Week Three: Negotiations
The Lesson: Negotiating
At the beginning of the day, the students were given and taught this handout on The Art of Negotiation.pdf
The Task: 3 teams. This week we have a very complex 3 way negotiation with A Financial Institution, A software Company, and A Landlord.
Financial Institution: Joyce Hu, Linda Shan
The Financial Company needs to hire the Software Company to create a database for them in order to keep track of their clients (without the database, they cannot take on the Landlord as a new client)
Software Company:Xiao Mei, Rachel Lei
The Software Company needs to lease an office at the Modern International so it can take on clients in Shenzhen (this includes the Financial Institution)
Landlord: Sophie Cao, Chloe Lai
The Landlord needs a loan from the Financial Institution in order to buy the office they plan to lease to the Software Company.
After the lesson, the students were given some time to analyze their goals. There are some tricks here that they first need to figure out. For example, the Landlord was not able to get a very large loan without a signed deal from the Software Company as proof they would be able to return the loan.
In the end three contracts need to be signed – The loan, the lease, and the database contract. If one fails, they all fail.
Each contract has 5 different areas to negotiate. Each area has up to 20 points that can be earned. In the end, the team with the least amount of points loses, and one person from that team will be kicked out of the contest.
Each team also has 1000 Jiahua Dollars to play with. Each $100 is worth one point. If a team gets stuck on an issue, they can try to give a hongbao to the other team to try to sweeten the deal!
The Results:
I was not happy at all with the results, but I was happy to see that our contestants learned a lot from the results.
This negotiation failed because of two main points:
1 - Time
All the negotiations started very late as everyone was too cautious to make the first move. There was too much time taken in the negotiation between the Landlords and the Software Company, which left not enough time for the Financial Institution to make it's deals. Everyone knew there were deadlines, and no one worked at the speed the business required.
2 - Stubbornness and Caution
The deal between the Landlords and the Software Company took so long as Rachel would not give the concessions needed to get the deal done. Sophie knew that Rachel needed full permission to renovate the entire office. She used that to her advantage and was very stubborn about it. In the end, the two did sign a deal, however Rachel gave up too much and both teams lost too much time. Sophie did a good job here as a negotiator - got more than she should have, but the cost of losing all the time was too much.
The Financial Institution was also very stubborn and would not give terms acceptable to the Software Company, and the Landlords would not give the Financial Institution the terms they needed.
As you can see above, there were 15 things to negotiate in this exercise. The whole thing fell apart because only 2 or 3 terms could not be competed. However, even if one team was not to get exactly what they wanted in one of those areas, giving in and signing the deals anyways would have been better for everyone. The big picture was not seen and the little details caused big problems. Not uncommon in the real business world
The lessons learned:
1 - Don't let little things stop you from reaching important goals.
2 - In business, you will have to deal with people that you feel are unreasonable. That is a part of life. Don't think of this as a needless obstacle. Think of this as an opportunity to improve our own character by handling them with professionalism and the determination needed to get the job done.
Xiao Mei vs. Eric
The original plan was this: If all contracts were signed, the weaker contestant on the team with the lowest score was out. If the deals failed - as they did - one contestant from EVERY team was to be kicked out. So I had decided to kick out Chloe, Linda, and Joyce. This is when Joyce finally got some good negotiating done. She argued a few points about fairness that I disagreed with, but then fought to say that as the lessons were learned, there is no need to punish half the contestants. They all wanted to push on and keep trying. So I agreed on one condition. I told Chloe that if there is only one person to be kicked out, it would be her as I felt she did the least actual negotiating. Sophie pretty much got the lease done on her own. I told her if she wanted to take Linda and Joyce down with her she could. But she stood up for them and wanted them to stay - so I agreed. However, Marco is now officially out as well for missing his second time with no substitute.
Click here to go back to the Business Contest
At the beginning of the day, the students were given and taught this handout on The Art of Negotiation.pdf
The Task: 3 teams. This week we have a very complex 3 way negotiation with A Financial Institution, A software Company, and A Landlord.
Financial Institution: Joyce Hu, Linda Shan
The Financial Company needs to hire the Software Company to create a database for them in order to keep track of their clients (without the database, they cannot take on the Landlord as a new client)
Software Company:Xiao Mei, Rachel Lei
The Software Company needs to lease an office at the Modern International so it can take on clients in Shenzhen (this includes the Financial Institution)
Landlord: Sophie Cao, Chloe Lai
The Landlord needs a loan from the Financial Institution in order to buy the office they plan to lease to the Software Company.
After the lesson, the students were given some time to analyze their goals. There are some tricks here that they first need to figure out. For example, the Landlord was not able to get a very large loan without a signed deal from the Software Company as proof they would be able to return the loan.
In the end three contracts need to be signed – The loan, the lease, and the database contract. If one fails, they all fail.
Each contract has 5 different areas to negotiate. Each area has up to 20 points that can be earned. In the end, the team with the least amount of points loses, and one person from that team will be kicked out of the contest.
Each team also has 1000 Jiahua Dollars to play with. Each $100 is worth one point. If a team gets stuck on an issue, they can try to give a hongbao to the other team to try to sweeten the deal!
The Results:
I was not happy at all with the results, but I was happy to see that our contestants learned a lot from the results.
This negotiation failed because of two main points:
1 - Time
All the negotiations started very late as everyone was too cautious to make the first move. There was too much time taken in the negotiation between the Landlords and the Software Company, which left not enough time for the Financial Institution to make it's deals. Everyone knew there were deadlines, and no one worked at the speed the business required.
2 - Stubbornness and Caution
The deal between the Landlords and the Software Company took so long as Rachel would not give the concessions needed to get the deal done. Sophie knew that Rachel needed full permission to renovate the entire office. She used that to her advantage and was very stubborn about it. In the end, the two did sign a deal, however Rachel gave up too much and both teams lost too much time. Sophie did a good job here as a negotiator - got more than she should have, but the cost of losing all the time was too much.
The Financial Institution was also very stubborn and would not give terms acceptable to the Software Company, and the Landlords would not give the Financial Institution the terms they needed.
As you can see above, there were 15 things to negotiate in this exercise. The whole thing fell apart because only 2 or 3 terms could not be competed. However, even if one team was not to get exactly what they wanted in one of those areas, giving in and signing the deals anyways would have been better for everyone. The big picture was not seen and the little details caused big problems. Not uncommon in the real business world
The lessons learned:
1 - Don't let little things stop you from reaching important goals.
2 - In business, you will have to deal with people that you feel are unreasonable. That is a part of life. Don't think of this as a needless obstacle. Think of this as an opportunity to improve our own character by handling them with professionalism and the determination needed to get the job done.
Xiao Mei vs. Eric
The original plan was this: If all contracts were signed, the weaker contestant on the team with the lowest score was out. If the deals failed - as they did - one contestant from EVERY team was to be kicked out. So I had decided to kick out Chloe, Linda, and Joyce. This is when Joyce finally got some good negotiating done. She argued a few points about fairness that I disagreed with, but then fought to say that as the lessons were learned, there is no need to punish half the contestants. They all wanted to push on and keep trying. So I agreed on one condition. I told Chloe that if there is only one person to be kicked out, it would be her as I felt she did the least actual negotiating. Sophie pretty much got the lease done on her own. I told her if she wanted to take Linda and Joyce down with her she could. But she stood up for them and wanted them to stay - so I agreed. However, Marco is now officially out as well for missing his second time with no substitute.
Click here to go back to the Business Contest
Comment
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Comment by Joyce on September 7, 2010 at 2:35pm -
Thanks Eric. I really learned a lot from this topic/other teammates. The progress the more important than the final result.
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Comment by Eric Velouria on September 7, 2010 at 1:47pm -
Joyce - you thought you would have more power on this point, but you did not talk to the financial team first and ask them. You simply assumed you would as per the comments on your paper. You did not have all the information before going in to the negotiation first. that is why I suggested to talk casually first and 'test the waters.' When we did this with the teachers, the Financial Institute won and the landlords lost.
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Comment by linda shan on September 7, 2010 at 1:10pm -
I think when we are in a negotiation it is very important to keep the whole deal in our mind instead of focusing on one condition by one condition and trying to win in every point.
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Comment by Joyce on September 7, 2010 at 12:17pm
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In real business world, the situation is not the same as we have. Both Rachel and I want WIN-WIN contract and we are serious to look at our weak piont with Landlord when negociating with them, also we want to use this bargin power to get more points from FIN team, but actually no use...
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Comment by Joyce on September 7, 2010 at 12:11pm
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Rachel & I thought we could have more power to negotiate with Joyce's Finance team after we got the full-redecoration point, however in fact, even we accept to deliver the software within 3 months (actually they only accept 1 month delivery time), Joyce still askfor other benefits with no charge, see lowest price paid by mothly with only 1 year's contract, 24 hrs online service, free update new technologies...that's the reason why we could not accept to sign the contract , no any benefits for our software team. I already found their weak point from the first beginning when negociating with FIN, and we also found it still no use even we had the bargin power, cause they don't care and they don't think it's their weak point. Therefore even you give more time, there will no deal done.
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Comment by Eric Velouria on September 7, 2010 at 10:46am
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Remember Sophie is a buyer - her job is all about negotiation - I expected her to be tough. Joyce perhaps could have been more reasonable in hers. She should have accepted less points with you so she could get more vs the Landlords when she would be in a stronger position - unfortunately there was no time for that.
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Comment by Eric Velouria on September 7, 2010 at 10:41am
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yes - each contract had one area that was 10 points or none. We will have to try this one again some other time and see what the results could have been if everyone finished!
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Comment by Rachel on September 7, 2010 at 10:34am -
But in the negotiation with financial institution, they only needed to persuade us to finish the software in 3month.if we accepted that, we could still get 10 points. it was highly possible that we accepted that one without much hesitation
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Comment by Eric Velouria on September 7, 2010 at 10:33am
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3 months was their urgent point yes - but it was not mandatory. If they convinced you to get things done in only 3 months, that means they could do better against the Landlord. But if they did not get it, the would have zero points, but would still be able to be at least second place - which is still a win.
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Comment by Rachel on September 7, 2010 at 10:33am
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In the negotiation with landlord, we won the full freedom to redecorate and we could only got 10 points, the landlord would lose 20 points .of course they would against that with all their effort. because of this we sacrificed a lot to get these poor 10 points.
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Comment by Eric Velouria on September 7, 2010 at 10:29am
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If you see all 6 negotiation sheets, there were all very fair - us teachers played it out first. Tyrone was first place, Cathy, second and Tian last. Remember you had more power against the financial institution and could have gotten more points then them on that contract. A successful negotiation is anything between your best case scenario and your bottom line. Bottom line is still success. :)
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Comment by Rachel on September 7, 2010 at 10:21am
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the rule of the game was not rational at some points.even if we could sign the contract, i and may would end up losers.
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Comment by linda shan on September 7, 2010 at 10:13am
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there was one point that I could do much better. I wanted to close the deal quickly, so I did not hesitate and said Ok when they wanted the term of loan return would be 15 years. If I did not accept that condition first and made them to give up concession in other ways, I thought Chloe would totally agree with my offer. The contest is all about learning for me:)
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Comment by Eric Velouria on September 7, 2010 at 8:41am
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Why did Chloe not accept it? What was the point she disagreed on? I think you and Chloe knew you won more points than Xiaomei and Rachel in that contract, so losing a few against Linda should have been ok.
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Comment by Sophie Cao on September 6, 2010 at 10:55pm -
I think Linda did really well on the negotiation with me ,and I agreed to sign the agreement with her at the last minute ,but I need more time to persuade Chloe to accept it ,I feel really sorry on the failure of our contract .maybe Chloe and I should discussed our bottom line beore this ,then things would get better.
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Comment by linda shan on September 6, 2010 at 1:53pm
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I did not see the point why I shoule be out of the contest, as you did not observe my negotiation with the landlord, even at the last minute Chloe refused to sigh the contract and no deal reached. Anyway, I was really appreciated by what Joyce said. Rules are very important in a game! But it is not necessary in the real business world.
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