 people that, you know, we are as a team, that we share best practices. We talk about what's going on, what are we seeing. We tell deal stories and so forth.
But the way it operates is we obviously have lots and lots of deals that come into EY and somebody's gotta get on them, somebody's gotta get assigned to them. And so different people have different strengths based on their backgrounds. And so we will assign the deals out to a negotiator based on availability too. Because sometimes, you know, we're typically handling, everybody's typically handling two or three deals at a time because you can kind of slot, you know, and they're all at a different part of the life cycle. Some of 'em are ramping up, some of them are ramping down and some of them are in, you know, full blown.
Like the one I'm on right now is in full blown negotiation we're trying to get to done. So I have a couple other ones that are, you know, are sort of getting started. So we manage the portfolio of deals across the team. They are all first chair negotiators. So sometimes I have to help them to the extent that I have more experience on who some of the people are internally to say, okay, you're going to be working with so-and-so, this is what they're like to work with. Here are the things you need to think about. It could be something like social styles, it could be this person is an analytic. They ask a lot of questions, they don't like a lot of talking, they just want you to give 'em the facts. They'll make a decision and they'll be rock solid on the decision.
But you've got to, because we deal with that a lot, that you have to adapt your social style to other people's social styles because I'm obviously an expressive because it's hard to shut me up. But if I know I'm going in front of an analytic or I know I'm going in front of a driver, somebody who's like, let's just get going, then I know to dial it way, way back for them.
It was actually a great story. Another one of my mentors, he is an expressive, extreme expressive, wonderful guy, very funny guy. And a team asked him to talk to a chief technology officer at a client who was engineer, analytic, not very charismatic person. And they said, we need you to explain to him why we're doing this the way we're doing in order to accomplish his goal. And they gave him a PowerPoint deck with 30 pages and he said, you're telling me he's an analytic? And they said, yeah. He said, I've only got 30 minutes with him, I'll take one page. And they said, no, no, you have to. He said, no, I'll take one page because I'll tell you what an analytic does. You hand them a PowerPoint deck and they will read and they will not, he will not look at me, he won't engage with me. He will suck in the data.
And so they distilled it down to one page. He walked in, how you doing? Put this down. Said, here's what we're trying to accomplish. Immediately his head went down, he read the page, that was it. He looked up. Now you could have a conversation because there was nothing else to read. There was no more data for him to suck in. And so now Bob could actually talk to this guy.
So again, back to the point around setting the table, you need to know what you're walking into ahead of time to know what are the right words with the right person at the right time. How am I going to handle this situation? And so in that case, Bob was highly adaptable. He dialed way back on his expressive nature in order to deal with an analytic and and actually engage and try to build a relationship with him.
AD : Yeah. And going back to your background as a journalist and as a lawyer to know your audience. Pretty essential.
JD : Yes, absolutely right. And I would throw the standup comedian part in there too. Although I would never claim to be a standup comedian, but I have done standup comedy so I kind of know, you know, what's how you gotta work the audience and listen for the signals and things like that.
But yeah, that's absolutely right. You've gotta know your audience. You have to know how can you influence somebody if you are not thinking about what will cause them to say yes, you can't do it. So you've gotta think ahead of time about that. You have to prepare for all of those things in advance because ultimately it comes down to emotion, right?
You have to understand what is going to influence the emotion of the other party because decisions are made on the basis of emotion and emotions are created. Positive emotions are created by that sense of trust and collaboration and affinity. So it all builds one on the other in order to get that brain to move from here to here and get that no to a yes.
AD : It's interesting because that's something I've heard before is the research does show that the vast number, the majority of business leaders make decisions based on emotion, gut, not necessarily what the data says. I just find that an interesting concept and in being able to be aware of that, so powerful.
JD : It is, well in my world, I won't say this for whatever other people are doing in negotiations, but in my world, no client ever chooses the best service provider. Every client chooses the service provider who they perceive is least likely to screw up. But the point is, it's about risk aversion, risk avoidance. Everybody is afraid of making the wrong decision. And so that's where the emotion becomes so powerful is because people are thinking about what are the implications of being wrong. And the old line that nobody ever got fired for hiring IBM used to be, you know, a mantra when I first started out with IBM because I hired IBM, how could that have been a mistake? That's a risk aversion statement, right? ‘If you hire IBM, you can't be wrong’.
So when clients are looking at that final option, where I'm going to go with, it's going to be a gut because you can't tell, there's no data to say what the future's going to hold. So you're making a guess and you're doing it on the basis of trust in what I've seen and putting all the fat you can do all the pros and cons, but at the end of the day, you're still making a decision based on your emotion of what do I think is the least likely thing to be the wrong decision. I think it's this one, this is the safe one. And so another part of negotiations and being successful is knowing in advance what are some of the things that the client perceives as risk and embracing that risk and saying to the client, I got this, I understand it, I've dealt with it. And push those red flags down. The more of those red flags you push down, if you're a sales guy, the better the opportunity it is that you're going to win the deal because you seem like the least risky option to the client.
NM : When you've been negotiating this long, you've likely had one or two negotiations go south or not end up the way you would've hoped. Can you share an example of a negotiation that you consider a failure in looking back? What lessons did you learn from it?
JD : Ironically, [laugh], the negotiations that I consider the greatest failures are the deals that we did that we shouldn't have done. Because if you think about what constitutes success in a negotiation, it's that the parties ultimately met their interests, right? And negotiation is not about getting to a deal. Negotiation is about getting to a decision whether or not to make a deal.
And history is littered with examples of bad deals that people did and publicly traded companies that did bad deals or private. So there are many that I look at and say, that was a failed negotiation because I may have, and you know, and sometimes I thought it was going to be a good deal and it didn't. So it was much on me as anybody else. But there are ones that I knew it was going to go badly and said we shouldn't sign up for this. I think the biggest sign for me is when we are negotiating something with a client who's not ready for what they are trying to do, that's when I know we're going to have a problem. Because we do what we do all the time and suddenly it's like, okay, let's go. And the client's reaction is, “whoa wait, we have to get all that done. We have to give you all this we need and they can't keep up with us.” And then things come apart. And I've seen in my career, big deals that get signed that actually destroy the relationship because the client couldn't keep up and felt like they weren't ready. And they said, it's your fault that I'm not ready to get this done.
I mean, I'd say 95% of the time when deals fall apart, it's because the line from the client is that you are the experts. You should have known that I wasn't going to be able to do this. And I've had that happen to me. And I've said, but I did tell you and I did tell you what you needed to do to be ready for it and you didn't do it. And I actually had a client say to me, yeah, but you didn't tell me loud enough, [laugh]. I was like, how loud do I need to tell you that you need to put the parachute on before you jump out of the plane? How loud, how loud does that need to be? Because I told you [laugh].
AD : That's an analogy Nolan and I appreciate, it's hard to protect others from themselves. And yet it sounds like you're saying that's part of my job as a negotiator is I gotta help them to be aware of their limitations as well.
JD : Yeah. Because in our business, the negotiation doesn't end when the deal gets signed because we do deals where we're providing services, you know, and other companies, you know, many, many companies do as well. We are providing services for many years, right? And so after that deal signs the nature of the services is going to change over time or the economy's going to change over time and a company's going to do better, company's going to do worse, they're going to need something.
So the negotiations continue. And what a lot of companies miss is they may have somebody who is a negotiator to get the deal signed, but then they put in operators to deliver and they have no negotiation experience and suddenly they come up against the client and it's the same team that may have negotiated the deal for the client and they start asking for things and, and the vendor may not be ready for it.
And so a company should have a culture of negotiation. A company should have a culture as part of their customer service, that they know how to provide the best service to the client, but also make sure that they're getting the best out of the deal as well. There has to be a balance in those things. And I don't think anybody ever talks about that, about what is our negotiation philosophy or training post-contract signing. Because that's really where, that's where the money is. You're trying to deliver, you're trying to make the money right, and it can all very quickly disappear.
AD : Now as you talk about this culture of negotiation, can I just ask, part of that's gotta be in how we both review negotiations and then how we incentivize a reward or, alignment incentives, KPIs with negotiation outcomes. Do you have thoughts about how you manage both those things, the process of review as well as aligning incentives to for the results strategy?
JD : Oh, for sure. Yeah. I mean the metrics, it's the oldest saying in consulting that you get what you measure. So if you tell people that what we care right now about is sales, you're going to get sales doesn't mean they're going to be good, but there'll be sales. So you have to be very careful about what is it that we're looking for for outcomes here? And make sure people understand those are what the targets are or else they'll just go out and do what they're supposed to do.
And the same thing with KPIs. If you get your KPIs up, ‘key performance indicators’ for those who are, something I had to learn at IBM, you gotta get those acronyms. What are those things about? You know, just a CPU. They kept talking about a CPU. When I first got to IBM in 1992, I said, what's a CPU? This whole central processing unit. I said the central processing unit, what is the central processing unit? It's the computer.
Well then just say the computer. I mean, why are you masking it? But when you establish KPIs, then people hit the KPIs and yeah, you even when we're talking about performance in the work that we do, we're always very careful to say to the client, well this is what you're measuring. Is this what you care about? Because there's a line as they call it, ‘a green dashboard, red faces’, which means you're hitting all your metrics, your dashboard's green, everything looks great, but the client is really furious and you ask them why this?
Well, because this, this and this, but well apparently we're measuring what you don't care about. So let's change the KPIs, let's change the metrics, let's get the stuff that you care about and make sure that we're tracking that instead. So that applies in terms of sales, it implies for negotiations and it implies just in terms of performance that you're always going to get what you're measuring.
NM : So I asked you about a failure. Is there a single negotiation that you're most proud of and that you can share with us? And then why do you kind of consider it a success and how do you use it as the model to replicate?
JD : There is one that probably stands out above others because it was one where the team and I really aligned on being strategic about the approach and how we could turn this deal around. It was a deal with a telecommunications company over in Europe that had been dominant for many, many years. And they came to us, and we had a huge account with them. This is in one of my prior lives we had a huge account with them with 70 million a year on this one contract we had with them. And they said, we need you to cut your rates by 30%, which is a drastic, drastic reduction, obviously in our rates. So when I got over there and I spent three months in the country working on the deal, which was , you know, fun in of itself to get to see the country, the question to ask was why? Why do they want to cut rates by 30%? Let's get behind and understand the interest.
And they were going through cost cutting because they were now dealing with mobile carriers. They'd been the dominant, like here in the US AT&T was the only phone company for many, many years. They had been the only phone company. Now they were competitors. And so they had to become more nimble, they had to cut costs, they had to find a way to be able to pivot fast or on services. And so there was a mandate that went out that we have to cut costs everywhere by 30%.
Well, the question I asked was, is it about cutting our price by 30% or is it about cutting the cost of our services by 30% [laugh]? Because those are two very different things. Because if you're saying to me, cut the cost of services, let's look at how we're providing the services today and see if we can meet your interests with some other options that don't focus on rates, but focus on operation. And what I learned was we were doing an annual contract with them, with largely onshore people, folks in country doing their work, which were expensive. And we went back and we said, well what about if we proposed to them a five-year deal so that we don't have to negotiate this thing every year, we offshore some of the work to India so that we can provide it with a less expensive base to get the work done.
Quality of the work is going to remain exactly the same. Will they make a revenue commitment every year or 50 million a year, they were already spending 70 million? So that was easy for them as well. So we took this package and we went back to them and we said, so here's what we would propose. Let's do a five year deal. You commit to 50 million a year that you're going to do this work and we will cut the cost of this service to you by 31%.
Now the reason why that was so important, we weren't beating their number by 1%, we're actually beating their number by 11%. Because typically when somebody asks you for a cut, that's not their bottom line. They're throwing that out as a starting point and they really needed 20% reduction. They said it was 30, but they really needed 20. So us coming in and giving them 31% instead of the 20% that the purchasing department thought they were going to end up with. That made them look like rock stars.
And I'll always ask that question of a team. I'll say, first of all, who needs to be the rockstar on the other side? Who needs to be the hero? Who do we want to really make them look good to their peers and their company that they're going to come away from this saying, that was a great deal I did with them and we say these guys here, if we can make them look like the heroes, we can get this deal done. And that's exactly what we did.
So we took a request for a 30% reduction in our rates and we ended up signing a 290 million renewal for five years of all of our services with them. The 250 million dollars spent that they committed to, they hit that in the first two and a half years. So that was a layup for them. I wouldn't say it was an easy solution. The solution was there. But by really digging into it and pulling out the interest and understanding what we could do and what are the options here, and using all of the tools of getting the yes, we were able to come out with the, with a really terrific deal.
AD : We've asked this question of others that are negotiators in other fields, you talk about running the room. How do you run the room in your personal life? Is it easier, harder, more effective, less effective?
JD : Well, I've been married now for 36 years and I have five children, so I'm not running that room. I'll tell you that.
AD : I understand. Yeah, I understand.
JD : I mean, in my house, I'm just like a half step above the dogs. It's like, mom should I throw this away? No. See if your dad wants it first, you know, it's like, oh okay. I get a crack at it before it hits the garbage or it gets to the dogs, you know, good for me. But it certainly is when you take the philosophy of collaboration, negotiation and influence to heart. One does start to feel empowered. One actually starts to feel a little bit more in control when the nature is to say, what's the situation I'm walking into? How can I manage this situation? I won't say it was a fast process, but at this point in my life, it's hard to get me riled. It's hard to get me angry because I've spent 30 years of people trying to get me angry [laugh], both professionally, you know, and things in personal life, you know, family, friends and everything else.
And you know, just driving around there were always people you could easily get very emotional worked up over it. And so when you kind of take this step back and say, I need to plan. How am I going to get the outcome that I want? You really become a little bit more unconsciously strategic in the way that you lead your life that you sort of pick what's important, what's not important, what's in my interests, what am I trying to accomplish here? How do I help them accomplish that? Instead you laugh off a lot more things which may just be a function of age too, that you learn to laugh off more things over time.
AD : Usually I try to summarize at this point as we get ready to wrap up concepts that people have shared. There's too much here, it's too rich. So I'm not even going to try to do that. I would like to first of all say thank you for spending the time with us.
JD : Sure.
AD : It's been what a rich discussion. Second, I do want to pass it back to you John, for one final thought. Is there anything we haven't asked you? Is there one challenge you put out there to our listeners? Anything you want to wrap up with?
JD : So the one recent development first, you know, just stay curious because there's so much that you can learn out there. I learned so much from my team, from their experiences. It's a very collaborative. So always stay curious, find out how you can get better at this. And it's only within the last four years that I learned something that has been really powerful in terms of my negotiation style. And that is mindfulness in whatever form one wants to take it. Meditation, mindfulness, yoga, however you want to do it. I just simply engage in mindfulness and just finding sort of that quiet inside. Ultimately you have to, we have to learn how to manage and control our own emotions before we can influence the emotions of another person.
So the more that we can do to understand this emotional thing that we are and the behaviors that we have, the better we're going to get at it. So I do a lot of reading on psychology. You know, things like emotional intelligence and you know, who are we and where do emotions come from, things like that. That's a really potent area for improving that self and building that confidence of, “I can handle this situation, you know, I'm not concerned about it.”
NM : Awesome. Thank you so much for sharing John. And with that, that is it for us on today's podcast, if you haven't already, please rate, review and subscribe to the NEGOTIATEx podcast and we'll see you in the next episode.
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