Five Minutes with Bob Gibson

Negotiation Resources is an international training and consulting firm founded in 1987 and based in Sausalito, California. We help companies and organizations increase profitability by improving the negotiation abilities of their people. Our clients continually prove our techniques on the street, in offices, and in the boardrooms of companies around the globe. Our client list spans a wide cross-section of industries and includes Hewlett-Packard, Motorola, American Airlines, RJR Nabisco, JP Morgan Chase, Caterpillar, Genentech, VHA, EDS, VeriFone, Chrysler, and Adidas. We serve clients in three ways:

Consulting
Our consulting is in the framework of our Special Ops for Business program. We work as strategic advisors to senior executives, and lead them through research, strategy, tactics, and the selection and training of “SWAT” teams to forge important business deals. We’ve orchestrated negotiations that have allowed companies to win key accounts and secure approval from regulatory agencies—and we’ve helped facilitate mergers, acquisitions, and partnerships.

Training
We are the creators of STREET-SMART® Negotiations, a popular series of offerings customized to business people at companies, trade events, and conventions. We’ve delivered customized speeches, seminars and workshops from the STREET-SMART® Negotiation series to executives, sales groups, technical and customer support teams, attorneys, and buyers. And we’ve done that in such industries as healthcare, high tech, biotechnology, construction, manufacturing, financial services, communication and media, gas and oil, real estate, and insurance.

Speaking
Speaking assignments convey the same essence as seminars and workshops with out the “how to.” Because of time constraints and the nature of the speaking experience, the speeches are lighter, more entertaining, and lend themselves to a convention/sales meeting atmosphere.

Why the focus on negotiation as opposed to other business skills?

It is the essential business skill. Negotiation skills often spell the difference between success and failure, in a company, or career. These skills determine whether a company saves or loses money, and whether customers feel satisfied or disappointed.

Just think for a moment of the various negotiation circumstances employees face daily. Negotiating within and between departments, a client’s request for work outside the scope of current assignments, pressure to change schedules unreasonably, a need to convince a customer to take a particular course of action, and a need to persuade others to work with you—not against you—are all calls to negotiate. And every one of those affects the bottom line.

What makes your negotiation training and methods unique?

Simplicity and Intent. Our approach is to simplify. We don’t burden our clients with complex strategies involving multiple parts to remember and rehearse. Instead, we offer common sense approaches that people can easily adopt. A key negotiation method we teach is the SUCCESS formula (Set the stage, Uncover the issues, Confine the issues, Confirm intent and authority, Evaluate the issues, Solve the problem, Satisfaction check). It’s so simple that clients can’t believe it is actually going to work until they see their profit margins go through the roof.

Our common sense approach reflects my own experiences—in fact, I often tell clients that I learned more trading horses in Texas than I did attending Harvard’s negotiation program. While the Harvard program was interesting, it was too ivory tower compared to the world my clients and I live in. (What do you expect? It’s Harvard.) One of the instructors remarked that to ensure success he liked to meet both parties in an upcoming labor negotiation at least two years in advance. Well, I thought that it was a bit removed from the world I live in. My clients are doing ten deals a month. They are buying and selling. They are going through mergers and acquisitions. They don’t even know what the world is going to look like in two years. They need something to happen next Thursday. My clients are up to their necks in negotiations and it’s difficult for them.

As to intent, we focus on negotiating by building value, instead of using manipulation and gimmicks. Yes, tricks and manipulation will work. Once. I suppose they’re fine if you are buying a used car in Bangladesh. But if you return often to that party, these create a blueprint for failure. Using those tricks is like digging a well you are going to drink from only once—which is one reason so many businesses are parched for profits. We teach people that negotiation is a process, not a one-time event. And it’s a process of building value. Our students and executives who are coached learn the tricks too—but only so they can understand how to deflect them.

Your definition of a negotiation is the point at which effort is converted into results. Can you explain that?

Let me offer a scenario that plays out daily in companies large and small, worldwide. Someone has an idea. After several meetings, the executives decide to move forward. R&D invests time and money for months, then rolls out a prototype. After a few rounds of testing and tweaking, the product is ready for launch. Marketing conducts research, tosses around ideas, considers possible approaches, and does media test runs.

At long last, the sales department has the product. At this point, the product has not yet generated a penny of return. The salesperson meets with a potential customer and a negotiation takes place. That negotiation determines, retroactively, the pay for all the time, effort, and energy expended up to that point. So, negotiation is where all these activities converge. It’s at that point the company converts the effort into revenues and profits!

Let me give you a real world example. We work with biomedical firms in Silicon Valley. A typical situation will look like this. After six years in research and development on a drug at a cost in the $200 million range, a company enters into negotiations with the FDA to secure approval. This includes FDA approval of the drug plus approval of language used on the product insert—specifically what claims the company could make in regard to the efficacy and applications for its new drug. Granted, few consumers read the product insert. But, the language in it determines marketability and future of that drug.

We provided a customized version of our Street-Smart Negotiation For The Technical Professional seminar to the company’s regulatory division. Then, we selected members for the FDA negotiation team and set up a war room where we coached them through the process. This involved preparation, strategy, tactics, and role-play (with another team from within the company playing the role of the FDA). During the actual negotiations, we consulted with the team behind the scenes. Ultimately, the FDA approved the drug and the product insert. The company team became educated to sophisticated techniques and strategies, which the company incorporated into all future drug approval negotiations.

What’s a common mistake that people make in negotiations like these?

When preparing for a negotiation, people often work the numbers and think tactics and strategies. While that’s all very important, negotiators often overlook the most important element: the human side. They fall into the trap of thinking they are negotiating with the XYZ company. The key, however, to all negotiating is dealing with people. You can’t negotiate with a company. You can negotiate only with people. And it is always going to come down to one or a few who make the final decisions. Hence, it’s paramount to understand whom you are dealing with—their background, interests, motivations, and even their negotiating style. The real issues in negotiations are often “under the table”—having to do with these personal considerations.

You are well known for saying “that sales ability determines your gross receipts, but negotiating ability determines your profits.” How so?

There’s a difference between sales ability and negotiating ability. For example, we’ll go into a company and meet salespeople whose gross numbers are impressive. Their clients love them and they have excellent repeat business. But when we analyze their profitability, it is far below where it should be. That’s the profile of someone who is a good salesperson—but a poor negotiator.

Companies have sent their buyers to negotiation classes because they realize that the savings gained go straight to the bottom line. Yet, their salespeople have been trained only to go out and get the account—which is just half the battle. Getting the account with good margins, now that’s good business.

In nearly every company, salespeople leave money on the table. Here’s a simple question I ask sales directors. Do your salespeople talk about the size of a sale, or about its profitability? If they don’t pass the test, it isn’t for lack of dedication or diligence. The root cause is few understand the difference between selling and negotiating.

How do you help salespeople negotiate when everything is so price-driven these days?

A well-trained salesperson has an arsenal of techniques for successfully steering the negotiation away from commodity pricing and into a more profitable value proposition. The more masterful a salesperson is at positioning a product or service, the less prominence price has as an issue. Thus, the salesperson must become a master at building value—and that takes time. The first step is to toss out the common misperception that a negotiation is a one-time event—something that takes place at a table or is at the end of the sales process, or is mainly about price and terms.

Negotiation is a process. I call it the continuum of building value. People see you and your company in terms of the value—quality, trust, service, and integrity—you bring to the relationship. Every encounter with a customer is an opportunity to alter your position with that customer and build value. After each meeting, do you have more integrity or less integrity? Do you command more respect or less respect? Are you a business ally dedicated to helping solve a customer’s problems or someone looking to put something over on them? The more you build value, the more you steer the negotiation away from price.

How else do you help companies negotiate better?

More firms in every industry are seeing the huge advantages of negotiation training or coaching for nearly everyone in the company—sales forces, engineers, financial, legal, customer service, technical support, managers, and even CEOs.

I recently meet with a group of hospital administrators at a multi-billion dollar healthcare co-op. They were trying to get a better handle on negotiating rising costs with doctors and member hospitals—who often bypassed them by placing orders directly with medical and pharmaceutical companies.

Likewise, we’ve worked with financial institutions that have realized that if their loan officers negotiate better deals—for example, negotiating a fraction of a point more on loan interest rates or more effectively negotiating the cross-selling of other products and services—the bank could add millions to it's bottom line.

We helped one West Coast telecommunications company save millions by transforming its customer service representatives into more skilled negotiators. In an effort to satisfy customers, these reps had relied on one solution for solving customer problems: a refund. So, in one shot, a customer service rep might refund an account as much as $30,000—a year’s worth of advertising! You can imagine how this practice—despite good intentions—damaged the bottom line.

After a period of observation and interviews, we provided a customized version of our Negotiating When Relationships Matter seminar to everyone in the department. We demonstrated how to satisfy a customer without needlessly giving away the farm. This immediately stopped the large outflow of dollars, and was so successful that the company held similar training in its other regional offices across the country.

We are training more technical people these days. Companies are increasingly calling on technical people to work directly with customers and support the sales effort.

Unfortunately, these folks have a tendency to drain all the hard-earned profits out of a deal a sales rep has worked hard to achieve. Our training shows them how to use their strengths to help the customer without hurting their company.

You recently returned from Asia. What was a Texan teaching in China?

We teach negotiation programs all over the world. My trip to China was part of a worldwide training project for a large multinational to teach its technical people how to better negotiate with government officials on manufacturing standards. The company sells products in over 70 countries. It is vital to the company that national governments agree to a common set of manufacturing standards. Otherwise, the company would have to create—and conform to—thousands of different specs. You can imagine the costs and the quality risks involved in such a situation. A key part of my work in China was helping that company’s technical people perceive themselves as having influence on the process and giving them the tools to negotiate more effectively.

Right now, we are providing a customized version of our How To Negotiate High Profit Sales seminar to the Latin America sales force of a global tech company. This program shows how to sell at high margins in very competitive, price-driven markets. Once that’s completed, we will follow-up with the group at intervals over the next six months to get a read on results in the field and work through outstanding issues.

What key advice would you give those who want to become better negotiators?

1. Develop An Awareness
We don’t have a choice as to whether or not we negotiate. Our choice is whether we do it well or poorly. We negotiate everyday as we sell products, services, ideas, and ourselves. Supervisors negotiate with employees to get work done. Employees negotiate for raises and promotions. Husbands and wives negotiate on dozens of issues large and small—all the time. And parents negotiate with children to get them to do their chores. By developing an awareness that we are negotiating, we lay the groundwork for becoming more effective negotiators.

2. Take A “Treat” Versus “Eat” Approach
In the past, it was complimentary to say a negotiator ‘eats people for breakfast.’ Not anymore. In fact, today’s effective negotiators don’t eat someone for breakfast, they take that person to breakfast and establish a relationship based on trust, cooperation and integrity. But most people still approach negotiations with the traditional win-lose mentality, failing to recognize that the negotiating process isn’t something you do to someone. It’s something you do with another person—someone who has needs and goals, just as you do. Remember, most negotiations take place in a relationship that will continue well past the negotiation. Recognizing that life lasts a long time—and that what goes around comes around—effective negotiators take a win-win approach.

3. Practice The Art of the Incremental: Know When You’re Being Nibbled
This is similar to the answer to “How do you eat an elephant?” One bite at a time. The same holds true for good negotiators. They negotiate in increments, one bite at a time. For most, however, negotiations live and die on getting the big deal. Some people are so intent on landing the big deal, that in the process they give away little things that in the end can really add up. They get nibbled to death. Remember, the nibble will cost you more than the gulp! Effective negotiators never give something away or concede an element in negotiations without asking for something in return. Otherwise, you train the other party to continue to want more while reducing the perceived value of what you're conceding.

4. Recognize That Negotiating Is A Learned Skill That Flourishes With Practice
My golfing buddies all know why I’m not on the PGA tour, but that doesn’t mean that I can’t study, practice, improve, and enjoy the game. That same mindset applies to negotiating. Like golf, negotiating is a game. And, just like any game, once you know the rules and practice your technique, you improve. The difference might be that once you polish your negotiating skills, you’ll find they become more than a game. They become an art.

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