One of the classic challenges that professional fee negotiators have to overcome is the “love vs. money” fallacy, i.e. the idea that one can either have a great relationship with the client or that one can optimise the economic outcome of a negotiation, i.e. fees. As the use of the term fallacy already indicates – good negotiators can in fact have both: good relationships and good outcomes.
In fact we believe that a well handled fee negotiation will in fact strengthen a professional- client relationship. On the one hand a good negotiation will help avoid surprises (which are poision to relationships), as a constructive negotiation will clarify what will happen if projects take a different turn and under what circumstances such changes will impact the fees to be paid.
On the other hand, we often see that clients gain more confidence in- and respect for their professionals when these professionals are able to demonstrate how well and constructively they can look after their own interests. Many clients worry (quite rightly) about how well a professional is able to look after their client’s interest if they cannot even look after their own. This phenomenon is particularly important for those professions where the professional is engaged in some adversarial role on behalf of their client, e.g. law, banking or lobbying.
This is not to say that professionals should negotiate assert their fee demands without regards to the impact on the client relationship. Rather what we are advocating is that a professional should have regard for both outcomesand process so as to determine the optimal approach to a fee negotiation.
Given that most professional fee negotiations are part of a (hopefully) longer term relationship this provides for a greater range of potential solutions than a typical one-off bargaining situation. Short term concessions can be compensated with longer term counterconcessions. Ofcourse, the side making short term concessions will have to ensure that it will be able to reap the benefits of the longer term counterconcessions it is expecting to receive. This is why it is usually a good idea for both sides to be making and receiving a mixture of short and long term concessions. This way both sides will have incentives to ensure that the relationship will still be working in the longer term.
An interesting article in the January 2015 edition of Negotiation Journal (1) adds a novel perspective on the outcome vs. process issue. This article looks at instrumentalism (i.e. the believe that rational people will behave in ways that promote self-interest) and an alternative relational approach. The article discusses the problems associated with too heavy a reliance on the assumption that negotiators will only pursue purely selfish motives. It also explores the possibility that negotiators see themselves as part of a system or network of relationships and that their objectives are also in part guided by a desire to understand the objectives of their counterparts and help them achieve these. One of the big differentiators postulated by the authors is that relational negotiators will pay more attention to the process in which the outcome is reached and that they will put a heavier emphasis on reaching an “equitable” outcome.
Many professionals will probably immediately identify themselves more with the relational rather than the instrumental camp. This is not surprising given that a professional’s core technical expertise is there to help their clients.
We fully support a relational approach to fee negotiation as we think that such an approach will be far better suited to reach mutually optimal outcomes. But there is one critical caveat that professionals have to bear in mind – healthy relationships are mutual. A relational approach to negotiation will only yield mutual benefits when both sides rare committed to operating in a similar approach. When one side adopts a “selfish”, i.e. instrumental approach the other side is likely to end up ceding much more.
In our fee negotiation workshops and in High Impact Fee Negotiation and Management for Professionals we talk extensively about two types of negotiators that approximate the instrumental vs. relational style – we call them shark vs. dolphins. The shark is out to get the maximum he/she can for themselves. The dolphin negotiator will still pay attention to their needs but will also have regard for the need of the other side and will try to find a mutually acceptable solution. The solutions reached by two dolphin negotiators will invariably be better from a long term relationship perspective than those involving a shark – as long as both dolphins work hard at exploring options rather than just settling for an easy, quick solution.
(1) Ingerson, M-C., DeTienne, K.B., Liljenquist, K.A. 2015 Negotiation Journal 31(1): 31-46