Standards are a great way to influence a negotiation and, if applicable or appropriate, a technique much beloved by experienced negotiators. Using standards can be so effective that often the party being influenced does not even realise that they have been influenced using this technique.
There are many examples of standards in negotiations – these include list prices, rack rates, terms and conditions, benchmarks and any other information made available and purporting to set in stone conditions that may in fact be negotiable. Even quoting a budget can be thought of as a standard.
Standards work so well because they combine two powerful techniques – anchoring and the higher authority gambit. Setting out a fee on the basis of a firm’s “official” rates both sets a high anchor as well as putting the blame for the “high” rates on the firm, its management or whoever set these rates.
Outstanding negotiators will challenge all aspects of an agreement in order to get a better deal. This will not just be limited to a headline rate or the total fee. They may also focus on issues such as payment terms, warranties, liabilities, delivery dates or any other value added feature. In short they apply the principle that everything is negotiable, even when the other side wants to pretend that it is not.
The skill in dealing with standards is to a) recognise them for what they are, b) understand if these are indeed real, some may be required by law or professional codes of practice, and c) the impact of challenging these.
There are a number of ways in which to deal with this technique. They range from simply challenging them – e.g. “this is not acceptable”, to asking questions like “what would happen if we ……” or “what would it take to change……”. Another counter is to respond with your own standard such as “this contravenes our internal policies” or “this is higher than the budget set by …….”.
Knowing the power of standards some organisations go to great length to establish and defend these. One classic example is the famous 1/3 of starting annual salary that serves as the standard fee for many recruitment consultants. Many of the larger firms in this segment have very firm policies around this. In some firms it is almost impossible to book anything but the standard fee structure as the internal accounting systems do not provide for sufficient flexibility. Consultants in these firms encounter significant difficulties if they want to offer clients a deal that is substantially different and often have to go before senior committees to justify deviating from the norm.
Breaking with a standard can be an opportunity as it allows a service provider to differentiate from the competition. But this can be hard work because once a particular method has become accepted as the “standard” in a market it can be difficult to get clients to agree to something different as this could involve having to justify adopting something that others have become used to.
Applying standards can make the life of a negotiator easy – but it is always worth testing if there are better alternatives.