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Strategies for Successful Project Negotiations — Part 5:
Seeing Things From the Client's Perspective
November 5, 2020
In previous blogs, we addressed several aspects of architecture and engineering (A/E) negotiations, including: a common misconception about negotiation, negotiation strategies, government negotiations, and negotiation preparation. In this post, we address the final piece to the negotiation puzzle: seeing things from the client’s perspective.
And this is definitely a case of “last, but not least.” While negotiation is, by its nature, a very “us-focused” activity, putting yourself in the client’s shoes is essential to success. Going into negotiations with only your firm’s interests in mind can quickly irritate and alienate the client.
And even if the client can get past your bull-in-a-china-shop attitude, it will likely be impossible for you and them to find the areas of mutual benefit needed to reach a win-win outcome. Ultimately, what you end up with is an unproductive “negotiating contest.”
Getting Input from Your Business Development Team
In most cases, your firm’s deepest connection with a client is through the member of your business development (BD) team that has interacted with them since the beginning. There are certain questions about the client that only that person can answer.
This person might not be selected to be part of your negotiating team, as they’re a little too close to things to be objective. But their insights on what’s important to the client are crucial for your negotiation preparation.
They can help you answer the first of two key questions:
1) What are the clients top concerns about the project?
2) What is our firm’s position on those concerns?
For example, your BD representative may tell you that cost is the client’s biggest issue. Your response to that issue might be that your firm is very efficient, and efficiency can help keep costs down. That’s good—that’s a point of connection that can move the negotiations in a positive direction.
On the other hand, if cost is their main concern and your firm has a reputation for having the highest fees in the area, that’s not a point of a connection. But taking a lower fee on this project could be a good bargaining chip. Either way, you’re prepared to discuss the issue.
Or maybe the client wants to create a “showpiece.” If you’ve got those kinds of projects in your portfolio, that’s good for some positive momentum.
So, essentially, you’re using input from your BD expert to identify notable places of alignment or misalignment with the client so that you aren’t caught off guard by them. In the case of misalignment in particular, you need to be ready to explain why the issues aren’t as important as they seem and/or be ready to discuss concessions your firm can make that lessen the impact of any issues. In other words, you need to be comfortable discussing an array of primary and alternative positions.
And, it’s absolutely acceptable to come into negotiations with some questions. There’s nothing wrong with saying, “In preparation for this meeting we discovered some gaps in our understanding of your wants and needs. Can you please tell us…?” We actually encourage the A/E firms we work with to script a list of questions that they want to go through in the negotiation process.
However, we caution them to make it clear to the client that they’re just asking these questions to help get to a win-win—and not to get information that will help the firm gain the upper hand. If the client starts hiding information from you, that’s a major problem.
"Virtually all of the successful negotiations we know of are the result of a firm invensting the time and effort to put itself in the client's shoes."
The Trading Mindset
Successful negotiations tend to involve a fair amount of trading. When the client gets something from you, you should get something from them, and vice versa. This can be difficult for technical people like engineers, who tend to view the world in terms of absolutes. But, you’re most likely to get to a win-win result when you’ve properly anticipated what the client will want from you and have identified things that align with that want, that don’t cost you much, and that you’re willing to surrender.
Of course, both the client and your firm will have things you simply can’t or won’t give up. Consequently, your negotiating team needs to know where your firm can flex and where you have to hold your ground.
Here again, we encourage firms to document this part of the process. What are the things you’re willing to give up, and what will they cost you or how important are they to you? You want to make the list as long as possible. These items are the “currency” of your negotiation, and the bigger your bank account is, the better.
In another list, what are the things you absolutely can’t give up? Things that will threaten your firm in some way—they’ll damage your financial stability, hurt your reputation, etc.
And, finally, what do you believe are the client’s bargaining chips and “can’t budge” items? One of the benefits of this list-making activity is that it enables you to identify places where you and the client can get some small early shared victories that put everybody in a positive frame of mind for additional, higher-stakes trading. Plus, their reaction to initial trades can give you a better sense of how they’ll respond later in the negotiation.
Mock Negotiations
After you make your lists, the next step is to conduct mock negotiations. Your BD representative or team can stand in for the client, since they know them best.
Ideally, you should go through multiple negotiation scenarios. You should have both sides come in with a win-win focus in one round. In another, you should require the firm’s team to experience the process when the client comes in with a win-lose mindset—meaning one where they’re trying to get all their needs met with no concern for yours. In addition, there should be a session where the firm has a win-lose attitude, and can see how counterproductive that is.
It takes some time to set up and execute these mock negotiations, but it’s time well spent. Firms that don’t go through this process greatly decrease their chances of achieving a positive outcome. And, of course, the larger the contract, the more time and effort should be invested in mock negotiations.
Ironically, most firms will walk through their marketing presentations in advance of trying to win the work as a matter of course, but when it comes to hashing out the particulars of a project, the value of mock negotiations doesn’t immediately click with them.
Creating a Negotiation Plan
Using everything you’ve learned from your BD team and in your mock negotiations, next you should create a negotiation plan. This plan should cover every aspect of the negotiation: assignments for each member of the team, who does and does not have trading authority, materials that are needed, etc. You want to go all the way down to the level of detail of things like where team members should sit at the negotiating table.
Once the plan is crafted, it should be distributed to team members at least a few days before the session so they can read it carefully and thoroughly.
Where Negotiations Fail… and Succeed
The vast majority of failed A/E firm-client negotiations that we’ve witnessed or heard about come down to one thing: the firm failing to see the process from the client’s perspective. Or, to frame it more positively, virtually all of the successful negotiations we know of are the result of a firm investing the time and effort to put itself in the client’s shoes.
Reiterating a point from our first blog on the negotiation process: being a "good negotiator" is not an innate attribute that some individuals and firms have and some don't. Negotiation is a learned skill and a commitment to doing your homework. The firms that recognize that truth and act on it invariably come out ahead in the long run.
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