Negotiating a good fee. Do you have what it takes?

Negotiating fees is becoming ever more critical for the financial health of any Professional Service Firms. One of the questions that I am regularly asked is whether outstanding fee negotiators are born or made. The question is often put to me by senior management considering the likely benefits of some form of negotiation training such as our High Impact Fee Negotiation Programme. Implicit in this question is a general scepticism as to whether professionals, who typically only feel comfortable dealing with technical issues, can become competent fee negotiators. (Incidentally I get similar questions regarding the possibility of turning professionals into fee generators)

What the research tells us

A review of the negotiation literature provides a simple and clear answer – Yes. The literature is unanimous in stating that anyone can learn to become a good negotiator. In fact, a whole industry has sprung up to cater for the needs of individuals, executives and MBA students to learn how to become a top class negotiator.

Searching for “negotiation” on Amazon will result in over 15,000 books. The vast majority of these either provide advice on how to negotiate or analyse past negotiation situations, the latter frequently in connection with international trade, government or political issues. Interestingly the search results also brought up titles belonging to the adult literature category so negotiation does appear sexy to at least some target audiences.
The persistent doubts that still remain in this area however are worth exploring deeper as the answer to the apparently straight forward question is far more complex and depends in part on what we mean by a good negotiator. I would like to propose the following negotiation skill categories:


has an understanding of key negotiation methods and techniques, can apply most of them, engages in some preparation, mindset focused on short term wins, little experience, uses one negotiation style;


can apply key methodologies and techniques well, prepares well, mindset does not get in the way, can apply previous experience to help decide what to do, able to recognise and use alternative negotiation styles;


makes skilful use of broad range of methods and techniques, in depth preparation are second nature, positive mindset helps generate creative solutions, makes good use of extensive experience to inform situations, adapts negotiation style to situation flexibly, starting to influence broader negotiation situation;


has mastered a broad range of methods and techniques, will engage in exhaustive preparations if need be, mindset helps counterpart to reach optimal agreement for all, broad range of experience to call on, highly flexible negotiation style, actively sets out to influence negotiation situation.
Just about anyone can learn basic techniques and methodology, however they often fall short of taking full advantage of these because they fail to prepare properly. This is probably the most frequent and costly mistake made. In my experience it is more a matter of mindset rather than any intellectual or informational barriers that stop individuals from committing the time, effort or resources to ensure a good preparation. Is one prepared to go through all the issues that may come up in a pending negotiation? Will one be able to dispassionately review one’s strengths and weaknesses and those of the other side? How ambitious is one willing to be? How well can one handle potential emotions if a negotiation has failed or failed in part?
Motivation is another key determinant of negotiation excellence. More often than not individuals actually don’t really care how they perform. They would rather give in or give up major concessions than lose a piece of business or they simply don’t feel that an improved outcome is worth the risks, time and effort required. This is particularly often the case when the individual is negotiating on behalf of other parties such as their employers.
I often find that the difference between average and an outstanding negotiator is that the average negotiator has a very short term or limited perspective of what the negotiation entails. They focus on the immediate task in hand and focus on the visible or known issues in terms of their strategies. This is often encouraged by their firm.
Advanced negotiators on the other hand will look beyond the obvious and will try to get a full understanding of the other side’s perspective so as to be able to make proposals that fully capture both sides’ interest and create additional value. This may for example be about supposedly peripheral issues (such as timing, risk, format of delivery, etc.) that, if addressed properly, may provide the client with extra benefits or convenience and hence value.
Where Master negotiators truly differentiate themselves, other than that they have more experience and technical mastery, is that they seek to influence the negotiations before these have even started. They do this by either actively creating for themselves additional alternatives or by finding ways to influence the counterparty and their perceptions . They know that the more alternatives they have at their disposal the better they can use their vetoes to project negotiation power. Likewise, fully understanding the factors that influence their counterparts will allow them to change the dynamics of the negotiation in their favour, often without the other side even realising what has happened.
Firms can help their employees negotiate better deals not just by focusing on skills training but also by addressing issues such as motivation. This should also address the perceived risks of negotiating more robustly. Often individuals hold back because of the perceived consequences of losing a piece of work or possibly annoying a client. This is highly counterproductive to developing good negotiators in the long run.
Ultimately great negotiators are made by acquiring the basic skills, practicing as often as possible and by reflecting on how things could have been done even better. Just about anyone has what it takes to do this, the question is are you willing to put in the time and effort to get there?
The issues highlighted above are covered in further detail in High Impact Fee Negotiation and Management for Professionals.


[1] For an overview see Lax, D A, Sebenius, J K (2003) 3-D Negotiations: Playing the whole game, Harvard Business Review, Nov 2003 and Lax, D A, Sebenius, J K (2012) Deal making 2.0, A guide to complex Negotiations, Harvard Business Review, Nov. 90


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