Steve Davies Online

I first learnt this lesson on a course I attended on negotiations. I had just been appointed to my first lending job at Barclays Bank, and I felt at a huge disadvantage when negotiating with customers. The bank’s training covered all the technical aspects of capacity, collateral, character and so on, but I felt that the person sitting across the desk had much more experience than I did when it came to negotiating.

Most bankers that I know have compensated for this by taking the “just say no” approach, but it seemed to me that there was more to it than this. That is probably why I ultimately left the banking industry behind and now describe myself as a reformed banker. 

The bank had no internal course on negotiations and asked me to find one that I thought looked sensible. I found it quite surprising that what was then the fifth largest bank in the world had no internal solution, but at least they were prepared to pay for me to go on a course. I found a three day negotiation course, and off I went at their expense

The course was a real eye opener, and 30 years later I still carry many of the lessons learned there with me. That was where the “boiling frogs” concept came from, but the most important thing was driven home by the principles of buying a car. The course was given by an impressive individual who clearly had the concepts of negotiation nailed, and he told the following story about an interesting failure that he had had.

He was buying a new car – a Jaguar X. something, and it was something he really wanted. He went to the showroom to look at the car, all nonchalant and laid back, but the salesman saw the look of love in his eyes as he ran his finger along the paint work, and gained the psychological upper hand because he knew that the customer really wanted the car.

My teacher used every technique in the book to try to get a “deal”. He said he really wasn’t sure and price was the issue.  He made an offer below the agreed price and when the salesperson said “no” he gave him a deadline and told him that his offer would expire the next day. He left the showroom with: “call me before noon tomorrow and we’ve got a deal”. The phone never rang and at a few minutes after noon he called the dealer and said “OK, you win”, and bought the car at the dealer offered price.

It really stuck in his craw, and the lesson is that if it is something that you want then you will not be nearly as effective in the negotiation as you would be if you really didn’t care one way or the other. Of course you’re not going to have somebody negotiate a car purchase, but the practical applications of this concept are wide ranging and extremely important.

The rule is that the more important something is to you, the further removed you should be from the negotiation. This operates at several different levels:

·         If you cannot trust yourself to negotiate at arm’s length on a retail purchase, set yourself some ground rules beforehand and make sure that you live by them

·         If you are embroiled in something rather more difficult, then you really need to get a third party to negotiate on your behalf.

Let me illustrate the second point with a story from my own past.

When I was running my computer service company, I owed about $6 million to National Westminster Bank USA and personally guaranteed the whole debt. For a variety of reasons that you can read about elsewhere, they decided that they no longer wanted my company as a customer or, more importantly, as a credit risk. They turned up the heat, as banks so often do, and decided to put me into what they euphemistically called their “workout division”.

I was very concerned because it meant that there would be an instant change in the “relationship”, and I had no idea about the factors that would drive their decision-making. The position was exacerbated by the fact that NatWest was, during that period, acquired by Fleet Bank, and I was summoned to go to Hartford, Connecticut, to meet with the undertakers in their black hat division.

I had no relationship with the new bank, and they clearly wanted their money back. Moreover, I felt that because they were a bank, they held most of the cards. I think it was Donald Trump who said “if you owe the bank a hundred thousand dollars it is your problem….. but if you owe them $100 million it’s their problem”. Looking back on it, I think I probably had more leverage than I realized and am sure I could have done better if I hadn’t handled the negotiation myself.

As it was, I drove about 300 miles round trip and felt outnumbered and at a huge disadvantage. Obviously I was concerned about the personal guarantee and not in much of a position to negotiate. I ended up getting a 60 day “standstill agreement” and a fee of $35,000 (which by definition we did not have) for the privilege. Driving home I realized that I had just had a “Fleet enema”.

The moral of the story is that if you are too personally involved in an outcome for any reason then you should find somebody else to handle the negotiation. You can use your lawyer or accountant or one of a number of intermediaries. I have handled a number of acquisitions for clients, and I guess that I am pretty well qualified to negotiate standstill agreements….as long as they are for somebody else.            

I want to acknowledge TAB Certified Facilitator and Franchisee Kevin Armstrong from Vancouver who used the expression “Business is like golf, the more you care the worse you get” in one of our franchisee TAB meetings that we hold to help us to run our businesses better.