The Art of the Two Table Negotiation

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Stop me if you've heard this one before.

  1. Customer licenses software from software supplier
  2. Customer doesn't understand licensing restrictions
  3. Customer deploys licenses like they're going out of style
  4. Supplier conducts compliance audit
  5. Supplier asks for bags full of money to look the other way

Sadly, I don't have enough fingers and toes to count the number of times I've seen this scenario play out.

A few years ago I was asked by a client to help them negotiate a settlement with one of their software suppliers after they were found to be severely out of compliance.

To make matters worse, the CEO of the software company and the CTO of the client organization had been trading barbs and strained an already fragile business relationship.

With millions of dollars on the table and a potential lawsuit looming, the CTO insisted on participating in the negotiations. My first conversation with him went something like this:

Me : "Let's talk about how we're going to deal with these guys."

CTO: " Listen Mohammed, these guys are a bunch of crooks and I'm going to make sure they know it. When we meet with them, I want you to look them in the eyes and tell them that we're ready to fight them in court if needed."

Me: "No. Let's talk about how I'm going to deal with these guys."

How to Navigate a Two Table Negotiation

When we think of negotiations, particularly contentious ones like this, we imagine the two sides sitting across from each other at a long table in a board room pointing fingers.

But in practice, the various stakeholders in a negotiation will almost never square off against each other all at the same time.

Usually, the playing field looks something like this:

  • The Front Table - This is where the negotiators from both sides sit and hammer out the terms and conditions of a deal. These individuals are tasked with the responsibility of achieving the best possible outcome for their respective side.
  • The Back Tables - These are the back shadows of the negotiation. It's from here, hidden from their counterparts, that the lawyers and decision makers provide direction and approval to their respective negotiators.

My client's CTO wanted to sit at the front table and beat up the supplier, and there are times in a negotiation when I'll bring a decision maker out of the shadows to do just that.

But only when it makes strategic sense, and almost never in the beginning of a negotiation.

Most suppliers won't bring their decision makers into a negotiation.

Suppliers will often say they need to go back and get approval for something that's not part of their "standard" terms, which means they don't have to commit to anything in the initial discussions.

They can do this because their decision makers almost never participate in the negotiations.

Unfortunately, clients often make the mistake of having their decision makers sit at the negotiating table and get caught having to make a decision on the spot because there's no one to go back to for approvals.

Bring your adversary to your side of the table.

Negotiations can be contentious, but the negotiators don't have to be.

In the case of my client's software compliancy issue, I spent some time trying to understand what was at stake for my counterpart (a software sales executive) in the negotiations.

I soon figured out that the sales executive wouldn't benefit from a compliance payment but new revenue would be reflected in her commissions, and the decision maker (her CEO) sitting at the back table didn't really want to lose this client.

Armed with that knowledge, I collaborated with her to create a proposal whereby my client would buy a few additional licenses to account for the over-deployment and also purchase some net new licenses for upcoming projects.

In return, the supplier would waive the compliance penalty and provide free professional services to help the client re-architect their environment in order to reduce the size of their current deployment.

The key to a successful negotiation is understanding what everyone wants.

There's a lot that can be said about the tactics of good negotiators.

But ultimately, those tactics are only useful to the extent that negotiators understand what all parties actually want — the front table and the back tables.