A top tier accounting firm was busy celebrating another year of fee income growth from one of its major audit clients, a large telecommunications business. The audit had run smoothly from the accountants’ view, despite some hiccups on delivery times and quality control, but overall, the advisers felt happy with the depth of the relationship and their position to retain the plum business.

So, when the client called for an internal review of the account service to negotiate a revised audit fee for the next three years, the accounting firm was naturally bemused.

The client opened the meeting by stating that they were generally happy with the relationship but wanted the lead partner removed from the engagement team and sought to reduce the total audit fee by 15%, a negative impact of $185,000 on the accountants.

So, how did the accounting firm’s negotiating team react?

They had essentially two options available — co-operative discussion or competitive challenging.

As a co-operative partner they could explore the areas of concern and identify the real issues. In a competitive stance, they would assert their integrity and authority to test the validity of the client’s complaints.

The accounting firm chose poorly. They adopted a competitive stance, feeling confident about the work they had performed to date, resulting in an acrimonious climate in the meeting which quickly degenerated into a dog fight. After an hour and a half of mud slinging, the client advised that they were not only going to cancel the audit contract, they would be withdrawing tax and consulting projects currently in the pipeline, a total value to the accounting firm of around $1.6 million. A costly error for the accountants.

So what really happened here? Why did things get out of hand so rapidly?

This hypothetical scenario demonstrates what can happen when we assume we know what the other party is thinking, but not explicitly saying.

What the accounting firm didn’t know was that the client was about to undergo a major restructure of its business, sell down many of its non-performing assets and acquire a new business in a related industry. The managing director simply wanted a new partner on the audit account who had a deeper knowledge of the new industry segment the business was buying and the audit fee reduction was to reflect a simpler business structure.

The accountants’ were guilty of breaking the golden rule of negotiating trusted relationships: they ignored the needs of the other party and failed to get all the facts on the table.

This negotiation should also never have been the flashpoint that it became. Had they known the true, but unstated facts, the meeting would not have got out of hand.

If the accountants had been proactively managing the relationship from a process (what’s happening in the relationship) viewpoint, instead of a content (the audit) perspective, the meeting may never have taken place, or at minimum, the groundwork for the meeting would have been undertaken weeks beforehand, with a vastly different outcome arising.

The lesson from this example is that professional advisers are engaged in negotiating the relationship dynamics with their clients everyday, not simply at a contractual renewal or crisis point. By then, it’s often too late, The negotiation is all but over, decisions made and positions locked-in.

Effective business relationships are concerned with an ongoing demonstration of trust and predictability, which must be negotiated at every interaction between client and adviser.

How often have advisory firms celebrated large tender successes thinking that the relationship has been won, and "as long as we deliver the content, we have the client in the bag."

The harsh reality is that the hard work of negotiating resilient, successful client relationships happens as soon as you win the account and is an ongoing, daily interaction of value exchange.

The mistake that many advisers make is to assume their authority as a subject matter expert allows them to avoid negotiating the traverses of the relationship.

Client relationships are undulating, rarely smooth. Yet unwise advisers only address issues and concerns to clients when there is a consequence, such as the threat of the loss of a contract or economic relationship.

If advisers use a consistent and systematic approach to negotiating the client relationship, as a daily behaviour, they will build more resilient client partnerships which actually sustain harmony, foster greater understanding and avoid skirmishes.

When differences inevitably arise, the resilient relationship will overcome turbulence and survive due to the negotiated, shared understanding of each other’s needs.

So how can advisers develop a negotiating approach to managing client expectations? Here are the seven golden rules of negotiating resilient relationships based on ENS International’s 25 years of negotiating experience:

• Look from above the action — avoid focusing on the content of the relationship; your subject matter experts can handle that. Focus on the process of the interaction, asking "What is really happening here? What are these clients really saying? What are their real, underlying needs?"
  
  
• Negotiate before it’s too late — research suggests that up to 80% of the outcome in any formal negotiation is determined prior to the actual face-to-face meeting, so use the time leading up to any meeting or planned interaction wisely. Get the facts, safely test the likely positions with client representatives and work through the optional scenarios of each other’s desired outcomes.
  
  
• Find common ground — no matter how difficult relationships become, there is always some common ground on which to build a solid foundation. Look for common ground areas at every client interaction. The more common ground you can establish, personally and professionally, the more resilient the relationship will be. Keep asking: "What do we both want?"
  
  

• Uncover the real needs of the other party — expert negotiators distinguish themselves by exposing the true or underlying needs of the other party early in any relationship, allowing a more open discussion of the issues and, ultimately, a better outcome. Ask open-ended questions to elicit deeper responses from the client. By continually asking questions rather than making statements, you will learn even the most hidden of agendas of disgruntled or even happy clients.
  
  
• Be flexible — the accountants in our example had two choices of style to respond to the client’s issues — co-operative or competitive. The problem was they chose their default or emotional reactionary style — to get angry and defensive. But the skilful professional recognises that a negotiating style is very powerful when you can adapt to the situation. Some situations require you to "act" in a contrary style to your personality — for instance, naturally co-operative consultants may have to become more competitive to assert their authority, for better results. So be aware of your style of negotiating and be prepared to flex your style muscles to suit the climate of the relationship.
  
  
• Build your tactics toolkit — tactics are the currency of negotiations. Everyone, in every daily negotiating interaction, formally or informally, uses a range of tactics to achieve their goals. Most people, even in business situations, are unaware of the tactics they use, and more vitally, are unconscious to the tactics being used against them. Write down the tactics you intend to use BEFORE any meeting and note the tactics your other party uses against you. This will build a very powerful, cogent skill in using tactics to achieve better outcomes in the relationship.
  
  
• Have a plan — how often do professionals plan and write down their approach to managing interactions with clients? Our evidence suggests rarely. Every negotiation of any timeframe, from three minutes to three years, goes through systematic phases of introduction, differentiation, integration and settlement. Once you understand the timeline of any negotiation you will become a skilful negotiator in defining the action and asserting your position more accurately.

Expert relationship managers know and understand that managing expectations is a daily, ongoing skill and that every interaction with clients is a negotiation, an opportunity to positively influence clients’ perceptions about your value as a trusted adviser.

Keith Peel is an influencing and negotiation strategist with ENS International, a global network of negotiation practitioners. He has 17 years experience in strategic communications roles in large corporations and professional service firms, including KPMG. Keith’s special area of expertise is in negotiating through change and business transformation, and in building employee commitment for the business journey. He lives in Sydney, Australia. You may reach Keith Peel by e-mail at [email protected] or visit his firm’s web site at www.intellectualcapital.com.au