The 'eart of the deal

In the Venture Capital world we often talk about the art of the deal. We are always negotiating something: a new financing with a startup, employment conditions for a new executive, a complex commercial contract between a startup and its customer, a merger deal, an employment severance agreement, a CEO's annual compensation agreement, etc... In fact, looked at through this prism, I would say I spend a good proportion of my time each week just negotiating.

At our recent CEO Summit we invited my good friend Moshe Cohen from The Negotiating Table to run a one hour introduction to "advanced negotiating". This was so successful that Moshe ran a one-day class for managers from our portfolio companies in early March which also received rave reviews. One of the key take-aways from Moshe is to work to understand the interests of the counter-party in a negotiation. That way you can find a way to provide for their interests in a way which is consistent with meeting your own. By the way, this requires you to understand your own interests properly as well, as opposed to negotiating from a zero-sum mentality where "giving up a point" is emotionally traumatic even if it doesn't matter to you!

The Economist recently published a short article "Inside a deal" about just this topic, and outlined some research that shows getting inside the head of your counter-party is much more important than getting inside their heart. Emotional empathy might help in the tenor of the negotiations, but cognitive resonance is more likely to generate the best individual and joint gain.

This matters in the non-profit world (my venture cyclist identity) as well, most notably in fund-raising. Donors give money because it makes them feel good and meets their inner needs to "give back", but they have real interests to meet as well, and if we understand those needs we can possibly increase the donations they make at that moment or over time.

What are those needs a donor might have? Inner feeling of making a contribution, obligation to community norms, standing in the community, desire to make an impact, desire to leave a legacy, desire to prove a point, desire to spread the word, obligation to family or friend or institution, reciprocating for others' gifts to their own favorite cause, and so on.

As we negotiate for how much a donor might give, how they will give it and to what purpose, if we can understand what their needs are in making the gift, we can increase the chance of making the gift happen and increase its amount.

OK, now I'm off to do some negotiation on behalf of JCDS and Hazon. Let me know if you want to be a counter-party!

2 comments:

ijones said...

I was really inspired by the book Getting to Yes, about principled negotiation. Negotiation always seemed "dirty" to me, but that book made me see that negotiation can be a source of good, not just of greed.

Anonymous said...

A very thought provoking post.
Essentially you are discussing quantifying the reasons why people donate. This is a topic with some research (e.g., why does the Red Cross give stickers to people who have donated blood? Because there is research showing that people like the social recognition of having done a good deed, and in fact may be more likely to donate if there is going to be such societal recognition). However, it is deserving of much more study (a good social psych. dissertation, in my opinion). I've always wondered about the relatively new practice of some non profits of including a nickel in their solicitation letter-- as if the receipt of such a nickel will make the receiver feel guilty enough to donate to the cause. How much is guilt a motivator in donations (or negotiations) versus some of the other motivators in your post? Possibly these organizations are wasting thousands of dollars in nickels. Anyway, an excellent topic to think about.