Tag Archive | "Negotiation"

Analyzing Trump’s Health Care Negotiations

Notes on Negotiation
By Marty Latz, Latz Negotiation Institute

President Donald Trump has called himself a “really great negotiator.” Let’s evaluate his first significant presidential negotiation effort – health care reform with the U.S. House of Representatives.

Three quick caveats to start:
• It’s essential to use an objective research-based method to truly evaluate what occurred, rather than the hyper-partisan approach that seems to dominate current political analyses. The Five Golden Rules of Negotiation will serve as our framework.
• While these negotiations were extensively reported, some of what occurred was private and beyond the scope of our knowledge at this time; and
• These negotiations were simply the first step of a multi-step legislative/negotiation process required to change the law. U.S. Senate approval would have been the next step. And had the Senate made changes, the different versions would have required reconciliation and further Congressional approval before a presidential signature.

While the Five Golden Rules provide a comprehensive framework, many of the issues here can be attributed to how Pres. Trump implemented Golden Rule One: Information is Power – So Get It!

As regular readers here know, the first step to effective negotiating is getting sufficient information to set realistic and achievable goals. Then you must design a comprehensive strategy to accomplish them.

Pres. Trump repeatedly stated his healthcare goals on the campaign and after becoming president – repeal and replace Obamacare with better coverage, lower premiums, and no one loses their insurance.

What does this tell us about Pres. Trump’s implementation of Golden Rule One in the first step of this legislative process?

1. Trump Publicly Set Unrealistic and Unachievable Goals
No proposal evaluated by the House even came close to achieving his goals. The Congressional Budget Office, a non-partisan expert body with a Republican-appointed head, estimated the first House proposal would cause 24 million Americans to lose coverage. Subsequent proposals eliminated more and more health care benefits without adding coverage.

Bottom line – Pres. Trump’s repeatedly stated goals were unrealistic and unachievable with the proposals on the table in the House. His overall strategy, which would have required Senate approval, was also unclear and unspecified. How, if at all, did he propose to achieve his goals? No one really knew, including the House members whose votes he needed.

2. Trump Failed to Understand the Interconnected Complexity of Healthcare
Based on Trump’s comment that “[n]obody knew healthcare could be so complicated” and the reporting of his actual negotiations with House Republicans, Pres. Trump does not really have great knowledge and understanding of healthcare policy. Nor does he truly appreciate the complexities of how these elements work together.

Of course, presidents don’t need to be detailed policy experts to negotiate great deals, and regularly delegate policy details to others. But it’s crucial to be able to substantively engage in a back-and-forth discussion about significant issues. An inability to do so even at a high level will be detrimental to achieving negotiation success.

For example, Pres. Trump near the end of the negotiations offered to eliminate “essential health benefits” like requiring insurance to cover pregnancy and doctor’s visits. He did this in an effort to pick up votes from members of the House Republicans’ “Freedom Caucus,” who favored eliminating these benefits.

But offering this without also eliminating the requirement to cover pre-existing conditions could have led to a collapse of the insurance markets. Expert House members knew this. So giving in on the benefits issue actually made it less appealing to some of these members, not more. And by doing this, he also lost the votes of some moderate House Republicans, who liked those provisions.

3. Trump Overlooked Key Players’ Interests and Motivations
Pres. Trump overestimated the loyalty interests of House Freedom Caucus Republicans. He apparently believed that Republican team loyalty and getting anything passed would trump their interests in getting a bill that lowers premiums and taxes, lessens regulation, minimizes governmental involvement in healthcare, etc.

But a cursory review of these Freedom Caucus members’ history of Republican loyalty would have raised serious questions of the efficacy of this strategy. After all, these were the same members who shut down the government several years ago over the objections of most mainstream Republicans.

Former Republican Speaker John Boehner was even forced out by these same members. Loyalty and taking one for the team is not really in their playbook.

4. Trump Failed to Build Coalitions
Pres. Trump might have been able to get sufficient House Republican votes if he had built up public support for the bill’s major provisions and built coalitions among the involved Republican interest groups.

This could have led those Freedom Caucus members to believe that their constituents in safe Republican districts would have been better off with the final bill and/or would have used this issue to vote against them in two years. This would have directly addressed what many believe to be the most crucial interest of any politician – survival interest in re-election.

But the bill and its provisions, according to polling, only had a 17% approval rating from the public. And almost every major interest group, from the conservative Koch brothers to doctors to every liberal group, opposed it with many spending millions on ads trashing it.

Latz’s Lesson: Information is power. Pres. Trump did not have it or get it.

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Marty Latz is the founder of Latz Negotiation Institute, a national negotiation training and consulting company, and ExpertNegotiator, a Web-based software company that helps managers and negotiators more effectively negotiate and implement best practices based on the experts’ proven research.  He is also the author of Gain the Edge! Negotiating to Get What You Want (St. Martin’s Press 2004). He can be reached at 480-951-3222 or Latz@ExpertNegotiator.com

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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Corporate Panel Lessons

Notes on Negotiation
By Marty Latz, Latz Negotiation Institute

I recently served on a panel of expert negotiators from the business and legal communities. Together the panel had over 100 years of experience negotiating deals, and settlements worth billions.

Here are some of the lessons, along with my own thoughts.

•    Set aggressive goals – then get the information to achieve them. One panelist described the negotiation for her dream job, which started while she was in law school. What did she do? Figured out exactly what she wanted and then spent several years learning about that industry and how she could add value to the organization that would eventually hire her as its top lawyer.

•    Re-evaluate your goals in long-term negotiations. Some negotiations last years. They require specialized strategies. In all negotiations, set aggressive, specific goals to start. For long-lasting negotiations, re-evaluate those goals in light of information gathered, fluctuating leverage, etc. Of course, there’s not likely a need to revise your goals weekly. But do it regularly, especially when significant changes occur.

•    Focus on your counterpart’s personal self-interest. Several panel members emphasized the need to find out counterparts’ personal drivers, pain points or self-interests. It’s especially crucial in negotiating with large entities. Why should that mid-level professional do the deal? Are they getting pressure from their boss to show progress or clear their desks of long-running disputes? How can you make them look good internally?

•    Gather information in unconventional ways. One panel member described several powerful information-gathering techniques.

  • Public companies are required to report critical information – get it. This panel member once analyzed a company’s public statements and financial reports and deduced its actual authority for the deal on which he was working. He got the entire amount, despite that company’s early false statements about its authority. Top mergers and acquisitions lawyers know this well, as many analyze the terms and conditions of their counterpart public companies’ previous deals and use this precedent in negotiating their deals’ terms.
  • Always be on the lookout for information. One panel member described a complex negotiation involving multiple impasses. After the last impasse, as he was walking out of the mediation, he inadvertently glanced into the room where his counterparts had been strategizing. Though the whiteboard had been erased, he could still notice the outlines of some critically important numbers. Wow.
  • Read everything and talk with everybody. Few negotiators really spend the time doing their strategic due diligence on their counterparts. Talk with folks who have negotiated with your counterparts previously. Read everything they have written. Find out their reputations. Talk to industry experts. Mine your social networks and online resources.

•    A strong case may involve weak leverage. One example involved millions of dollars in a litigation matter where the very survival of the company was at stake. And the company was likely to lose. Yet it had decent leverage. How? The company on the “winning” side had no interest in spending a ton of money to win only to likely get little in bankruptcy court. This panel member settled his losing case for pennies on the dollar.

•    Limited vs. full authority is usually advantageous. Parties with authority have power, right? Wrong. They have the power to concede. One panel member described a negotiation in which he flew to London to negotiate a big deal. He knew after walking in to the meeting he would get a great deal. How? His counterpart at the table was its top guy, the one with its ultimate authority. From that point on, every time his counterpart requested a concession, this panel member called home to try to get more authority. He got an excellent deal and got his counterpart to even pay for his flight home.

•    Fair and reasonable standards can drive the result when you have weak leverage. Sometimes there’s nothing you can do to strengthen your weak leverage. Now what? Focus on fair and reasonable standards. One panel member described negotiations worth hundreds of millions of dollars with the federal government where the government – if it couldn’t negotiate a deal – could legally just stop payment on the services provided. That’s weak leverage. What did this panel member do?  Focused on independent objective fair and reasonable standards, like: precedent and market value (what the government had done in similar circumstances in the past with them and other similarly situated companies); costs and inflation (how their increased costs and inflation led to higher amounts to be paid); and experts’ opinions (what independent objective experts suggested was fair.)

•    Don’t ask for their bottom line – ask what they want and why. An experienced mediator on the panel shared one of his “secrets” –  simply ask what the other side wants and why. And don’t ask for their authority or bottom line, issues where many will bluff or lie or prematurely commit – often reducing their ability to reach a solution later without losing credibility.

Latz’s Lesson: These strategies sound simple. They are. The challenge is systematically putting them into practice.

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Marty Latz is the founder of Latz Negotiation Institute, a national negotiation training and consulting company, and ExpertNegotiator, a Web-based software company that helps managers and negotiators more effectively negotiate and implement best practices based on the experts’ proven research.  He is also the author of Gain the Edge! Negotiating to Get What You Want (St. Martin’s Press 2004). He can be reached at 480-951-3222 or Latz@ExpertNegotiator.com

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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Trump’s Negotiation Skills – Good or Bad?

Notes on Negotiations
By Marty Latz, Latz Negotiation Institute

President Donald Trump considers himself an expert negotiator. Is he? And if so, does his business negotiation experience necessarily translate to being a great negotiator as president, either with Congress and/or with our international allies and adversaries?

Let me give a great legal answer to both questions – it depends. I recently re-read his book “The Art of the Deal” and have followed Pres. Trump for years. And he has certainly completed a lot of business deals and profited substantially from many of them.

But just getting a deal done – and even profiting greatly from it – doesn’t mean you negotiated a super deal. Nor does it mean you’re an effective negotiator. You might have substantially overpaid for some commercial real estate in 2002, paying well over market value, and still have profited from the strong real estate market going forward.

Likewise, you might negotiate a fantastic partnership deal only to see it fail due to unrelated business issues.

So how can we evaluate Pres. Trump’s negotiation abilities as president on NAFTA, the Iran Nuclear Deal, the Middle East Peace Negotiations, an Obamacare Repeal/Replacement Plan, and the list goes on?

Watch and track these factors, which also apply to how we should evaluate and learn from our own negotiation successes and failures.

1. To what extent did he satisfy his goals and interests?
We have a documented record of Pres. Trump’s promises. Of course, these were campaign promises, so perhaps they included a lot of hyperbole.

Even so, they provide data points on our ability to evaluate his negotiation skills and success.

For example, how much will the Trump healthcare proposal – once unveiled – achieve his stated goals of lower costs and better healthcare while ensuring no one loses insurance? How much of his plan will Congress pass relative to the original core components of his proposal?

What about his plan to negotiate with Mexico to pay $10-$20 billion for a new wall?

Great negotiators also recognize, explore and creatively satisfy parties’ mutual interests, which may be neither stated nor obvious.  Super aggressive negotiators often ignore these “win-win” elements.

Of course, we can’t rely on partisan self-reporting for these answers. There is too much political self-interest involved. But non-partisan expert organizations track these quantifiable facts and interests.

2. How much better is the deal than his alternative/Plan B?
Leverage is largely based on how well your deal (Plan A) stacks up to your best alternative, or Plan B. The better your Plan B, the stronger your leverage. And vice versa.

One mark of expert negotiators is how much better their negotiated deal is than their Plan B. Let’s say Company A’s first offer to buy my company is $25 million and Company B’s several offers have culminated in a “best and final offer” of $26 million.

A good negotiator can get Company A to offer over $26 million.  A great negotiator will get Company A to offer substantially over $26 million. The more over $26 million, the better the negotiator. The bigger the difference between your Plan A and B, the stronger your negotiation abilities.

Another mark of an expert negotiator is the ability to impact your counterpart’s perception of your Plan B (or their Plan B, an equally powerful element of leverage), without losing credibility that can affect your future negotiations.

A great negotiator can sell an average product for a lot to someone who’s not very interested in it.

What should we track here? Will Pres. Trump’s new NAFTA (or elimination of NAFTA) or other trade negotiations, like his recent withdrawal from the Trans-Pacific Partnership deal, provide better economic and employment results than the status quo going forward?

The status quo going forward is our Plan B – and his deals will be Plan A. These deals can and should be measured, again, based on objective data and facts from non-partisan expert organizations.

3. How do his results measure up to objective benchmarks?
Market value. Precedent. Tradition. Experts’ opinions. Cost and profit margins. Professional standards. These independent objective standards should be used to evaluate Pres. Trump’s deals.

How much below the current market can the Trump Administration drive the drug prices Medicare pays pharmaceutical companies by empowering the U.S. to negotiate them (assuming he can negotiate successfully with the Republicans in Congress, who have opposed this for years)?

Pres. Trump has called the Iran Nuclear Deal a horrible deal and says he wants to renegotiate it. One reason he calls it horrible is that it might allow Iran to restart its nuclear weapons program in 10 years. How far can Pres. Trump extend that moratorium, based on this precedent?

What do Bureau of Labor Statistics experts conclude about the number of manufacturing and other jobs created due to his negotiations with corporate titans and threats of tariffs and public shaming?

And how do independent academic negotiation experts evaluate his skills and results? There has been a lot of negotiation research in the last forty years on what works and what doesn’t. Is Pres. Trump employing proven strategies, or not?

Of course, we may not know the answers to these questions for some time. History may be the ultimate judge.

Latz’s Lesson:  Stay tuned – we can all learn from Pres. Trump’s negotiations. They may even determine his success or failure as President.

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Marty Latz is the founder of Latz Negotiation Institute, a national negotiation training and consulting company, and ExpertNegotiator, a Web-based software company that helps managers and negotiators more effectively negotiate and implement best practices based on the experts’ proven research.  He is also the author of Gain the Edge! Negotiating to Get What You Want (St. Martin’s Press 2004). He can be reached at 480-951-3222 or Latz@ExpertNegotiator.com

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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The Five Keys to Success in Reverse Auctions: Part 2

Notes on Negotiations
By Marty Latz, Latz Negotiation Institute

What should you do if you’re selling and your potential buyer puts you in Conference Room A and your competitors are in Rooms B, C and D? It’s a reverse auction – and it can be brutal.

Last month I detailed the first two keys to success in this environment: 1) Prepare a Strategic Plan and Write Down Your Goal; and 2) Investigate Your Counterpart’s Interests/Options and Creatively Address Them. (click here to read part 1)

Here are the final three keys.

3.    Research Competition and Evaluate Incumbency Advantage
Knowing your competition sounds simple. It’s not. How much will your competitor discount to get a foot in the door with your client? Will competing bidders operate at a short-term loss – the classic loss leader – intending to make it up later?

Some contractors always bid super low to get the contract. Their profit comes from scope changes they “unexpectedly” incur later.

Companies spend billions to find out this strategic intelligence.

How can you get this information? Ask around at industry conferences. Talk with your customers who have previously worked with your competitors. Hire industry consultants who know the competitive landscape. Reach out to your social networks.

A supplier once told me how he negotiated a great deal with Walmart. He was sitting in Conference Room A and stuck his head out the door – and there was no one in Conference Rooms B or C or D.

Find out who else is bidding, before the reverse auction if you can. Then develop your strategic plan. (By the way, Walmart made a strategic mistake by giving this supplier the opportunity to see that no one else was bidding).

And if your customer is running the reverse auction, you probably don’t need to undercut your competitors’ bids to keep their business. Why not? Because changing suppliers involves risk and cost – and your customer knows this. This incumbency advantage can be significant.

4.    Differentiate with Independent Standards
It’s one thing to say you’re different and/or better than the competition. It’s quite another to get a potential customer to believe it and be willing to pay more for it.

The best way to effectively differentiate on issues other than price is to provide independent, credible evidence and standards supporting your differentiation.

For example, “here are a dozen references – from companies just like yours – who will tell you about our timeliness, reliability and creative ability to solve your problems better than our competitors.”

Or, “here’s an independent study by industry experts attesting to the true quality of our product or service.”

5.    Strengthen Your Pipeline/Plan B
Earlier this year a Fortune 500 company asked me to bid on training 1,000 of their employees to more effectively negotiate. At first, it sounded like a potentially significant deal.  However, after analyzing their RFP and talking with their representatives, I decided not to bid.

Why? It became clear to me – despite their rhetoric – that they were looking for a low price leader. That’s not my business model.

In addition, I was already pretty booked for the time in which they wanted the training. Could I have fit them in? Sure. But already having work, and the pipeline for more work, gave me the luxury to sit this one out.

Strengthen your pipeline. You may even decide not to bid.

Latz’s Lesson:  Effective differentiation from your competitors plus a solid pipeline will put you in the driver’s seat in reverse auctions

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Marty Latz is the founder of Latz Negotiation Institute, a national negotiation training and consulting company, and ExpertNegotiator, a Web-based software company that helps managers and negotiators more effectively negotiate and implement best practices based on the experts’ proven research.  He is also the author of Gain the Edge! Negotiating to Get What You Want (St. Martin’s Press 2004). He can be reached at 480-951-3222 or Latz@ExpertNegotiator.com

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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