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Negotiating Strategies
By Michael Strogoff, AIA

These articles initially appeared in Negotiating Strategies, the monthly newsletter for design professionals and their advisors with practical, proven techniques for negotiating better and more profitable agreements. To view a sample newsletter or find out about subscribing to Negotiating Strategies, click here, call 866 ARCH ENG (1 866 272-4364), or email Newsletter@StrogoffConsulting.com

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Provide Compelling Reasons Why Your Client Should Modify a Contract Provision

How To Define the BATNA Of Those Sitting Across the Negotiating Table

Branding Starts With a Firm's Core Spirit and Values

Adopt a Long-Term Perspective and Negotiate Better Terms with Vendors

SPECIAL OFFER!

Provide Compelling Reasons Why Your Client Should Modify a Contract Provision
By Michael Strogoff, AIA
Negotiating Strategies Publisher

Clients don't willingly modify their agreements without compelling reasons. Unfortunately, when confronted with unacceptable contract terms, most design professionals respond with reasons such as "Your indemnification language is uninsurable" or "We cannot meet those turnaround times for reviewing submittals." These responses, which are solely from the design professional's perspective, are seldom effective in persuading clients to modify specific clauses. For better results, frame your responses from your client's perspective, as in these examples:

Sample Clause 1:
The Architect shall supervise the Owner's consultants retained on this project to ensure a properly coordinated set of documents.

Response:
We understand the intent of the draft language but cannot directly supervise consultants that are not contracted through us. Changing the language to read, "The Architect shall coordinate its services with those of other consultants under contract with the Architect and with those retained directly by the Owner," provides the coordination you want. In addition, our supervising your consultants might alleviate them of responsibilities for their own actions and leave you shouldering more risks.

Analysis of Response:
The response 1) acknowledges and supports the owner's intent, and 2) provides alternative language that addresses the Owner's goals, and 3) describes the possible implications to the owner.

Sample Clause 2:
The Architect shall review and take appropriate action of the Contractor's submittals within five (5) days of the Architect's receipt of each submittal.

Response:
The five day timeframe might not allow sufficient time for the review of some submittals (e.g., those entailing structural drawings or calculations or requiring review by multiple disciplines). The language as drafted also provides a contractor with greater ability to submit claims against the owner for delays (the largest cause of claims by contractors). We suggest modifying the language to read, ". . . within five (5) days of the Architect's receipt of each submittal unless the Architect notifies the Owner and Contractor that additional review time is required due to the nature of the submittal or because the submittals were incomplete."

Analysis of Response:
The response clearly explains the problem with the draft language and includes tangible examples. The response also discusses the added risks the owner might incur if the language is not modified.

Sample Clause 3:
The Architect shall attend all meetings and client worksessions during the design phases as determined by the Owner.

Response:
Because the project scope has not yet been finalized, the number of meetings and worksessions could vary dramatically. There are several options for proceeding: 1) keep the language and number of meetings open-ended and reimburse our team on an hourly basis for those meetings, 2) quantify the total number of meetings included within each phase of our Basic Services, or 3) meet with you later this week to specify the user groups and committees with whom we are expected to meet. Options 2 and 3 will eliminate our need to include extra contingencies within our fees.

Analysis of Response:
The response provides clear options for the owner to choose and provides an incentive for the owner to modify its language.

© 2004, Strogoff Consulting

How To Define the BATNA Of Those Sitting Across the Negotiating Table
By Michael Strogoff, AIA
Negotiating Strategies Publisher

Constantly evaluating the likely outcome of a negotiation against your BATNA (Best Alternative To a Negotiated Agreement) allows you to make rationale decisions about how aggressively to pursue the remainder of a negotiation and when your interests are better served by not reaching an agreement. This requires that you know your BATNA. (Refer to the January, 2004, issue to determine how to identify your BATNA.) Determining the likelihood of your client pursuing its best alternative is equally important. Knowing your client's BATNA can guide how far you push a negotiation and can provide insight into when your fees are so high or your proposed contract terms so unacceptable that the client's interests are better served elsewhere. To determine a client's BATNA and know how aggressively to negotiate, follow these steps:

• Place yourself in the client's shoes. What does the client fear most and what measures will the client take to avoid that outcome? What is the client's perception of the likelihood of reaching an agreement with your firm? If you were advising the client how to negotiate with another firm like yours, what concessions would you advise the client not to make? At what point might the client be willing to walk away because its feels it might get a better deal elsewhere? At what point is the client better off not making any deal?

• Find out what the client has done in the past. Talk to your counterparts at other firms with whom the client recently negotiated and find out where the tipping points were during their negotiations. Research the fees the client paid to other design professionals. Contact your consultants that were part of other teams that pursued the project. These people might know what alternatives, if any, the client is actively considering in lieu of reaching agreement with you and which of those alternatives represents the client's BATNA.

• Identify why the client selected your firm and who else meets those criteria. For example, if the client selected your firm because of your experience designing K-12 schools, the client's alternatives are numerous since many other firms also specialize in K-12 design. However, if the client selected your firm primarily because it was enamored with your firm's principal designer and team of specialized consultants, the client's best alternative will entail significant compromises. In this latter example, you might include your principal designer and key consultants in the early negotiation discussions with your client to reinforce your team's appeal and make the client's BATNA even less appealing.

• Talk to people behind the scenes. Contact some of the client's representatives and advisors with whom you have a candid relationship. If skillfully approached, these people might reveal their perceptions about the status of the negotiation, the politics influencing the client's negotiating stance, the client's willingness to discuss the outstanding issues of most importance to your team, and the client's likely alternatives.

• Determine the client's deadlines. If the client is not under time pressures to reach an agreement, it probably enjoys greater negotiating latitude. Conversely, if the client feels that its deadlines are jeopardized or its revenue stream and future profitability will suffer if it cannot reach an agreement with your firm, the likelihood of its BATNA yielding better results than reaching an agreement with your firm diminishes and your degree of negotiating latitude increases.

• Evaluate where the client falls on the competitive vs. cooperative scale. Is the client more interested and "winning" the negotiation or more committed to reaching an agreement with your firm? How much patience does the client exhibit? Is the client willing to discuss the issues of most importance to your firm? In general, the more cooperative a client, the more that client tends not to focus on its alternatives.

• Test the limits. Without adopting a take-it-or-leave-it stance, test the client's resistance points on issues of most importance to your firm. Explore changing the client's standard indemnification language, shifting responsibilities to the client's project manager, excluding some services from your scope, proposing fees slightly higher than the client paid other design professionals, and revising the client's most objectionable contract language. Each of the client's reactions provides insight into how far to push before the client will seriously consider its BATNA.


© 2004, Strogoff Consulting

Branding Starts With a Firm's Core Spirit and Values
By Michael Strogoff, AIA
Negotiating Strategies Publisher

The term "branding" is now part of our everyday lexicon. And, like other business jargon and trends (e.g., re-engineering, down-sizing, just-in-time production, TQM), many businesses embarked on branding campaigns but underestimated the focus and commitment required at every level of their organizations to truly succeed. Instead, they focused their efforts on renaming their departments and creating memorable marketing campaigns in order to revamp their outward appearances. Some architecture, design and engineering firms, in their quest to brand themselves, simply shortened their company names, stopped referring to themselves as providers of architectural, design and/or engineering services and recast their firms' mission as "problem-solvers for the built environment" or "facility consulting firms." Internal discussions about implementing their branding strategies were limited to their principals, marketing departments and, of course, their graphic designers who designed new logos and marketing collateral. Project managers, designers, technicians, administrative staff and consultants found out about their company's branding efforts through updated web sites, new stationary and business cards, and new covers on their firm's statements of qualifications. In some cases, prospective clients knew more than the firm's staff about a firm's branding efforts. They were the recipients of carefully scripted branding messages delivered during marketing interviews and as part of press releases and announcements.

These companies missed the point. Branding starts with a firm's core spirit and values, and is reflected in every interaction, debate, decision, hiring choice, presentation, phone call and e-mail a firm makes. Branding is part of every message a firm crafts (both internally and externally), in every set of documents it prepares and in every solution it recommends. For a branding strategy to be successful, every principal and staff member must believe in its message and demonstrate its meaning through their actions. Branding is more than appearances. For a professional service firm, branding includes what its staff does when no one is looking.

Before a design or engineering firm rolls out its branding message, it must instill in its leaders and staff the values that and spirit that support its brand. If an engineering firm wants to brand itself as providing superior service and placing its clients' needs above all else, the firm must empower every staff member with the ability and authority to meet clients' requirements even if doing so means sacrificing profits or forgoing meeting other of the firm's goals. If an architecture firm wants to brand itself as a design consulting firm dedicated to helping clients achieve their business goals, the firm must limit its recommendations to only those solutions that propel clients toward their goals, even if that means advising a client not to construct a new building when the client merely needs a management-driven solution to solve its space requirements. If your firm wants to brand itself as trendy and elegant, start by hiring only trendy and elegant staff who live trendy and elegant lives . Cutting edge? Make sure your firm employs designers who think outside the box and technicians who search for new solutions, and relies on innovative methodologies and state-of-the-art equipment. The brand lives in every detail.

If a branding campaign focuses only on projecting an image to others and is not supported by a firm's internal attitudes and behavior, then it's simply public relations. And the only people who will believe the branding message are those who craft it. *.


© 2004, Strogoff Consulting

Adopt a Long-Term Perspective and Negotiate Better Terms with Vendors
By Michael Strogoff, AIA
Negotiating Strategies Publisher

Businesses differ vastly in how they negotiate with vendors. Wal-Mart, in its effort to shave every penny off its costs, demands the lowest possible prices from its vendors, helps vendors streamline their practices and rewards them with high volume contracts. Supermarket chains require less aggressive pricing but make suppliers pay for prime shelf space. Other American businesses run the gamut from collaborating with their vendors to ruthlessly negotiating with and playing suppliers off of each other. Unlike the Japanese, who often organize themselves into parent companies (end-product manufacturers) and child companies (component suppliers) that work collaboratively to make each company more efficient and cost-effective, American companies seldom achieve favorable pricing from their vendors by focusing on long-term interests.
Next time you negotiate with one of your vendors, try negotiating by helping them succeed and prosper. It is in neither of your interests to nickel-and dime-one of your suppliers. Follow these steps:
• Conduct annual reviews of your major expenses, such as office supplies, printing, delivery, phone and data services, equipment, food and beverages, parking, payroll services, healthcare coverage and legal advice. Identify a savings goal for each vendor, perhaps 5% to 20% and make a list of alternate ways of meeting those goals. For example, to reduce your delivery expenses, can you schedule pick-up times once per day instead of multiple pick-ups or can you consolidate your accounts and use a single vendor? To get a less expensive parking rate, can you pre-pay the garage every three or six months instead of monthly? If you put your tax or legal advisor on a retainer, will that reduce your annual costs? (Yes, even lawyers will negotiate their fees.)
• Ask each vendor, "What can we do to help you save money?" Meet with each of your key vendors. Tell them your target goal, explain some of the alternatives you developed for meeting those goals and ask for their input about how to reduce their prices. They know their businesses best and will likely propose options that you have not thought of. Explore ways to reduce their costs. For example, if you ordered supplies through their web site instead of via phone and give them more scheduling latitude by accepting a two-day instead of next day delivery, how much of their savings would they pass onto your firm?
• Make long-term commitments in exchange for discounts. Salespeople usually offer substantial discounts for long term commitments: they benefit from larger commissions and their companies gain by locking in guaranteed orders. Ask for price breaks based on different levels of commitments. For example, payroll services and telephone providers willingly provide discounts or upgrade service levels in exchange for 12 or 24 month contracts. (Even this publisher will give substantial discounts for multi-year subscriptions!)
• Look for creative ways to benefit both parties. For example, in exchange for exclusive vendor contracts, a reproduction company might place expensive equipment in your office for your convenience, or install software that enables your firm to print directly to their off-site equipment off-site.

© 2004, Strogoff Consulting

Watch for more articles by By Michael Strogoff, AIA to appear in your AIAToledo.org

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