Negotiating

Profitable
Agreements
The Six Guiding Principles

by Paul Hennessey
Executive Vice President
Thousands of negotiations
occur everyday in most
major corporations:
negotiations with customers;
with suppliers; and between
departments. One thing is
certain: Every dollar your
people give away in those
Negotiating
negotiations is a dollar
lost forever from your
company’s bottom line.
In today’s “do more with
less” business nvironment,
effective negotiation can
Agreements
make the difference between
profit and loss…and
determine whether your
corporation’s key goals
are achieved. Yet in most
organizations, good
negotiating is the exception,
not the rule.
In fact, the negotiation
behavior of many managers
and individual contributors
is often the opposite of
what top performers do.
High-performers know
instinctively that good
negotiating builds both
profitability and strong
relationships. But exactly
what do these high
performers do that
others don’t?
High Performers:
What Do They Do?
Since its founding in 1980,
BayGroup International has
helped more than 20,000
sales representatives,
managers, and individual
contributors in major
corporations improve their
negotiating performance.
At a wide variety of fortune
500 companies, BayGroup
International consultants
Profitable
have found that high
performers are guided
instinctively by six
fundamental Principles
of Negotiating when they
plan and execute their
negotiating strategies.
1. Position Your Case
Advantageously
The Six Skilled negotiators create
a favorable environment
Guiding Principles for negotiating by
positioning their case
effectively. In each
negotiation they
communicate a consistent,
compelling “theme”
which provides a strong
BayGroup International foundation for their
Performance Report point of view.
2. Set High Aspirations
In negotiations, those
who ask for more
typically get more…and
those with low targets
typically underachieve.
Unfortunately, many
managers and individual

Positioning:
An Example
Ray Hofheinz, owner of the
Houston Astros baseball team, had
a problem. He was drawing large
crowds to his new stadium, the
Astrodome (which some called the
eighth wonder of the world), but the
grass was dying from lack of
sunlight under the dome. A
salesman from Monsanto Chemical
had the right product solution: a
plastic grass substitute. During the
negotiations, the Monsanto
salesman shared Monsanto’s
significant price tag for covering
the Astrodome with his product.
With little hesitation, Hofheinz
responded with a positioning
theme. “That’s interesting.
Coincidentally, that’s exactly what
I was going to charge you for
promoting your product.” In the
end, Hofheinz got what he wanted:
the Astrodome was carpeted for free
(in the process, of course, the
product was named “Astroturf”).
Hofheinz did what all top
performing negotiators do: he
positioned his case advantageously.
In the process, he was able to tilt
the negotiation playing field
dramatically in his direction.
contributors have low aspirations, either because they are
afraid to negotiate or because they don’t feel confident
about their negotiation power base. The results? Their
opening offers are too low, and their ultimate settlements
are sub-optimal and less profitable than they could be.
3. Manage Information Skillfully
Many professionals “leave money on the table” because
they share sensitive information about their flexibility,
deadlines, and internal pressures at the wrong time in their
negotiations. For example, a purchasing manager can do
costly damage to his/her company’s negotiating position
if he/she says, “Listen, we need those components now,
because our project is already behind schedule.” At the
same time, many opportunities for mutual gain and better
relationships are lost when we fail to ask enough questions
to uncover complete information about the other party.
Skilled negotiators carefully plan a strategy for protecting
and gathering important information during negotiations.
By doing this they protect the company’s interests, and
maintain positive working relationships with their
customers, suppliers, and fellow employees.
4. Know the Full Range and Strength of Your Power
Most people enter negotiations feeling that the people they
negotiate with have most of the power. And yet through
good planning, your people can both build their own power
and “level the playing field” in their negotiations. High
performers realize this, and inevitably negotiate agreements
which are more profitable, and which build respect in the
minds of those with whom they negotiate.
5. Satisfy Needs Over Wants
The person we’re negotiating with may say they want a
quicker delivery, a higher price, or more liberal terms and
conditions. But their underlying need may be to look good
to their boss, protect their job, or exert power. By
understanding these underlying needs, top negotiators find
alternate negotiables which protect your profits and build
stronger long-term relationships with suppliers, customers,
and representatives of other parts of your company.

Example:
Weak Information
Management
Increases Costs
A major telecommunications
company had a problem. An
important customer was relocating
to a new corporate headquarters,
and wanted phone service up
and running in the new location
in two weeks (less than half
the normal time frame). While
negotiating the close of the
deal, the telecommunications
company’s sales person committed
their company’s internal
operations department to work
overtime—and slow down other
projects—to install those hundreds
of phone lines within the two
week window. After all, the
alternative was to lose a major
piece of business.
Only after the very expensive
installation began did the sales
person discover that the customer
needed just two or three lines
installed at the new location
for the receptionist. The rest
of the personnel were not moving
for six weeks! The failure to
uncover vital information
eroded the telecommunications
company’s bottom line, and
damaged its credibility with
an important customer.
6. Concede According to Plan
Most people give away too much too soon in negotiations.
In the hopes of pleasing the other side and ending the
negotiation, they make concessions quickly rather than
slowly and reluctantly.
When negotiators make concessions too quickly, or fail to
get something of value in return for a concession, they
devalue the things they give away. Rather than making the
other party happy, they encourage thoughts like, “I should
have asked for more” or “Something must be wrong with
this deal.”
Top performers know that the key to profitable negotiating
is planning their concessions in advance, and using
“elegant negotiables”—those which have high value to
the other party, but low cost to you. When they must give
concessions, they trade them, asking the other party for
something of value in return.
By using these six Principles of Negotiation consistently, your
managers, buyers, and other individual contributors avoid
“leaving money on the table” in their critical negotiations.
At the same time they build better, stronger relationships
with their customers, suppliers, and with each other.
Effective Negotiating: It’s “Counterintuitive”
As important and fundamental as the guiding Principles of
Negotiation are, it’s surprising how often even experienced
negotiators fail to do the right thing. In fact, many do the
opposite of what they should in key negotiation situations
when they:
• react to the other side’s position rather than
putting forth their own position;
• lower their targets in the face of pressure from
the other side, rather than maintain high
aspirations and work to justify them;
• give up more information than they should
rather than give up as little as they can to
move the negotiation along;

“Skilled negotiators
carefully plan a
strategy for protecting
and gathering important
information during
negotiations. By doing
this, they protect the
company’s interests,
and maintain positive
working relationships with
their customers, suppliers,
and fellow employees.”
• assume the other side has more power than they do,
and therefore “cave-in” too quickly, rather than identify
and apply negotiating power of their own;
• respond to the other side’s demands (what they say
they want), rather than probe to uncover the other
party’s real needs, the “why” behind the “want”; and
• give away too much too quickly rather than concede
reluctantly and with a plan.
Why does this happen? Because many negotiators are
uncomfortable staying in the tension of an important
negotiation. This happens because their behavior is shaped
by paradigms such as:
• “The customer is always right.”
• “We partner with our customers and suppliers.”
• “Don’t rock the boat.”
• “It’s important to be liked, and they’ll like me if
I give them what they want.”
In fact, the presence of these mindsets lead to a key
conclusion: For most corporate personnel, effective negotiating is
counterintuitive. Our natural negotiation reactions are often
the opposite of what we should actually do.
Developing the Negotiating Skills
of Your Team
Given the “counterintuitive” nature of good negotiating,
“what is the best way to build and reinforce the skills of
your people in this key area? The most effective approach
is through a management-driven initiative built around
BayGroup International’s Situational Negotiation SkillsTM
capability. This approach:
• shows your people how important it is to use
the six Principles of Negotiation;
• helps them understand their natural negotiating
habits can lead to incorrect decisions in key
negotiation situations;
• gives them feedback on the skills they need to
work on, as well as their areas of strength;
 • provides opportunities for them to practice
new, counterintuitive skills in a safe, low-risk
environment;
• builds their skills in negotiation planning;
• enables them to apply new learning to actual
negotiations, so time spent in training has
immediate payback;
• fosters ongoing reinforcement of effective
negotiating; and
• includes regular feedback of negotiation results
to the organization.
Using an approach like this, you can dramatically improve the
negotiation productivity of your staff; help them build stronger
relationships with customers, suppliers, and fellow employees;
and ensure the best possible negotiated agreements for
your company.

Paul Hennessey is Executive Vice President of BayGroup International, where

he is responsible for research, development, and marketing. Paul consults with
major corporations about the successful implementation of BGI’s Situational
Negotiation Skills™ behavior change approach.
About BayGroup International
BayGroup International is a global performance improvement firm that
helps corporate leaders reach critical profitability, cost containment,
and team effectiveness goals quickly, with high impact. The firm helps
its clients improve individual performance, organizational profitability,
and shareholder value by:
 Ensuring that key business initiatives demonstrate significant ROI;

 Helping implement corporate strategies successfully;

 Building planning and execution skills across the organization for

creating profitable agreements, both internally and externally; and
 Leveraging online technology to improve individual and team
performance.
BayGroup International implements strategic projects that include
research, highly relevant performance improvement activities, and the
tracking of results. Our work in client organizations is supported and
reinforced through executive leadership communication campaigns,
management coaching processes, and online performance support tools.
Our proven approach to performance change has helped clients achieve
desired business results, and improve the ability of key employees to
build better agreements with:
 Customers, especially when competitive sales pressure
threatens profits.
 Suppliers and other outside parties, whose increasing costs
can erode the bottom line.
 Internal team members and between individuals, where failure
to handle tough, contentious issues can threaten quality,
customer service, restructuring, and other strategic initiatives.
 Strategic partners, where poor agreements can threaten the
success of mergers and acquisitions, as well as other mission-
critical alliances (in areas such as distribution, research and
development, and marketing).
By partnering with BayGroup International, clients achieve significant
improvements in human performance and millions of dollars in
bottom-line results.
Since its founding in 1980, BayGroup International has built a select
client list of major global corporations, focusing on the technology,
telecommunications, pharmaceuticals, transportation, consumer products,
and financial services industries. Our consultants have worked in North
and South America, Asia, Europe, and the Middle East. We serve our
clients from offices in major cities around the world.
 To find out more about BayGroup International’s
approach to improving bottom-line results through more
effective sales strategy execution, please contact us:
2200 Larkspur Landing Circle
Larkspur, California 94939 USA
www.baygroup.com

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