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Newsweek Interview with Negotiations Expert Jim Thomas

MSP NegotiationsBy Jennifer Barrett

We usually associate negotiations with business deals, job offers and car purchases. But Jim Thomas argues that bargaining is part of practically every human activity. In his book “Negotiate to Win” (Collins), he predicts that the role of haggling in our daily lives will become even more pronounced with the rise of globalism and new management and work trends (like collaborative alliances and partnerships with other businesses, for example, that require regular renegotiations of burdens, benefits, roles and responsibilities). That may be a problem for Americans, whom he ranks among the worst negotiators in the world.

In his book, Thomas, who has been practicing and teaching negotiations for a quarter-century, offers 21 rules to improve Westerners’ negotiating skills and gives several more reasons why honing those skills is so important. NEWSWEEK’s Jennifer Barrett asked Thomas for some tips. Excerpts:

NEWSWEEK: What’s the biggest mistake people make when negotiating?

Jim Thomas: I think we assume that if we are generous the other side will reciprocate with generosity. Historically, if we gave someone something, they were in our debt. They felt a social obligation to reciprocate. Maybe today with friends and family, that still does work. But, generally, ‘you owe me one’ counts for nothing today. Maybe it’s shrinking margins or commercial desperation… As margins get tinier there’s more pressure to maximize them. Suddenly, negotiating an extra quarter point or half point can be the critical difference between being successful and being underwater. But our cultural instincts have not caught up yet to the seriousness of the matter.

Why are Americans such bad negotiators?

There hasn’t been any real research done in this area, so it’s not entirely clear as to why. There have probably been about 500 theories raised— everything from impatience to fear of conflict to fear of failure to geographic isolation, to our Puritan ethic… The reason I mention it in the book is because Americans find the whole topic so stressful. I can explain to them, this is why it’s so uncomfortable: there is no cultural hook to hang it on. [They’ve] been taught that negotiating is déclassé.

Is this natural reluctance to bargain unique to Americans?

I think it’s unique to Western societies: the United States and Western Europe and maybe Australia. Germans are awful. They don’t bargain. The French are a little more tolerant. It’s further south, in Greece and Turkey, where it comes back to life…My mandate is not to figure out why [Westerners] are bad negotiators but to help them get over it. I don’t expect everyone to love to negotiate, but when it does come around, having a formula helps you to overcome your anxiety.

What’s the most important thing to keep in mind when negotiating?

Remember to trade concessions. That’s crucial in terms of the other side saving face. Get in the habit of saying: `Okay, but if I agree to this, I need this from you,’ or ‘If I agree, then I can’t do this other thing we talked about.’ Another important thing is not to put the final price on the table at the beginning of the negotiation. Why not put out a higher price? Some people worry that you’re lying if you ask for more than you expect. But if you say `I would like X amount’ even if you don’t expect to get it, that’s being honest. Don’t say: `I have to have this. This is the bottom line.’ That will hurt your credibility,  especially if you back down eventually.

It’s also important to treat all the issues as a package… If you close the door on each part of the negotiation, you are bleeding leverage all the way along. You should be able to reopen any issue until you get an overall package in place that you are happy with. Our instinct is to settle point one then move to point two. But that’s dangerous. A lot of the rules are counterintuitive—for us, anyway. But once you practice a few times, it becomes more comfortable.

Can you give examples of transactions that Americans often don’t realize are negotiable?

Typically you can negotiate with big-ticket items that cost a few hundred dollars or more—or if you know someone is working on a commission. I wouldn’t necessarily go after the price of the item but ask for something else to be thrown in… I had not entirely committed to a [pricey] suit at [a high end department store]. I said, I’ll take it if you throw in the shirt and tie. They said we’ll do the shirt. It’s good to start high then you can drop back.

Is anything off limits?

I wouldn’t negotiate at a restaurant or a grocery store.

What separates professional negotiators from amateurs?

An insistence on protecting the relationship. Professionals won’t let the other side kill themselves or give away the ranch. Even if you know your counterpart is a dolt—and most times they are not—you know their boss probably isn’t. If you send them away with a lopsided deal, you’ve gotten nothing. A negotiation has to occur within reasonable boundaries.

How can you spot an amateur?

Amateurs are only thinking about the short term and their own side of the deal. They’re not thinking about the execution of the deal. A lopsided deal is hard to execute because the other side will be bitching and moaning about you all over town, they’ll try and cut every corner they can. If you have to police a deal excessively, it’s lopsided. That’s often as harmful as under-negotiating.

At what point do you walk away?

There’s a basic requirement of rationality. The other side has to be able to listen to what you’re saying and assess it in terms of whether it will benefit them. If they are completely wacko or irrational then it’s a waste of time. But in rational negotiation, the question is: Is the best you can offer better than the status quo? If not, then you are going to lose. If you’re offered your best and the other party has rejected it and you are out of time, then it’s time to quietly close the door— though you may be tempted to slam it.

Well, you never know when you may have to open it again.

Exactly. And that’s one advantage of the envelope.

The envelope?

That’s from your opening target to your bottom line. You open at [the initial offer], cruise toward your target and then to the bottom line. Establishing those is the critical homework responsibility of each party. Once you have the envelope, it is just a matter of executing a formula. Now you are trading in a knowing way. It’s more dispassionate and more a matter of costs and benefits.

It takes the emotions out of the negotiations.

Yes, it really does. Whether the other person is a nice or a crummy person, you will do the same thing. It’s a refreshing break from the crazy process when you’re reacting against an individual.

What’s the most important lesson you’ve learned as a negotiator?

Negotiating is not magic. You can never outrun supply and demand. If your product is a little more expensive and it’s not demonstrably better than other products and you have no pre-existing relationship with the other party, you will probably lose—and you probably should. You cannot remake the economic landscape…But you can make little improvements that add up and are very important and attractive. Negotiating can be very powerful and it should be used with care. But it’s a nice thing to have in your bag.

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