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19 November 2020

Negotiating scope, not price

Four traditions say the same thing about cooperation: the room for manoeuvre lies in what gets done, seldom in the amount. The position held since, and what it costs.

The price of an engagement is discussed once and settled in ten minutes. Scope is discussed for the whole engagement. It took me a while to see that the second conversation decides the fate of the first: a fair rate on a vague scope always ends up a bad rate, while a clear scope makes the rate almost secondary.

01The abundance mindset, and its condition

Stephen Covey files cooperation under what he calls public victory, and rests it on a simple idea: there will be enough for everyone. The idea holds in a relationship meant to last, because such a relationship produces more than it divides. It fails in a one-off negotiation where the budget was fixed before the first meeting, and it is fixed more often than people admit. What I keep is not the formula but its condition: abundance is checked, not assumed.

02The pie, and the step that gets skipped

Barry Nalebuff proposes naming first what each side wants, and only then cutting. The rule sounds obvious; it is hard because the first step is nearly always skipped. When two sides argue over a figure without having said what they would do with it, they are not negotiating, they are digging in. Game theory named that deadlock the prisoner’s dilemma: two decisions rational apart, ruinous together.

03Offering to cut, to find out

The judgement of Solomon settles nothing: it offers to settle, and it is one side’s refusal that reveals which has most to lose. On an engagement, offering to cut plays exactly that part. When I say I can deliver half the scope within the agreed time, the answer tells me more about the project than three scoping workshops: it says which part of the request was actually meant.

04行: the victory you decline

The character 行 reads as to walk, to act, and also names the manner in which a thing is done. A martial arts maxim extends it: a crushing victory wounds the opponent’s pride. It is the only one of the four sources that speaks about afterwards. Winning a negotiation to the point of humiliating the other side buys a difficult delivery, and in a trade where the next client often comes from the last one, it buys it dearly.

05What I leave out

None of this says how to set a price, and I have no method to offer there. These four sources are about the frame of the discussion, not its figure. They are worth something only in a relationship you expect to renew: against a buyer you will never meet again they are a handicap, and better known as such beforehand.