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Creating Value: Negotiation Avoiding Neediness

by Ben Killerby
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Negotiating with big corporations often starts as a dream
and ends as a nightmare. Almost always, this is because
you have demonstrated neediness.

Neediness is most evident when small and mid-sized


companies do their own negotiations. It might be that a
start-up needs this Fortune 500 company as a
demonstration client or a cornerstone client. It might be
that an expanding company needs capital from a VC, PE
company or large investor. Alternatively, it might be
shareholders wanting to divest their company in a business
exit.

Neediness is wanting or needing the deal to excess


and is often linked to a weak or non-existent Best
Alternative to a Negotiated Agreement (BATNA).
When professional negotiators detect neediness, they hone
in on it and exploit it. Often, this doesnt happen in they
way you expect it. At first glance, you would expect a
strong negotiator to force down your price and immediately
take advantage of your neediness. Granted, this happens a

lot, but what also happens is the opposite: a big company


talks to you as if it accepts your price, your conditions and
even the perks you have woven into the deal for your
company. Author Jim Camp is quoted in Harvard Business
Essentials Negotiation [1] as saying:

Tough negotiators are experts at recognizing this


neediness in their adversaries, and expert in creating it
as well. Negotiators with giant corporations, in
particular, will heighten the expectations of their
supplier adversaries, painting rosy, exaggerated
scenarios for mega-orders, joint ventures, global
alliances, all for the purposes of building neediness on
the part of their adversary. . . . Then, when the
neediness is well-established, they lower the boom
with changes, exceptions, and . . . demands for
concessions.[2]
I have seen this personally dozens of times especially
when selling land to developers or mining companies. This
is where the vendors are drawn into the rosy picture of their
land becoming an entire suburb or producing mine, only to
find that the purchase contract becomes an option to
purchase and the large sums become conditional on zoning
approvals, environmental approvals or grants of mining
leases. It also occurs when smaller companies are being
played off against each other in supplying big orders for big
corporations. It happens time and time again in business
exits where the prospective purchaser seems to have no
qualms about the price or terms until due diligence starts to
throw up problems that can only be solved by a lower price.
The problem is that the longer and more frequent the
contact you have with the other side, the more you are
building up an emotional commitment to the outcome. It is
that emotional commitment that makes you hang on to the
result that you want (a supply contract, an investment, or a
sale of your business) in the face of each movement
downward in price by the other side. Indeed, there is
research that shows emotional commitments to the
outcome cause up to 33% of negotiators to accept an
outcome that is worse than their BATNA.

The text book answer to the neediness issue is to work


harder on your BATNA and to let the other side know up
front that you are prepared to walk away if your BATNA is
not met. [3] I think it is more complex than this. Thats
because I think there are really two types of neediness:

Subjective neediness where emotions, feelings


and often general inexperience is driving your
negotiations, and

Objective neediness where you may be completely


unemotional and personally detached from the outcome,
but your company needs the deal so badly that it is
affecting the outcome.
Yes, the answer in both cases is to focus on your BATNA, but
even in the second case of objective neediness, you may
even choose to acknowledge that there are no other buyers
or investors on the horizon (especially if they already know
this) but you are not taking their offer because it simply
doesnt make any profit/wont discharge your liabilities after
the business exit etc. It is at this point that you seek
to create value with trades, or simply walk away as you
promised yourself you would when you developed
your reservation price and your BATNA.
What do You Really Need?
In negotiation preparation, we always make the distinction
between need and want and, indeed, nice to have.
Oftentimes a company needs a sale of its business by a
certain date for a certain amount simply because the
investors or bankers are demanding it, or it will run out of
cash and become insolvent. On the face of it, that is a
pretty compelling need. We have, however, often been in
the situation where the other side has detected this need
and driven such a hard bargain that our client could not
rationally accept the offer without having disposed of its
business and still been facing insolvency because of the
liabilities that were not transferred. In this situation, the
client has turned down the offer and explained that the
situation, then calmly turned to the investors or lenders and
explained the situation to them. At that point, investors
have put more money in and bankers have agreed
to extend and pretend by not calling in the loans. Yes,
there had to be a plan for the future of the business, but the

point is that when faced with having an investee or client


becoming insolvent, investors and bankers will usually try
to resolve the situation some other way.
How Neediness Manifests Itself in Negotiations
The most obvious manifestation of neediness is an
excessive willingness to please, to tailor the agreement to
the wants of the other side and an unnecessary willingness
to act at the behest of the other side. There is, though, a
flip side of this. Neediness can also show up as table
thumping, impoliteness or disproportionate anger at
comments and suggestions from the other side. This is
because the attachment to the outcome is so strong that
any impediment (such as the other side wanting something
their way) produces upset and a misplaced sense of
urgency.
Both an excessive willingness to please at one end of the
spectrum and anger at the other end of the spectrum lead
to sub-optimal negotiating outcomes.
Conclusion
For anyone who is even vaguely entrepreneurial, there are
always going to be negotiations where they will bet the
farm. For many growing companies, there are always
defining negotiations with bigger companies that will make
or break the business. To prevent neediness, you should
always spend a lot of time on your reservation price and
your BATNA, but if you need the deal so badly, you should
probably send in professional negotiators.
[1] Luecke, R., Harvard Business School Press Negotiation
Perseus Books Group.
[2] Camp, J., Start with No (New York: Crown, 2002), pp.4
6.
[3] Luecke, R., op.cit.

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