21 Jan Relative Power (Part 1)
The Theory of “Relative Power” (Part 1)
At Tenacity, we don’t teach negotiating skills. There are lots of companies out there that do though. That’s largely why we don’t. As you know, we do just this “one thing” (helping our clients keep the clients they’ve worked so hard to acquire).
But, there’s a point in the Clients for Life® process where effective and timely negotiating is particularly important. That point is after the new client has been sold (perhaps with a Letter of Intent) and just before the contract has been signed and service has begun. That is the precise point where the “Transition Meeting” must be held. The Transition Meeting is the hand-off from Sales to Operations, which includes the new client as a key participant. Expectations, on both sides, are elicited, negotiated and memorialized, serving as the primary value creation standard against which success or failure can be judged. This is where Operations fully accepts, in the presence of the client, the promises and representations that Sales has put forward.
Since there is a negotiation aspect to this step, let’s drill down for a moment. We believe two important aspects of negotiation come into play; the first is power and the second; timing. The two are related, which is why this exact timing is precisely scripted for the Transition Meeting. Completing the meeting prior to contract execution permits negotiating in an environment where the provider has the highest degree of “Relative Power”.
Power is a great arrow to have in the quiver when entering a negotiation. In many cases, it is based on principle (being in the right) – that’s the best kind to have. In the business setting we’re discussing, power is dependent on two things:
- Clearly defined negotiating parameters permitted by the firm (Right Clients / Right Terms®)
- The ability, willingness and obligation to walk away from the deal if certain criteria are not satisfied.
Timing is so critical here because walking away from the deal is no longer possible (or at least ethical) once the contract has been signed. Unless the other side knows that you have retained for yourself the ability to walk away and they believe that you’re willing to, you’ll never find your way to the best outcome in the negotiating process.
So, once again, timing is everything.
(Tenacity Commandment #2: “Start the Contract According to the Client’s Expectations.” (And, by the way, make sure they understand yours before you do so.)
We’ll go deeper into the concept of “Relative Power” next week and explore how it can be used effectively to ensure new contracting relationships get off to the most positive start.
John & Steve