The Naked Negotiator

Have you ever noticed that smart negotiators use simple words? They don’t try to create confusion and ambiguity with jargon and bull. George Orwell in Animal Farm wrote:

“The great enemy of clear language is insincerity. When there is a gap between one’s real and one’s declared aims, one turns instinctively to long words and exhausted idioms, like a cuttle fish squirting out ink.”

The same advice applies to contracts. Mark Twain advised:

“I notice that you use plain simple language, short words and brief sentences. That is the way to write English — it is the modern way and the best way. Stick to it; don’t let fluff and flowers and verbosity creep in.”

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No sense of humor…

My wife and I were watching Who Wants to be A Millionaire while we were in bed.

I turned to her and said, “Do you want to have sex?”

“No!” she answered.

I then said, “Is that your final answer?”

“Yes,” she replied.

Then I said, “I’d like to phone a friend.” That’s the last thing I remember.

The wife in this story gets to have the final say.

In most sales negotiations however, the customer has the final say.

Their threat to “phone a friend (re:competitors)” is always there.

Customers are rarely chained to you by the vows of marriage.

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Negotiators are persistently, and irrationally overconfident. Research shows dealmakers consistently overrate their talents, knowledge and skills. When overconfidence combines with arrogance or excessive pride the result is hubris.

The best and most persuasive evidence of overconfidence and hubris comes from the world of corporate mergers and acquisitions. Empire-building CEO’s have created what is now a multi-trillion-a-year making orgy.

Yet study after study- carried out over the last 30 years - shows up two out of three mergers and takeovers fail. Instead of creating wealth for the buyer, they destroy it.

A prime reason: An overconfident ego-driven buyer paid too much for the acquisition in the first place.

In Ego Check: Why Executive Hubris is Wrecking Companies and Careers and How to Avoid the Trap, author Matthew Hayward says while overconfidence is essential for business success it can also be highly destructive.

Ego Check identifies four sources of overconfidence. The first source is “excessive or exaggerated pride.” The symptoms are needing to impress others and inflating data to exaggerate their achievements.

The second source of destructive overconfidence is “isolation.” The isolated person shuts herself off from negative feedback. Hayward uses former Hewlett Packard CEO Carly Forina as his prime example. In the days before her fall she surrounded herself with protective assistants - who were unwilling to tell her that she was wrong.

The third source of destructive overconfidence is in “selective judgments.” Whenever you get feedback that doesn’t fit in with your view of the world you discount or ignore it.

The fourth source of destructive overconfidence is “underestimating the consequences” of their decisions. Failing to think about tomorrow fuels hubris in decision making today.

If any of Matthew Hayward’s four sources of overconfidence are present in your organisation, Beware.

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You are ambling down the street and you spot a dime on the pavement. You bend over, pick it up, just as a $10 bill flies by. Because you concentrated on picking up the dime, someone else grabs and pockets the $10 bill.

The opportunity cost of pocketing the dime is $9.90.

Profitable deal making invariably involves opportunity costs — the costs of not landing an alternative deal.

In deal-making, before you even start negotiating, you need to assure yourself you are talking with the right party. If you want to achieve your Best Possible Agreement (BPA) you must talk to the right people.

Too many deal-makers pursue sub-optimal deals with the wrong party. So, instead of ending up with the Best Possible Agreement (BPA) they end up with a Barely Acceptable Deal (BAD).

In a recent webcast I ran with over 200 C level executives, over 60% in an online poll reported over half of their deals could be classified as Barely Acceptable Deals. If you have a high proportion of BAD deals you need to review your dealmaking process now!

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“We lose money on every sale… but we make it up on volume.”

- Insolvent Retailer

If you substitute the word acquisition for sale, this quote describes the behavior of more than a few CEOs who pursue expansion without disciplined negotiation strategies in place. The fact is, that in the orgy of acquisitions and mergers at least 50% of buyers lose money. In essence, they overpay. The skillful ones, such as G.E. and Pitney Bowes, who pursue disciplined plays, executed by highly trained staff, enjoy markedly superior results. In the last six years, Pitney Bowes has acquired 70 companies. In the words of their CFO Bruce Nolop:

“For us buying other companies couldn’t be a seat of the pants adventure, it had to be tracked as a business process.”

Manage the process, shape the result. Smart dealmaking is much more about process management than few dealmakers care to acknowledge.

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