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Are You an Amateur Negotiator?
Join Ben from Innovate Podcast and Darren A. Smith with their talk on how to become an effective negotiator. Learn useful tools like the squaredance for negotiating and disregard bad practices like running to PowerPoint first. Read on to discover the basics of effective negotiation that you can start using today.
You Can Read the Full Transcript Below:
Darren A. Smith:
What else could we do? What could I explore? What do you want from me? Could we talk about a contract that’s 50 years long? No, we can’t, Darren. Alright, what about one’s five years long maybe? Okay. Could we talk about improving the quality, and reducing the packaging? Could we work together on blah, blah, blah? There’re a million things we could talk about. Now. None of them might bridge the gap between a 10-pound case and an eight-pound case. But let’s try.
Ben:
Welcome to the Innovate Podcast, a show where we discuss, dissect, and attempt to rebuild the world of product and category within consumer goods. Today I’m delighted to be joined by Darren a Smith a veteran of the grocery industry with over 3o years of experience, I think working either for retailers or advising manufacturers and brands. Darren and I briefly crossed paths as buyers and category managers at Sainsbury back in the very early naughts, which we may discuss in a moment. But Darren, welcome to the Innovate Podcast. Delighted you can join us. How are you? How are you today?
Darren A. Smith:
Hey, Ben. I’m good. We’re in process of moving house, not today, but in the next couple of weeks, so I am struggling with that process. There’s a reason it’s stressful.
Ben:
So yeah, you just thought you’d add another huge seismic life event onto the already kind of generational economic challenges that we’re facing.
Darren A. Smith:
That’s absolutely true. I think we just squeezed in for the interest rates went through the roof.
Ben:
Right. Yeah, yeah, yeah. That’s not a joking matter actually. Yeah. Okay, cool. Good. So, Darren, just for the benefit of the listeners, I guess a natural place to start would just be to introduce yourself, talk through your kind of background from Sainsbury through to now and just talk about what you’re focusing on with your current business MBM, if that’s okay.
Darren A. Smith:
Of course. So I started Sainsbury in 1990 and at that point, I was the assistant. Now that’s the important part. I was the assistant cottage cheese buyer. I wasn’t even the real one. I didn’t even know what cottage cheese was at the rightful age of 19. So that’s where I started. Then I took on various buying roles for the next 13 years. My last real job was looking after the fruit team for Sainsbury, where I decided that actually I wanted to go and see if I could do something by myself, set up MBM, and ever since we’ve worked on soft skills training.
Ben:
Okay, awesome.
Darren A. Smith:
For the last past 20 years now.
Ben:
So soft skills training, I guess that could be quite broad. It’s clearly focused on people. What are kind of the key areas that you focus on in terms of developing skills?
Darren A. Smith:
The key ones that people want are how do I get the most out of my time — time management. How do I get the most out of my people — people management, leadership skills, and how do I get the most out of my deals, particularly in the industry that you and I are in? So it’s negotiation predominantly.
It’s time management and it’s people management skills. They’re the three. There are a number of other soft skills. The bit I really like is Jack Ma, recently the chairman of Alibaba said that with the progress of AI, soft skills is the only way forward. Love it.
Ben:
Right. Awesome.
Darren A. Smith:
Which is great. So we can try and process data really quickly and be analysts, but ultimately it’s about how you and I interact about the teams we build and about how we lead people is the future.
Ben:
Yeah. That’s very interesting. So we’re recording this in mid-November. It is an incredibly challenging market both within grocery and food and drink specifically. But you know, generically we have just kind of western consumers, we’ve kind of lurched from the generational challenge of covid through to the kind of the latest generational challenge of the economic crisis.
So you talked about negotiation skills there, clearly manufacturers, private label and brand. That’s probably one of the main things that their commercial teams are doing at the moment. That process in terms of working with their retail partners, and their food service partners to effectively kind of reach a commercial position that can enable survival.
Not to sound kind of too dramatic about it, but I think that’s what many manufacturers and in fairness retailers are facing at the moment. So that’s the topic that we’re going to dig into today. It’s looking at negotiation, negotiation skills, and how our listeners can kind of improve those skills from their own personal perspective and kind of bring some of those ideas into their businesses as well.
Do you want to just give a little bit of background, I guess, to start before we kind of delve into some of the specific areas about how you know, what the kind of the key principles within negotiation that people should be thinking on? Then we’ll move on to this kind of seven areas that we’re going to discuss today.
Darren A. Smith:
I think it’s firstly worth saying, Ben, I’m feeling for all those people Both account managers on this side, and buyers on this side. It’s tough, it’s hard. Yes, they get paid the big bucks as you and I did as buyers and as account managers, but it’s hard. Conflict is hard. Anyone who says that they enjoy conflict, or they don’t mind conflict, they’re lying. Conflict is tough.
It’s mentally gruelling. You go home at the end of the day and it’s still spinning around in your mind. So it’s really tough for these guys at the moment. Now here’s the real crux of this. It’s harder to negotiate with an amateur negotiator than a professional one. The reason for that is amateur negotiators tend to do fight or flight or sanctions. If you don’t give me that, I’m off to find someone else. That’s really hard because they’re not working with this art form.
They’re not dealing with the complexities of the negotiation. It’s just fight or flight. So what we aim to do is try and help the buyers and the account managers to be more, let’s call it professional or we prefer effective negotiators because they’re easier to work with. They understand the science, the art, the game, and they understand that a win-win must happen.
Ben:
Yeah, that’s interesting. The empathy piece I think is quite important because the buyers that I still know in the industry, they’ve had a pretty miserable 18 months actually. I know it’s on both sides, but the amount of kind of requests coming into them from a cost and commercial perspective has been unremitting. That’s pretty much certainly the ones that I talk to.
That’s all they’ve dealt with. That’s not a particularly kind of joyful thing to do at all. You and I know as former buyers, that actually the much more kind of positive elements of a buying role are looking at kind of category strategy and how you increase the size of the pie, not how you kind of shrink margins and all that, all that type of thing. There’s very little of that. I think it is just unremitting. So I do think that empathy is a good place to start. Yep.
Darren A. Smith:
It is. It is very tough for them on both sides. They both want to get through this. They don’t want a fourth or fifth or sixth round of price increases on either side. Unfortunately, it’s the way the world is. They’ve got to get through it and they’ve got to try and be friends at the end of it.
Ben:
From your dealings across the industry, do you see the retailers giving their buyers a lot of support at the moment in terms of kind either negotiation skills, training or just general kind of support for what they’re going through?
Darren A. Smith:
I think there is a lot of support out there. It’s also not forgetting that it’s damn tough. I think no matter what support you give, ultimately, you’ve got to go up against that cold face and you’ve got to face into every day, 3, 4, 5 price increase requests. Yeah. That you just don’t want to deal with.
You’d rather deal with the other stuff that grows the category; not just makes you stand still. It’s a bit like getting service on our car at times, isn’t it? You go to the garage, you get your service, you pay your 500 quid, get back in your car, and nothing’s different. Price increases can feel a little bit like that. A lot of hard work for not a lot.
Ben:
Yeah. And there’s certainly the benefit to the consumer is not obvious. It’s not front of mind, is it? There’s no real kind of change to shelf price in many of these instances. So yeah. Difficult times.
Darren A. Smith:
No one’s going to thank you for it. The shop is not thanking you for higher increases.
Ben:
No.
Darren A. Smith:
The buyer’s not thanking you, and so forth. Let’s see if we can help some of these guys to be more effective negotiators and make their life maybe 1% better.
Ben:
Yeah. Indeed, indeed. So, on that note, there are seven areas that we’re going to talk about today that you work with on a daily basis in terms of the work that you would or the kind of approaches that you would advise people to adopt when it comes to improving negotiation skills.
So I guess in terms of the obvious first one to start with is preparation. I’ve heard you reference this term of the squaredance before. How do you kind of work with people when they’re preparing for a negotiation, first of all?
Darren A. Smith:
So it’s worth providing some context first of all. There are roughly four stages of negotiation. If you were to Google it, there are four or 5, 6, 7. But let’s keep it simple that there are four. Preparation, exploration, proposal, conclusion or summary. Most amateur negotiators skip the first two. They skip the preparation and the exploration. Where do they start?
They start by calling up our dear friend PowerPoint and typing some slides. PowerPoint is about as useful to negotiating as you being hungry, Ben and cellar-taping a sausage roll to your stomach. It’s going to do diddly. You might think it’s looking good, but it’s going to do diddly squat. So what we want to do is help these guys have a simple template for preparation and PowerPoint isn’t it? It just isn’t going to work.
So what’s the alternative? We provide a simple one-page template that poses some questions that the negotiator needs to ask. They’re things like, what’s your wish? I want to get eight pounds a case, 200 X stores listing, or I just want to get cost/price increase of 8%. What’s your walk away? I need to get 4%.
Okay, so that’s my top and bottom. Left and right we’ve got our gives. What am I prepared to give to keep the wheels of this negotiation moving forward and what would I take? If I’m going to take a lesser cost increase, then maybe there are some other things I could get.
Could I do a category review? Could I get some free data? What is it? We call these gives and takes the grease or the oil of the negotiation because they keep it moving forward. Because without these gives and takes, you end up top and bottom and you’re hacking.
Ben:
Okay,
Darren A. Smith:
So preparation is the squaredance. Why we called it the squaredance? I’m not sure. But we called it that about 20 years ago and it stuck. So it’s a simple template that they can download off our website. We came up with it because we were frustrated by amateur negotiators going to negotiations and starting with 10 slides of PowerPoint and presenting. But by presenting, you’re going straight into the proposal stage here. You skip these two stages.
Ben:
Right? Okay.
Darren A. Smith:
So we don’t want to start with PowerPoint. If your listeners take nothing else away from here, only take, don’t start with PowerPoint. It is not a preparation negotiation tool.
Ben:
Okay. So with the square dance template, you’re effectively kind of getting all of the pieces that you can move around in the negotiation. You’re getting them ready, you’re getting them clear in your mind and you’re ready for the first interaction with the individual on the other side of the table, I guess.
Darren A. Smith:
You are. There are some other pieces in the middle of it. I’ll just add a few more advanced pieces where it asks what tools you might use. So I was watching a film a little while ago. Have you seen Oceans 11? Might be 11 or 12.
Ben:
I have, well I’ve certainly seen a couple of the Oceans films. I can’t remember the numbers, but yeah, I have.
Darren A. Smith:
It was one of them. I’m sure there’s Ocean 10 to 19 now. I think it was Brad Pitt that says to George Clooney, we’ve got to do this con-type thing. Let’s do a Lucy Lou followed by a Jacoby and a painted wall. Now we are not supposed to know what those things are. What we are supposed to see is these are contracts. So my question to your listeners is what tools are they putting in play for their negotiation?
That’s what the squaredance asks in the middle of the template. What tools are you going to use? For instance, are you going to use a Russian front and up and over, a silence they will have heard of. But there are probably a hundred negotiation tools and they’ve got to select the right ones for their negotiation. At the moment, the preparation is, I’ll start on PowerPoint type, some slides, maybe a bit to think on the train, let’s see what happens. That’s not effective negotiation.
Ben:
Okay. So those things like Russian front, those are techniques in terms of how to handle a negotiation. Are they, I presume?
Darren A. Smith:
Yes, they’re techniques that you can employ. Now we’re not proposing that people we train use all of these techniques. We are proposing they grab three, four, or five and use them well. It’s better to have three, four or five used well, rather than 50 you’ve got no clue about.
Ben:
Okay, so just give us an example. You mentioned the Russian front for example. What is that as an example of a potential technique?
Darren A. Smith:
I’ll do the up and over just because it’ll stick in their minds a bit more. Do you remember the old garage doors that were up and over? The big steel ones that creeked, normally broken, and the springs were no good. Keep that as a metaphor in your mind, if you would. So let’s say you and I are buying a car. You are buying my car and make me a ridiculous offer for my fiesta worth 5,000 pounds, let’s say, what offer would you make me Ben?
Ben:
1500 pounds.
Darren A. Smith:
If you could give me cash, your first dog and you could also give me your card, then I’ll absolutely give that to you. All you are doing is taking their offer and matching it with an equally ridiculous offer. It has to be credible. I was doing a bit of comedy, but it has to be credible.
What happens is the person who made the first offer says, hold on by what you’ve said, my first offer was a bit ridiculous. Yes, it was. So you never need to say no to someone in a negotiation because you just take what they’ve said and you find a way to match it.
Ben:
Right. Okay. Okay. So there are lots of different approaches and techniques that people can use along similar lines. Okay, fine. So we’ve looked at preparation. What’s the next step for people to consider?
Darren A. Smith:
I think the most famous tool, and it’s taught by every training company in the world on negotiation is if you then I. You might remember it from your Sainsburys.
Ben:
Yeah, it does ring a bell. It does ring a bell. Yeah.
Darren A. Smith:
So every trainer trains this one and the reason they do is because it’s really, really effective, and really, really simple. Basically, it says when we get to this stage, which is the proposal stage, I might say to you, if you can buy my fiesta for 5,000 pounds, then I’ll throw in some free mats.
Ben:
Okay.
Darren A. Smith:
The reason it works is because there’s two parts of the sentence. There’s the, if you then I, and by structuring it in the bit that you want, second, the then I, it makes the other person listen to it.
Ben:
Okay.
Darren A. Smith:
Because if I were to say, for instance, if I da da da da, you might put your hand out, try and shake my hand. Ah, I didn’t get to say the bit I wanted.
Ben:
Right.
Darren A. Smith:
So if you then I. Now what typically happens when people start using this tool is they get it wrong one way and that’s okay. Learning and training is a bit like tuning in an old radio. Sometimes you get the music and you hear Noddy Holder playing his Christmas thing and sometimes you don’t. You have to keep trying to tune it in. So you have to keep practising if you then I, until you hear the music. You’ve got it tuned in.
Ben:
Reflecting on negotiations that I had when I was a buyer and others since then, there’s probably quite a difference between negotiating face-to-face. So sitting across the other side of a table with a buyer, which is great in many ways, you’re probably more likely to reach a resolution but equally does add a fair amount of performance pressure versus email negotiations, which I know kinds of still happen a fair amount.
These kinds of techniques in terms of preparation, et cetera, do they still apply to whatever the medium that you’re using to kind of actually communicate and negotiate with the other party?
Darren A. Smith:
Most of the techniques will apply whatever the format is.
Ben:
Okay.
Darren A. Smith:
Because you are trying to move the negotiation forward to a win-win. The bit that is really interesting is over here like you and I are doing at the moment. When we are training people at the moment, we need to train on face to face, we need to train them over screen and we need to train them over email, maybe even text as well. But let’s say those three formats.
This one’s particularly interesting because when we are talking and coaching with our learners, you’ll see some of them like this, or like this or the light’s bad. This will halve your influence in your ability to negotiate. We’ve got to make sure that we’re framed properly like I am. I’m filling up as much of the space as possible.
My head runs quite small, I’ve got decent light and I’m talking to the camera. Yeah. You’ve probably been in meetings where someone’s talking to you like this because they’ve got two or three monitors. It just makes them less effective and influential. So we’ve got to be really careful about how we’re coming across on this screen and you can see me use my hands, you can’t see what’s below here.
Of course, you can’t. So I’ve got to bring my communication up and I’ve got to show you what I’m trying to say.
Ben:
Right. Okay.
Darren A. Smith:
Now the other thing that’s worth knowing is that when we negotiate over here, we are at 1 million maker pixels. In real life, you and I are about 576 million pixels. So it’s reduced 500 times. So I can’t see all the little non-verbal cues that you are making, which is why this is exhausting for everyone over the screen.
Because I’m struggling to see all the little things that are going on around your face to see what you’re really saying and thinking.
Ben:
Yeah.
Darren A. Smith:
And that’s why we finished these calls and we’re knackered.
Ben:
Right. Particularly after a day of back-to-back calls. Yeah, yeah, for sure. Yeah. From what you hear around the industry at the moment are most negotiations happening on Teams and Zoom or are they happening on email or face to face or all of the above?
Darren A. Smith:
If we take Covid, it was obviously Teams, completely screen completely. We’re starting to see some more face-to-face coming in. I would certainly encourage our account managers to try and negotiate to get facetime. Now when you get that face time, try to make sure you’re not there for two hours. Try and use the time effectively. But that face time is really important versus screen because it’s 500 times clearer as to what they’re really saying. And that’s important.
Ben:
Right. Okay. So we’ve looked at kind of the preparation in the early stages. What would be the next area to focus on when you’re working with people?
Darren A. Smith:
Yeah, have you ever seen a Monty Python sketch where they’re haggling a market?
Ben:
Yes, I think I have. Yep.
Darren A. Smith:
It’s a great sketch worth looking up. What happens is one guy tries to haggle with the other one and the other guy says, no, no, no, alright, I’ll take it for that. No, no, no. You must haggle. No, well I’ve just said I’ll take your price. No, no, you must haggle. It’s a great sketch. The point is that there are a number of ways of resolving conflict, two of which are negotiation and haggling for bartering.
Ben:
Okay.
Darren A. Smith:
Now it’s important to know that they’re different. Most negotiators are haggling and that’s okay. It’s still a valid form of resolving a conflict. What we’re teaching our learners to become an effective negotiator is to know the difference. So haggling is you and I are buying Roy Band sunglasses in a market somewhere in middle east and you said to me, Darren, these are 80 euros.
And I say, no, I couldn’t possibly do that they’re 10, and we meet in the middle. That’s haggling and we’ve resolved the conflict. Haggling is all one dimension. Normally price, it can be time. But let’s say it’s price at the moment. Then there’s negotiating. Negotiating is discussing across multiple dimensions, price, color, delivery, quality, blah, blah, blah, wherever those things are.
Ben:
Right. Okay.
Darren A. Smith:
Negotiating is much more of an art form, much more complex, and much harder to do. Haggling isn’t. So we need to know which one we are doing and which will be the most effective.
Ben:
How do you handle it if one party is negotiating, and one party is haggling?
Darren A. Smith:
I would try to bring the other party to negotiating and you’re going to do that by introducing tradeables. Although those gifts and takes that we talked about earlier, those extra things that make the negotiation a bit more interesting.
Ben:
Right. Okay. So haggling is effectively on a linear scale of one dimension. Negotiating is looking at multiple moving parts to try and reach a resolution. Okay.
Darren A. Smith:
Absolutely. We’ve all done the haggling at the market in the far east or in the middle east. Negotiating is what we really ought to be doing more of because we’ll get more back for our bank for our buck.
Ben:
Right. Okay. So we’re trying to avoid haggling, we’re trying to get into negotiating using a more structured approach. It sounds right.
Darren A. Smith:
Yeah. Absolutely. So haggling is not negotiating it’s the takeaway.
Ben:
Okay. You mentioned this concept of tradeables there. Just expand on that a little more. I mean I guess that’s kind of part of preparation as well and knowing how to leverage them during the negotiation. But just expand a bit on what you mean by tradeables.
Darren A. Smith:
Amateur negotiators come to the negotiation with I want that you want that we end up with a stalemate because we’re both hitting it probably on one dimension of price and we’re not agreeing. That’s probably because there’s no bargaining arena, there’s no overlap, we’re just part. You’re a 10-pound case, I’m an eight. The tradeables or the give and takes on our squaredance are things that might bridge the gap. So you won’t give me the 10-pound case I need, well, what could you give me?
Well, Darren, I could give you another 200 stores or free sampling, something in the magazine, pause, whatever it is. Okay, well that takes us a little bit forward and now we might mind not a 10-pound case, but I could reduce it to 9.50 pounds. Okay. Let’s do that. Now, price is important. Of course, it is. But if we just go in with price only, we are going to end up in a stalemate. So what other things could we ask for if, for instance, I had a blank chequebook. What can I put in it for you?
Ben:
Okay. In the current climate, I’m hearing a lot of orbit anecdotal stories of suppliers going to retailers and saying, we need this cost/price by next Friday or we stop supplying. That’s one dimension that feels quite linear as a kind of flipping back to our former careers. How would you kind of go about handling that type of thing where it’s almost not a negotiation, it’s a little bit of a demand, isn’t it really?
Darren A. Smith:
It is. It’s what we call sanction negotiations. So that’s where I come back to the more amateur negotiators. If you can’t do that, we’re off. Now that may just happen. What we need to make sure we do is this next stage. We’ve got preparation, and exploration. Okay. We might get to that stage, but just before we do, what else could we do? What could I explore? What do you want from me?
Could we talk about a contract that’s 50 years long? No, we can’t, Darren. Alright, what about one that’s five years long? Maybe. Could we talk about improving the quality, reducing the packaging? Could we work together on blah blah, blah? There’re a million things we could talk about. Now, none of them might bridge the gap between 10-pound case and eight-pound case. But let’s try.
Ben:
Yeah. Okay.
Darren A. Smith:
Let’s have an exploration. Just because I’m exploring doesn’t mean I’m accepting I will give you this. All I’m doing is finding other ways to try and bridge a gap.
Ben:
What’s your view on let’s assume that both parties come to the table with tradeables, and they’re being exchanged, but you couldn’t possibly know in advance what the other party’s tradeables were. So you’re likely to have, certainly as an account manager, you’re likely to have to go back to your business and kind of get input and feedback and approval. This idea of kind of fragmenting negotiations into chunks versus trying to kind of solve it all in one hit. What would your advice and guidance be on that?
Darren A. Smith:
You’re right, we hear this a lot where either the escalations sorry, either the negotiations get escalated internally because the account manager couldn’t do it, or this thing goes on forever. So in the squaredance, the other benefit it has is I as an account manager, let’s say fill out my squaredance. I go to my boss and say, this is what I’m thinking of doing. What do you think? A, I genuinely want your feedback because you know the account.
Well, I won’t try a Lucy Lou, but I might try blah blah blah at all. Okay, because we know Bob and Bob might respond to that. That’s good. But also, boss, could you sign off this 10-pound case, eight-pound case? Yeah, I can sign that off. Now what normally happens is most bosses get really nervous and they say something like, but you won’t go straight to an eight-pound case, will you?
No boss. Of course, I won’t. Trust me, I’ve been here 20 years, I know what I’m doing. Okay. As long as you don’t go straight down to the eight, I’m okay. What you get is authority, a bargaining arena to negotiate with. Because otherwise, and you and I did this as by as we go, well, if you haven’t got the authority, don’t talk to your boss. Then the account manager loses all credibility. We haven’t got an effective account manager and we’re just now dealing, excuse me, with the sales director forevermore.
Ben:
Yeah.
Darren A. Smith:
It doesn’t work for either of us.
Ben:
Okay.
Darren A. Smith:
Since we’re not enabled authority.
Ben:
Okay. But there’s probably quite a few kinds of tradeables that are brought to the table by both parties I would guess that are hard to kind of assign a value to. Your brief example there of kind of a retailer saying they’re offering space in a magazine or marketing space on the shelf, or whatever it might be. Those are quite hard to kind of assign a value to.
So it would be difficult for anybody, even reasonable seniors to kind of say yes to that and then go back and actually figure out, oh shoot, I’ve just thought that that was worth 50 cases it’s actually worth 15 cases to us. I would’ve thought there are going to be times when you do need to kind of get some input from your business and that might kind of break the negotiation into chunks potentially rather than it being resolved in one traditional hit.
Darren A. Smith:
You’re absolutely right. That will happen and you might need to chunk the negotiation. But if you want to speed up the process because time’s against you, then maybe you agree upfront. I’ve got an hour and a half with the buyer, we’re going to try and get to a proposal within 20 minutes, then I’m going to call for an adjournment. Buyer, can I have five minutes? I just need to go and talk to my boss, get feedback. I’ll come straight back.
Ben:
Okay.
Darren A. Smith:
Straight face, this, what do you think? Yes. No, back I. Go.
Ben:
Yeah. Okay.
Darren A. Smith:
It doesn’t have to be a combination of six meetings. My boss coming in five emails. It doesn’t have to be protracted. We make it protracted because we’re worried about the conflict and we’re not prepared.
Ben:
So carve out some time, get all of the relevant kind of potential decision makers and stakeholders ready and available and then try and reach a resolution. Okay. That’s nice. Yeah.
Darren A. Smith:
That’s why often they get escalated because we either don’t have the authority to negotiate or we don’t like the conflict. I hear a lot and it happens in training where two people go, okay, we’ll make a plan. No, you’re just avoiding the conflict.
Ben:
Right.
Darren A. Smith:
You’ve got to get stuck into this. You need to be prepared and you’ve got to trade.
Ben:
Yep.
Darren A. Smith:
It’s a little bit like a pizza. I send it to you. It’s deep and crusty. It’s got pineapple and ham on. You take half my pineapple off, put some [inaudible 29:39] on, get rid of my ham, make it thin, crispy, you send it back. We do this in stage three and proposal. That’s the way it has to work. Not we’ll go and make some plan and we’ll actually come back to this in three months with a plan that no one likes because we’re still back to the original problem. Yeah. You wanted 10 pounds a case, I wanted eight pounds. We’re not solving the problem.
Ben:
Yeah. We’re nearer. Okay. So we’ve moved through preparation, we’ve done some exploration, we’ve got kind of tradeables moving. You talked about this concept of no free fish, which is a very intriguing headline. Talk a little bit more about that.
Darren A. Smith:
One of the biggest pitfalls that amateur negotiates face is no free fish. So imagine the Arctic, we’ve got the snow blizzard coming in, we’ve got our fishermen cut a hole in the ice, and fish coming out.
Ben:
Yeah.
Darren A. Smith:
Hops onto the sledge. We’ve got the huskies. He’s now on his way back. Alright. So imagine now fisherman, pile of fish, and huskies. A long day of fishing and we’re going back. A polar bear, big beggar comes out of sight. Now what do you do with the polar bear that’s now chasing you?
Ben:
Run as hard as possible.
Darren A. Smith:
Well, you probably shout the huskies to go faster. You grab one of the fish off the pile and you throw it. The polar bear thinks that’s lovely. Finishes that because there’s a big polar bear and eats the fish quickly. What does it do next?
Ben:
Well, you’ve distracted said polar bear, it’s whether or not it wants more of the free fish.
Darren A. Smith:
The polar bear looks up and thinks I can smell more of those.
Ben:
Yeah.
Darren A. Smith:
So our fishermen—
Ben:
Keeps throwing. Yeah.
Darren A. Smith:
So this is about no free fish. You and I were taught as buyers to the metaphors to bring the account manager down the mountain. What can I get for free? Can I get free sampling? Ask can I get a cost reduction? Can I get quicker deliveries, better payment terms? Just keep asking. Then when you get something you thank and bank it.
Thank you very much for those payment terms. What else could you do for me? Now, our job as effective negotiators is not to allow free fish. The way we do that is if you can give me an extra 50 stores, whatever it is, then I’ll reduce your payment terms.
Ben:
Okay.
Darren A. Smith:
So it’s conditional giveaways. You never give away a free fish without asking for something in return.
Ben:
Right. Okay. Fine.
Darren A. Smith:
So no more free fish is the takeaway from here.
Ben:
Okay. You talk about the big outrageous ask. I certainly remember being trained on this at Sainsbury and I think it’s, yeah. It’s called lots of different things for lots of different people. But that’s the idea of the first time you put an offer on the table, it’s quite excessive, I guess and compared to where you would actually like to end up. Is that a reasonable description?
Darren A. Smith:
It is. The research from many deals in negotiations over the last 20 years suggests that most people aren’t ambitious enough. So, if we come back to our squaredance, we’ve got our wish and our walkaway the wish is not a big enough wish because we just need to ask sometimes. With our BOA, our snake metaphor of a big outrageous ask, as long as it’s credible, ask.
Let’s see where it goes. But it has to be credible. There’s no point in asking for stupid stuff and losing your credibility. But every chance you ask for a bit more. Let’s say we ask every account manager watching this and maybe every buyer. If you could ask for just 1% more won’t be outrageous, and if you’ve got one in a hundred and you do 200 deals a year, that’s worth quite a lot of money.
Ben:
Yep. Okay.
Darren A. Smith:
It’s worth asking.
Ben:
Yeah, for sure. You’ve talked about credibility a couple of times. Is there a way of kind of defining that? Because I guess what a credible cost/price increase request now in November 2022 when the economic situation is horrendous, it is probably very different to what it was three or four years ago, for example, for certain categories that might have been suffering from inflation. As a guide, is it just a subjective thing? It either feels credible or it doesn’t. Or is there a way of kind of making that a bit more objective?
Darren A. Smith:
Yeah, it’s a good question. It’d one we get asked a lot, and unfortunately the answer’s not great. The answer is that it only comes from experience. So with any account manager that we’re talking about at the moment, it’s asking those around you with more experience, getting two or three opinions to understand is 12% credible. I think so. Okay.
Then you need to break it down. So if it were we’re taught in Sainsbury that there are seven degrees, which are important. So you might take, go to your boss and say, I’m asking for 11, 12, 13 or seven degrees here. Put a line where it’s credible and not credible there. Okay, good. We need to ask in a way that’s not leading and is tangible and by writing down seven different options and ask them to put a line without really saying anything else, that side’s not credible, that side is. Okay. So it’s that number. That would really help them to be credible.
Ben:
Okay.
Darren A. Smith:
You need to make it tangible.
Ben:
Yeah. Okay. One thing that interests me on this part of the process is how much would you advise negotiators to be evidencing the, let’s just assume that most certainly at the moment are kind of cost/price driven. How much would you ad advise people to kind of evidence? So let’s just say that they’re arbitrarily kind of asking for 10 pence per unit more.
Is it kind of, you just put that on the table and then you wait for the response? Or do you say it’s 10 pence and three pence is driven by gas, two pence by electric, three pence by logistics, et cetera, et cetera? What’s your kind of guidance on that?
Darren A. Smith:
It’s a long answer, Ben. Because I’ve been thinking about this one for two decades. So I’ll give you a couple of answers and we’ll see how they resonate. There’re two schools of thought in asking why. If you say to me, I want to buy your fiesta for 4,000 pounds, and I say, why? You are going to tell me.
Now because I’ve asked why I’ve invited you in and I’ve invited that information in and you tell me that, well, I’ve got three kids so I can’t afford to choose four and I can’t get to work, and I work 40 hours every three days. Wow. Okay. You’ve now built a wall that I’ve got to climb over.
Ben:
Right.
Darren A. Smith:
So I’ve just made my life harder. Now, if I don’t ask why I may not have uncovered that the reasons you are giving are rubbish and I can knock them down.
Ben:
Right. Okay.
Darren A. Smith:
So there’s two schools of thought. You ask why you might get reasons, and they’re built up a real case that you can’t overcome. Ouch. Or you don’t ask why, and potentially they haven’t got any reasons and they’re playing poker.
Ben:
Right. Okay.
Darren A. Smith:
So I’m 50/50 on this. If you ask or don’t ask, you might get it, you might not.
Ben:
Right. Interesting.
Darren A. Smith:
Now, if I had to pick one, I’d say ask.
Ben:
Right.
Darren A. Smith:
But know what you’re walking into. I might get an extreme amount of information from you. I get a wall. I can’t climb that wall.
Ben:
Right. Okay. Anecdotally, I’m hearing that a lot of retailers are asking for some kind of justification I think at the moment so that they can link things to their own energy trackers, for example. But hopefully, we’re in a relatively unique period of time now and in future negotiations, you don’t necessarily need to kind of evidence everything quite as heavily.
Darren A. Smith:
You don’t. Now the other reason that the buyers are asking for evidence is they’re rightly doing their due diligence as they should. Why do you want a price increase? Show me the evidence. The other reason they’re asking is so they can look at that evidence a bit like a piece of cheese and poke holes in it. You and I did the same. Now here’s the other bit that we need to be aware of.
The brain is split into four, and I’ll try and do this really quickly. We’ve got the top half, the bottom half the left, and the right brain. Most people know about the left and the right brain. The left brain’s logical, and the right brain’s a bit more creative, but there’s actually a top and bottom as well. If you get the fact part, brain-driven bias, they’re going to want loads and loads of information because that’s where they’re comfortable.
Ben:
Right.
Darren A. Smith:
With other buyers, you’ll be asked less information. So the point is here, an account manager and a buyer needs to understand who they’re dealing with. Are they driven by facts? There are four types. Facts, form, feelings and future. They’re the four we’re speaking to.
Ben:
Okay.
Darren A. Smith:
Get one of these guys, which is the facts guys. They’re going to want endless amounts of facts.
Ben:
Right.
Darren A. Smith:
But we need to understand the animal that we’re dealing with. There’s a bit more on our website called HBDI, which helps you identify different people in the way they think.
Ben:
Right. Okay. So that would just come from your relationship with the buyer and having done some kind of previous discovery with those individuals. Okay. It feels like we’re making good progress through this kind of hypothetical negotiation. We’ve done really good preparation. We’ve done some exploratory work, we’ve done tradeables, we’ve got some offers on the table now. How do you kind of bring this process to a conclusion?
Darren A. Smith:
Well, I’m actually going to jump back if that’s all right before I conclude it, because in our stages of preparation, exploration, everyone’s heard of open questions and closed questions. If I ask you a closed question, you’ll say to me, Darren closed question, I only get a yes or no to. In our experience of training a lot of people, everyone understands open and close questions. No one does it in practice.
Ben:
Right. Okay.
Darren A. Smith:
So when they’re exploring, if they do this stage, which they should, they need to uncover what does the other person want? Yes, you want a better price, but what else is important to you? Asking open questions and genuinely sitting back and waiting for the answer is absolutely critical if you’re going to explore what’s in their head.
Ben:
Right. Okay. We do this an approach.
Darren A. Smith:
Sorry, go on.
Ben:
This is an approach I know reasonably well because it works very well with my teenage children. I find, if they come home from school and say, did you have a good day at school? You get a kind of a grunted yes or a grunted no. Whereas if you say what was the best bit about your school day, you at least get some dialogue, Darren. So yeah, I can relate to that.
Darren A. Smith:
Perfect. You’re absolutely right. You get some dialogue going and that’s what you want with these open questions. Now the way to remember these is five bums on a rugby post. So a rugby post, five Ws. The five Ws, where, what, when, which, who and the H is how. That’s how we start writing questions.
Ben:
Okay.
Darren A. Smith:
Alright. So five bumbs on the rugby post is the metaphor I want to put in people’s head.
Ben:
Okay. That works very well. So, okay. So lots of dialogue to do really good exploration that you can then use as tradeables and kind of move forward from there. Okay?
Darren A. Smith:
Absolutely. In order to put together in stage three your proposal. So I’ll give you an example. If I take stage three, what typically happens, let’s imagine I’m in a car full of people, and I’m dribbling over this red seat sorry, this red two-seat sports car. It’s lovely. Let’s call it a poacher 9-11. I really want it. Gorgeous.
The guy comes over, only had two owners. One was a vicar, 30,000 miles, serviced, and he’s off with his pattern. What he doesn’t realise is I’ve got six kids. No, I haven’t, but let’s say I’ve got six kids. I’m never going to buy that car. I’d love to, but I can’t. What he needs to start with is exploration. What are you looking for? Why are you looking for that? What’s your family size? Blah, blah, blah. Then he says over there is the SUV that you need.
Ben:
Yes. Okay.
Darren A. Smith:
Often we go into negotiations straight into the proposal stage. The other person doesn’t like it because we’ve no idea what they want.
Ben:
Right. Okay, and you’re just immediately a loggerhead. Yeah. Okay. You talk about the management of expectations and conditioning being quite an important element. Just talk a little bit more about that if you would.
Darren A. Smith:
Let’s stick with our car industry for a moment. Your car breaks down, and the engine’s smoking, but you just managed to limp it to the local garage. You go in, there’s the guy sitting behind the service desk. He’s covered in oil, he’s got the overalls. It’s a garage. Okay. I get it. You say, Tim, my car is absolutely gone. It’s smoking, there’s oil coming out of everywhere. It’s horrible. What’s the first thing he does before he says anything?
Ben:
Trying not to be too offensive to my local mechanics that I’ve dealt with over the years. Yeah. Makes lots of noise about how expensive it’s going to be, I presume.
Darren A. Smith:
So the first thing this guy does when you tell him your engine’s screwed, he goes [inaudible 43:37]. What do you know at that point, as soon as he does that?
Ben:
It’s probably not entirely true because there’s no investigation being done and no discovery. So that individual is setting some expectations the other way. Yeah.
Darren A. Smith:
So, you know, you’re likely to absolutely get a have on this.
Ben:
Yeah.
Darren A. Smith:
The bill that you thought was 500 quid and now just gone to five grand. He has managed your expectations in under about a second. Conditioning is really important. Now, we can’t do the cliche conditioning of our garage friends, but we can do conditioning. We already do it at the moment. So you ask me for eight pounds a case and if I go, let me ask my boss, you are walking away thinking, if you get eight pounds of a case here, rock on. It’s actually in my mind, I’ve panicked.
I’ve gone, oh, no way can I get it. But let me ask. You don’t know what’s going on in my mind. So we need to condition people to manage their expectations. So when you asked me for eight pounds a case, I say I think that’s going to be tough. Really tough. But let me just ask and I’ll, okay. I’ve managed your expectations. That eight-pound case is going to be tough.
Ben:
Right. Okay.
Darren A. Smith:
So we need to do that for them and for us to manage this expectation. Otherwise, if I don’t manage your expectation and I come back two days later and go no way to eight pounds case you go, I thought you could, I didn’t say I could. I thought you could. Then what happens is they talk about this foggy thing, which is body language, but they can’t articulate it so they end up having [inaudible 45:51].
Ben:
Right. Okay. So in that instance, the negotiation is oscillating very hard, isn’t it? It’s kind of there is false expectations being set on one side and then promptly bubbles are being popped two days later and it just builds up resentment and lack of trust. Yeah.
Darren A. Smith:
And it becomes horrible. Trust is really important in negotiation. There’s a trust model that has four parts, reliability, intimacy, credibility, and self-orientation. We need to make sure we answer all four parts of this because some bright spark many years ago said trust is a bit foggy. Hold on, I’ll break it down into four parts.
So if I don’t trust you, it might be because of reliability. When you say you’re going to do something you never do. Credibility. If I ask you about bi-products I’d expect you to know the answer. Absolutely. You’re credible. Intimacy is, do I know a little bit about you and you know a little bit about me? Well, you and I, for instance, have talked about Sainsbury. We have a little bit of intimacy. But all of this can be killed by the fourth part, which is self-orientation. If I only talk about me, you are going to get fed up.
Ben:
Right. Okay.
Darren A. Smith:
So if our listeners are thinking about anyone they do trust or don’t trust, if you trust them, you have all four parts tips. If you don’t trust them, one of those parts is missing.
Ben:
Okay. That’s very interesting. There’re lots of moving parts that play on to really kind of conclude a successful negotiation. Very interesting. But doing this kind of live and face-to-face as we used to, it’s quite a challenge, isn’t it?
Darren A. Smith:
It’s not easy. There’s a reason that buyers and account managers pay the big bucks. They should be because they are dealing with very complex soft skills that they need to master. They don’t want to be amateur negotiators that just say fight or flight. They need to be masters at this.
Ben:
Yeah, that’s true. Very interesting. Darren, we are running out of time.
Darren A. Smith:
Cool.
Ben:
How would you wrap up in terms of kind of final bits of guidance for people who haven’t been through this process so far?
Darren A. Smith:
The biggest challenge that most people face is a lack of preparation because they don’t know how to prepare effectively.
Ben:
Okay.
Darren A. Smith:
Google MBM squaredance. Whether you buy anything from us or you don’t, it will make you a better negotiator. Download the template and just use it because it will ask you all the questions you’d want to be asked about the negotiation that’s coming up. I want them to be the very best version of their negotiating themself. That’s my job. That’s what we do.
Ben:
Okay. Darren, it’s been genuinely really interesting. There are lots of directions we could have gone in. I suspect, but in the interest of time, we’re going to have to wrap it up. So I really appreciate your time today. Darren, thank you very much for participating in the Innovate podcast.
Darren A. Smith:
Thanks. Thanks a lot, Ben. Hope to see you again next time.
Ben:
Yep, very good. Thank you for tuning in. Listeners, there will be more episodes coming down the line, but thank you for your time today. We really hope you enjoyed that episode of the Innovate Podcast. To hear more biweekly episodes, please hit the subscribe button below. Thank you.
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