Franchising to Grow Your Business

Have you heard of Secret Recipe? Here in Malaysia, when you hear ‘secret recipe’, you don’t think of Colonel Sanders or Coca-Cola, you think of scrumptious cakes and lifestyle cafés.

Secret Recipe started out as a single family-run café in 1997. Now just 13 years later, Secret Recipe has more than 100 outlets in seven countries. Their most recent? Pakistan. Can you imagine that? Secret Recipe cakes available on the streets of Karachi. Without a doubt, Secret Recipe is one of Malaysia’s most successful franchises ever.

Franchising is an excellent model for expanding your business. One of the main reasons why, of course, is because as a franchisor, your capital expenditure is shared by your franchisees, thereby minimizing your expansion costs. Franchisees also take over direct management of their own affairs, thereby giving you more freedom and opportunity to further expand or carry on essential R&D.

Communications and recommendations from your franchisees also help you maintain your product quality and advance product improvement. The larger your franchisee base, the more diverse your input will be, leading you therefore, to better business decisions.

Pooled resources between you and your and franchisees also cut costs on group advertising and group buying. Costs of equipment and materials for your franchisee, as a result, are potentially lower than they would be for an independent entity. This means higher profits for your franchisee and, ultimately more royalties for you.

Caution is necessary before you decide on franchising as your method of growing your business. Just because you have a great business idea and a fool-proof business plan, you have no guarantee of becoming a global franchisor.

This is because operating successfully as a franchisor requires different business skills than those required to run your original business. You can’t, for example, manage a franchising business the same way you manage a family-run cake shop.

Do keep it mind, however, that as a franchisor it’s important that the same values and the same respect for your product always remain in place just as they were when you started your original business. While franchising may be an excellent avenue for expansion, your mission is still to put quality products on the market for people to enjoy and benefit from. Remember, your business foundation is selling your product and not selling more franchises.

To Grow or Not to Grow?

Here’s a scenario for you to picture. Your company has a product that’s in demand. Calls and orders are frequent so you’re getting more business than you can handle. The last thing you want to do is turn new business away to your competitors, but your schedule is almost full with business from your regular customers. Now what? Has the time come to grow your business? Let’s talk about the pros and cons.

We’ll begin on the upside. Three very good reasons for expanding your business are:

First, increased efficiency. As your business grows, business processes are separated, first to individual executives and later to individual departments. Operations, originally in the hands of a few, now go into the hands of many, which means that you are more likely to hire specialists rather than jacks-of-all-trades with miscellaneous job descriptions.

The second reason, increased brand recognition. Customers are drawn to businesses with names they know and trust. Growing your business also better enables you to slip your name brand into niche markets, thereby offering your customers a wider range of your products to choose from.

The third reason to grow is increased potential for landing major contracts. Major customers require suppliers capable of producing high volumes for consistent supply. The larger your production capacity, the more inviting your company looks to the blue-chip customers you want and need.

Expanding sounds like a great idea so far, but now lets look at the downside. Here are three reasons to think twice before expanding:

First, risk. Expanding always costs money. Whether you are hiring new staff, purchasing new equipment, moving into a larger facility or acquiring another business, funding must come from your own capital or from outside loans. In either case, it’s money on the line and money you don‘t want to lose.

The second reason, impact on quality. Growing a business that you have personally nurtured from seed puts operations and processes into the hands of others. Your role, therefore, may become less hands-on and more administrative. Finding people you can trust to ensure the quality of your product may be challenging.

The third reason to reconsider expanding is the potential for overextension. New products that you introduce on the market may siphon off sales from your old ones. In addition, you may be allocating resources to slower-moving products, thereby affecting production and R&D on your cash-cow products.

So, is it time to grow your business? The potential to increase your profits is certainly alluring, but it’s always in your best interest and in your company’s to think twice.

Price Breakdowns to Slice the Cake

Planning your negotiation strategy is critical for a successful outcome. Deploying appropriate tactics along the way, however, is what moves your strategy forward. Simple tactics require little effort to deploy, but can be very effective in getting the concessions you want from your counterpart. The last of the five for you in this series is called slicing the cake.

Whenever you send out a request for proposals to complete a project, the replies you receive from potential contractors will normally give you a list of deliverables and a package price – one figure. Go through your proposals carefully and select the contractor you want to work with, but don’t take their first offer at face value. Chances are it’s been padded for extra profit and to allow room for flexibility when negotiations begin.

To ensure your success in reducing their price, slice the cake. Ask your contractor for a breakdown. Ask for a price list of each deliverable item they’re offering to you. The total value of their breakdown should obviously be equal to their package price.

You gain two advantages in asking for a price breakdown. First, it’s easier for you to gain a sense of the market value of each item in their offer. If, for example, they seem to be asking a high figure for labor, you can challenge it based on market value and evoke the competition, stating that other contractors charge less for labor. On the prices of materials, you may even be able to point out some cost inefficiencies that your counterpart has, thereby lowering costs for both you and them and creating a long-term win-win situation.

The second advantage is, it’s easier to negotiate several smaller figures that it is to negotiate one large figure, although it may take more time. Smaller figures give you a greater sense of what you are negotiating for, and concessions on each item can be easier to achieve. When all is said and done, each concession you receive on each item in the breakdown will add up to a discount greater than you may have achieved negotiating the package price.

Ask for More!

It’s often the simplest negotiating tactics that will get you the extra few concessions you’re looking for. Sometimes, in fact, getting a little extra requires little more than just asking for it. This is called an add-on.

To show you how it works, let's go shopping for a stereo system. You know the one you want and how much you want to pay for it. So, first you go from shop to shop comparing competing prices until you find a dealer you can do business with.

Now you work on the price. Don’t ask for a discount. Make an offer that’s less than what you want to pay, and then come to an agreement on price. But don’t agree on a deal yet. This is where add-ons go to work.

Let’s get the price a little lower first. Does the stereo come with a karaoke microphone? Great. How much is it worth? Fifty ringgit? Okay, you don’t need the karaoke microphone, so can we get another fifty ringgit off the price of the stereo?

What about maintenance? Does the system come with a lens cleaner for the CD player? No? They’re not very expensive. Ask if the dealer can throw one in for you.

What about blank CDs? You’d like to try the burner as soon as you get home to ensure that everything’s working properly, but you haven’t got any blanks to work with. Maybe the dealer can throw in one or two, yes?

Anything else that you think you might want that will make this or any other deal sweeter for you is fair to ask for. As long as your negotiating counterpart keeps on saying yes, the deal gets better. When your counterpart says no, you’ve lost nothing for asking. Keep it in mind, smaller add-ons are easier to get.

Getting add-ons on a deal you’ve almost finished negotiating requires nothing more than asking, but working up the nerve to ask can be tough. To get over this get out of the mindset that tells you, “The answer will be no.” Tell yourself instead, “I’ve got nothing to lose by trying.” Because when you’ve got nothing to lose, you’re in a powerful position to negotiate.

Evoking the Competition

One of your advantages as a buyer in negotiations is that most of the time you have options on where to buy what you want. If one vendor doesn’t accept your price offer, you can try offering to another. If one supplier can’t provide the terms you need, you can look around for another who can.

Competition, in this respect, is good for buyers. It creates options, and having options improves your negotiating position. Your ability to evoke the competition skillfully in your negotiations, therefore, can give you the power and confidence you need for more successful outcomes.

The more competition you can generate for what you possess, the more valuable it becomes. As a buyer, what you possess is money. And vendors know that if you walk away from negotiations with them, someone else is going to get your money.

Sometimes the mere mention of competition is enough to get you a concession. Imagine, for example, that you’re with a real estate agent viewing office space that you want to occupy. It’s just what you need and the rent is already low. Still, you say to your agent, “Well, it’s okay. But, to be honest, I’m looking at another place that’s equally good.” At this point, your agent may do what she must to make her offer better.

If getting the price down is your specific objective, bring it into the competition. For example, “This other place I’m viewing is 300 cheaper than this one. If you can knock 350 off the rental for this place, I’d be more likely to consider it.”

Savvy negotiators realize, however, that evoking the competition can often be a bluff. That’s why it’s useful for you to substantiate the competition you bring into your negotiation. Saying you can get a better price is one thing. Producing a price quote on paper from the competition and putting it on the table is another thing altogether.

Some of the most effective negotiating tactics are the most simple to deploy. In a world where the customer is king, evoking the competition is an easy way to get the concessions you’re looking for.

Highballing: An Easy Tactic for Getting More

Here’s another tactic you can deploy early in your negotiation that may help you get more than you expected. It’s called a highball. This is a term that comes from baseball. Sometimes the pitcher may intentionally throw a highball to the batter, hoping that he’ll take a swing. When you highball your negotiating counterparts, you ask for more than you expect to get, hoping that they might go along with your higher price.

Highballing, however, must be done carefully. If your first offer is high, but reasonable, you’re signaling to your counterpart that your position is fair. Reasonable offers are useful when negotiating with long-term business associates with whom you’re taking a collaborative approach.

Highballing a little more will make your offer more questionable. This may signal that your approach is going to be more high pressure, but questionable offers are still negotiable. They just take a little more work.

If you highball too far, however, your offer may become indefensible and your counterparts might not take you seriously. They may very likely walk away before negotiations begin. That’s why any highball that you offer must not be too far out of your counterpart’s range.

Two benefits come from accurate highballing. First, highballing gives you a wider range thereby allowing you more room to negotiate and the ability to make greater concessions if necessary. Giving in a little creates the perception, when it’s to you advantage, that you are being fair, reasonable and easy to negotiate with.

Second, when you ask for more, who knows? You just might get it. For example, can you think of good reasons to ask your customer to invest in your full extended service warranty? Or why you should ask for an even bigger discount from your supplier? Or why you should ask for a higher salary and better benefits when attending a job interview?

If you’ve got good reasons to ask for more, highballing your offer is your answer.

A Simple Tactic for Negotiating

When you negotiate, it’s essential to have a strategy. A good strategy is like a map. It’s the route to your objectives and a plan for using options and detours.

However, “Strategy without tactics,” wrote Sun Tzu in The Art of War, “is the slowest route to victory.” In other words, any plan can only be as good as its execution.

This is why it’s valuable for you to know how to deploy and counter some common negotiating tactics. A strategy is what you plan, but tactics bring your plan into play. Here’s the first of five tactics I’ll be describing over the next few weeks. It’s called the flinch, and it’s the easiest and one of the most effective negotiating tactics to deploy.

A flinch is simply your reaction to an offer, and how you flinch will affect your counterpart’s perception of your position. Let’s start with an easy example. Suppose you’re at the night market and you want to buy bananas. You ask the vendor her price and she responds, “Fifteen ringgit per kilo.”

What’s your immediate reaction? Some remark of disbelief, right? "Ayoh!" That’s a flinch. The vendor immediately knows she’s not going to get that price from you.

Sometimes your counterparts will include an item in their offer just to test your reaction. That’s why your first reaction must lead your counterparts in the direction that you want them to go. Without a flinch from you, your counterparts will know that you consider their offer reasonable and, as a result, easier for them to achieve.

Here’s a story. Before I left Mexico, I did my shopping for a serape, a colorful woven blanket popular among touristas. A vendor with an assortment of serapes over his shoulder approached me and I asked his price. “Five-hundred pesos”, he said. “Ay!” I exclaimed. “Bueno, four-hundred,” he said. “Huy!” I continued. “Okay, three-hundred”, he offered. “Cielos!” I cried. “Diablo!” he said. Now he was flinching, too. “Two-hundred!”

All it took was three flinches from me to get his price into my range. Easy, no effort, and one of the most effective tactics you can use to get the deal you want.

Ten Tips for Doing Good Phone

The telephone has been around as a business communication tool longer than you‘ve been in business. So it’s not unlikely that from time to time you might take the phone for granted and relax your communication skills a little when using it. Remember, however, that your ability to communicate effectively over all available channels is the best indicator of how your company does business.

For that reason, here’s a quick ten-point check list to help you ensure that your company is keeping telephone communication professional:

1. Focus on your caller. You have picked up the phone, now the person on the other end deserves your full attention.

2. Maintain a level of formality. Business people tend to be much less formal today, but being overly casual on the phone can seem unprofessional.

3. Greet and identify. Develop a standard answering protocol for your company that includes a greeting and a name. You make communication easier for your callers when they know who they’re speaking to.

4. Answer the phone. Try to pick it up after just three or four rings. The perception of service and availability that this provides will go a long way.

5. Allow occasional silence. Gaps in conversation will occur on the phone as they will in a face-to-face conversation. Don’t try to fill gaps with meaningless talk.

6. Plan outgoing calls. Make a list of the points each phone call must cover. It’s better to be thorough and call once than it is to have to call back soon after.

7. Check on timing. If what you have to say is going to be long or confidential, it’s a good idea to check with the person first to see if it’s a convenient time to talk.

8. Use names. Refer to your caller by name two or three times during the call. This helps you restore some of the warmth that’s lost from a face-to-face conversation.

9. Summarize your points. Before you wrap up your call, repeat the main points that were covered and plan the next step. People remember best what was said last.

And with that in mind…

10. Smile on the phone. Although they can’t see it, people on the other end can hear your smile when you talk. And this makes your conversations sound more attentive and more personal.

Listening with Empathy

The telephone is one of the most widely used business communication channels, so doubtlessly you and your employees spend a large part of the business day on the phone. Most of this time is likely spent on routine business, some of it might even be pleasant. But every now and again someone in your business is going to have to deal with a difficult caller.

This is especially likely for customer service agents handling complaints. In my work as a trainer, I’ve seen people reduced to tears in the most extreme cases. The sense of removal that the telephone provides dispenses with the politeness normally exercised face to face. Customer dissatisfaction can quickly escalate to anger.

Listening and empathy, however, can help you and your employees prevent this.

First, listen. Dissatisfied customers need an opportunity to vent frustration and you need to hear their side of the story. Provide verbal feedback as you listen by responding with short filler phrases or by asking questions for clarification. Although you may have an agenda that must be followed to make the service call complete, remember that callers must always feel as if you are following their agenda.

Next, empathize. Put yourself in their shoes. A simple apology can be nice, but talk to your dissatisfied customer as if you really feel what they feel.

Here’s a quick example of what I mean. At one of my trainings, I was using an LCD projector that I’d just had repaired. Early in the day, the projector died and I had to rent an expensive replacement from the hotel. I called the repair center to complain, and to this day I remember three things the service agent said to me. “That must have been so embarrassing for you"; "what a shame you met with that unnecessary expense"; and "Mr John, you must be feeling so frustrated and unhappy right now.” She was right on all three counts, but listening to her say them made me feel a lot better.

The telephone allows for anonymity, so callers might be downright rude when provoked. You job on the phone, however, is to prevent turning a dissatisfied customer into an angry customer. Listening and empathy can help you manage emotions and make the telephone an easier tool to work with.

Listening Feedback on the Phone

Do you gesture when you speak? Most people do. Some people gesture so much that you’d think they couldn’t speak if you strapped their arms to their sides.

Do you gesture when you listen? Well, maybe not as much as you do when you speak, but as you listen you do send important visual information that indicates how much you’re tuned in and how much you understand when someone is speaking to you.

In fact, the speaker relies on your visual listening signals as a form of feedback, or a response to what they’re saying to you. Visual feedback is like a silent conversation taking place alongside the spoken conversation. A nod, for example, may indicate agreement while a raised eyebrow may indicate the opposite. Intense eye contact may indicate concentration while flickering eye contact may betray boredom.

Remove the visual feedback from conversation, however, and where are you? On the phone. It’s happened to you, I’m sure, that after your speech on the phone is met with silence on the other end, you have to check to see if the other person is still listening. Hello? Are you there?

You can prevent this by ensuring that the verbal feedback you provide on the phone compensates equally for the visual listening feedback that’s lost. You already do this to an extent without having to think about it. Short phrases and fillers like ‘yes’, ‘right’, and ‘I see’ are a natural part of telephone conversation.

Invest a little more effort as a listener and you can ensure that the feedback you provide on the phone is accurate. In addition to the short fillers you add, ask questions, paraphrase and summarize. This will make it easier for your speaker to interpret your feedback and verify the extent to which you’ve understood the spoken message.

The telephone is one of the most widely used business communication channels. That’s why providing and interpreting feedback over the phone accurately can improve greatly your business communications.

Compensating for Absent Visuals

In face-to-face conversation, you pick up messages from three different signals – the words you hear, the way they’re spoken, and what you see as they’re spoken. Verbal, vocal and visual.

All the research says that visual signals carry significant meaning. In fact, some research says that body language speaks louder than words. We rely on body language like eye contact, facial expressions and gestures to support and enhance the spoken message.

Now, get on the telephone and what happens? All of the visual information disappears. All we have left are verbals and vocals – spoken language.

Two consequences result. First, as a listener, you lose a significant amount of information. Eye contact, which you use for verification, is missing. Facial expressions, which tell you how speakers feel about what they say, are gone. Gestures, which emphasize and support meaning for you, are absent.

How much do you miss this visual information? Think about it. When you’re on the phone, do you visualize? Do you see the person you’re speaking to in your mind? When you hear laughter, do you see that person laughing? The extent to which you visualize measures just how much you rely on visual information.

The second consequence is this: As a speaker, you've now got to compensate somehow for the missing visual information, and this must be done using just your verbal and vocal signals.

Three vocal characteristics you can concentrate on are tone, rate and clarity. Like facial expressions, tone reflects your mood and tells your listener how you feel. A slow, even pace in your rate will allow your listener time to absorb everything you have to say. And speaking with clarity, of course, will ensure that what you have to say is understood.

Remove the visuals from communication and we miss out on a huge chunk of information. Visualizing as a listener and compensating as a speaker, however, will help you ensure that your telephone communication is always successful.

Collaborative Conflict Resolution

At work and at home, you experience interpersonal conflict on many different levels for many different reasons. And you know what? That’s a good thing. Resolving interpersonal conflict can have a positive impact on your relationships and improve your ability to get along with others. How is this done? Let’s look at some alternative approaches and examine the outcomes.

You may avoid interpersonal conflict or deny that it exists. As a result, it never goes away. You may brood over it and cause yourself unnecessary worry and stress. The outcome of unresolved conflict for both you and the other party is lose-lose.

You may decide to dominate and impose your will. This may resolve the conflict for you, but may embitter the other party. Ultimately, they have no sense of ownership in your solution and may not participate. The outcome here? You win, they lose.

You may decide to give in. While this may have occasional advantages, frequently giving in or going along with the flow means you’re going through life without getting your own needs met. The long-term outcome here is you lose, they win.

So compromise must be the best approach to resolving interpersonal conflict, right? Well, maybe. But have you noticed that a compromise never really gets you want you want? A little, yes. But you focus as much on what you’ve forfeited as on what you’ve gained. The outcome? Win-lose for both of you.

Compromises are often reached too quickly while just a little effort would produce a more positive outcome for both sides. Here’s a useful six-step collaborative process that will help you achieve this.

First, define your conflict based on need. Take turns explaining what you want and what outcome you’re looking for. Listen to each other earnestly.

Second, brainstorm a list of possible solutions. Be open and honest, neither critical nor judgmental. At this stage, every idea you come up with together is a good idea.

Third, jointly select the best solution and discuss possible implications. Will it work? Why or why not?

Fourth, make an action plan. Use Wh- questions to help you. Decide who will do what, where and when.

Fifth, put your plan into play. Follow it sincerely with your desired outcome in mind. If you are focused on where you’re going, it’s easier to get there.

Finally, sixth, review the process together. Celebrate what you did well and talk about what you could have done better.

Collaborative resolution to interpersonal conflict is your best approach to achieving a successful win-win outcome .

Functional and Dysfunctional Conflict

Functional conflict can benefit your organization. When maintained at an ongoing minimal level, functional conflict results in innovation, teamwork and cooperation.

Dysfunctional conflict can hurt your organization. When managed effectively, however, the detrimental effects can actually be turned around and get your organization back on track.

Dysfunctional conflict results from many different factors. They may be interpersonal conflicts based on emotion. They may be interdepartmental conflicts based on competition for limited resources. They may be structural conflicts based on needs for recognition. Whatever the source, dysfunctional conflict must be detected and resolved in its earliest stages.

As a manager, your immediate response to dysfunctional conflict and your correct approach to addressing it will deliver positive results for your company. Let’s look at five different methods that you might implement for successful conflict management.

First, be competitive when you know you’re right. At times you may have to impose your opinion when unpopular programs or enforced discipline are necessary for the company’s benefit. Remember also, some of your colleagues may take advantage of noncompetitive behavior and could end up taking the floor while you remain in your chair.

Second, be collaborative when both sides have concerns that are too important to be compromised. Listen to insights from people with perspectives that differ from your own and synthesize them. Work towards building a consensus and getting commitment from all parties involved.

Third, be evasive when issues are trivial or when you are pressed with more important issues. Your hesitation may allow others to cool down and the conflict may resolve on its own. You also allow yourself the luxury of more time to gather information when contemplation supersedes the need for an immediate decision.

Fourth, be accommodating when you are wrong. Allow those with better ideas to take the floor, and demonstrate how diplomatic and reasonable you are. When issues are more important to others than they are to you, give leeway. Allowing others to benefit from your accommodation builds credit that you can use later on. Conceding to others with better opinions also helps to develop your subordinates, who learn from your occasional mistakes.

Finally, be compromising when goals are important, but the collaborative effort may be disruptive. Compromise for temporary settlements and as a backup when competition or collaboration have been unsuccessful.

As a manager, knowing how to choose the best method to manage dysfunctional conflict makes you one of your company’s most valuable assets.

Three Ways to Understand Conflict

The role of conflict and its effects on organizations is open to different points of view. Let’s look at three of them.

First, the traditional view argues that conflict is always bad and should be avoided. The presence of conflict indicates an imperfect social structure and this impedes cooperation. Conflict management under this point of view simply means correcting or removing conflict behaviors to improve group performance.

Second, the human relations view suggests that conflict is an inevitable occurrence in all groups and organizations and, consequently, must be accepted. This positive understanding of conflict even suggests that it might be used to foster innovation and adaptability. When properly managed, conflict may even benefit a group’s performance.

The most recent research into conflict and organizational behavior has produced a third perspective called the interactionist view. This states that a harmonious, peaceful and cooperative group is prone to becoming static, apathetic and nonresponsive in the absence of conflict. In other words, the interactionists encourage conflict.

Not all conflict, of course. They differentiate between functional and dysfunctional conflict by observing what supports or hinders group performance. The upshot, however, is that the interactionist approach encourages group leaders to maintain an ongoing minimal level of functional conflict. Just what that conflict should be, however, is difficult to determine. What works today might not work tomorrow. What works for one group might not work for another. The benchmark, in any case, is how to what extent the functional conflict improves group performance.

Interactionists argue that functional conflict is good for an organization because it provides higher quality decision making due to differences in opinion. It establishes the foundation for innovation and teamwork. Successful conflict resolution paves the way for future cooperation. Some interactionists go as far as to say that conflict is the basis for a company’s existence. Research shows that long-lasting companies are those with institutionalized conflict and diversity in their structure.

The most current thinking in organizational behavior does not see conflict and cooperation as opposites. They are only opposites in the traditional view, where conflict is demonized. When applied judiciously for the benefit of group performance, however, conflict and cooperation become two opposite sides of the same Oreo cookie.

At the Heart: Conflict Resolution

Some time ago, I lived on the corner of a blind intersection in Alexandria, Egypt. Cars collided below my kitchen window once a week, and the ensuing drama consistently repeated itself:

The drivers would jump out of their cars, and without even inspecting the damage, begin shouting into each others faces loud enough to draw a crowd. Once a large enough crowd had assembled, the drivers would raise their fists at each other and start swinging.

At that precise point, the crowd would pull them apart to prevent the fight. The drivers would shout and curse at each other from opposite sides for another five minutes, then jump back into their cars and drive off.

The crowd would go on their way.

The end.

I asked an Egyptian colleague about this behavior. Why bother with all the commotion if nothing is ever resolved?

“Ah, but it is resolved,” she told me. “With all of the shouting, they have released the anger from their hearts.”

Now, here’s something for you to think about. Does unresolved conflict exist in your business? Do interpersonal conflicts prevent teamwork? Do interdepartmental conflicts impede operations? Do management-level conflicts delay your progress?

If so, it’s okay. As much as we’d like to think that conflict is dysfunctional, it’s actually the normal state of corporate affairs. It becomes dangerous, however, when left unacknowledged and, therefore, unresolved.

Unresolved conflict works at the heart of your business. As those in conflict brood, it worsens. Rumors start; relationships deteriorate. Motivational levels plummet. Workers spend more time discussing each other than they spend discussing their work. That’s why it’s critical for your management to be in tune and consistently on the lookout for unresolved conflict.

As soon as you spot it, deal with it. Get it out in the open immediately. I don’t recommend the shout-and-swing-driver method. However, I do recommend reasonable, honest, diplomatic, collaborative conflict management and resolution.

That’s how you keep your company's heart beating.

Conflict Resolution Builds Relationships

I want to introduce you to a married couple I know. For obvious reasons, I’ll just call them Sam and Mary.

Sam and Mary, it seems, are in a perpetual state of disagreement. Sam goes on the offensive and criticizes Mary’s shopping habits. Mary, in turn defends why she needs to spend so much. Mary scolds Sam because he hasn’t been pitching in to help with the housecleaning. Sam counters by saying if it wasn’t for his work, they wouldn’t have a house to clean. Whenever an argument comes up, they go back and forth at each other increasing in volume until one or the other stops – and then it all settles down. Until next time.

Spending time with Sam and Mary makes me wonder how they’ve lasted for the six years I’ve known them. And what’s even more surprising is (are you ready for this?) they’ve been married for 45 years.

How do they do it? They consent to conflict. “No point trying to avoid it,” Sam tells me. “We bring it on, we deal with it, we kiss and make up. We’re experts in conflict resolution.”

In other words, the quality of their relationship is not measured by the amount of conflict they face, but by their extraordinary ability to resolve it.

Sam and Mary experience interpersonal conflict, which can have a number of different causes in a relationship. In business, you can experience conflict at four different levels. Interpersonal conflict, of course, is common, which is why we have staff meetings and teambuilding programs.

On a second level, you might experience intrapersonal conflict, or coming into conflict with yourself. This will occur most frequently when you are faced with an important business decision for which you may have to weigh out the pros and cons.

A third level is structural conflict, where status, roles and competition come into play. Structural conflict can happen between individuals, between departments (think of marketing and engineering), between companies and even between nations.

The last level is strategic conflict. Unlike the other three, which develop naturally out of emotions, values or needs, strategic conflict is purposely initiated to achieve a goal. One company I know of, for example, implemented a company-wide competition (a form of conflict) to see which team could identify the highest number of potential safety hazards in their plant.

Whatever the type or whatever its source in your business, conflict is a natural state of affairs. Your ability to step into it and resolve it productively and consistently helps ensure the quality of your business relationships.

Leveraging Against a Greater Power

The Communist takeover in China in 1949 affected American foreign policy interests in the Far East. Trade embargoes were put into place, and countries that traded with the expanding Communist bloc became ineligible for American foreign aid.

Indonesia was of primary concern. It considered itself neutral and had many radical elements within that sympathized with Communist China. The Indonesian government’s primary interests were stabilizing rubber and tin prices and developing its infrastructure. Yet, they remained unwilling to accept economic assistance from America if it meant conceding to American policies and interests.

By maintaining this resolve in their negotiations, the Indonesians forfeited lucrative American military grants. However, they satisfied the nationalistic sentiments of its people and managed to substantially water down American demands in their final agreement. For America, money was power, but Indonesia’s indifference to the influence of foreign aid was a key factor in their successful negotiation from a weaker position.

We’ve been discussing how to identify, gain and sustain leverage when your counterpart is in a more powerful position. To summarize, here are four simple tips to help you remember what to do:

1. Project and maintain confidence. The strength of your position lies in what your counterpart perceives, so lead them in the direction you want them to go.

2. Leverage time to your advantage. If you know your counterpart is negotiating on a deadline, save trading off concessions until the deadline approaches.

3. Highlight your strengths. It’s rare to enter negotiations with no strengths at all. Like the Indonesians, if you can identify your power points, you can use them to your greatest advantage.

And finally…

4. Highlight their weaknesses. Every negotiator has an Achilles’ heel -- a spot of vulnerability. When you find it, take advantage of it.

Achieving a successful outcome in any negotiation is not all about power. The strength of your position is relative. It’s your ability to leverage your strengths that determines your outcome.

Leverage is Rooted in Perception

Among the thousands of insects on display at the butterfly park in Kuala Lumpur’s Lake Gardens, one specimen stands out – the Atlas moth. The Atlas moth’s wing span reaches as much as 20cm, making it the largest in the collection. The Cantonese name for this giant is the ‘snake’s head moth’, because if you look closely, the pattern of a snake’s head – the eyes, the mouth, the scales – are there in detail on each of the moth’s wing tips.

Here’s why: In the wild, this moth is obvious prey. It’s fat, it’s juicy and it’s slow compared to predator birds. In negotiating terms, this moth is in the weaker position. So it has evolved a defense mechanism creating a perception that it’s more powerful than the birds. And as long as the birds think the moth is more powerful, it is.

This is creating leverage.

Leverage in negotiation is rooted in perception. That’s why it’s useful for you to enter your negotiations with self-confidence. You need to believe that you have leverage and options, because as soon as you let on that you feel vulnerable, you become vulnerable.

Your ability to project confidence is an indispensable negotiating skill, but it’s not always easy to acquire. One of the main reasons why is that the stress of competition may sometimes cause you to overrate the strengths of your counterparts while underrating your own. As master negotiator Herb Cohen once observed, we judge others based on what they have accomplished while we judge ourselves based on how far we’ve fallen short .

Creating leverage in your negotiations, therefore, begins with focusing on your potentials. Power can be subverted. Remember the strategy of the Atlas moth. If your negotiating counterparts think you have options, savvy and potency (even if you don’t), then you do.

Five Tips for Leveraging Time

When I worked in the parts department of an automobile dealership many years ago, one of the sales guys from the showroom let on to me that the easiest customers were those who came in during the day. That’s because, he explained, he would have the rest of the day to work with them and get a good price. The ones he didn’t like were those who came in at night, especially near closing time. Those customers, he confessed, were at an advantage because he’d be quicker to cut a deal in order to get home.

Imagine the extra leverage car buyers would have if they all knew this.

Time pressure is one of your best points for leverage if you are negotiating from a weaker position and your counterpart has an obvious deadline. Your advantage increases as the deadline approaches. Time can be your best negotiating partner if you've got more of it than they do. So here are five tips for leveraging time to your advantage in negotiations:

1. If you know your counterpart has a deadline, don’t let on that you know. Disclosing this knowledge may warn your counterpart that you may use the deadline to your advantage and push for last minute concessions.

2. Be an active participant in the negotiation right up to the end. Although you are leveraging time to your advantage, you do not want to appear as if you are deliberately dragging things out.

3. As the deadline approaches, get your counterpart to make a final offer. Then refuse it and make a counter-offer that is more beneficial to you. Differences between offers at this point should not be extreme, however, unless your counterpart's final offer is unreasonable.

4. If your counterpart refuses your counter-offer, wait for them to make the next move. You are under less pressure to change your offer than they are. If your offer is not unreasonable, they will either concede or make another offer.

And finally…

5. Leverage time skillfully, not forcefully. Get your best deal without squeezing loads of last minute concessions at the deadline. You may be doing business with your counterpart another time in the future, and your collaborative approach will be better received.

Creating Leverage in Negotiations

What does it really mean to be a ‘power negotiator’?

Perhaps you think of the Hollywood image -- Wall Street types in Armani suits pounding on tables in back rooms thick with cigar smoke. Or maybe you think of the strong and unmovable silent type sitting hands folded at the table with a no-nonsense, take-it-or-leave-it expression on her face.

You know who I think of? My four-year-old daughter, Jessie. Jessie is the most successful negotiator I know. She gets me to stop work and play with her for twenty minutes. She gets a piece of chocolate even though she hasn’t finished her dinner. She gets a ride to Mid Valley even after I’ve told her she has to stay home. How does she do this? Is this 42-inch little girl a ‘power negotiator’?

Well, maybe not in the Wall Street sense (after all, I don’t let her smoke cigars), but she is powerful in that she knows where she’s got leverage. She knows that if I don’t play with her, she’ll shuffle sadly from my office and sigh, “All right," and that will melt my heart. She knows that if asking for chocolate didn’t work the first time, she’ll ask a second time -- and a third, and a fourth, and a fifth… She senses that I was bluffing when I told her she had to stay at home while I went off to Mid Valley, so she’ll put on her shoes as I put on mine.

Power negotiating, you see, doesn’t mean bullying or stonewalling your counterpart into submission. It means applying the right influence in the right amount at the right time. In many situations, I have more power, but Jessie has more leverage.

In business negotiations as well, one side may be more powerful. The other side, however, may know how to leverage their few strengths better. They may also know how to leverage the other side’s weaknesses better. They may also know how to leverage time better.

In short, the side that knows how to leverage best can come out ahead despite being in a less powerful position.

Cultural Perspectives on Business Ethics

Success or failure in international business depends on your ability to shift your mindset from ethnocentrism towards multiculturalism. Awareness and monitoring of this process can help you remain open to information about your host culture and facilitate your adaptation, either as a company or as an individual.

In addition to observing how behaviors between your culture and theirs compare and contrast, you need to understand the reasons behind their behaviors. When you do, you become less judgmental, more appreciative and more equipped to do business overseas.

Some behavior is obvious, for example, the value your host culture places on punctuality. Some behavior is less obvious, for example, differences in perspectives on business ethics. This, however, although the least obvious, is one of the most important aspects of your host culture that you must understand.

Let me tell you a story. I once worked for an international publisher based in London. Like many multinationals, strict regulations regarding giving and accepting gifts were in place. Any gifts received were to be turned over to the company and used as door prizes for company events, such as dinners and family gatherings.

The manager of the company’s Taiwan branch had received an expensive Rolex watch as a gift from a major buyer. Rather than turning it over, however, she kept it. When confronted by management in London, she explained, “If I were to show up at this buyer’s office not wearing that watch, he’d never buy from me again.” She violated company policy, but was she being ethical?

Business practices can be evaluated based on ethics and legality. Accepting the watch was illegal under company policy, but a necessary part of doing business in Taiwan. As a result, keeping the watch and pleasing the buyer was, in the manager’s eyes, the right thing to do.

What about other practices? Take, for example, gender issues and sexual harassment. How does your culture view the role of women in your workplace? What about your host culture? Consider hiring relatives to occupy key positions. Is this nepotism or is this looking after your primary responsibility – your family?

What’s most important for you to understand is that another culture’s perspectives on business ethics are neither right nor wrong, they are simply different. With a multicultural mindset, you understand that ethics are relative. Conflict over business ethics, therefore, can be managed through thorough understanding of your host culture’s business practices and clear communication in solving your differences.

Overcoming Ethnocentrism

When doing business overseas, forming accurate, non-judgmental cross-cultural perspectives is a critical key to success. Without this, foreign companies and individuals may enter host cultures insisting on doing business ‘their way’, thinking that doing business is the same everywhere.

Nothing, however, could be farther from the truth. The infamous DaimlerChrysler merger illustrates this beautifully. Language, protocol, business etiquette and a host of other cross-cultural barriers contributed to this merger’s demise. In fact, I would be surprised if you didn’t see some of the same barriers popping up occasionally in your international business.

Why do these cross-cultural barriers present themselves and, more importantly, how can they be overcome?

The root cause of cross-cultural barriers in business is ethnocentrism. Basically, this is the belief that your culture is the 'right' one. The further a foreign culture is from your own, the more barbaric, absurd and backward it may seem to be. We all use our own culture as a reference when making comparisons, so a degree of ethnocentrism is natural when you begin doing business in a new culture.

Ethnocentrism is strengthened by social factors such as a strong central authority, kinship and clannishness, self-sufficient markets and in-group favoritism. The more homogeneous and insulated the culture, the more inflexible the sense of ethnocentrism. In business, however, if ethnocentrism is not managed, companies and individuals can maintain a sense of cultural superiority, thinking ‘our way will work anywhere.’ Cultural conflicts begin here.

Fortunately, ethnocentrism can be overcome and along with it fall a series of cross-cultural barriers. The most obvious way to achieve this is through exposure. Learning a second language, for example, opens windows into how other cultures think and communicate. Exposure abroad through travel and study and communication with overseas friends or relatives challenges your ethnocentric perspectives and enables you to view foreign cultures less judgmentally. Even small steps, like learning to appreciate a new culture’s art or music, can give you new insights as to what the culture is really about.

If your company is thinking about making the move overseas, thorough research into the host culture’s perspectives on doing business is critical. And if you’ve received a short-term expatriate assignment in your company’s foreign branch, cross-cultural training is essential to help you adapt.

All cultures share similarities, but no two cultures are exactly the same. International businesses and individuals need to move from ethnocentric to multicultural mindsets.

The key for international business is to find ways for people who think differently to work together.

SIAP - Forming Cross-cultural Perceptions

DaimlerChrysler, one of the largest international corporate mergers in history, fell apart in just nine years largely due to cultural differences. Why? How did this happen? Is culture so huge a barrier that it prevents companies and individuals from doing business together? Well, yes and no. Culture can certainly be a barrier, but with proper training and skills, you can overcome any barrier.

DaimlerChrysler executives agreed that cross-cultural training was one of their weak points. What they received focused mostly on behaviors and stereotypes rather than on the reasons behind the behaviors. Participants were told, for example, that Germans can be stiff and formal while Americans can be superficial. The resulting cross-cultural perceptions conflicted with reality, and executives were confused when the Germans were actually relaxed and friendly and the Americans were sincere.

Whether you are working locally with expatriates or working overseas in a multinational company, ensuring accuracy in your cross-cultural perceptions is a key component of conducting international business successfully. You can develop a systematic understanding of other cultures once you know how your cross-cultural perceptions are formed. So, let’s examine this four-phase process.

Phase One is called Selection. Imagine you’ve been given a two-year assignment in your company’s Paris office. You’ve never been to Europe and you speak no French other than ‘bonjour’ and ‘merci’. When you step off the plane at Charles de Gaul International, you are overwhelmed with new sensations so you try to control the amount of cross-cultural input. You may isolate yourself from the host culture and seek out people who are ‘like you’. Comparisons with your culture may be negative. At the Selection phase, you’re feeling some of the symptoms of culture shock.

Phase Two is called Interpretation. As you observe behavior in your host culture, you learn the meaning behind it. You can explain, for example, why the French seem to disagree with everything you say. As a result, you accept that diverse perspectives exist and appreciate similarities even more.

Phase Three is called Application. At this stage, your perspectives lead you to behave appropriately in French culture. Some of your perspectives, in fact, may shift towards the French world view. Now, when comparing French culture with your own, some aspects of yours may actually appear negative. You have adapted some host culture behavior, and you live it.

Phase Four is called Prediction. Now you understand what to expect from your host culture. You know that some of your own behavior will result in specific consequences. If I do this, then the French will do that. As a result, you know how to build bridges between two cultures. Both your frame of reference and your identity has become multicultural.

Selection, Interpretation, Application and Prediction. Monitor this four-phase process as your own cross-cultural perspectives develop. If you do, then S-I-A-P, siap! You’re prepared.

A Corporate Culture Crisis

Let me tell you a story. Remember this one?

Once upon a time, specifically May, 1998, Daimler-Benz and Chrysler Corporation announced the first megamerger of two large international companies, creating the fifth-largest maker of automobiles in the world. Floated high on expectations, stock prices rose to US$108.00 a share.

Unfortunately, reports of cultural clashes between the two companies soon surfaced. Although English was the chosen business language, American executives felt marginalized when the Germans spoke together after meetings. The Germans, familiar with more formal business protocol, were uncomfortable with Americans calling them by their first names. German executives had lunch with the workers; American executives ate separately.

Disagreements in conducting international business resulted in differences over how to compensate expatriates. For the Germans, international assignments were a prerequisite to advancement and merited nothing extraordinary. For the Americans, being sent overseas was uncommon and deserved lavish reward. Top managers at Daimler had international experience; few of those at Chrysler even had a passport.

Cultural practices were in conflict even at the highest levels. American engineers responded to consumers and crafted automobiles based on market demands. The Germans focused on technical quality and decided for consumers what their cars would look like.

It was a cultural mismatch from the start. Just two years after the merger, stocks were selling for as low as US$26.00. By 2007, the merger was dissolved.

Not all cross-cultural misunderstandings results in corporate crisis. They do, however, lead to strained relationships, negative stereotyping, and seemingly insurmountable communication barriers – all undesirables in your business.

That’s why your perceptions about other cultures need to be accurate and nonjudgmental. In today’s globalized economy, you might just hire a German engineer to work for your company. Maybe you’re teaming with an American marketing consultant on a new strategy for a Taiwanese manufacturer. Or maybe your company is sending you to Johannesburg for two years.

If you can maximize your synergies and appreciate your differences, your cross-cultural business relationships will be fair and mutually beneficial.

Break Through Deadlock with Information Exchange

As you probe for information while negotiating, listen intelligently to what your counterpart says. What they disclose to you are the conditions for your deal. They’re revealing their interests and the reasons behind their positions. They’re explaining what they have for you and what they want from you.

To obtain as much information as possible, remember to give a little back. Information exchange is a negotiation taking place within the negotiation. You probe to get what you want, and your counterpart gives something up. You probe to get more, and this time your counterpart hesitates. Why? Because now it’s your turn. Remember, your counterpart will only keep talking if you offer something back. Share something. Give them what you’d like them to know. Then ask them another question.

Probing only works if negotiation is two-sided. Your ability to offer a little and probe some more keeps the discussion moving.

But now, let’s imagine a worst-case negotiating scenario. You’ve already exhausted your questions and your silence is met with equal silence from your counterpart. Information is not forthcoming; no one is negotiating. You have reached a deadlock.

Deadlock seems to happen when you cannot agree, but this is not true. Deadlock happens because you cannot reach an agreement. Note the difference, you can agree. But, how can you reach an agreement if you aren’t discussing anything? To keep negotiations moving, you’ve got to jumpstart the talk.

So, what to do? Simply this. Use your imagination. Create a scenario. Deploy the most powerful two-letter word in your negotiating vocabulary. It’s not “NO”, it’s “IF”.

IF helps you test the waters in a negotiation without either side making a commitment. IF creates a hypothetical situation that you and your counterpart can imagine and evaluate without actually having to do anything.

Here’s how it works. Suppose you’re deadlocked. Create a scenario that your counterpart may respond to, like this: “Let’s just suppose. If I do allow you 60 days credit on the balance, would you raise your deposit to 25%?” And your counterpart might reply saying, “Well, no. If I give you 25%, I want 90 days.” Evaluate their counteroffer, then proceed, either with a probe or with another offer. Information is exchanged, positions are revealed. IF gets negotiations moving again.

And there’s no need for you to be IFfy all the time. Phrases like “let’s pretend”, “just suppose” and “let’s imagine” will work just as well. Being hypothetical will help you break deadlock and propel negotiations forward.

Need Info? Ask.

Building rapport and being at ease are the first steps that you and your negotiating counterparts need to take. Once this happens, you’re ready to begin the real business of negotiation.

Your next objective is to acquire information. You need to know where your counterparts stand. You need to know what they have to offer you and what they expect from you in return. You need to know their first offer and their bottom line. You also need to know the key interests behind their positions and whether their interests are aligned with your own.

If this seems like a big job, you’re right. And what makes it a tough job is that your counterparts probably have information that they want to protect -- if they know anything at all about negotiating. Some of it may be disclosed bit by bit, some of it may never be brought up at all. However, by using the right tools, you can prompt your counterparts to divulge that information willingly.

We’ve discussed the Japanese method using silence and listening. But, this will work for just so long. Let’s be realistic. You can’t expect your counterparts to fill every silent moment.

So here’s another tool you can use. When you think that your counterparts fall silent, but still have critical information that you need to know, simply ask for it. That’s right. Ask a question.

It may sound like common sense, but you’d be surprised how often negotiators hesitate to ask for what they need to know. “Oh, asking this would be rude," they think. “They’ll never tell me this anyway," they think. Don’t allow prejudgment like this to prevent you from using such a simple and highly effective probing tool.

Generally, you have two types of questions to work with. First, a closed question. Closed questions will get you short, specific answers. These often begin with Who, What, When and Where, and are useful when probing for details. For example, "Who is your final decision maker? What alternatives do you have if we need a different solution?" Avoid asking too many simple yes/no questions, however. They provide you with limited information.

Second, an open question. Open questions will get you longer answers. They often begin with How and Why and oblige your counterparts to provide more comprehensive answers. For example, "Why is 51% equity your most important condition for this joint venture? How can you meet our requirements without ramping up your manufacturing?" The longer they talk, the more information you collect.

Along with silence and listening, asking questions is another negotiating power tool. A properly framed question at precisely the right time can get you the information you need and bump up the strength of your position by yet another notch.