Negotiating Contracts

Events Management 5.1

 Contents

• Negotiation Goals
• Preparation
• Trade-offs
• Mind-set
• Negotiating Process
 Negotiations –
Welcome to your Life
• Personal
– Get a raise
– Buy a house
– Maintain harmony in relationships
• Business
– Contracting for a/v needs
– Establishing hotel room rates
– Renting office space
– Internal H/R issues
Negotiation Goals
 How Important are
Negotiations?
• Business schools do not focus much
attention on skills training
• Businesses have formal sales strategies,
but, tend not to have formal negotiation
strategies
• Sales = business, but, negotiations = yield,
in both business and other positive
outcomes.

Negotiation Goals
Avoid the Adversarial Trap
• Mental metaphors argumentation, a contest,
confrontation, at worst, a fight.
• Win-Win? tendency is to want to win more, get the
best deal, come out ahead, WIN! (At least more than the
other side.) In Singapore, they call it “Kiasu”
• Do sellers sell value, become strategic partners and
trusted advisors, or are they just vendors /?
• Do buyers really want strategic alliances, preferred
vendors and most favoured suppliers, or do they just
want the lowest price possible? Is procurement a
relationship, or is it just commodities /?
• Trust sometimes disappears at the bargaining table
• Partnering can bring more benefits in the long run.
Negotiation Goals
Sun Tzu on Whether to
Fight
In war: “To subdue the enemy without
fighting is the supreme excellence.”

In negotiations: To accomplish your goals

without fighting is the supreme
excellence.”

Negotiation Goals
 Downside Risk of
Adversarial trap
• Harm to the relationship – distrust
• Legacy issues – expectations of future
negotiations that have to be dealt with
each time.
• I win, you lose – are you happy?
– How hard are you going to work to keep me
happy?
– How will you approach the next negotiation

Negotiation Goals
 Benefits of the Win-Win

• Negotiations are easier among partners –

in an atmosphere of trust and mutual
interest.
• Helping each other win creates conditions
for future business – both relationships
and wealth.

Negotiation Goals
 The Goals are Important

• Without a negotiation goal you are more likely to:

– Be reactive vs proactive
– Abandon plans and cave in to demands
– Have tactics define your strategy
– Fail to see the other side’s plan, strategy and tactics
– Allow emotions to control
– Think short-term vs long-term
– Be less creative in finding win-win solutions

Negotiation Goals
 A Good Goal
• Make sure both sides get the best deal possible
• Build your relationship and move beyond win-win
– Added value for both sides
– Reputation building
• Trustworthiness
• Fair dealing
• Business solutions
• Focus on value
• All other issues should be subordinate to that
– Making a particular profit
– Achieving a certain margin
– Meeting revenue goals
– Keeping the boss happy
Negotiation Goals
 Contents

• Negotiation Goals
• Preparation
• Trade-offs
• Mind-set
• Negotiating Process
 Sun Tzu on Knowing

In war: “Know the enemy, know yourself;

your victory will never be endangered.
Know the ground, know the weather; your
victory will then be complete.”

In negotiations: Know your negotiating

partner, know yourself, know the
environment; your negotiations will then be
a great success.
Preparation
 Know the Needs of your
Negotiating Partner
• Understand their motivations and objectives
– How hungry are they for your business?
– If it’s a hotel, do they have a ‘hole’ to fill? (You could
be the difference between them meeting or missing
budget.)
– Body language and speech patterns can give you
insights, but, some cultures use body language and
gestures differently.

Preparation
 Collecting Information
when Planning Meetings
• Know the events market – is business up or down?
• Hotels – occupancy levels, average rates – in some
cities this is public information, in others the CVB or
Chamber of Commerce could be a source.
• What else is happening in the hotel (other bookings)
or destination (other conventions and events)
• Understand the business mix – e.g. if a city has
strong corporate demand Monday – Thursday and
good tour and travel business on the weekends, need
for events not so high.
• Seasonality – prices and value-adds will vary
depending on business levels.
Preparation
 The Starting Point

• Know the value of your meeting:

– Are you looking for the same dates as a more
impactful group?
– What total revenue will your group generate, including
additional guest room nights, room service, restaurant
and spa services? (Post Event Reports “PERs”)
• Negotiate with multiple properties
– Competition is powerful, but not if too many players
(everyone assumes slim chances)

Preparation
 Cultural Issues

• Most cultures expect some degree of give and

take
– Some would see accepting a first offer as a weakness
(Southern Europe)
– Some would see the first offer being fair, and
extensive negotiating would not be appreciated or
expected (Northern Europe)
– In Western cultures, attempting to renegotiate a
contract after it is signed would be seen as unethical
even if conditions have changed
– In China, if the conditions of one of the parties has
changed, not renegotiating would be seen as
unethical. Preparation
 International Factors

• Belgian event organiser, acting on behalf of a

Singapore client, negotiating with a hotel in
Hong Kong owned by an American company.
• International currencies
• Misunderstandings – “yes” in one culture may
mean agreement, in another, it could mean “I
understand what you are saying.”

Preparation
 ENDTM Analysis

• Effect of Negotiation Demise (cost of failure)

– Seller
• Have to sell to someone else
– What’s the market demand? How many clients do we need to
make up for not getting this deal?
• Have to live with current relationship
– Buyer
• Have to buy from someone else
– How will that work out? Will that satisfy our business cycle?
Dependability of supply? How good will the relationship be?
• Do nothing and use the money some other way
• Build or service it ourselves
• Find a substitute
Preparation
 Analysing Effects of
Failure
• Short and long term
• Hard costs (eg. dollars and time)
• Soft costs (eg. Relationship issues,
inconvenience, unhappy boss, morale and
customer satisfaction)
• How do these apply for both of the organisations
in the negotiation, and both of the individuals?
• Understanding effects of failure helps to define
the “ZOPA”

Preparation
 Zone of Possible
Agreement (ZOPA)
• The space where a potential agreement would
benefit both sides more than their alternative
options do the common ground.
Effects of not selling
preferable to selling
below this price Seller’s acceptable price range
Walk-away

ZOP
A
Walk-away
Effects of not buying
Buyer’s acceptable price range preferable to buying
above this price

Preparation
Applying Effects of Failure
Analysis
• Situation: Other side’s view of effect of failure
may not be reality.
Response: Gentle explanation of reality.
• Helps you define your ‘walk away’ point
• Whoever has worse effects has less ‘muscle’
(eg. Is it a buyer’s or seller’s market? Use
muscle discreetly, and only when necessary.)
• Sometimes not reaching agreement has
benefits.
• Analysis must be objective and realistic
Preparation
 Contents

• Negotiation Goals
• Preparation
• Trade-offs
• Mind-set
• Negotiating Process
 Added Value

• Often times you can make concessions

that help to advance negotiations at little
cost - hotel examples:
– Early check-in
– Waiver of late check-out
– Low partner rates
– Room upgrades
– F&B menu and wine upgrades

Trade-offs
Ranked Items on the
Negotiation Table (RINTTM)
• More simply - ranked priorities.
• Know your and the other side’s list, and
boundaries for each item.
– What is on the table
– Order of importance
– How they are weighed in importance
– Who is affected, and how? (key stakeholders)
– Upper and lower boundaries for each item
– Why they are on the table

Trade-offs
 Causal Drive TM

• More simply, motivations - what is motivating

each side on certain issues?
• Buyer examples:
– Cost cutting and revenue generation
– Avoiding repercussions
– Reducing number of vendors
• Seller examples:
– Becoming more entrenched with buyer
– Future up-selling
– Links to other clients

Trade-offs
Doing Better Than Win-Win

• Simple example of win-win

– Seller got a price higher than cost of provision
– Buyer got a price lower than alternate sources
• Good negotiations improve on simple win-wins
by addressing other priorities as well.
– Exchanging items that are valued differently by each side.
(Adding items to the mix leads to creative solutions)
– Eg. If buyer wants price and seller wants volume, seller can
trade lower price for longer term contract
– Eg. Buyer has cash flow issues, seller isn’t so concerned about
payment terms, seller can get higher price for favourable terms

Trade-offs
Collecting Information About a
Specific Negotiating Partner

• Effects of failure
– Company website, marketing materials,
statutory filings
– Their employees who are your advocates
– Your employees who have worked with them
• Ranked priorities
– Past experience, similar negotiations
– Pre-negotiation meeting

Trade-offs
 Contents

• Negotiation Goals
• Preparation
• Trade-offs
• Mind-set
• Negotiating Process
 Attitude

• Many people approach negotiating with a built-in

fear of confrontation, rejection and failure.
• People in the service industry focused on
pleasing their clients, so negotiations may
appear adversarial and contradict their need for
acceptance and approval.
• Successful negotiators overcome these fears
and look forward to negotiating situations as an
opportunity to be enjoyed and to be successful.

Mind-set
 Pre-negotiation Meeting

• Don’t negotiate
• Ask questions, understand priorities and needs
• Don’t share your effects of failure
• Do share your priorities, but not their boundaries
• Don’t react to what they tell you – it might show
your cards, or lead to negotiations
• Ask why each of their items is important to them
• Read ‘between the lines’ – indications of their
effects of failure

Mind-set
 Expanding the ZOPA
• Now you know more about their ranked priorities
– seek to add value to the negotiating table
• When one item on the table (eg price) a win-win is a deal
within the ZOPA
• Adding and exchanging other items
– increases the deal’s total business value
– better than win-win
• Not every item expands the ZOPA, make sure to:
– Only exchange things that expand the ZOPA
– Take out those things that shrink the ZOPA
– Only give on an item if you get something in return
– Only negotiate items in relation to others in the mix
– Negotiating on ‘motivation’ level = more innovative solutions
Mind-set
 Focus

• Right direction
– Don’t focus on low priority items
– If seller’s cost to provide an item is more than
the buyer can get it elsewhere, take it off the
table – it shrinks the ZOPA

Mind-set
 Interdependence
• All items should be taken as a whole – no part of the
deal can change without affecting the other parts
• Don’t allow line by line sub-negotiation, each could be
win-lose
• Fairness – if one side asks for something, other side
should get something in return

Mind-set
 It’s not Compromise
• People adopt varying negotiation styles based on how
they balance their concern over their needs vs. the
other’s needs
• Medium concern for both parties’ needs = compromise
• Compromise means giving up things that you want for
the sake of harmony
• Therefore, neither side gets what they want and both are
dissatisfied
• High concern for each parties’ needs means problem
solving, collaborative approach and a better result.

Mind-set
 Contents

• Negotiation Goals
• Preparation
• Trade-offs
• Mind-set
• Negotiating Process
 Opening the Negotiation
• Expectations high – both sides have shared needs during pre-
negotiation
• The side with more muscle and better data about the other side’s
effect of failure and ranked priorities will usually open.
• What offer should be made, at what point in the ZOPA?
– Open close to the other side’s walk-away boundary so you occupy most
of the ZOPA (‘Anchor’)
– Other anchors and counter-anchors will be placed eg. budget
limitations, future deals, etc.
– Any unreasonable anchors outside the ZOPA should be disregarded,
and the conversation refocussed
– CEATM ‘Categorized Equivalent Anchors’ – two or more, equal to us in
value, but, different in value to the other side.

Negotiating Process
Sample Hotel Negotiation

Buyer’s Priorities Seller’s Priorities

1. Lower minimum room 1. Higher total room
commitment commitment
2. Low banquet rate 2. High room rate
3. FOC Rooms 3. High banquet rate
4. Shorter cancellation 4. Longer term contract
deadline 5. Longer cancellation
5. Low room rate deadline

Negotiating Process
 Buyer

Lower
Categories:

3 = Long Term
1 = Short Term
2 = Medium Term

3
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Price
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2

ZOPA -2
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- 1 26 en
at
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om ro
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-$ 0w 0 tc
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- $ 1 tim e m 0r
s oo
- 1 28 e FO m
- $ 2 w 0 ev C s
Categorized Anchors

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Higher

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at oo ro
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Seller s
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Negotiating Process
 Sharing the ZOPA

• Focus on the anchors

– Share the zone as appropriate
– Build relationship
– Good faith effort to address both sides needs
– Collaborate and problem solve

Negotiating Process
 Structural Deadlock

• Offer is outside the ZOPA (creates

mistrust) or
• Both buyer and seller can do better
elsewhere (walk away and don’t burn
bridges)

Negotiating Process
 Emotional Deadlock

• Offer is within ZOPA, but, the other side isn’t

accepting it (egos and perceptions)
• You did the research, discuss the effects and
priorities, get their opinions.
– Ego: help other side save face by helping them
explain the “win”
– Personality: focus on goal, strategy and plan, nothing
changes just because they yell. Remain calm,
tactfully use your data.
– Perceptions: reframe issues in a way they are more
likely to understand and accept

Negotiating Process
Behavioural, Situational or
Environmental Deadlock
• Outside forces intrude on ability to
negotiate
– Behavioural: understand their culture and
rules of ettiquette
– Situational: e.g. different rules on timing or
location of negotiation – if personal issues
and time pressures, make sure the timing is
good for making a deal!
– Environmental: acts of God, sometimes you
have to be flexible.
Negotiating Process
 Final Discussions

• Once you’ve overcome any deadlocks or

objections:
– Final exchanges where appropriate
– Sign the contract
• Make sure all items explicitly stated

Negotiating Process
 Feedback

• Legacy issues, expectations and other

variables affect the negotiations.
• Issues arise and new data appears.
• Re-analyse, re-visit the preparation, data
and discussions, be flexible.
• Review outcomes, and use knowledge for
future negotiations.

Negotiating Process
CMP Exam Study Points

• Terminology:
– Anchor
– Categorized Equivalent Anchors TM
– Causal Drive TM
– Deadlock
– Legacy issues
– RINTTM
– ZOPA
Contributors to Original
Texts
Samuel R. Tepper, PHD
Manager, Organization and Change Strategy
Accenture

Peter Haigh
Director of Sales Operations, Europe
Le Meridien Hotels & Resorts

Albert Kemp, FCII

Chairman
Insurex Expo-sure

Sandra R. Sabo
Freelance Writer & Editor
St. Paul, Minnesota
Thank you
 Sources, Attribution &
Applicability
Presentations in the Gary Grimmer & Company “Event Management” series are intended to be specifically geared
toward content that is relevant and helpful to candidates seeking professional certification through the Convention
Industry Council’s (CIC’s) CMP Program. This content is intended by Gary Grimmer & Company to be used as a
learning resource, to assist candidates in qualifying for a CMP exam and to assist candidates in preparation for
actually taking a CMP exam. As such, much of the material is derived from the study texts that are recommended
by the CIC. These include:
ƒ CIC Manual, 8th Edition
ƒ CIC International Manual, 1st Edition
ƒ PCMA Professional Meeting Management, 5th Edition
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here. We have interpreted this information with intent to provide what we deem to be the most important, helpful
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