How We Saved Our Client $250,000

In my previous posts, you've already read about the importance of never making unilateral concessions and speaking directly with the decision-maker.  With this post, I'll bring these two principles to life with a case study straight out of my negotiation journal.

We Love You. Sorta.

At first sight, it seemed like just another bargaining game.  I shoot high, you fire low, and then we push and pull back and forth until we come to some sort of mid-point.  

That was the game that one of the major, export-oriented clients of our international business law firm, LegalLab Law Boutique, was about to play.  It had submitted a winning offer for professional services to a Fortune 500 multinational corporation, only to receive a not-so-positive message in response.

"Your proposal looks good, but if I send this to our senior management as is, it'll probably be rejected.  Go down on the price by $250,000, and you should be good."

To give you an idea, $250,000 was 20% of the quoted service fees of $1,250,000.

Our client's C-suite was about to enter this bargaining game until my business partner Narek Ashughatoyan and I stepped in and asked a critical question: just exactly who was this person?

Goodbye, Middle Guy

It turned out he was a mid-manager of the corporation, who "screened incoming offers before they were presented to the Board for decision."  At first sight, it seemed like he was doing us a favor by giving us the inside scoop and a chance to make improvements, instead of risking losing the deal.  Well, that begged further questions: Was he being sincere? What interests did this mid-manager have personally?  Why would he be asking for a concession?

We brainstormed with our client's leadership on possible answers:

• The mid-manager is not the final decision-maker.  His actual role is "sweetening" the deals, rather than just "screening" them, before sending them up.
• The mid-manager wants to look good in the eyes of his senior management.  He may be doing this to set him up for a promotion or a raise.
• This is a negotiating tactic of their corporation.  The service provider (our client) goes through two bargaining rounds: first with the mid-manager, and then with the senior manager.

Our suggestion for the negotiation strategy was simple: bypass the mid-manager, ask him to send our offer up without any changes, and speak directly with the senior management.

Hello, CEO

Although reluctant to let our offer go up, the mid-manager eventually conceded and set up a conference call with the SVP of the company.  Before this call, there was one thing and one thing only that our team had to do over and over again: prepare, prepare, prepare.

Often, negotiators step into a negotiation without prior planning and preparation.  "We're born negotiators, we'll negotiate on the fly and roll with the punches," they think.  Well, that's similar to an Army General thinking:

"There's no need for strategy.  Let's mobilize our troops and head straight to the battlefield.  We'll just shoot left and right as we move forward."

Breaking News: It doesn't work that way.

So as we proceeded to Round 2, our team did just that: prepare.  What were the senior management's interests, and how could we meet those interests with our offer?

Through intensive research and brainstorming, we jotted down what we thought were the top three interests of their corporation's senior management for this offer:

• Getting the best price possible,
• Ensuring high quality services and low delivery risk,
• Ensuring continuity in our client's project team (reducing churn): they didn't want our client's employees who were going to work for their corporation to change often (or, ideally, at all).

Armed with a fair knowledge of the other side's interests, we were ready to draft and develop options we could put on the table.

Option A or Option B

Eventually, we developed two options to offer during our conference call.

Option A: This was the exact same as the original offer for $1,250,000.  Nothing had been changed.  It was what it was.

Option B: This was the alternative.  "Ok, if you'd like us to go down $250,000 on the offer, we will, but with conditions."

• $1,000,000 is the new quoted service fee,
• Instead of the entire work being implemented by the head office, our client would delegate a part of the work to its subsidiary,
• The head office would ensure quality control and supervise performance of the subsidiary team through state-of-the-art online tools.

Option B was the one which was eventually selected, for obvious reasons.

It was in the best interests of their corporation: they got their requested 20% discount, secured high quality/low risk through continuous oversight from the head office, and ensured high team stability since the subsidiary, as we informed them, had a lower churn rate (employees not being replaced often).

However, the beauty of this option is that it was in the best interests of our client as well.

Instead of reducing the price off the bat for nothing, our client got a great deal in return.  Our client was interested in driving new business toward its subsidiary to boost its revenues.  By doing so, it would keep the subsidiary's employees busy and grow their professionalism through experience: an investment which would have long-term returns.  Further, our client wasn't making a financial sacrifice by going down on the price since the subsidiary's profit/cost structure was much more effective than the head office.

"Negotiation may not make you a fortune, but..."

When asked, derisively, how much money he made as a philosopher, Arthur Schopenhauer famously responded: "Philosophy hasn't brought me much income, but it has saved me many expenses."  Inspired by this response, I offer an alternative wording:

"Negotiation may not make you a fortune, but it may very well save you one."

Indeed, if our client hadn't reached out to us, it might have entered the endless bargaining game, which would have been a losing one: 20% off for the middle guy, maybe another 10% off for the CEO, and before you know it, you just gave away the largest part of your profits.

Instead, never make unilateral concessions, and speak directly with the decision maker.  Don't get me wrong: conceding is ok, and that's a part of negotiating.  Instead, whenever you do, make sure you request and get something in return which is in your interests.  Also, don't waste your time with the middle guy.  It may be a great way to warm things up, but make sure you eventually speak with the person who has the authority to commit.

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Stay tuned for more on negotiation by clicking the "Follow" button above.  For my previous LinkedIn Pulse columns on law, negotiation, and strategy, see this link. 

I have also presented this case as part of our law firm's presentation, titled "The Lawyer is Not A Translator: Traditional Problems, Innovative Solutions."  To watch the respective part of the video (in Armenian), click here.

Stepan Khzrtian is co-founder and Managing Partner of LegalLab Law Boutique (www.legallab.am) and co-founder of the Center for Excellence in Negotiation: Yerevan (www.cen.am). For nearly 10 years, he has been engaged in training and consulting on negotiation, working with clients to successfully close deals with Fortune 500 companies and empowering officials and officers to best serve constituencies. 

He writes on law, negotiation, and strategy.