The Naked Negotiator

“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.

Popularity: 11% [?]

If you want to read a fascinating biography of a legendary dealmaker, philanthropist, and robber baron read David Nasaw’s biography, Andrew Carnegie (Penguin Press, 2006).

Although he stood just under five foot tall, Andrew Carnegie (1835-1919), as a dealmaker and corporate capitalist, consistently outgunned J.D. Rockerfeller and J.P. Morgan, the two other giants of the Gilded Age.

Carnegie was a remarkable dealmaker, salesman and negotiator who outwitted Rockerfeller and Morgan in most of their big deals. He was often unscrupulous. His business dealings were often unethical though not necessarily illegal at the time.

Carnegie is best known as a union buster. Yet early in his career he was lauded when a proposal for a farsighted deal to steelworkers tying wages to profits, so that both the bosses and the workers would share in good times and in bad. The union agreed to cut wages and increase working hours during a market downturn.

However, when the boom time returned, Carnegie reneged on his promises. The steel workers went on strike calling him a liar, hypocrite and scoundrel.

Carnegie believed it was contrary to the “laws of civilization” to pay workers more than the minimum they needed. To pay workers more than they needed was to “encourage the slothful, the drunken and unworthy.”

The great benefactor who bequeathed libraries, museums and vocational schools to the nation was happy to see his chief manager call in the Pinkerton guards who fired on striking workers.

President Teddy Roosevelt believed that, “if Carnegie had employed his fortune and his time to doing justice to the steelworkers who gave him his fortune, he would have accomplished a thousand times what he accomplished” with his generous philanthropy.

I agree with Roosevelt.  What do you think?

Popularity: 82% [?]

Harry Mills has been selected to join Negotiators International - an international network of expert deal-makers and negotiators.

Founded by Israeli negotiator and author, Daniel Weiser, Negotiators International offers business and government clients access to an international network of top dealmakers based in Israel, the USA, Germany, Canada, China, Germany, Japan, Korea - and now in New Zealand!

Popularity: 80% [?]

The year: 1912. Teddy Roosevelt was nearing the climax of a hard fought presidential campaign. The final push was a whistlestop tour through middle America. At each stop Roosevelt planned to deliver an inspiring address and hand out thousands of pamphlets. On the cover of each pamphlet was an imposing Presidential portrait; inside was a rousing speech. Hopefully, these would win over vital undecided voters.

The final tour was about to begin when a campaign worker noticed a small printed notice on each photo: Moffett Studios - Chicago. The photograph was copyright and no one had obtained a clearance from Moffett.

Unauthorized use of the photo could cost a dollar for each pamphlet distributed. The prospect of a three million dollar bill sent a chill through campaign workers. They simply couldn’t afford it. The pamphlets were a crucial part of the re-election strategy. If they went ahead without Moffett’s permission and were caught out, they’d be branded lawbreakers and be liable for a small fortune.

The campaign workers concluded they had no choice; they had to negotiate with Moffett, and there was no time to lose.

You can imagine how they felt, Moffett seemingly had them over a barrel.

Dejected, they sought campaign manager George Perkins’s help. Perkins immediately instructed his typist to cable Moffett.

“We are planning to distribute many pamphlets with Roosevelt’s picture on the cover. It will be great publicity for the studio whose photograph we use. How much will you pay us to use yours?”

The reply came back soon:

“We’ve never done this before, but under the circumstances, we’d be pleased to offer you $250.”

Legend has it Perkins accepted without asking for more. Perkins understood the power of information; the critical role it plays in shaping a negotiation. By selectively controlling the flow of information to Moffett, Perkins created the illusion that he held the upper hand.

Information power lies at the heart of the bargaining process. In even the simplest of negotiations, both parties take a position, then present facts, arguments, data and other information to support that position. Both sides then use information to get the other side to modify their position until there is enough common ground to reach a mutually satisfactory settlement.

To guard against information being manipulated or concealed, you must do your homework. The more information you have, the more power you have. It’s that simple.

Popularity: 51% [?]

Between 1969 and 1973 Henry Kissinger conducted secret negotiations with North Vietnamese diplomats in an effort to negotiate a face-saving end to the Vietnam War for President Nixon.

Kissinger was undoubtedly very bright, he had three degrees from Harvard and had written a raft of papers and books on international diplomacy and arms control. Kissinger also rated himself as a formidable negotiator. When a journalist asked him what personal qualities it took to be a diplomat Henry replied,

“Knowledge of what I am trying to do. Knowledge of the subject. Knowledge of the history and psychology of the people I am dealing with. And some human rapport…To have some human relations with the people I am negotiating with. This takes some rough edges off. They will make concessions they wouldn’t otherwise make.”

In his first secret meeting with North Vietnamese diplomats in Paris he believed he had made progress. He reported back to Nixon the North Vietnamese had signaled possible concession.

Later Kissinger had to admit, the North Vietnamese had agreed to “nothing more than a willingness to hold future secret discussions at unspecified future dates.”

Xuan Thuy Hanois’s representative “had no authority to negotiate. His job was psychological warfare,” Kissinger later concluded.

Kissinger had made the elementary error of confusing “the monkey with the organgrinder.”

The dangers of negotiating with someone who has no authority is something we all need to guard against.

Popularity: 48% [?]