Making Credibility Your Strongest Asset
Dealmakers often forget the power of a good reputation. In this article from Negotiation, HBS professor Michael Wheeler tells why having a storehouse of credibility will put you head and shoulders above the competition.
Negotiation is a breeze if you're selling a unique product or service that others desperately need: Just sit back and let the bidding begin. Likewise, if you're a buyer in a buyer's market, getting a bargain is a snap.
But what happens when lots of other people are selling what you've got, or many others are bidding for what you want? One solution to distinguishing yourself in competitive environments is to build your bargaining endowment—storing up credibility and resources by developing relationships, burnishing your reputation, and controlling key assets.
When you're trying to prevail amid fierce business competition, your bargaining endowment can spell the difference between closing the deal and being shut out. A healthy bargaining endowment explains how Darren Rovell won a job on national television while other journalism graduates were lucky to be doing programs on cable access. It's also how Tony Lucci got box seats for the World Series when thousands of others were shut out. And it explains how Bob Kraft positioned himself to buy a professional football team.
Although Rovell, Lucci, and Kraft operated in very different contexts, they all met their goals by enhancing their own credibility and discerning the interests of other key players. Their three stories illustrate different elements of the process of building your bargaining endowment: (1) grab someone's coattails, (2) foster a reputation for generosity, and (3) plan several moves ahead.
Grab someone's coattails
Lots of people have great ideas for new products and services, but most lack the imagination and doggedness to actually get them launched. Darren Rovell is a notable exception. As a college student, he had a passion for the business of sports—licensing deals, complex stadium financing, and hardball negotiations between free-agent players and teams.
Media coverage of this terrain had been haphazard. Rovell saw that omission as a great opportunity, but he had two problems. First, media giants such as Sports Illustrated and ESPN didn't think the business beat would appeal to the average fan. And—oh, yes—Rovell was just a kid in his teens.
Nevertheless, he launched a business-of-sports talk show on Northwestern University's student radio station, WNUR. His "producer" (actually, a roommate) aggressively pursued big-name players, general managers, and agents. Most declined, but a few said yes. Once Rovell recruited a celebrity, that person often would cheerfully give him another star's direct line. Rovell quickly built an impressive Rolodex.
You can succeed without explicitly swapping favors.
Tapes of the show enhanced his credibility as an interviewer and also demonstrated the power of his idea. But Rovell knew that T.V. and newspaper sports departments are flooded with resumes and demo tapes from thousands of wannabe reporters. To ensure that his material wouldn't be lost in the shuffle, he mailed it in the largest box that the post office would deliver.
The gambit worked. Right after graduating in 2000, Rovell landed a job at ESPN.com as its first business-of-sports anchor. He's now regularly featured on the network and writes prolifically for its online magazine.
On the surface, Rovell's story illustrates the value of confidence and persistence. Dig a little deeper, and important negotiation lessons emerge.
First, you can succeed without explicitly swapping favors. After all, Rovell had nothing of substance to offer successful sports figures. But by being respectful, persistent, and doing his homework, he persuaded them to appear for free.
Second, Rovell was careful to build and test a prototype. His college radio show was small potatoes in terms of listeners, but he proved his ability to pull off the new concept.
Finally, and perhaps most important, he rapidly built his own credibility by "coattailing" on the credibility of others. The athletes he attracted had never heard of him, but they knew the name of the All Star who had appeared on the show the prior week. As Rovell's reputation grew, his past success became a resource. Today his calls get answered, and people phone him with stories.
What's remarkable is that Rovell did all this without a patent or a copyright. In theory, anyone could try to horn in on his territory. Surely some are trying; there are no formal barriers to entry. Rovell's competitive advantage is his reputation.
Foster a reputation for generosity
Now consider Tony Lucci, who founded, and whose family still operates, a sporting goods store in suburban Boston. Having worked in business for decades, he was well known in his niche but not beyond it. In a telling anecdote, Tony relayed to me how, one October afternoon, he got a call from a stranger, a television producer frantically looking for a radar gun. The producer's network was broadcasting the World Series that night, and the radar gun—the device that tracks the speed of pitches—was on the blink.
The producer had made several fruitless calls, and many people had said, "Try Tony. He might be able to help." As it happened, Lucci didn't have a gun, either, but said he'd ask around.
He tried several coaches and the operator of a baseball camp, but these leads came up dry. Then, out of the blue, he got a call from someone else looking for a favor, a coach involved in a police athletic league for troubled kids. "Some Red Sox players have agreed to autograph baseballs that we can auction off for fundraising," the officer told Lucci. "Could you could contribute a couple dozen?"
"Absolutely," said Lucci. "By the way, Officer, could you look the other way while a radar gun leaves your precinct for the evening?" When Lucci explained the situation, the cop said he'd drop the equipment off in twenty minutes.
Lucci called back the television producer. "Good news!" he said. "You've got your radar gun."
In return, Lucci might have asked the network to cover the cost of baseballs or asked for free publicity for his store. Instead, Lucci said, "Do you have tickets for tonight's game?" That's how he got eight box seats for the World Series in Fenway Park.
This story offers two important lessons. First, the deal worked only because each party brought different resources and needs to the table.
Second, over time, Lucci built a reputation as someone who could get things done. There are lots of sporting-goods stores in Greater Boston and lots of radar guns, too. Yet Lucci went to the game while others watched it at home on TV.
Why? In part, because he was careful not to squeeze people. When the network asked if he could find a radar gun, he didn't ask, "What's in it for me?" Likewise, when the officer asked for baseballs, Lucci didn't say, "You can have them if you'll loan me a radar gun."
The fact that Lucci didn't condition his helpfulness made it more likely he'd get calls in the future. Much like Darren Rovell, Lucci built his bargaining endowment by stockpiling a network of valuable relationships. There probably are similar people in your company or community whom others turn to when they're under pressure. Odds are, they're willing to help even when they are busy, and they're unlikely to haggle about return favors.
The same dynamic applies to external relationships with longtime customers, vendors, and clients. Negotiating successfully in a competitive environment isn't just a matter of driving a hard bargain or maximizing joint gain. Also important is how each transaction enhances—or compromises—one's reputation for treating other people. Reputation is relevant, of course, only when people are known and past relationships are remembered. Yet even in e-commerce transactions, where negotiators rarely meet, rating systems have emerged to reward good service and integrity.
Plan several moves ahead
Bob Kraft owns the New England Patriots, one of the most successful franchises in professional sports. Notably, he didn't get the team by outspending other prospective buyers. Instead, years in advance, Kraft put himself in a position to make a smart move when the time was right.
When the Patriots first went on the market in the late 1980s, Kraft was wrapped up in other businesses and apparently didn't have the wherewithal to put a deal together. The team was purchased by Victor Kiam, then the president of Remington Products Co. However, Kraft and a partner did place the winning bid for the Patriots' stadium, which was sold separately from the football team.
The fact that [Tony] Lucci didn't condition his helpfulness made it more likely he'd get calls in the future.
Many people were surprised by Kraft's offer, as the Foxboro stadium was poorly designed and in terrible condition, and depended on the Patriots for most of its income.
Kraft and his partner were astute enough, however, to spot obscure provisions in the lease that not only stipulated that the team pay a reasonable rent but also required the Patriots to play in the stadium through 2001. Most real-estate investors wouldn't have cared about that latter clause; they would value the lease for its guaranteed rent, regardless of where the team actually played. But Kraft had his eye on eventually buying the team. Enforcing the operating clause would scare off anyone who might wish to buy the Patriots and move the team to another city. It would also deter local buyers who might have hoped to swing a public-private deal to construct a new facility.
For Kraft, it was a double win. With better management in place, the stadium deal was a profitable venture from the start. Several years later, when the Patriots were once again on the market, Kraft had greatly increased his leverage to buy the team by knocking out most of the competition.
The old ownership tried to force Kraft to put a price on the lease, and there were threats of lawsuits on all sides. Two other groups reportedly topped Kraft's bid, but, in the end, the seller reluctantly chose to settle for less rather than get involved in protracted legal battles. Afterwards, Kraft attributed his success to having recognized, years earlier, the advantages gained from controlling the stadium. "If we didn't have that lease," he said, "there's a high probability that the team would have gone to St. Louis."
As Kraft understood, credibility is essential to survival in hardball environments. Sometimes credibility is a matter of expanding what you can bring to the table; in other instances, it allows you to block the moves of potential competitors. Building your bargaining endowment requires accurate identification of key players and then taking visible action that sends the appropriate signals.
As all three stories reveal, deals can be both means and ends. Whether it was Rovell landing a guest, Lucci solving a caller's problem, or Kraft acquiring the stadium, each transaction made sense in its own right. But each one also enhanced the odds of making the next deal—and enhanced each player's bargaining endowment. How you negotiate today can determine what you end up with tomorrow.
Reproduced with permission from "Want to Pull Ahead of the Competition?" Negotiation, Vol. 8, No. 10, October 2005.
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