Monday, February 19, 2007

A Successful Negotiation and its Lessons

Global Software, a large developer/marketer of specialized software, bought out the stock and thereby the main product of SuperTech Software. That main product was not fully developed, but promised great returns for Global, because the timing was right to take advantage of new government regs requiring such software. Global budgeted an extra ten per cent beyond the buy-out price to purchase training for its software people to learn enough about the product to finish developing it to something marketable.

Then they approached Cindy, the project manager and a principal developer at the former SuperTech, seeking the training they needed. They offered the budgeted 10%, but had a list of training tasks, although with missing parts. Cindy was confident that, personally and with colleagues she would organize, she could deliver the training. But not for the ten percent. What could she do?

Cindy’s business coach spent an hour or two with her persuading Cindy she could conduct an effective negotiation. She also got a few pointers from a professional negotiator. Then she approached Global’s project manager, Charles. She set a date to visit with him, and prepared a spreadsheet showing all the tasks that would be needed, reasonable prices for each task, and the total, which was about three times the budgeted 10%.

On the appointed day, and in several later phone calls, Cindy went over the details of the spreadsheet with Charles, explaining the amount of time required for each task, why the prices were in line with industry standards. She also explained how Global would waste its large investment if it went cheap on the tech transfer training, perhaps never completing the project, or completing it after the window of sales opportunity closed. He countered by explaining how they had set up a fixed budget and could not change it.

Finally, with persistence she convinced Charles, Global’s project manager. He in turn went to his boss and his boss’s boss to seek additional investment in training, using the materials Cindy provided. After hemming and hawing, the higher managers agreed, and Global issued a contract to Cindy, one that would assure her and her colleagues months of remunerative and interesting work.

This story—the names have been changed—illustrates several points about successful negotiating. The first is how important preparation is. The detailed spreadsheet greatly helped Cindy make her points. Doing it in advance enabled her to take the time to do it right.

The second is the use of outside, objective data. Here, that data were the prices for the various tasks, compared to typical pricing for similar training tasks.

Point three is that Cindy separated out any personal emotions she had initially about Global apparently trying to cheat her by offering a lowball contract, and using Charles as a battering ram.

The fourth point is Cindy stuck to her guns without being personally obnoxious or angry, but instead remaining informative. Eventually this negotiation worked out successfully.