No place in business for ultimatums and egos

PUBLISHED : Sunday, 19 September, 1993, 12:00am
UPDATED : Sunday, 19 September, 1993, 12:00am

I WAS meeting executives of a corporate client recently when the owner of the company turned to one of his trusted aides to ask how a particular negotiation was going.

The associate replied that the other side was making some tough demands, then added: ''Of course, I told them they were out of their minds. We would never consider those terms.'' The owner cut him off and snapped: ''Never tell them what you wouldn't do! The more options you have and the longer you can keep those options, the stronger your position.'' The owner made a valid point. In fact, it was such an obvious point that you'd think he wouldn't have to tell his staff about it. (It reminded me of the moment in The Godfather when the Don tells his hotheaded son, Sonny: ''Never tell anyone outside the family what you're thinking.'' But as I thought about it, it struck me that people in business abuse this rule all the time, perhaps without realising it.

They say: ''I'd never pay more than $100,000 for that'' when you know that with a few sweeteners they'd pay a whole lot more.

They say: ''I won't take less than $100,000 for that'' - which is silly posing if you know they'll take less and downright irresponsible if you were willing to pay more. Or they say: ''I'll never work for that executive'' - which needlessly cuts off a career option.

''Never tell them what you wouldn't do'' is the flip side of an ultimatum. And we all know that ultimatums backfire as often as they work. Ultimatums can stop discussions dead in their tracks. They are potential deal-breakers. Ultimatums are like slamming the door shut in the other side's face and hoping the other side will knock on the door, pleading for you to let them in again. Quite often, the knock never comes.

If you give people an ultimatum, you're forcing them to call your bluff.

Tell someone: ''We must have your final offer by 5 pm today'' and, if they're reasonably alert, they'll ask: ''Is that an ultimatum?'' Then you are faced with two less than attractive options. If you say yes, they may back away from the negotiations leaving you with no one to talk to. If you back down, you have weakened your position. Who knows what other points you might cave in on? In my experience, when people abuse the ''never tell them what you wouldn't do'' rule, it's almost always out of weakness or because of misguided ego. The rule most often gets broken by people who exaggerate their value or the worth of their product or service.

We had a client who was interested in writing a book. The problem was his inflated sense of what his book was worth. His instructions to us were: ''Don't come to me with any six-figure deals. I won't take an advance less than $1 million.'' Who knows where he got that figure? Perhaps it was arbitrary. Perhaps that's what he heard one of his rivals had received. But there it was - a large number mocking and challenging us.

Quite often, an inflated financial target can be a tremendous spur to creativity. It's like setting ''impossible'' sales quotas: people come up with ingenious schemes to meet them.

And indeed, we've frequently come up with heroic efforts and results for clients expecting outrageous sums for their time and talent. But that wasn't the case here. The offers only came to half what the client was demanding, and he refused to consider the deal.

No matter how unrealistic his expectations, he wasn't backing down. What looked like a good deal just died on the table - and the only reason was his ego.

It is ironic that people who tell the world what they won't do think they are demonstrating their confidence and strength. More often than not, they are merely proving their insecurity and weakness.

Remember this the next time you hear yourself saying: ''I won't take less than . . . '' or ''I won't pay more than . . . '' Are you really prepared to close out your options? What may sound like bravado to you may be telling the other side something quite different.

There is one exception to the rule. I think it's useful to say: ''I'd never do this or that'' to people with whom you have a long-term or personal relationship. Ruling out what you wouldn't do is a great way to maintain trust.

Question: Three of our most promising executives recently jumped ship to an arch-rival. It started with one executive, who then lured two of his colleagues. I'm sure you've faced this problem over the years. How do you stop the competition from poaching your executive pool? More important, what can you do to stop the one that got away from taking business and clients with him? Answer: At our company, I like to say we've never lost anyone we didn't want to lose. To a large degree that's true. Certainly people have left whose departure has caused us some grief, but at the senior management level our ranks have been incredibly stable.

The irony is that we've tried the standard tactics to combat talent raids - asking executives to sign non-compete agreements and instituting a ''golden handcuffs'' compensation policy, staggering part of executives' compensation over several years and paying it out only as long as they are with us. But I am not convinced that this is what keeps people on board.

At best, the non-compete agreement tends to prevent surprise or hostile departures.

The staggered payout merely makes a departure more expensive, either for the departing executive or for his new company, if the executive was smart enough to negotiate a payment for lost income. (It eases some of the pain to know one of my competitors ispaying a former executive money that we once owed). But I don't believe you can keep people against their will. If they really want to go, it is usually best to let them go with your blessing.

But you are right to focus on stopping the one that got away from raiding his former home. That's where the real damage is done.

You can lose an entire department of people if they go along with a charismatic leader. The best tactic is prevention: tie up as much of your talented people's compensation - their bonuses, their perks, their special pension funds, etc - to a promise that they won't hire from your ranks.

You can't always stop people from leaving, but you can make it painful for them to ask others to follow.